Daybreak Weekend: US Eco, International Energy Week, Softbank Earnings

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This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we'll
look at some delayed economic data in the US and
how they may impact FED policy. I'm Nathan Hager in Washington.
I'm Caroline Hedkit in London, where we're looking at the
global energy sector.
I'm Dot Krisner looking at softbanks approaching earnings, as well
as the company's bets on artificial intelligence.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Good day to you. I'm Nathan Hager. We begin today's
program with some key economic data in the US. It's
coming a little late thanks to the recent government shutdown,
but we do expect to get the January employment report
this Wednesday, so no jobs Friday this month. The Consumer
Price Index that had been scheduled for this Wednesday is
coming out this Friday, so we get a CPI Friday instead.
Here to get us ready for the figures and how
they may affect FED policy. Is Stuart paul Us, economist
with Bloomberg Economics, starting to get a little used to
this data coming a touch late with these recent government shutdowns.
Are we expecting any distortions in the data due to
the slight lapse in timing on these numbers?
Stuart, The distortions will probably be pretty limited. Data collection
continued pretty much uninterrupted, so I think that the quality
of the data should be about fine. What we're expecting, though,
is a pretty poor reading for headline job gains. We're
expecting the January report to show just about fifteen thousand
jobs added during the month of January, and that's about
a quarter of what the consensus estimates it estimates we're
going to see. The thing that's most interesting, Nathan, is
that beyond the actual monthly job gains number, we're just
going to have a lot of technical adjustments that are
included in the January report. We're gonna have an adjustment
of the birth death model. We're gonna have the official
rebenchmarking of the data. We've already seen a preliminary rebench
marking showing that about nine hundred eleven thousand jobs are
going to get stripped out of the data. So the
job total job number is going to be revised down
by about nine hundred eleven thousand jobs. So there's just
gonna be a lot of quirks in the report itself,
beyond even the slow pace of hiring that we're expecting
the report to show.
We got some clues into that slow hiring in some
of the latest data leading up to this report. The
latest weekly jobless claims came in a little bit higher
than expected. And that pretty eye popping number on layoff
notices from Challenger Gray and Christmas as well. Does that
factor into some of your analysis on why you're a
little bit below consensus on the top line number for payrolls.
It just paints a picture of a cooling labor market
and that's been one of our major themes for several
months now. So, as you mentioned, Challenger job cuts number
shows about one hundred and twenty percent increase year on
year in total job cut announcement. The initial jobless claims
data popped last week, and when we also think back
to last week's December JAULT report, it really showed a
major cooling in labor demand in the month of December.
So December through January, all the way through January, labor
demand had just been cooling pretty dramatically. So we think
that when we finally see this nonfarm payrolls report in
the middle of the next week, it's going to add
to our conviction that the labor market is cooling and
it's not a material source of inflation pressure.
Right now, the theme we've been hearing is low, higher,
low fire labor market. What's driving the dynamics in the
labor market right now, we're starting to see a little
bit more evidence of this weakness.
Firms are really reassessing their labor needs right now. I
don't think that firms are fully realizing the efficiency gains
to be had from AI. I don't think that they
know what to even expect as they deploy AI. But
right now they're really hitting the brakes on headcount. And
when we look at first, especially small business hiring plans,
right now they're really just hitting the brakes and looking
to see how much they could expand how much AI
will crowd out their need for additional headcount and ultimately
what they'll need. And at this point, this sort of
turn of the year business plan reassessment point in time,
that's really what we're seeing from firms. They're just reassessing
how much labor they're actually going to need and so
how much they're going to need to hire throughout this year.
Is this payrolls report going to raise questions for you
about whether the FED was right to pause on interra
straight cuts last month.
Well, I think that the FED is focused right now
on the balance in the labor market and whether that
balance in the labor market is feeding through into inflation.
They knew going into the January meeting that the labor
market was tilted toward an excess supply of workers. That
point was only confirmed in the December Jolts report, which
showed about one point two unemployed workers per job opening,
and so the FED already understood that there was this
excess supply of workers. I think that the decision to
pause is really uh more contingent on what's going on
on the goods side of the market, whether we're going
to see additional inflation pressure coming from tariff passed through,
and I think that the jury is still a little
bit out on that front. When we dig into corporate data,
it looks as though we're passing through peak tariff pass through,
but it seems like the Fed is taking this cautious
approach on the inflation side, really worried about goods more
than labor.
Well, that gets us to the CPI print that we're
expecting on Friday. What are your expectations there when it
comes to inflation.
I think that the monthly print is going to be hot.
I think that we're going to see about a zero
point three percent month on month pace of both headline
and core inflation. When we look at PMI data, firms
were marking up their prices. They were reporting higher input costs.
I think that inventories were a big story and running
down inventories during the holiday season. Now firms are feeling
a little bit higher input costs and they're starting to
try to pass that through to customers once again. And ultimately, however,
we think that pricing plans are pointing toward cooling inflation pressures.
But this January CPI report we think is going to
end up showing I think quite a bit of inflation
pressure in January.
Thanks for the Stuart, good having you with us. It's
Stuart Paul, us economist with Bloomberg Economics. Let's take a
look now at some stocks making news in the week ahead.
I'm Nathan Hager, joined by Bailey Lipschultz, senior equities reporter
for Bloomberg News. Bailey, it looks like Wednesday is going
to be a particularly busy day on the earnings for
we got several big names reporting in the middle of
the week. So let's start with Cisco. The tech earnings
aren't quite done with us yet.
Huh No, not done with us yet, and we're pivoting
to some of those I don't know, actual companies that
make real tangible goods that you can hold, and Cisco's
going to be a big one given the stocks up
more than thirty percent over the last year and a
lot of expectations are a big focus on can they
maintain the momentum that we've been seeing given the jitters
broadly speaking around software, AI and kind of the broaderself.
Yeah, we've seen the sub massive sell off, particularly and
software stocks after the anthropic AI agent was announced. So
how could that potentially affect the results we see from
Cisco particularly well.
I think the big question comes back to what is
management guide towards for the remainder of twenty twenty six
And everyone seemingly is marking down their software expectations. But
is a company like Cisco that makes the hardware and
is able to at least benefit from a huge push
of AI investments. The question will be is there actually capacity?
Is their capacity constraight and are we going to hit
a point where maybe some of these companies, the likes
of Meta and Google, who seemingly are not slowing down
on their investment, are we going to see that potentially
hidden inflection point or a peak and that'll be critical
for investors. But again, this is a stock that has
continued to rally over the last few days and weeks,
as opposed to, as we mentioned, the big sell off
that we've seen for anything that could lose out to
AI making their kind of software relevant.
Along with Big we're waiting for earnings from Big Max.
What do we expect from McDonald's this week, Bayley, There's
a lot.
Of optimism about this, how McDonald's is positioning benefiting from
tax rebates for the lower end consumer benefiting potentially from
your upper and middle class downshifting some of their spending.
This is a company that, if you look at the
chart on a twelve month basis, looks a bit like
an EKG. But right now it's going to close at
another record high. So this is a lot of excitement
around their new offerings. It does seem like when you
talk to analysts or look through some of the notes,
this is one of the companies that could benefit as
a fast food operator, not only here in the US,
but globally speaking. So again, does it turn into to
your point of price perfection example remains to be seen,
But a lot of excitement.
No, there are a lot of questions, aren't there about
whether the pivot, the return of the extra value meal
is going to eat into McDonald's margins potentially.
Well, that's the question when you look at a company
like McDonald's, or you kind of look broadly speaking at
some of these companies who are needing to rethink their playbook,
does that impact margins? And are investors willing to underwrite
maybe more narrow margins for actually a return to growth
or seemingly bigger kind of beat on the top line.
But the questions do come back to your point. If
you're using better deals or trying to get people in
the door, and you're competing with other peers who are
catering towards people who don't want to spend up to
eat out or eat fast food, how does that ultimately
impact the bottom line. But it does seem like again,
at least the cell side is very optimistic, and I
do want to call out the fact that if investors
are rotating away from fast growing tech stocks, McDonald's is
not a bad place to park your money. And we've
been seeing that play out over the last few weeks.
And along with McDonald's and Cisco Systems, we're going to
get earnings as well from Tea Mobile on Wednesday, I
think we had some recent beats, didn't we from Verizon
and AT and T. Where does that leave the country's
most valuable cell phone provider.
It's kind of stuck in a rut. If you look
at the stock price right now on Team Mobile really
move in sideways. Did rally from a low at the
end towards the end of January of one hundred and
eighty three dollars. But when you compare or overlay their
charts against AT and T to your point or Verizon,
those stocks look like rocket ships. Verizon over the last
week went from thirty about forty dollars a share to
forty seven dollars a share. On the flip side, AT
and T is up pretty sharply after rallying after its results,
So it does seem like investors maybe are baking in
some optimism. There was a bit of a lift which
we typically do see with mobile or spectrum providers. We
do see with airlines when one company beats, people get
a bit more optimistic. But if we're looking at a
T Mobile stock that on the last twelve months is down,
it doesn't seem like investors are maybe giving them the
credit to benefit again from the optimism and from what
all intents and purposes, kind of looks like a little
bit like a rocket ship as much as it could
for a communications company. What we saw for Verizon again
rallying twelve percent last week after their results.
So what are the potential big growth drivers for T
Mobile in this quarter?
Focus is going to be on how are they competing
with AT and T? With Verizon, can they continue to
compete on price? We all see the Verizon ads about
how if you can swap and they can beat your
price for a mobile provider. The big other question is
are they going to benefit potentially from what we've seen
play out with SpaceX's starlink direct to consumer potentially from Starlink.
The big question also is when you look at these
companies in their propensity to return capital, whether that's buybacks,
whether that's through dividends. Management's commentary around that I think
also will be closely watched.
A lot to watch just on Wednesday for earnings. Thank
you for this, Bailey Lipschultz, see your equities reporter for
Bloomberg News. And coming up on Bloomberg day Break weekend,
we'll look ahead as global energy leaders convene in London
for International Energy Week. I'm Nathan Hager, and this is Bloomberg.
This is Bloomberg Daybreak weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Nathan Hager in Washington. Up later in our program, we'll
look ahead to earnings from the Japanese holding company soft Bank.
But first in the coming days, global energy leaders convene
in London for International Energy Week. Policymakers chief executives, academics,
and even influencers will gather united by a shared focus
on growth and security during an increasingly disordered energy transition.
For more, let's go to London and bring in Bloomberg Daybreak.
You're a banker, Caroline hebger Nathan.
In recent weeks, the conversation around global energy has been
focused on the Middle East to oil markets have been
calibrating the prospect of a conflict between the US and Iran.
The tension is built up as President Donald Trump has
dispatched an armada to the region and a US jets
shut down an Iranian drone. Trump said recently that the
two sides are now talking, Deran's foreign ministry has expressed
hopes that the process could bear fruit. There's also a
growing standoff, though, between the White House and Iraqi politicians
over who should be Iraq's next prime minister, which could
destabilize another OPEC nation. So geopolitics and hard power will
likely be high on the agenda at the upcoming International
Energy Week, where participants are expected to discuss issues including
energy sovereignty and industrial competitiveness, but there are many other
aspects touching on global energy needs that will also feature
including the need for energy in supporting evolving technology. China's
ramping up its energy installations. Elon Musk has worn that
energy is a limiting factor for AI deployment. Microsoft's vice
president of Energy Bobby Hollis says that energy will play
a central role in the future of Microsoft.
I think we have a lot of history to support
how energy is needed and how it can actually be
used efficiently to support infrastructure for data centers, including AI.
So the opportunity really is to take advantage of what
we saw when cloud developed, and we found lots of
opportunities for efficiency. So there's a wide range of expectations
and planning numbers out there, and you do have to
plan for a larger number so that you can make
sure that the energy is there to serve you. But
we do believe that there's going to be significant efficiency
that's going to come from deploying AI and figuring out
how we can actually make sure that we're using every
single mega megawat hour in the most efficient way possible.
That was Bobby Hollis from Microsoft speaking that to Bloomberg Television.
So how will the energy sector fuel the next technological
era and will geopolitical uncertainty overshadow its progress. Joining me
now Bloomberg's climate opinion columnist Laura will and our energy
reporter Aim and Farhat. Welcome to both of you, and
thanks for your time.
Aiman.
Can I start with you just specifically? I suppose on
the conference and its aims, it is going to gather
a lot of people together at a very pivotal moment.
Yeah.
I mean, it's an energy conference, but really energy across
all types of oil, gas, but also power electricity. You know,
we're talking about AI and data centers and trying to
power them. ePower economies. A lot of that is how
do we build more generation, whether that's gas plant, solar farms,
you know, all this stuff, and how we bring together
different stakeholders like government officials, companies and some of the
people who are funding this to make that happen. I
think this kind of conference really does that.
Yeah, Lara. A lot of the discussion surrounding energy is
still about fossil fuels, though. How motivated our policy makers
our businesses to shift the conversation towards renewables?
Yeah, well, you know, when it comes to policymakers, I
think it depends on the policy maker, you've got someone
like Ed miller Bandon, that's his big mission. He's fully
committed to the energy transition. He wants to rally support
for you know, him investing the UK's money in renewables,
for a lot of other policy makers. I think now
zero has become a politically charged thing and I think
that makes it slightly harder to communicate. So you know,
for example, with offshore wind, we had the results of
the latest subsidute auction in the UK in January and
it was a record auction in terms of capacity. It
was really positive, but it was also more expensive than
the last auction and more expensive than wholesale power prices,
and it kind of does against the overall story that
has been in recent years that renewable prices are coming
right down. And to be clear that you know, this
capacity that the UK secured will still help bring down
power prices in the future by reducing the amount of
gas that has to be bought, but it's a more
complicated story to tell voters who are concerned about their
energy bills today, and I think potentially there is you know,
policy makers are nervous about rocking the boat, especially with
far right parties like Reform on the rise. You know
that leaves a void then, which is filled by people
who have an interest in talking about fossil fuels.
Yeah, and the distinctly sort of pro oil and gas
stance of the current White House surely factors into that too.
In terms of the energy transition though. Aimon last year
I was speaking to core Weaves UK and Global Heads
about their rapid data center expansion plans for the UK,
and it really is all about the need for energy.
How are people thinking about that now?
Yeah?
When I talk to some of these people trying to
build and develop better centers, which is really in line
with what the government wants. You know, it's just about
how quickly can they get powered. They don't really care
much about price, it's about can they connect to the grid.
And as you've seen before, I mean, you know we're
talking about gas still being important. I mean, right now,
you know, gas generation. Building a gas power plant could
be the fastest way to do that in the US.
That's what you know Trump has been talking about. You know,
if we're trying to do it with renewables, it will
take a lot longer. And some of the companies trying
to develop these data centers don't want to wait that long,
so then it you know, we risk maybe losing out
on some of this momentum the data centers have right now.
So it really it is all about getting that power
as quickly as possible and trying to see how government
can facilitate that.
For companies, Laura, how much broad support is there still
for the energy transition.
Among corporates. I think I think there is broad support. Really,
I think from what from people I've spoken to, there's
been a lot of green hushing going on. So the
toxicstal atmosphere makes it hard to kind of shout about
climate change unless you want to draw the wrath of
the US President. But you know, the investments are still
being made in renewables, and that's partly because you know,
it is just cheaper and being energy efficient is really
good for business, and reducing operating costs has always been
a motivator for to operates, and you know, really it's
a much more powerful one than doing the right thing.
So while you might not hear businesses going on about
climate changing carbon emissions, the investments are still being made,
and I think there is still broad support for the transition.
I am in how are businesses dealing with the uncertainty
around the kind of energy backdrop. I mean, obviously we're
not in a period of such volatility of prices as
we saw after Russia's invasion of Ukraine, but it's still
a highly uncertain environment.
Yeah, I mean wholesale power prices which feeds into household
bills but also businesses bills. They are still elevated and
people are still worry about what the future could bring
because you know, when it comes to all these government
plans and all these things we talk about clean power
twenty thirty, breaking down bills, these are all just forecasts
and a lot can change between now and then, whether
that's you know, how much it cost to build an
official wind farm, how much the price of gases soment.
Companies who are making plans to maybe build a factory
and do all this, they have to really be sure
that will really putting their model some uncertainty around the
energy prices, and right now there isn't much certainty around that.
We can try to model things, but things can keep changing.
And in terms of policy here in the UK, how
much do you think is changing in terms of capacity
and sovereignty and all those sorts of discussions for you know,
the UK's policy makers.
Yeah, I mean after what happened with the Russian invasion
of Ukraine, there was definitely a reckoning of we have
to have some more energy sovereignty and clean Pawer Tway
and thirty. It does bring down bills, It's that's important
because renewables is achieved, but also it means that our power
will be generated in the UK and that's a big
push for the government. You know, they've set up gb Energy,
a kind of state owned utility that will help to
develop some of this. And it's a lot about trying
to be in control of our own energy because that
also means you can control your economy, your growth, and
not be reliant on outside partners as much.
That's interesting, Lara. Also a topic on the agenda at
this event that's taking place in London is Africa's energy transition.
How much of a focus is there on clean energy
for emerging markets.
Yeah, well, you know, the African continent is like one
of the settings for one of the most like positive
renewable stories out there right now is and absolutely huge
booming solar installations. I think they jumped fifty four percent,
and that's you know, both utility scale and ones you know,
on on people's roofs, and so it is, you know,
it is there is a big focus on that in
emerging markets. More broadly, I think they're you know, there's
a huge opportunity. People that often talk about them, you know,
leap frauding fossil fuels because you know, part of the
motivation for these tentries is simply expanding access to energy
full stop and clean. You know, renewables are cheap, so
it's a good way that they can you know, expands
energy access. But they receive so little of the kind
of global investment and so that's the main thing that's
holding them back. So I'm sure there'll be lots of
conversations about how to increase the funds going to these markets.
Laura, what do you think the biggest challenges to the
energy transition then are going to be in the years
to come? If you say, you know, as you mentioned
for emerging markets, is actually just getting access to electricity
and to power, what are going to be the big challenges?
Do you think that maybe the participants of this event
are going to be well versed in I.
Think I think partly is you know, improving grid infrastructure.
We used to a kind of on demand model and
so now we've got to have much more capacity and
also work in energy storage because renewables are intermittent. I
think so I think, you know, just improving grid infrastructure
all around the world is going to be a big challenge,
and I think, you know, the kind of rise of
AI will also be a big challenge. There's there's places
where you know, coal power plan have been kept going
just because of the energy demand from new data centers,
and so AI has a potential to help us, you know,
improve energy efficiency, but it could also be a drawd
and it really just depends on which way that trend goes.
I mean, what are you thinking about then, in terms
of what people are going to get out of this event,
in terms of what corporates are hoping to gain from it,
What do you think might emerge in the days ahead?
Yeah, I mean, I think when you look at what
the topics are, who the speakers are, it's very clear
that now we're at the stage in the UK and
Europe and even elsewhere that it's less about kind of
proving the case for the transition, but more understanding how
we're going to deliver it and what the impacts will
be on consumers and the challenges ahead. I mean, I
think it's understand now that I mean, as Laura said,
you know, the economic case in lots of cases, is there.
I mean, it's a cheapest form of power. It's more
about how do you actually now build these things, make
this happen, and how the governments play their part in that.
Yeah, and make it a priority. Thank you so much
to both of you for your I'm really great to
speak to you. That is our energy reporter Aimin Farhat
and Bloomberg's climate opinion columnist Lara Williams. My thanks to
both of you. I'm Caroline Hepge here in London and
you can catch us every weekday morning for Bloomberg Daybreak.
Youre at beginning at six am in London. That's one
am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg day Break weekend,
we'll look ahead to earnings from the Japanese holding company SoftBank.
I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
Daybreak Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Nathan Hager in Washington.
This week we get the latest results from Japanese holding
company SoftBank. Let's get to Bloomberg's Doug Chrisner for that.
He's host of the Daybreak Asia podcast.
Nathan SoftBank founder Masayoshi's son has met the farm on
artificial intelligence. The company is one of the largest backers
of open Ai.
Now.
Some of the funding has come from the sale of
soft Bank's earlier investments. As one example, in the fourth
quarter of last year, soft Bank sold at steak in
Nvidia for about five point eight billion dollars. It also
sold part of its steak in t Mobile for nearly
nine point two billion. For a look at SoftBank, I'm
joined by Bloomberg's Alice French. She covers the Japanese equity market,
and she joins us from our studios in Tokyo. Thank
you for being here. What are we expecting to learn
from soft banks results?
So soft Bank is interesting, right because it's kind of
more so become almost a proxy for open AI or
for sort of AI sentiment in general in Tokyo, and
I think investors are looking much more toward you know,
any comments from some around future investment plans current returns
on investment rather than the actual kind of earnings numbers themselves. Now,
obviously the open Ai investment is sort of the big
top line issue here, and we know that soft Bank
is kind of betting on who it's the whole house
on open Ai right recently this additional thirty billion dollar investment,
and whilst that you know, has allowed the stock to
kind of ride on the coattails of the AI boom
over the past year and it did really well in
twenty twenty five, I think caution is really starting to
kind of come to the fall now, right. I mean
we saw this with Microsoft results recently in the States,
these kind of worries that all these companies are just
pumping so much money into AI and when are we
actually going to see the returns and what does it
mean for their credit risks and things like that, And
I think if it starts to look kind of irresponsible
this investment, then that's something that's really going to weigh
on sentiment, right, So any kind of language around that,
I think is something that investors will really be looking for.
Away from the story on open Ai, help me understand
what SoftBank is doing in the hardware space as it
relates to AI. I think. In the last week the
company announced a collaboration with Intel on developing cutting edge
memory technol.
Soft Bank wants to make sure that they are kind
of jumping on all of these tech bandwagons, right, and
so the Intel story is, yeah, I mean, we know
that memory prices are set to saw they're already up
a lot because of all of this demand for AI products,
and so soft Bank trying to kind of hitch a
ride on that too. Something else they've also spoken about
in recent months is robotics, right, so this idea of
physical AI. We saw this acquisition of ABB's robotics arm
back late last year, and so they're kind of trying
to get their fingers in all of the AI pies,
I think, and it seems like memory is going to
be the biggest one in the coming months.
What do we know about soft banks commitments to invest
money in the United States? How is that process going?
This is the big ongoing question, right. So we know
that there is this five hundred and fifty billion supposed
packed between the US and Japan as part of this
kind of tariff deal. Now all of it's still sort
of quite up in the air.
Now.
We kind of get the sense that we might start
to get some of these deals getting announced in the
next kind of few weeks or months, but it's all
been quite hush hush. We know that soft Bank is
going to be playing a big role in it. Of course,
it's already a big part of the Stargate project with
those US firms, and we know that Son has had
meetings in the US and and with Trump, so they
will be playing a big role there. But again that's
another potential risk, right. This is all money that they
are throwing at an area where competition is rising, and
there's already so much caution and worries about overvaluation in
the stock market. So I think it really could go
either way in terms of soft banks performance.
Do you have a sense of how soft Bank shareholders
are feeling about what Masayoshi sun is up to these days?
People are really split, right, I mean, if we just
look at what's happened so far this year, soft Bank
is actually down around two percent, and that's compared to
a seven percent rise for the topics. I mean, Japanese
stocks overall have been doing pretty well, partly on this
kind of takaichi trade ahead of ahead of the election.
But I think in the last few weeks, I would say,
I think things have been shifting from kind of excitement
more towards caution, right, And I think it's partly because
son is going in so hard on open Ai at
a time when open i is coming up against you know,
competition with Google's Gemini and just worries really about how
much money they are throwing at this, and you know
they they're not really that diversified, right, They're going so
hard on open ai and AI in general at a
time when market sentiment is really kind of looking a
bit jittery, and I think, you know, investors are going
to have to start seeing some real, kind of solid,
tangible returns and get some more confidence that you know,
this is actually going to be all worth it, or
I think, you know, the shares are going to suffer.
And I think the sentiment is really kind of at
a crossroads right now.
When you look at the firm soft Bank is investing in,
how are they distributed geographically? Are most Japan based?
No?
I mean they've been working with a lot of foreign firms, right,
of course, we know that they're heavily involved with with
ARM the chip gear makers that's based in the UK.
I mentioned ABB there of course open AI in the state,
So they're very kind of outward looking, and I think
that's partly because you know Japan's market in general, you
know they have there's pockets here of sort of companies
that can jump on the AI trend. For example, we
saw just recently the toilet and maker Toto, for example,
that makes these kind of very niche ceramic products that
can be used in chips for AI. There are companies
that sort of have small pockets of AI exposure, but
we don't really have those kind of big AI leaders
here in the Japanese space, and that's why SoftBank essentially
has become the proxy for that in the domestic market.
And that means there's a lot riding on it, right
and it's a good stock to sort of monitor if
you want to see what the sentiment is around AI
domestically in.
Japan, Alice, if we take a step back for a
moment and look more broadly at what's happening in Japan
as it relates to AI, is it primarily showing up
in the semiconductor space and perhaps to a lesser degree robotics.
I mean, the traditional names that investors would be looking for,
right are these chip gear makers. So the big names
we've got here ad Van Test, Tokyo, Electron Shift Screen, etc.
And you know, we're well into earning season now and
it's been quite a mixed kind of quite a mixed
showing for the earnings so far. Advan tested really well,
it's really been rallying so far this year, outperforming the benchmark.
You know, it's forecast kind of blue investors away. On
the other end, laser Tech, another chip gear maker, kind
of disappointed. So I think it's kind of becoming it's
becoming quite a stock pickers market in that sense, right,
you've got to be backing the right one. But of course,
on the memory theme, right, which again as we were saying,
is is a huge theme for AI this year. We
have Kyoxia, which is a memory chip maker. It was
actually the world's best performing stock in twenty twenty five,
only just iPod at the end of twenty twenty four,
and that's still been continuing. It's rallied so far. And
then what a lot of investors say Japan might kind
of have have an edge over other markets is robotics, okay,
physical AI. So we have companies like yaskaver Electric and
phanok that have been working in this robotic sphere for
a long time. Some of them have been announcing collaborations
with big US AI names in recent months two and
I think we might see that physical AI, that kind
of robotics theme really gaining ground throughout this year, and
that's a benefit for Japan.
During the last week in the US, many software stocks
were very hard hit on concern over how AI will
impact their core businesses. The catalyst for the pullback was
the release of a new AI tool from Anthropic. Can
you give me a sense of how Japanese software companies
are holding up in the face of the many new
advancements in AI.
I mean, we've seen a similar theme here in the
past week, you know, after that Anthropic news, some of
those software names really dropping. Oracle Japan is a big
one that was hit, and those worries are definitely there,
I think as well. A big theme for Japan, of
course is gaming and video games, right, and we did
have news in the past we of kind of these
new tools, these new AI tools where you can sort
of make your own gaming world using AI. And I
think there were some worries that that could start threatening
video game developers, right, And of course we've got Nintendo
and Sony here, but we have the slightly smaller names
like Capcom and Konami as well that sort of really
felt some headwinds from that news. So I think investors
are still trying to figure out kind of weighing up
the pluses and minuses of these new AI tools, right,
And it does seem like software makers, whether they are
sort of the more kind of corporate office software or
whether it's gaming software, it's entertainment, you know, there's definitely
a risk there, and I think it's whether these companies
can kind of counter that with here's how we're going
to use it to kind of boost our productivity and
actually boost earnings. And I don't think investors are quite
seeing enough of that potential upside yet.
Alice will leave it there. Thank you so very much
for helping us set up the earnings in the week
ahead from SoftBank Bloomberg's Alice French. She covers Japanese equities
and she joined us from our store videos in Tokyo.
We move next to trade. In the last week, President
Trump said he would roll back tariffs on India. That
was after Prime Minister Narendramodi agreed to stop buying Russian
crude oil. Trump said he would lower his twenty five
percent tariff on Indian goods to eighteen percent. That sparked
a rally in Indian markets. And that's where we begin
our conversation with then Anantha Nagaswaren then is the chief
Economic advisor to the Government of India and he spoke
with Bloomberg's hustlind Amen.
Your thoughts on this long much anticipated trade deal.
This was something that was one big stumbling block to
sentiment in the capital market also for the Indian to BESO,
I'm not surprised that the reaction is very positive in
both these markets. And I mean, at the end of
the day, it is the worst biggest consumption market twenty
one zillion dollars of GDP and therefore to be able
to have access to it is important and for all
labor intensive products. And two, I think the China plus
one strategy that many Western companies and multinationals are looking
at India as the next locate dation for the global
value change. That thought process was getting a bit disrupted
due to these tariff related uncertainties. Now that would once
again sort of be back in contention, and therefore it
lends a huge dose of upside to our growth estimate
in the economic survey.
In terms of how it's playing out in the market.
Are you satisfied that this will provide a boost for
the Indian group ye, which has been among the worst
performers in Asia for a while now?
Yeah, I mean, of course, to put the Indian drop
performance in context. Over the last five years or since
the dawn up the millennium, Indian roop hasn't performed any
worse than most emerging currencies which have a Karada context.
Is just to put it in context. Nonetheless, obviously in
the last year or so, due to be drying up
of capital flows, especially on the portfolio side, which has
not been made up as much on the FTI side,
although it was doing better than the previous financial year,
we have had this impact on the Indian coupe and
that was to be expected, and this was proving to
be a big mind block the on the part of
investors because they were thinking about India being restricted from
accessing one of the world's because consumption markets and what
it and therefore what it meant for Indian value chain
attracted was in India for global value chains, et cetera.
So they were extrapolating from this TARI funds ability onto
much bigger and broader questions. And to the extent that
this UH framework allies those concerns, it is it has
going to be a very big boost to capital flows,
which are very critical. Even though India's Cann't account deficit
is extremely on the lower side compared to historical trends,
this matters for capital flows and therefore it couldn't have
come at a better time from that perspective.
That was then Anantha Nagaswaren, the Chief Economic Advisor to
the Indian government, speaking with Bloomberg's hustlind Ahman. I'm Doug Krisner.
You can catch us weekdays for the Daybreak Asia podcast.
It's available wherever you get your podcast.
Nathan, Thanks Doug, and that does it for this edition
of Bloomberg Daybreak Weekend. Join us again Monday morning at
five am Wall Street Time for the latest DOUN markets
overseas and the news you need to start your day.
I'm Nathan Hager. Stay with us top stories and global
business headlines are coming up right now.