Daybreak Weekend: Fresh Data, Mobile World Congress, Baidu Earnings

This is Bloomberg day Break Weekend, our global look at 0:00:05.080 --> 0:00:07.080 the top stories in the coming week from our day 0:00:07.120 --> 0:00:09.360 Break anchors all around the world, and straight ahead on 0:00:09.400 --> 0:00:11.799 the program, a look at the US housing market ahead 0:00:11.800 --> 0:00:14.760 of the big spring home buying season and some highly 0:00:14.800 --> 0:00:19.279 anticipated data on inflation and economic growth. I'm Tom Busby 0:00:19.360 --> 0:00:19.919 in New York. 0:00:20.239 --> 0:00:23.000 I'm Stephen carolind London, where we're looking ahead to AI's 0:00:23.239 --> 0:00:27.400 starring role at this year's Mobile World's Congress in Barcelona. 0:00:27.480 --> 0:00:29.840 And I'm Ran Curtis in Hong Kong. I'll take a 0:00:29.880 --> 0:00:34.040 look at my news upcoming results, whether AI makes an intercot. 0:00:37.200 --> 0:00:41.239 That's all straight ahead on Bloomberg Daybreak Weekend, The business 0:00:41.280 --> 0:00:45.280 news you need to wrap up your week, Available on Apple, Spotify, 0:00:45.400 --> 0:00:48.760 the Bloomberg Business Appen everywhere you get your podcasts. 0:00:53.520 --> 0:00:55.400 Good day to you. I'm Tom Busby and we begin 0:00:55.440 --> 0:00:59.320 today's program with home buyers, home sellers, home builders, and 0:00:59.400 --> 0:01:02.600 home improf been chains for more on where we stand. 0:01:02.640 --> 0:01:06.360 We welcome Bloomberg Intelligence US home building analyst Drew Reading. 0:01:06.440 --> 0:01:08.640 Drew, thanks for being here, Thanks for having me. 0:01:08.800 --> 0:01:12.880 Well, let's start with the biggest roadblocks in the home 0:01:12.920 --> 0:01:16.720 buying selling Everybody sky high home prices, a dearth of 0:01:16.720 --> 0:01:20.160 homes on the marketplace, and mortgage rates, which just last 0:01:20.160 --> 0:01:22.640 week rose back above seven percent for the first time 0:01:22.680 --> 0:01:26.319 since early December. Drew, is there any relief in sight, 0:01:26.480 --> 0:01:28.000 any good news out of this. 0:01:28.440 --> 0:01:29.800 I think you hit the nail on the head with 0:01:30.040 --> 0:01:32.399 the challenges facing the home buyer. I mean, we've had 0:01:32.520 --> 0:01:35.880 home prices rise more than forty percent over the last 0:01:35.880 --> 0:01:39.320 couple of years. We've had interest rates rise from three 0:01:39.360 --> 0:01:43.760 percent now above seven percent. We have the worst affordability 0:01:43.760 --> 0:01:46.840 on record if you look at monthly payments relative to income. 0:01:48.240 --> 0:01:50.600 We've been describing the housing market as kind of a 0:01:50.640 --> 0:01:53.280 tale of two markets. On one hand, you have the 0:01:53.320 --> 0:01:56.520 resale market, who's battling not only the high rates, but 0:01:56.600 --> 0:02:00.320 low inventory and homeowners who don't want to sell. On 0:02:00.360 --> 0:02:03.880 the other hand, you have the new home market, where 0:02:04.240 --> 0:02:07.360 builders have done extremely well. Sales actually grew in twenty 0:02:07.400 --> 0:02:10.800 twenty three, and that's because they've been bringing more supply 0:02:10.880 --> 0:02:14.800 to the market. They've been pretty aggressive and adjusting base prices. 0:02:14.960 --> 0:02:16.840 So if you look at prices in the new home market, 0:02:16.919 --> 0:02:20.160 they were actually down double digits in twenty twenty three, 0:02:20.960 --> 0:02:24.280 And most importantly, they've been offering financing incentives, so that's 0:02:24.320 --> 0:02:26.080 been a big tool in their belt that the existing 0:02:26.120 --> 0:02:29.600 home market really doesn't have to leverage. So a buyer 0:02:29.639 --> 0:02:31.600 who's going out into the market now is looking at 0:02:31.600 --> 0:02:35.120 something in the seven percent range. Builders are able to 0:02:35.160 --> 0:02:37.200 offer lower rates somewhere in the five and a half 0:02:37.200 --> 0:02:40.040 to six percent range, So that's been a huge differentiator 0:02:40.080 --> 0:02:40.399 for them. 0:02:40.520 --> 0:02:43.480 Now, you follow the builders, so you know what they do, 0:02:43.600 --> 0:02:47.359 where they do it, how they think. Home builder sentiment 0:02:47.639 --> 0:02:51.280 actually was I think a six month high right now. However, 0:02:51.680 --> 0:02:54.360 they also face a lot of challenges, don't they. Not 0:02:54.520 --> 0:02:57.959 enough available land, not enough of skilled labor. I mean, 0:02:58.080 --> 0:03:01.399 how are they still building these homes where people want 0:03:01.440 --> 0:03:03.760 to buy with the challenges that they face. 0:03:04.240 --> 0:03:07.920 Yeah, builders have been facing these challenges for quite some 0:03:08.000 --> 0:03:10.799 time now. You mentioned, you know, the lack of available labor, 0:03:11.040 --> 0:03:15.080 particularly as volumes heat up, the lack of developed land, 0:03:15.080 --> 0:03:17.280 which we think could become even more of a problem 0:03:17.320 --> 0:03:20.560 for the industry. But the way I would look at 0:03:20.560 --> 0:03:22.400 the new home market is, on one hand, you have 0:03:22.800 --> 0:03:27.080 the large, well capitalized, pickly traded home builders, and on 0:03:27.120 --> 0:03:30.560 the other hand you have smaller private peers. We think 0:03:30.600 --> 0:03:33.560 that the large builders are going to continue to take 0:03:33.680 --> 0:03:36.000 market share from those smaller private piers. And the main 0:03:36.040 --> 0:03:39.480 reason is because a lot of the private builders are 0:03:39.800 --> 0:03:43.560 reliant on regional bank financing in order to grow, whether 0:03:43.600 --> 0:03:48.480 it's for land acquisition, land development, or construction loans. And 0:03:48.880 --> 0:03:52.440 with not only the cost of those loans going higher, 0:03:52.440 --> 0:03:55.440 but also the availability as the economy has weakened a 0:03:55.480 --> 0:03:58.440 little bit, we're seeing their ability to access that growth 0:03:58.440 --> 0:04:01.360 capital has come down. We think that the large builders 0:04:01.400 --> 0:04:03.480 are stepping in to fill the void because they've got 0:04:03.520 --> 0:04:07.240 strong balance sheets, they've got long land pipelines, and they're 0:04:07.240 --> 0:04:09.680 able to self develop their land. So we think that, 0:04:10.200 --> 0:04:11.960 you know, as we move through twenty twenty four and 0:04:12.000 --> 0:04:15.280 into twenty twenty five, they'll continue to be the beneficiaries. 0:04:15.880 --> 0:04:18.640 Now I imagine also some of these builders, the ones benefiting 0:04:18.640 --> 0:04:21.599 the most, are the ones building homes where people want 0:04:21.640 --> 0:04:24.400 to live. And that means the Sun Belt Florida, all 0:04:24.480 --> 0:04:28.240 the way across to Texas and the Southwest. Are there 0:04:28.440 --> 0:04:31.680 other builders having success? You know, the Toll Brothers up 0:04:31.680 --> 0:04:35.640 in the northeast. Are they building big houses, make mansions 0:04:35.680 --> 0:04:38.400 or even mansions? Are are they all seeing you know, 0:04:38.440 --> 0:04:41.000 the rising tide lift all boats in the housing market. 0:04:42.120 --> 0:04:44.640 Yeah, that's a great question. And you know, when you 0:04:44.640 --> 0:04:46.800 look big picture, the Sunbelt is really where you want 0:04:46.800 --> 0:04:50.160 to be due to more favorable demographic patterns. That's where 0:04:50.200 --> 0:04:54.000 the population shifting, that's where the job growth is. Affordability 0:04:54.080 --> 0:04:56.080 is better, so you see some migration out of some 0:04:56.120 --> 0:04:59.159 of the higher cost markets. What's interesting right now is 0:04:59.200 --> 0:05:03.680 we are seeing pretty broad based rebound in the new 0:05:03.680 --> 0:05:07.520 home market across the country. Some of the hardest hit 0:05:07.560 --> 0:05:09.480 markets in the back half of twenty twenty two were 0:05:09.480 --> 0:05:13.960 in the West, think California, the Pacific Northwest to Southwest, 0:05:14.000 --> 0:05:17.320 but we're even seeing a strong rebound there. You mentioned 0:05:17.320 --> 0:05:20.720 the Northeast, which is actually an interesting example because if 0:05:20.760 --> 0:05:23.800 you look at sales paces that the builders have been 0:05:23.800 --> 0:05:27.880 doing relative to twenty nineteen, the Northeast and the Midwest 0:05:27.880 --> 0:05:29.720 have held up really well. And I think part of 0:05:29.760 --> 0:05:32.080 that has to do with the fact that maybe these 0:05:32.080 --> 0:05:34.800 are markets that didn't participate as much on the way up, 0:05:34.880 --> 0:05:37.920 so they weren't the boom markets, but they also didn't 0:05:37.960 --> 0:05:40.400 follow as much on the way down. When things got 0:05:40.440 --> 0:05:41.960 a little bit hairy. Theer in the back half of 0:05:41.960 --> 0:05:44.800 twenty twenty two and into twenty twenty three, So the 0:05:44.839 --> 0:05:48.560 Northeast has done really well. We heard from Toll Brothers 0:05:48.600 --> 0:05:51.880 recently they noticed strength across their entire footprint, across all 0:05:51.920 --> 0:05:54.000 of their price points. So it's been a pretty broad 0:05:54.040 --> 0:05:54.760 based rally. 0:05:54.880 --> 0:05:58.640 Wow, yeah, everybody wins now. One thing you have been 0:05:58.680 --> 0:06:03.680 reporting on though, is is more modest, moderately priced new homes, 0:06:04.560 --> 0:06:06.160 more of them going up. What can you tell us 0:06:06.160 --> 0:06:06.600 about that. 0:06:06.800 --> 0:06:10.000 There's been a decided shift over the last several years 0:06:10.960 --> 0:06:14.000 from builders who wanted to engage more at the entry level. 0:06:14.920 --> 0:06:16.600 One of the reasons is because that's where a lot 0:06:16.600 --> 0:06:19.120 of the demographic based demand is now and will be 0:06:19.200 --> 0:06:22.279 in the coming years. The other reason that they're targeting 0:06:22.279 --> 0:06:26.640 that market is for relative affordability. As I mentioned, affordability 0:06:26.640 --> 0:06:30.080 is near the worst on records. So one way builders 0:06:30.080 --> 0:06:33.839 are looking to address that is through doing smaller square 0:06:33.839 --> 0:06:36.400 footage floor plans, which allows them to get the price down. 0:06:36.440 --> 0:06:38.960 They're also doing projects with more density, so they could 0:06:38.960 --> 0:06:43.000 spread more units over the same piece of land and 0:06:43.040 --> 0:06:46.760 spread out costs that way and address affordability for the 0:06:46.760 --> 0:06:48.800 buyer through density. So there's a couple of different ways 0:06:48.839 --> 0:06:51.719 they're doing it. It's something that's been ongoing for a 0:06:51.720 --> 0:06:53.760 couple of years, but it's starting to be emphasized a 0:06:53.760 --> 0:06:54.640 little bit more. Now. 0:06:54.839 --> 0:06:57.320 One last question, Drew, and it's about last week we 0:06:57.400 --> 0:07:00.320 had home depot earnings. This week we have lows. Are 0:07:00.360 --> 0:07:05.040 we likely to see the same kind of not disappointing results, 0:07:05.120 --> 0:07:08.720 but clearly home improvement projects have slowed down. 0:07:09.360 --> 0:07:12.400 Yeah, expectations coming into the print for lows are all 0:07:12.440 --> 0:07:15.880 that high. As you mentioned, home Deep gives some rather 0:07:16.120 --> 0:07:18.840 disappointing guidance I think on the outlook for twenty twenty four, 0:07:18.880 --> 0:07:21.640 calling for the market to be down about one percent, 0:07:22.320 --> 0:07:24.800 I expect to hear similar commentary from Loew's. 0:07:24.720 --> 0:07:28.480 Our thanks to Bloomberg Intelligence US home building analyst Drew Redding, 0:07:28.520 --> 0:07:31.520 and up next, some closely watched economic data points out 0:07:31.600 --> 0:07:34.240 this week what they could mean for the Fed's next 0:07:34.280 --> 0:07:36.560 policy meeting just three weeks from now. And for more 0:07:37.000 --> 0:07:41.680 we welcome Bloomberg International Economic and Policy correspondent Michael McKee. Well, 0:07:41.760 --> 0:07:44.840 let's start with the Fed's preferred measure of inflation. This 0:07:44.920 --> 0:07:48.800 is a mouthful. The personal consumption expenditure core price index 0:07:48.840 --> 0:07:52.160 for the month of January and the fourth quarter. That's 0:07:52.160 --> 0:07:54.760 the biggie this week. What are you expecting to see? 0:07:54.840 --> 0:07:56.400 Well, we get to the fourth quarter as part of 0:07:56.400 --> 0:07:59.760 the GDP report. It's a revision, so that doesn't get 0:07:59.760 --> 0:08:02.600 as much attention from the Fed because it's quarterly, it's 0:08:02.640 --> 0:08:07.520 over a three month average. But the monthly number, which 0:08:07.560 --> 0:08:10.520 represents the latest month that we have will be January, 0:08:10.640 --> 0:08:12.560 and that's the one that the FED looks at because 0:08:12.600 --> 0:08:14.960 it gives them the most complete picture they think of 0:08:15.040 --> 0:08:18.320 where inflation is at the moment, and that's going to 0:08:18.400 --> 0:08:21.480 be the key for them, where inflation is at the 0:08:21.560 --> 0:08:24.960 moment in the PCE, because in the CPI, obviously it 0:08:25.120 --> 0:08:30.680 was not good news for January. Now, the forecast for 0:08:30.920 --> 0:08:34.600 the PCE is for a two point four percent year 0:08:34.640 --> 0:08:37.960 over year increase, which is down from two point six 0:08:38.040 --> 0:08:41.640 the year before, and a two point eight percent, down 0:08:41.679 --> 0:08:46.120 from two point nine percent for the core. FED Vice 0:08:46.200 --> 0:08:49.959 chair Phillip Jefferson spoke last week and said the FED 0:08:50.040 --> 0:08:53.520 staff is basically predicting the same thing. So there are 0:08:53.559 --> 0:08:56.000 people out there who think we might see an increase 0:08:56.440 --> 0:09:00.560 in the PCE this month because of some unusual factors, 0:09:00.920 --> 0:09:04.960 but the Fed seems sanguine going into the number. 0:09:05.120 --> 0:09:07.280 Now, what are the factors that we see that could 0:09:07.559 --> 0:09:08.839 make inflation even worse. 0:09:09.400 --> 0:09:11.760 Well, one of the questions is what's happening with energy 0:09:11.840 --> 0:09:16.559 and with food because those went up in the CPI report, 0:09:18.160 --> 0:09:20.520 expected to but not by as much as they did. 0:09:20.559 --> 0:09:25.480 And then the ongoing question is always what's happening with housing? 0:09:25.920 --> 0:09:31.600 The CPI showed unexpected strength in housing inflation when it's 0:09:31.720 --> 0:09:34.920 supposed to be according to everybody who follows it going down. 0:09:35.320 --> 0:09:37.560 It's less of a weight in the PCE, so it 0:09:37.600 --> 0:09:40.960 may not make as much of a difference, but it 0:09:41.040 --> 0:09:45.640 could affect that number as well. But the big one 0:09:45.640 --> 0:09:49.920 in the PCE, this is what I call the Pogo problem. 0:09:50.400 --> 0:09:53.760 We have met the enemy and he is us. Our 0:09:53.880 --> 0:09:58.199 listeners are at fault because so much trading has gone 0:09:58.200 --> 0:10:02.400 on in the markets, and obviously the markets have continued 0:10:02.440 --> 0:10:07.640 to go up, so stock trading fees are a big 0:10:07.679 --> 0:10:11.280 component of why the PCE has stayed high. And there 0:10:11.320 --> 0:10:13.920 are some analysts who really follow this stuff closely who 0:10:13.960 --> 0:10:17.400 think that's the number that's going to push PCE higher 0:10:17.440 --> 0:10:18.480 and instead of lower. 0:10:18.559 --> 0:10:21.320 Let's go back to GDP because you talked about that. 0:10:21.679 --> 0:10:23.880 We're going to get a reading, a second reading on 0:10:23.960 --> 0:10:27.560 fourth quarter GDP. What kind of growth overall growth are 0:10:27.600 --> 0:10:29.440 we expecting in the economy, and also what does that 0:10:29.480 --> 0:10:30.280 mean for the full year? 0:10:31.440 --> 0:10:33.360 Oh, if we only knew what it meant for the 0:10:33.400 --> 0:10:36.240 full year. Three point three percent was the initial read, 0:10:36.320 --> 0:10:40.240 and the economists we survey don't expect a change in that, 0:10:40.559 --> 0:10:42.359 just a little bit of a change in the composition, 0:10:42.480 --> 0:10:46.520 with more coming from business investment in inventories and a 0:10:46.559 --> 0:10:50.559 little bit less from personal consumption consumer spending. But for 0:10:51.160 --> 0:10:54.560 the year, the view has been that we are seeing 0:10:55.160 --> 0:10:58.040 a slowing in the economy, and we have seen some 0:10:58.160 --> 0:11:02.520 numbers that suggest that. But I go back to some 0:11:02.559 --> 0:11:05.200 of the remarks from FED officials in this last week 0:11:05.240 --> 0:11:08.520 where they warn that one of the dangers is that 0:11:08.600 --> 0:11:12.080 consumer spending doesn't drop off that much, and that we 0:11:12.120 --> 0:11:15.400 do see a stronger than expected economy through the year. 0:11:15.760 --> 0:11:18.280 That could put pressure on inflation, and that would have 0:11:18.320 --> 0:11:21.560 an impact on if and when they start cutting interest rates. 0:11:21.600 --> 0:11:25.560 So it's something to keep in mind. It's really hard 0:11:25.600 --> 0:11:29.959 to make a prediction because it's been so it's been 0:11:30.000 --> 0:11:33.439 so weird coming out of the pandemic. Nobody expected the 0:11:33.559 --> 0:11:37.640 kind of recovery that we've gotten, and it could keep going. 0:11:37.880 --> 0:11:40.480 Well, that's for sure. I mean, even with a slight 0:11:41.080 --> 0:11:44.400 pullback in consumer spending, three point three percent growth in 0:11:44.440 --> 0:11:47.400 the final three months of the year is pretty strong. 0:11:48.120 --> 0:11:51.160 Good news in Washington, certainly for this administration as we 0:11:51.200 --> 0:11:52.240 go into an election year. 0:11:52.679 --> 0:11:55.000 Yeah, they should be meeting to figure out how they're 0:11:55.000 --> 0:11:57.640 going to sell all this to the American public because 0:11:57.640 --> 0:12:01.800 obviously the political polls don't match what's happening with the 0:12:02.000 --> 0:12:07.320 economy at this point. But overall, if the economy doesn't 0:12:07.320 --> 0:12:11.600 go into recession and inflation does come down, then that 0:12:11.720 --> 0:12:15.920 could be good news for Joe Biden. The saying is 0:12:15.920 --> 0:12:19.440 always it's the economy stupid, and people have wondered if 0:12:19.480 --> 0:12:22.280 that's going to be the case this year, and we'll see. 0:12:22.600 --> 0:12:24.640 Well, a lot to look forward to, and our thanks 0:12:24.679 --> 0:12:29.520 to Bloomberg International Economic and Policy correspondent Michael McKee, coming 0:12:29.600 --> 0:12:31.720 up on Bloomberg Day Break weekend to look ahead to 0:12:31.760 --> 0:12:35.720 the Mobile World Congress that takes place in Spain this week. 0:12:36.040 --> 0:12:49.200 I'm Tom Busby, and this is Bloomberg. This is Bloomberg 0:12:49.280 --> 0:12:51.360 Day Break weekend, our global look ahead at the top 0:12:51.400 --> 0:12:54.360 stories for investors in the coming week. I'm Tom Busby. 0:12:54.400 --> 0:12:54.920 In New York. 0:12:55.280 --> 0:12:57.560 Up later in our program a look at inflation in 0:12:57.640 --> 0:13:00.920 New Zealand and the next move from its bank, as 0:13:01.000 --> 0:13:04.760 well as earnings from China's biggest tech giant, but first. 0:13:04.920 --> 0:13:08.200 Mobile technology arguably one of the fastest growing sectors of 0:13:08.240 --> 0:13:12.760 the twenty first century and one investors think has boundless possibilities. 0:13:12.920 --> 0:13:15.760 In the coming days, everyone who is anyone in the 0:13:15.800 --> 0:13:18.480 world of connectivity will convene under one roof at the 0:13:18.520 --> 0:13:23.120 annual Mobile World Congress in Barcelona, trading ideas and discussing 0:13:23.160 --> 0:13:26.280 the future. But can telecom keep up with multiple high 0:13:26.320 --> 0:13:28.880 paced advancements in the world of tech. For more, Let's 0:13:28.920 --> 0:13:32.600 go to London and bring in Bloomberg Daybreak anchor Steven Carroll. 0:13:32.640 --> 0:13:36.920 Tom The market frenzy about tech and artificial intelligence driven 0:13:37.040 --> 0:13:40.400 gains seems to have reached fever pitch this earning season. 0:13:40.640 --> 0:13:43.280 Telecommunications is one of the many industries that's racing to 0:13:43.360 --> 0:13:48.200 adapt and harness its advantages. This year's Mobile World Congress 0:13:48.240 --> 0:13:51.240 in Barcelona will see major tech companies, including the likes 0:13:51.240 --> 0:13:54.440 of Meta, lining up to showcase their AI products to 0:13:54.480 --> 0:13:57.320 the sector. A recent survey of more than four hundred 0:13:57.320 --> 0:14:01.760 telecoms industry professionals by AI chip giant Nvidia underlined this, 0:14:02.160 --> 0:14:05.760 over half of respondents agreed or strongly agreed that adopting 0:14:05.800 --> 0:14:09.079 AI will be a source of competitive advantage. That's a 0:14:09.080 --> 0:14:11.360 score that's up from just thirty nine percent in twenty 0:14:11.559 --> 0:14:15.280 twenty two. In Nvidia themselves are seeing blockbuster growth thanks 0:14:15.320 --> 0:14:18.240 to the technology, and their latest results show no sign 0:14:18.280 --> 0:14:22.400 of that growth slowing down. The CEO of Futurum, Daniel Newman, 0:14:22.440 --> 0:14:26.280 and bab o'donald, chief analyst at TECHnalysis, say the pressure 0:14:26.480 --> 0:14:29.600 is on for Nvidia to continue these gains. 0:14:30.680 --> 0:14:32.800 The only result that was going to be acceptable was 0:14:32.800 --> 0:14:35.520 not only a beat, but a substantial beat and a 0:14:36.040 --> 0:14:40.080 guidance upbeat because people are beginning to wonder, how many 0:14:40.120 --> 0:14:43.840 consecutive quarters can this company continue to run with triple 0:14:43.880 --> 0:14:47.160 digit revenue growth and high triple digit earnings growth. But 0:14:47.240 --> 0:14:49.640 it seems each quarter they continue to surprise. 0:14:49.920 --> 0:14:53.240 This is a company that continues to execute and completely 0:14:53.280 --> 0:14:57.320 blow away everybody's most robust forecast. I mean, they raise 0:14:57.400 --> 0:15:00.360 their own forecast, the street raises the forecast, and they 0:15:00.400 --> 0:15:02.440 still beat them. It's kind of crazy. And of course 0:15:02.520 --> 0:15:04.080 the big question has been how. 0:15:03.920 --> 0:15:05.000 Long can this continue? 0:15:05.000 --> 0:15:07.480 How long can this go on. The competition has never 0:15:07.600 --> 0:15:10.920 been more fierce than it is right now foreign Vidia, 0:15:10.960 --> 0:15:12.560 but they have a huge headstart. 0:15:12.600 --> 0:15:14.600 Do you think there is sort of a consensus in 0:15:14.640 --> 0:15:17.280 the industry to put some competitive pressure back on. 0:15:17.360 --> 0:15:21.080 In video, they've been innovating at a pace that nobody 0:15:21.080 --> 0:15:22.280 else has been able to keep up. 0:15:22.320 --> 0:15:26.920 With Daniel Newman from Futuram and Bob O'Donnell at tech Analysis, 0:15:26.960 --> 0:15:30.480 they're discussing the latest results from Nvidia with Bloomberg. Well, 0:15:30.480 --> 0:15:33.640 perhaps some of those future gains could come from AI 0:15:33.800 --> 0:15:38.160 collaborations with the telecoms industry. Those conversations will be happening 0:15:38.160 --> 0:15:41.440 at Mobile World Congress in the coming days. Apart from 0:15:41.480 --> 0:15:44.000 the latest tech, industry players will also be considering the 0:15:44.080 --> 0:15:48.080 regulatory requirements that are facing some telecoms companies that aren't 0:15:48.080 --> 0:15:51.600 applicable to their big tech cousins. Telecoms may just be 0:15:51.640 --> 0:15:53.680 at the beginning of its AI journey, but will it 0:15:53.760 --> 0:15:56.960 be a dalliance or a long lasting partnership. While I've 0:15:56.960 --> 0:16:00.000 been discussing all of this with our European telecoms and chips, 0:16:00.280 --> 0:16:02.720 Jillian Deutsch and I started by asking here how important 0:16:02.840 --> 0:16:07.160 Mobile World Congress is in setting the agenda for the sector. 0:16:07.960 --> 0:16:10.960 Yeah, this is really the key event for the year, 0:16:11.000 --> 0:16:12.400 and I think it's gonna be fun to kind of 0:16:12.440 --> 0:16:16.000 see not as European telcos which have lots of things 0:16:16.040 --> 0:16:19.240 that they're pushing, for example, deregulation and lots of m 0:16:19.240 --> 0:16:21.440 Andy talks across Europe, but also a lot of different 0:16:21.480 --> 0:16:24.800 international telcos and also major US tech companies coming to 0:16:25.320 --> 0:16:28.960 all descending on Barcelona to kind of really set the 0:16:28.960 --> 0:16:31.160 agenda for tacos in tech the next year. 0:16:31.760 --> 0:16:33.520 So AI is one of the key themes at this 0:16:33.640 --> 0:16:37.400 year's events, talk us through where Telecom's companies are with 0:16:37.560 --> 0:16:40.400 them implementing that technology and where they found success with it. 0:16:42.000 --> 0:16:44.800 Yeah, I mean AI has definitely hit a taco sector 0:16:44.840 --> 0:16:46.240 of course as well, and so I think we're going 0:16:46.280 --> 0:16:49.680 to be seeing lots of announcements about, you know, different 0:16:49.680 --> 0:16:52.320 offerings with different US tech giants for example, and how 0:16:52.320 --> 0:16:55.520 they're integrating artificial intelligence into their offerings, you know. I mean, 0:16:55.720 --> 0:16:57.360 I just definitely think a lot of this is hype. 0:16:57.360 --> 0:16:59.840 I think anyone who founds tech is used to hypes 0:17:00.320 --> 0:17:03.000 of course, and AI is obviously in the most recent ones. 0:17:03.200 --> 0:17:04.960 But I do think there's a lot of really interesting 0:17:05.359 --> 0:17:08.280 ways that companies are trying to integrate AI into their offerings, 0:17:08.480 --> 0:17:11.480 really kind of to improve the experience for consumers when 0:17:11.480 --> 0:17:15.200 it comes to customer service also with businesses, and really 0:17:15.280 --> 0:17:18.240 kind of creating you know, more streamlined offerings for their 0:17:18.280 --> 0:17:20.639 for their clients. And so I think a lot of 0:17:20.640 --> 0:17:23.080 this also will be kind of in with kind of 0:17:23.119 --> 0:17:25.680 key announcements with big tech giants. So we already saw 0:17:25.720 --> 0:17:27.760 now key is stock going up recently when they announced 0:17:27.760 --> 0:17:29.720 a partnership with the Videos. Those kind of big names 0:17:29.760 --> 0:17:32.080 obviously are really important to show that they are really 0:17:32.119 --> 0:17:34.879 serious about AI and intergeting AI. But also I think 0:17:34.920 --> 0:17:37.240 we'll see some interesting ones. You know, BT for example, 0:17:37.320 --> 0:17:40.439 last year announced pretty massive job cuts fifty five thousand 0:17:40.480 --> 0:17:43.639 people until twenty to thirty and that's not entirely but 0:17:43.680 --> 0:17:45.679 at least in part because they're integrating AI, so it's 0:17:45.720 --> 0:17:47.800 kind of helping them to trim from the fat in 0:17:47.840 --> 0:17:49.800 the company. And so I think that's we might see 0:17:49.800 --> 0:17:52.600 some more more kind of uses of AI in that sense. 0:17:53.400 --> 0:17:55.760 So does it do we have the sense that European 0:17:55.800 --> 0:17:59.720 companies are sufficiently investing in this given that so many 0:17:59.760 --> 0:18:02.479 of the technology advancements are coming from US firms. 0:18:03.440 --> 0:18:06.720 That's a great question. I mean, celcos are It's funny, 0:18:06.560 --> 0:18:08.919 they are really afraid of just becoming you know, a 0:18:08.960 --> 0:18:10.560 pipe in the ground, right, And so it's kind of 0:18:10.560 --> 0:18:12.560 sparked this kind of panic a lot of among a 0:18:12.600 --> 0:18:15.640 lot of tech tech taco companies across Europe, and so 0:18:15.760 --> 0:18:17.720 that has led to this massive push to keep innovating 0:18:18.600 --> 0:18:20.560 and and there are a lot of questions about whether 0:18:20.640 --> 0:18:23.720 or not they actually can outcompete you know, Silicon Valley 0:18:23.720 --> 0:18:26.320 giants that have you know, massive market caps and have 0:18:26.680 --> 0:18:29.280 all of that talents obviously you know, really harmonized or 0:18:29.280 --> 0:18:33.480 centralized into one location and already in their companies, and 0:18:33.520 --> 0:18:35.240 a lot of what these celcos are doing is to 0:18:35.240 --> 0:18:37.159 really trying to compete with them. So you see a 0:18:37.200 --> 0:18:40.359 lot of kind of IT solutions and cloud solutions and 0:18:40.560 --> 0:18:43.760 networks and factories and these are all things that actually 0:18:43.760 --> 0:18:48.119 put tuco's in direct competition with US tech giants. And 0:18:48.200 --> 0:18:50.160 I think there's a lot of skepticism that they can 0:18:50.200 --> 0:18:53.720 really outcompete tech giants, but that is really a crucial 0:18:53.920 --> 0:18:56.360 crucial thing for tacos going forward, if they really want 0:18:56.480 --> 0:19:00.400 to make sure they're not just you know a utility company. 0:19:00.600 --> 0:19:03.080 So it is a question of cooperation as well as 0:19:03.080 --> 0:19:04.680 some competition in these areas too. 0:19:06.200 --> 0:19:07.880 Yeah, absolute, I me, you know, we already do see 0:19:07.920 --> 0:19:10.879 lots of tacos and tech giants working together. They have 0:19:10.960 --> 0:19:12.800 for a long time when it comes to data centers 0:19:13.760 --> 0:19:16.119 and other kinds of partnerships they've had, or even you know, 0:19:16.200 --> 0:19:18.439 when you open up your you know, you turn on 0:19:18.480 --> 0:19:21.720 your TV, you probably see YouTube or Netflix offerings, right, 0:19:21.800 --> 0:19:25.040 So telcos really do rely on us tech giants as well. 0:19:25.040 --> 0:19:26.960 It's kind of a fren of me love hate relationship 0:19:26.960 --> 0:19:29.000 between the two, and I do think we see that 0:19:29.000 --> 0:19:33.240 that kind of relationship really play out in Brussels, where 0:19:33.240 --> 0:19:36.440 I'm based and covered tech regulation or have cover tech Regnation. 0:19:37.320 --> 0:19:39.280 A lot of these techos argue that they're way more 0:19:39.280 --> 0:19:43.000 over regulated than they're often American counterparts, and are really 0:19:43.040 --> 0:19:47.520 pushing for tucos to help out with with helping tech giants. 0:19:47.560 --> 0:19:52.440 Excuse me, helping telcos with these massive, expensive network infrastructure investments. 0:19:52.520 --> 0:19:54.240 And they say, you know a lot of these tech 0:19:54.280 --> 0:19:56.600 giants get to piggyback off of the really expensive and 0:19:56.600 --> 0:19:57.880 complicated work that they do. 0:19:59.040 --> 0:20:01.720 Yeah, that's a really just in conversation that I'm sure 0:20:01.720 --> 0:20:05.280 will be featuring two at Mobile Work Congress. What you know, 0:20:05.320 --> 0:20:07.359 the European Commission recently published a white paper on this 0:20:07.440 --> 0:20:10.680 on reforms to the market. What were the problems that 0:20:10.680 --> 0:20:12.120 that white paper identified. 0:20:13.440 --> 0:20:16.240 I think it's really interesting because Taco's for the past 0:20:16.320 --> 0:20:18.960 least couple of years, I've really been, like I said, 0:20:19.040 --> 0:20:21.840 arguing that tech companies need to help with the bill 0:20:21.920 --> 0:20:26.120 for infrastructure, and this argument was dubbed fair share Tech 0:20:26.119 --> 0:20:29.880 companies need to pair their fair share for infrastructure. That 0:20:30.280 --> 0:20:33.119 specific lobbing effort failed, but what they did do is 0:20:33.160 --> 0:20:35.720 really put Taco's back at the top of regulator's agenda. 0:20:35.760 --> 0:20:38.359 They've been really overlooked for the past five plus years. 0:20:38.880 --> 0:20:41.119 So this white paper was really interesting because it actually 0:20:41.160 --> 0:20:43.639 dives into the issues that Tacos have been complaining about 0:20:43.640 --> 0:20:45.879 for years and acknowledge a lot of the issues that 0:20:45.920 --> 0:20:48.240 they've been complaining about. You know, it's an incredibly fragmented 0:20:48.320 --> 0:20:52.040 market with over fifty players in you across the EU, 0:20:52.160 --> 0:20:53.840 you know, compared to the United States where they're early 0:20:53.880 --> 0:20:57.720 three maybe four kind of massive players. They do knowledge 0:20:57.720 --> 0:21:02.240 that they're overregulated. There's too much bureaucracy to get permits 0:21:02.240 --> 0:21:04.840 et cetera. But I think when it comes to the 0:21:04.880 --> 0:21:06.800 actual solutions, I think most of the telcos I talk 0:21:06.880 --> 0:21:09.960 to feel like the paper is kind of lacking. There's 0:21:10.000 --> 0:21:13.000 some talk about, oh, we should harmonize spectrum policies atle 0:21:13.000 --> 0:21:14.919 bit more across the European Union, and we need to 0:21:14.960 --> 0:21:18.639 make it easier for companies to achieve scale by merging 0:21:18.680 --> 0:21:21.800 across borders. But telco's for their main number one ask 0:21:21.960 --> 0:21:24.840 really has been to merge in market, and there's very 0:21:24.880 --> 0:21:28.160 little acknowledgement of that. And you know, and even when 0:21:28.240 --> 0:21:30.639 when the Commission was unveiling this paper, you know, we 0:21:30.680 --> 0:21:34.240 had Margaret Investigate, the competition chief for the European Commission, saying, 0:21:34.320 --> 0:21:37.440 you know, in market consolidation is not the answer. So 0:21:37.520 --> 0:21:39.080 I think that was kind of met with a lot 0:21:39.119 --> 0:21:43.159 of sadness among the telcos. But it also will have 0:21:43.200 --> 0:21:45.760 a new commission coming in next year, and so it 0:21:45.760 --> 0:21:48.240 really is a question of what is that next commission, 0:21:48.240 --> 0:21:50.639 who's in charge, what do they think is actually the solution? 0:21:50.760 --> 0:21:53.639 Do they even do they take up telcos as a 0:21:53.680 --> 0:21:54.800 topic end item? 0:21:55.200 --> 0:21:57.480 Yeah, so an interesting time for those companies too. I 0:21:57.520 --> 0:21:59.080 mean we're also in the midst of earning season of 0:21:59.119 --> 0:22:01.680 course as well, what's sort of financial state are these 0:22:01.680 --> 0:22:02.400 companies in. 0:22:03.840 --> 0:22:06.080 Not not a great one in them And there's obviously 0:22:06.080 --> 0:22:08.600 a lot of nuance between companies and different markets, but 0:22:09.200 --> 0:22:12.159 these more broadly speaking, we definitely see declining revenues for 0:22:12.200 --> 0:22:15.399 almost all of these tacos year on year, and I 0:22:15.440 --> 0:22:17.680 think there's some really interesting trends that have come out 0:22:17.680 --> 0:22:19.920 of that. So I think a good one to look 0:22:19.960 --> 0:22:21.879 at is Votaphone, for example. You know, they're really a 0:22:21.960 --> 0:22:25.320 key pan European toco. They're actually exiting a lot of markets. 0:22:25.359 --> 0:22:28.119 You know, they've sold off their operations in Spain, is 0:22:28.200 --> 0:22:30.480 going to They're trying to exit Italy. There's a massive 0:22:30.480 --> 0:22:32.840 merger in the UK, so I mean there's one, but 0:22:33.440 --> 0:22:35.240 this is an example of the kind of massive M 0:22:35.280 --> 0:22:38.480 and A talks we're seeing across Europe. And you know, 0:22:38.520 --> 0:22:40.280 this is really so that companies can try to achieve 0:22:40.320 --> 0:22:42.679 that scale that they say is necessary to actually make 0:22:42.720 --> 0:22:45.879 the kind of big infrastructure investments that they need to 0:22:45.920 --> 0:22:48.600 remain competitive. So every kind of company is trying to 0:22:48.600 --> 0:22:51.440 scramble to find solutions in that sense. But we're also 0:22:51.480 --> 0:22:54.000 seeing a lot of foreign investment more hedge funds coming in. 0:22:54.840 --> 0:22:56.840 Whenever I talk to telco's and I ask, you know, 0:22:56.880 --> 0:22:59.119 where do you see this market in five years? Really 0:22:59.160 --> 0:23:00.640 no one has a clear pick sure or what it's 0:23:00.640 --> 0:23:03.000 going to look like, which is kind of frightening but 0:23:03.000 --> 0:23:05.159 also quite exciting I think for companies. So it'll be 0:23:05.680 --> 0:23:07.919 very interesting to see where that kind of talk is 0:23:07.960 --> 0:23:11.280 at ahead of this at the conference. 0:23:11.880 --> 0:23:13.960 Because one of the really big investments these companies have 0:23:14.000 --> 0:23:16.640 been making has been in five G networks. Are those 0:23:16.640 --> 0:23:18.840 investments paying off for these companies or when are they 0:23:18.920 --> 0:23:21.359 expected to a great question. 0:23:21.400 --> 0:23:23.360 I mean, I think what the best way to look 0:23:23.359 --> 0:23:25.959 at is to start with the Tulco infrastructure companies. So 0:23:26.000 --> 0:23:28.560 this is no Ki and Erickson. They really hold this 0:23:28.680 --> 0:23:31.800 kind of Nordic do compily very really interesting because they're 0:23:31.800 --> 0:23:35.040 at the mercy of network operators and no Key in 0:23:35.040 --> 0:23:37.640 their recent earnings was saying, look, you know, these companies 0:23:37.720 --> 0:23:40.240 have to start investing in five G if they want 0:23:40.280 --> 0:23:43.360 to really remain competitive with each other. And they say 0:23:43.359 --> 0:23:46.080 that these investments will start soon, but they really don't 0:23:46.119 --> 0:23:49.200 have a great idea of when that actually will happen. 0:23:50.119 --> 0:23:53.240 And I think, you know, we do see inflation decreasing. 0:23:53.240 --> 0:23:55.160 Of course, energy costs are lower than they have been, 0:23:55.960 --> 0:23:58.159 so I think there's some optimism that maybe this is 0:23:58.200 --> 0:24:00.920 the year where things start to turn around, but it's 0:24:00.960 --> 0:24:04.760 not a very clear picture when this actually could turn around. 0:24:04.960 --> 0:24:07.159 I also not mention, you know, not just with five G, 0:24:07.359 --> 0:24:11.080 which is obviously a massive focus for tacos, but there's 0:24:11.080 --> 0:24:12.639 also a lot of talk about open ram, which is 0:24:12.640 --> 0:24:16.119 basically a technology that allows network operators to pick and 0:24:16.200 --> 0:24:18.800 choose parts from different suppliers. There's been a lot to 0:24:18.800 --> 0:24:20.480 talk about open round for a long times when pushed 0:24:20.480 --> 0:24:22.880 by the US government, but it never really gained traction 0:24:23.000 --> 0:24:24.600 until the end of last year when at and T 0:24:24.720 --> 0:24:27.480 and that's some massive contract with Ericson to actually start 0:24:27.520 --> 0:24:29.400 rolling this out in the US. We see Deutsche Telcom also 0:24:29.440 --> 0:24:31.960 in Germany doing this with Nokia, and so I think 0:24:32.000 --> 0:24:35.600 that's also giving companies some hope, and that might that 0:24:35.680 --> 0:24:38.119 might also kind of help for Nokia and Erickson, and 0:24:38.160 --> 0:24:42.760 that might kind of stimulate more and more network infrastructure investment. 0:24:43.240 --> 0:24:45.879 So maybe this is the year, but I'll be curious 0:24:45.880 --> 0:24:48.199 to see if there's actually much optimism in Barcelona about it, 0:24:48.880 --> 0:24:51.280 or if this is just you know, another year. There's 0:24:51.600 --> 0:24:54.240 some hope, but never actually any any reality. 0:24:54.480 --> 0:24:57.960 Thanks too, Bloomberg's European Telecoms and Chips reporter Gillian Deutsch. There, 0:24:58.000 --> 0:25:00.399 I'm Stephen Carroll in London. You can catch us every 0:25:00.400 --> 0:25:03.720 weekday morning here for Bloomberg Daybreak Europe. Begetting at six 0:25:03.760 --> 0:25:06.800 am in London at one am on Wall Streets. 0:25:06.960 --> 0:25:09.919 Tom, Thank you, Steven, and coming up on Bloomberg day 0:25:09.920 --> 0:25:14.119 Break weekend, another closely watched central bank rate decision and 0:25:14.280 --> 0:25:17.959 earnings from a Chinese tech giant. I'm Tom Busby, and 0:25:18.080 --> 0:25:31.240 this is Bloomberg. I'm Tom Busby in New York with 0:25:31.280 --> 0:25:33.560 your global look ahead at the top stories for investors 0:25:33.600 --> 0:25:36.679 in the coming week. For markets in the Asia Pacific region, 0:25:36.760 --> 0:25:39.360 two things stand out in the week ahead, a rate 0:25:39.440 --> 0:25:42.800 decision from New Zealand Central Bank and an earnings report 0:25:42.880 --> 0:25:47.240 from online retail giant and search giant by Do for more. 0:25:47.359 --> 0:25:50.919 Let's get to Bloomberg's Doug Chrisner, co host of Daybreak Asia. 0:25:51.080 --> 0:25:51.359 Tom. 0:25:51.400 --> 0:25:54.479 We begin with Kiwi inflation. We know higher prices have 0:25:54.560 --> 0:25:58.040 been sticky in several economies, and New Zealand is no exception. 0:25:58.520 --> 0:26:01.160 The question now is over the response on the part 0:26:01.160 --> 0:26:03.880 of central bankers the Reserve Bank of New Zealand will 0:26:03.880 --> 0:26:07.159 meet in the week ahead. Recently, the swaps market has 0:26:07.200 --> 0:26:10.280 been pricing in a possible rate hike from the RBNZ 0:26:10.480 --> 0:26:13.359 in the coming months. How real is that possibility though? 0:26:13.800 --> 0:26:17.280 Let's bring in James McIntyre from Bloomberg Economics Asia. He 0:26:17.359 --> 0:26:20.399 joins us from our studios in Sydney. James, always a pleasure, 0:26:20.440 --> 0:26:22.719 Thanks for joining us. I'm going to ask you that question. 0:26:22.800 --> 0:26:27.440 How real is the possibility that the RBNZ raises rates again? 0:26:28.000 --> 0:26:28.200 Great? 0:26:28.240 --> 0:26:30.160 Look, thanks for having me, it's great to be here. 0:26:30.200 --> 0:26:33.000 And look, I think that I think it's not a 0:26:33.040 --> 0:26:37.199 real possibility, but their threat is there. The RBNZ have 0:26:37.400 --> 0:26:40.359 been quite hawkish still, even though they've done a lot 0:26:40.480 --> 0:26:43.160 and they went earlier than everyone else, and also even 0:26:43.200 --> 0:26:45.639 though they are getting things moving in the right direction, 0:26:45.720 --> 0:26:48.639 whether it's the inflation story with the New Zealand, the 0:26:48.720 --> 0:26:52.320 unemployment rate, labor capacity beginning to ease up, a lot 0:26:52.320 --> 0:26:54.720 of that is moving in the right direction. But they've 0:26:54.760 --> 0:26:58.159 stayed tremendously hawkish. There's a few reasons why, but I 0:26:58.200 --> 0:27:00.399 think that they're more a threat than anything. It's likely 0:27:00.480 --> 0:27:02.160 to become a reality over the next few months. 0:27:02.200 --> 0:27:05.080 When you look at inflation expectations, though, can you give 0:27:05.119 --> 0:27:07.480 me a sense of how that measure has been moving. 0:27:07.720 --> 0:27:09.760 Yeah, well, there is a there's a key measure of 0:27:09.760 --> 0:27:13.480 inflation expectations two year ahead expectations from a survey the 0:27:13.560 --> 0:27:18.639 RBNZ does, and those expectations actually dropped down to about 0:27:18.640 --> 0:27:21.280 two and a half percent. Now one to three percent 0:27:21.359 --> 0:27:23.520 is the rbnz's target band, and they want to hit 0:27:23.560 --> 0:27:26.720 that midpoint of two. So two and a half percent 0:27:27.160 --> 0:27:29.920 for inflation over the next two years is not quite 0:27:30.000 --> 0:27:33.199 there yet. But more than a quarter of the participants 0:27:33.200 --> 0:27:37.600 in that survey saw that headline inflation measure moving to 0:27:37.720 --> 0:27:40.560 the midpoint of the rbnz's banned by the end of 0:27:40.560 --> 0:27:43.640 this year. So things are moving in the right direction there. 0:27:43.800 --> 0:27:45.960 But I think that that might not actually necessarily be 0:27:46.040 --> 0:27:48.879 the thing that the rbnz's super worried about at this point. 0:27:49.320 --> 0:27:52.919 I think maybe that market pricing, which before traders had 0:27:52.960 --> 0:27:55.960 begun to move to price in the chance of another hike, 0:27:56.240 --> 0:27:59.240 that market pricing had seen those two year swaps. So 0:27:59.280 --> 0:28:01.919 if we think about the to your inflation expectations from 0:28:02.000 --> 0:28:05.200 economists to your swaps out there in markets, those had 0:28:05.200 --> 0:28:07.720 been beginning to price in more and more of the 0:28:07.840 --> 0:28:10.200 arbyens at easing, and that's something that we think that 0:28:10.240 --> 0:28:12.399 they might have wanted to or that might be beginning 0:28:12.480 --> 0:28:14.440 to start to try and talk against right now. 0:28:14.520 --> 0:28:16.920 So from what I've read about the key we inflation, 0:28:17.040 --> 0:28:19.719 the headn't line number is cooling a bit, but there 0:28:19.760 --> 0:28:22.439 are elements that are proving to be sticky. Where do 0:28:22.520 --> 0:28:24.280 we find those elements in the economy. 0:28:24.800 --> 0:28:27.520 Yeah, it's in the non tradable side of the New 0:28:27.600 --> 0:28:31.560 Zealand inflation basket. So we've had the tradable inflation falling, 0:28:31.600 --> 0:28:35.120 and that's especially things like the energy price decline and 0:28:35.480 --> 0:28:38.080 the goods price deflation that we've been seeing coming from 0:28:38.560 --> 0:28:40.640 all around the world, and those are the things that 0:28:40.680 --> 0:28:43.600 are kind of actually not really within the ARBs control. 0:28:43.880 --> 0:28:47.280 Those non tradable side of things. Services inflation in particular, 0:28:47.320 --> 0:28:49.640 they're proving a little bit stickier, and in the fourth 0:28:49.720 --> 0:28:52.680 quarter data that we had back at the end of 0:28:52.720 --> 0:28:55.360 January on the twenty fourth, they were quite a bit 0:28:55.400 --> 0:28:59.000 stronger than expected and not only by economists, but the 0:28:59.080 --> 0:29:01.880 arbiens it's own exit dictations for those. So that's that's 0:29:01.920 --> 0:29:04.680 a lot of the services side within the economy, rents 0:29:04.720 --> 0:29:07.880 being a bit of a challenge there and some of 0:29:07.880 --> 0:29:11.680 the other services pricing that some of the domestic labor 0:29:11.720 --> 0:29:14.880 costs might be a problem. For now we think that 0:29:14.880 --> 0:29:17.920 that things are on track for those to EBB. But however, 0:29:18.080 --> 0:29:20.480 the arben said, this is this dynamic that we're that 0:29:20.520 --> 0:29:24.000 we've got with the hawkishness and some of that market pricing, 0:29:24.320 --> 0:29:27.840 and even some of our economists peers thinking that the 0:29:27.920 --> 0:29:30.320 Arbenz might want to actually do a little bit more 0:29:30.560 --> 0:29:33.040 to take a little bit of extra insurance. So not 0:29:33.120 --> 0:29:35.440 quite there yet on the non tradables front, which is 0:29:35.440 --> 0:29:38.719 the part that from the domestic side and from the 0:29:38.800 --> 0:29:42.239 what the Arbenz can control where they've probably got their 0:29:42.320 --> 0:29:43.880 their maximum point of nervousness. 0:29:43.880 --> 0:29:44.080 Stay. 0:29:44.120 --> 0:29:46.960 When I think of higher prices in New Zealand, the 0:29:47.000 --> 0:29:49.720 property market comes to mind when you look at how 0:29:49.800 --> 0:29:53.120 home buyers have been behaving in an environment where rates 0:29:53.360 --> 0:29:56.520 have been elevated, at least on the mortgage side. Has 0:29:56.560 --> 0:29:59.680 there been a shift? Is are sales contracting a bit, 0:30:00.320 --> 0:30:03.440 our prices coming down? What's the behavior of the housing market? 0:30:03.480 --> 0:30:05.960 Pit, Yeah, we've had a bit of a turn in 0:30:06.000 --> 0:30:08.200 the housing market. So we had been in a decline 0:30:08.280 --> 0:30:11.880 as the housing market was responding to the rate hikes 0:30:11.880 --> 0:30:15.440 thus far. But as the RBNZ has been on that pause, 0:30:16.360 --> 0:30:19.280 we have seen some life come back into the property market. 0:30:19.480 --> 0:30:21.880 Now part of that has been the very very strong 0:30:21.960 --> 0:30:24.800 demand for property that we've seen. So like Australia, New 0:30:24.840 --> 0:30:29.680 Zealand has been recently experiencing a really massive rebound in 0:30:29.720 --> 0:30:33.200 its migration. We're getting population growth in the high twos, 0:30:33.760 --> 0:30:37.400 possibly getting towards three percent, and that's really showing up 0:30:37.440 --> 0:30:39.360 across a whole range of parts of the economy. But 0:30:39.400 --> 0:30:41.560 in the property sector it's showing up in extra demand 0:30:41.600 --> 0:30:45.040 for rents, an inflation problem for the RBNZ. And on 0:30:45.160 --> 0:30:47.520 the price side of the market, we're seeing a little 0:30:47.520 --> 0:30:49.560 bit of a pickup and activity a little bit more 0:30:49.560 --> 0:30:52.360 confidence than some of those prices starting to rise. So 0:30:52.560 --> 0:30:54.960 that's again one of the sort of if you're on 0:30:55.000 --> 0:30:57.800 the camp of cutting rates soon in New Zealand, you'd 0:30:57.800 --> 0:31:00.360 be looking at where the economy is going in terms 0:31:00.360 --> 0:31:03.800 of activity, consumer spending, the unemployment rate, and where the 0:31:03.800 --> 0:31:06.840 inflation track is ultimately going. But if you were going 0:31:06.880 --> 0:31:08.960 to be a little bit hawkish and sort of thinking 0:31:08.960 --> 0:31:12.120 that the RBNZ could hike that property sector and the 0:31:12.160 --> 0:31:15.680 little bit of a migration stirred revival there, along with 0:31:15.720 --> 0:31:18.160 inflation on the non tradable side being a little bit 0:31:18.160 --> 0:31:21.240 too high. They're the kind of factors that you're balancing there. 0:31:21.360 --> 0:31:24.160 I'm sure it's going to be a very interesting conversation 0:31:24.360 --> 0:31:26.560 around the table at the meeting of the Reserve Bank 0:31:26.600 --> 0:31:28.680 of New Zealand in the week ahead. James, thank you 0:31:28.760 --> 0:31:32.160 so much for helping us preview the meeting. James McIntyre 0:31:32.200 --> 0:31:35.800 from Bloomberg Economics Asia. Up next we go to Hong 0:31:35.920 --> 0:31:40.280 Kong and the other host of Daybreak Asia, Brian Curtis Doug. 0:31:40.440 --> 0:31:42.720 We'll be having a chat with Ernie bot in the 0:31:42.800 --> 0:31:46.480 coming week as by Do reports its fourth quarter earnings. 0:31:47.040 --> 0:31:51.400 The ernie chatbot has been generating considerable excitement for Baidou 0:31:51.520 --> 0:31:55.000 as it looks to capitalize on AI. Erniebot is based 0:31:55.040 --> 0:31:58.920 on Baidu's internally developed large language model, and like others, 0:31:59.000 --> 0:32:03.080 it can generate tech images and videos. Bidou said at 0:32:03.120 --> 0:32:06.320 the end of December that the chatbot had attracted more 0:32:06.360 --> 0:32:09.680 than one hundred million users. We thought it would be 0:32:09.680 --> 0:32:11.440 a good time to take a look at how baid 0:32:11.600 --> 0:32:14.640 and other companies in Asia are doing on the generative 0:32:14.720 --> 0:32:18.040 AI front, where the buzz seems to be a little 0:32:18.080 --> 0:32:20.440 bit less than what we're hearing in the United States. 0:32:20.520 --> 0:32:22.720 And joining us now for a look at baido is 0:32:22.840 --> 0:32:28.120 Jumping Huang, who covers technology companies for Bloomberg News. Jumping 0:32:28.160 --> 0:32:31.479 thanks very much for coming into our studios. So Bidu 0:32:31.560 --> 0:32:34.400 is competing against ten Cent and Ali Baba and others 0:32:34.440 --> 0:32:37.400 to commercialize this as far as we know, and I 0:32:37.400 --> 0:32:39.560 know we won't know for sure until we get the 0:32:39.600 --> 0:32:42.480 earnings in the coming week, but as far as we know, 0:32:42.600 --> 0:32:44.880 how well is byd monetizing AI. 0:32:45.680 --> 0:32:48.920 Right before we get deep into earning BA, I would 0:32:48.920 --> 0:32:52.840 like to know that the fundamental business for Baidu is 0:32:52.920 --> 0:32:57.720 to search advertisement and it's sort of using advertisement revenue 0:32:57.760 --> 0:33:03.200 to fund its risky projects like Erniba. So for the 0:33:03.240 --> 0:33:07.440 results we were seeing the coming week, it's essential to 0:33:07.480 --> 0:33:10.560 see if it's ever a NewView is picking up again 0:33:11.000 --> 0:33:14.720 during a very difficult time during China's economy. 0:33:15.080 --> 0:33:15.680 But back on. 0:33:15.720 --> 0:33:19.240 Learning, Yeah, it's sort of the leader, at least in 0:33:19.320 --> 0:33:23.560 the Chinese internet sphere because it's the first to launch 0:33:23.600 --> 0:33:26.400 the service to the public and it already started to 0:33:26.520 --> 0:33:30.720 charge a monthly subscription fee for a premier tier of 0:33:30.760 --> 0:33:35.880 the Arniba, which costs a dollar promounts. So monetization is 0:33:35.960 --> 0:33:39.040 kicking off, yes, but we still have to wait and 0:33:39.080 --> 0:33:42.560 see to see how big of an impact it will 0:33:42.600 --> 0:33:44.360 have to byduce top line. 0:33:44.400 --> 0:33:46.800 Now, I know that China has enforced a law to 0:33:46.920 --> 0:33:52.040 regulate this area. It's something that China perhaps is in 0:33:52.120 --> 0:33:56.000 advance over other places like the United States and Europe 0:33:56.040 --> 0:33:59.280 and others. What do we know about how tough this 0:33:59.400 --> 0:33:59.960 new law is. 0:34:00.840 --> 0:34:04.920 Yeah, so what China did is like for every generative 0:34:05.000 --> 0:34:09.080 AI service to get online to be used for Chinese 0:34:09.200 --> 0:34:12.840 users and need to get the pre approval from China's 0:34:12.920 --> 0:34:19.719 top internet regulator, the CAC, and back earlier last year, 0:34:20.360 --> 0:34:24.880 the CAC issued its first batch of approvals to Chinese 0:34:24.960 --> 0:34:28.160 tech giants, including Baidu. So we got like around that 0:34:28.239 --> 0:34:32.920 doesn't like services that was greenlight by Beijing. And that's 0:34:33.000 --> 0:34:37.560 also to say that also means that foreign services like 0:34:37.880 --> 0:34:41.920 GPT and the ones from Google and Microsoft will likely 0:34:42.160 --> 0:34:45.920 never be available within China's internet. So we're sort of 0:34:46.000 --> 0:34:51.360 like seeing yet another episode of the parannel universe of 0:34:52.000 --> 0:34:55.000 the China Internet. Versus the global Internet. 0:34:55.320 --> 0:35:00.680 And how different is the approach of Chinese chatbot compared 0:35:00.719 --> 0:35:03.759 to those in the West, particularly in light of the 0:35:03.800 --> 0:35:05.880 overhang of the legislation that's in place. 0:35:06.040 --> 0:35:09.520 The Traine spot will like actually do a lot of 0:35:09.640 --> 0:35:16.400 censorship to prevent some questionable answers from the bots. Whenever 0:35:16.440 --> 0:35:21.600 you touch upon politics or human rights or actually if 0:35:21.640 --> 0:35:25.880 you're trying to type the name of Chinese president, in 0:35:26.000 --> 0:35:28.960 many of the Chinese spots, they won't even let you 0:35:29.239 --> 0:35:34.319 to continue the conversation. So I think data is one thing. 0:35:34.560 --> 0:35:37.600 When we talk about whether it's like training data or 0:35:37.640 --> 0:35:42.320 like the output data, it's sort of filtered and self censored. 0:35:42.719 --> 0:35:47.960 That could have a negative impact on the effectiveness of 0:35:48.000 --> 0:35:49.040 the Chinese spots. 0:35:49.200 --> 0:35:51.760 And we might think that the search leader in China 0:35:51.840 --> 0:35:56.000 would have almost a step ahead or a leading start 0:35:56.040 --> 0:35:59.560 against other companies. But I understand that Chinese companies are 0:35:59.680 --> 0:36:03.600 kind of of well armed with ample CAPEX built into 0:36:04.280 --> 0:36:06.759 the spending model for this year. Are we expecting to 0:36:06.800 --> 0:36:08.080 see a lot of money spent on this? 0:36:08.600 --> 0:36:12.640 Yeah, Actually, it's quite funny. The way it's calling China 0:36:12.760 --> 0:36:16.360 is a wall of one hundred models, meaning like whether 0:36:16.400 --> 0:36:19.239 it's like tech giants or startups there, they're trying to 0:36:19.239 --> 0:36:23.440 build their own models instead of applications. Because in the West, 0:36:23.960 --> 0:36:28.000 GPT is a clear winner, and in China, like not 0:36:28.200 --> 0:36:31.239 everyone's buying by do well be the Chinese version of 0:36:31.360 --> 0:36:36.240 open Ai. Yet, so venture capitalists are trying to fund 0:36:36.360 --> 0:36:41.080 a lot of like rival models and for robbing THEE 0:36:41.280 --> 0:36:44.040 is trying to argue, hey, let's stop building model because 0:36:44.040 --> 0:36:47.880 it's a waste of resources. Let's try build applications on 0:36:47.960 --> 0:36:48.680 top of learning. 0:36:49.680 --> 0:36:53.439 And if we were to set aside generative intelligence and 0:36:53.600 --> 0:36:57.760 this push on developing a chatbot, how does Buyd's earnings 0:36:57.760 --> 0:36:58.400 look otherwise? 0:36:59.520 --> 0:37:03.839 Yeah, that goes back to my first point about advertising. 0:37:04.440 --> 0:37:08.759 So in advertising, we know it is closely tracked with 0:37:09.040 --> 0:37:12.760 China's macro economy, which is not in a good shape 0:37:12.800 --> 0:37:19.120 because it's dealing with a couple of fundamental problems like deflation, use, unemployment, 0:37:19.360 --> 0:37:23.759 and a shrinking population. And for bay Do, it's the 0:37:23.800 --> 0:37:26.719 bread and butter of its ad revenue comes from the 0:37:26.840 --> 0:37:33.799 search revenue, and traditionally automobile makers and travel agencies will 0:37:33.840 --> 0:37:37.200 be a big spender in search ads. It would be 0:37:37.239 --> 0:37:40.520 great if the company provide us any breakdown or color 0:37:40.560 --> 0:37:44.279 about who's spending more in terms of search ad and 0:37:44.320 --> 0:37:47.600 who's spending less, so we will get a better idea 0:37:47.680 --> 0:37:49.919 of where the Chinese economy is going. 0:37:50.160 --> 0:37:52.879 Japping, thanks so much for joining us. Chapping Huang, who 0:37:52.920 --> 0:37:57.239 covers technology companies for Bloomberg News. I'm Brian Curtis along 0:37:57.280 --> 0:37:59.799 with Doug Christner. You can catch us every weekday here 0:37:59.840 --> 0:38:02.839 for or Bloomberg day Break Asia, beginning at nine am 0:38:02.880 --> 0:38:05.880 in Hong Kong and six pm on Wall Street. 0:38:06.320 --> 0:38:08.799 Tom thank you, Brian, and that does it for this 0:38:09.000 --> 0:38:11.720 edition of Bloomberg day Break Weekend. Join us again Monday 0:38:11.719 --> 0:38:14.080 morning at five am Wall Street time for the latest 0:38:14.120 --> 0:38:16.640 on the market's overseas and the news you need to 0:38:16.640 --> 0:38:20.000 start your day. I'm Tom Busby. Stay with us. Top 0:38:20.040 --> 0:38:23.680 stories and global business headlines are coming up right now.