Daybreak Weekend: Homebuilders Preview, UK Jobs, Lunar New Year

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1:10This 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, a look at what we can expect from home builders in the months ahead. I'm Nathan Hager in Washington. I'm Caroline Hetker in London, where we're looking ahead to the UK jobs numbers and asking whether AI is starting to affect productivity. I'm Doug Krisner looking at the outlook for Chinese consumer spending during the Lunar New Year holiday. That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

2:02Good day to you. I'm Nathan Hager. We begin today's program with homebuilders. Recently, we heard the Trump administration is exploring an antitrust investigation into the industry as the White House sharpens its focus on tackling the housing affordability crisis. For more on what we can expect from homebuilders in the months ahead, we're joined by Drew Redding, U.S. Homebuilding Analyst for Bloomberg Intelligence. Drew, how do you see the backdrop now in the new home market? So in the new home market, the backdrop is still a little bit challenged. We have made some progress on affordability, which as we all know, has been the primary constraint for buyers out there in the market.

2:40Mortgage rates are down about 100 basis points from where we were last year. But what we've heard pretty consistently from the builders that we talked to is that it's not just about affordability. It's also about sentiment. You have more consumers out there in the market who may be concerned about the direction of the economy, the outlook for employment. So there's not a lot of urgency. And one of the things I think that's happening is you have a lot of people sitting on the fence who are saying to themselves, look, I think rates might be coming down. I think home prices might be coming down. So I'm going to take a wait and see approach.

3:13Now, with that being said, we think that the market can grow this year from a sales perspective. A lot of that's going to be driven by community account growth. So we actually have new home sales rising in the mid single digit range. But we do think that housing starts, which is probably the most widely followed measure in the new home market, will be flattish because builders want to work through their standing inventory before putting new product in the ground. So that sentiment damper you're talking about, is that across the board or is it just in the luxury sector, the low to middle income sector?

3:44How does it look that way? Yeah, so I think we've heard pretty much across the board from builders that sentiment has been a major issue. You know, when you start to look at customer profile, certainly the entry level has been a little bit more pressured. If you think of that buyer, they're typically more sensitive to fluctuations in mortgage rates and monthly payments compared to, you know, call it a Toll Brothers, who is more exposed to the luxury end of the market where, you know, the buyer is more affluent and doesn't have the same rate considerations. But you have to think of housing as an ecosystem.

4:19So while the higher end may be doing better, they still need to see movement at lower price points in order to facilitate those move up home sales. So if builders are sort of working through this despite those sentiment concerns, what could that mean for their margins? Yeah, that's a great question. And it's probably the number one thing on investors' minds because margins have come in pretty significantly over the last couple of years. And the reason is because builders have had to be pretty aggressive in their use of mortgage rate buy downs in order to stimulate demand. Now, it has helped them maintain sales levels.

4:54If you look at how new home sales has trended versus the resale market, they've held up a lot better, but they're having to pay a lot in order to buy down these mortgage rates. And what we've heard from those that have reported earnings so far is that they expect the use of incentives is going to remain elevated through the spring selling season because there's still a lot of challenges out there. You've seen a lot of focus from Washington on the housing sector as well. These ideas about limiting institutional purchases of single family homes, maybe allowing more use of 401ks for a first time down payment, things like that.

5:32Does that affect your view on the outlook for the housing market if some of these policy ideas come into fruition? Yeah, so policy has certainly become the biggest wildcard, I think, for home builders in 2026. They've been squarely in the crosshairs of the administration for four or five months or so, given the heightened focus on affordability. Outside some of the things you discussed, like the proposal to ban institutional purchases, we really don't have a lot of concrete ideas. We've got plenty of tweets and leaked news stories, but nothing substantial yet. And I think we could hear something at the State of the Union in a couple of weeks.

6:08what that may be, I don't know. But the administration has been critical of the large public home builders in particular. They've talked about their landholding thing. They own 2 million lots. They need to start building on them. And they've even threatened to withhold liquidity from them if they don't start building. They've said that builders shouldn't be buying back their stock, which has become a big part of their business model. And then the other piece that we think could be a risk going forward is the discussion about mortgage rate buy downs. You know, there were some tweets out there saying that they're artificially propping up prices.

6:40So it does seem that they're looking at everything. And I think ultimately what it does is creates a more volatile operating environment and two-way volatility for the stocks. Are you seeing the industry actively making preparations for whatever could come down from the Trump administration, Drew? Yes. So, I mean, at this point, it's kind of just business as usual. We've heard from most of them that, you know, really since the end of last year, they've been working alongside the administration and policymakers in a collaborative manner to try to come up with solutions, you know, whether they be demand side stimulants or a way to get more supply into the market.

7:19So as of now, it's business as usual. We'll have to wait and see what comes down the pike. Thanks for this, Drew. Great having you on with us. That's Drew Redding, Home Builders Analyst for Bloomberg Intelligence. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager, joined by Bloomberg News Equities reporter Alexandra Semenova. And Alex, we're going to hear from some big ones this week in terms of the earnings. The biggest name in retail is reporting on Thursday. What are we expecting from Walmart? Hey, Nathan. So it is indeed going to be another busy earnings week.

7:51Walmart is such a bellwether of low and mid-income consumers. So that's going to be an important company to watch. It is scheduled to report earnings results before the bell on February 19th. And something to note ahead of its earnings readout is Walmart just saw its market cap eclipse the$1 trillion mark on February 3rd for the first time ever. This is something that you don't see from retailers. It's something you typically see from tech giants. So Walmart is now in a category typically occupied by big tech heavyweights such as NVIDIA and Alphabet Inc. And Walmart is a longtime favorite, of course, of bargain hunting consumers, which is why it has been doing so well.

8:33It has flexed its massive scale and supplier network to keep prices low and grab market share across various income levels. And not only has Walmart maintained its appeal to households looking for value, it's also been recently drawing some new wealthier shoppers as well with its online business. So when we get to those results, some of the key metrics to watch will be same source store sales performance. That is going to be an important metric to monitor growth for long-term revenue and profit expansion for the company. Contribution from higher margin businesses to and inventory management. And I want to point out the stock is up something like 19 percent year to date.

9:18So the bar is pretty high going into these results. Yeah, certainly with a trillion dollar valuation now and with the fact that Walmart recently relisted to the NASDAQ, it really does seem like they're leaning into this tech side of the story. But we're also going to hear from another name that we think of more traditionally on the tech side, DoorDash reports on Tuesday, right? Yeah, it does, Nathan. So I'd say for this company, the main thing investors will be watching is signs that it can monetize on heavy CapEx spending. So during the last earnings report from DoorDash, it took a record plunge after the company said it's going to spend more on investments next year to build new products and bolster internal tools, which really weighed on its earnings forecast.

10:03These increased costs contributed to a muted fourth quarter forecast for adjusted EBITDA specifically, with the company expecting that metric to be around$710 million to$810 million. So watch that number. Also watch order growth, which is currently exceeding that of some of its online delivery peers. And it's also supposed to get a potential boost from Deliveroo, which it acquired recently. So that's going to be something to monitor during those results. And then it is also expanding into new categories beyond just restaurant delivery. So groceries and convenience, which are expected to aid with consumer retention.

10:44And ahead of the report, some of the big Wall Street firms did lower their price targets on the company. Bank of America was one of them, lowering their price target to$260 a share from$305 a share. But it did still maintain a buy rating. Goldman Sachs added DoorDash actually to its U.S. conviction list. So that's pretty positive. And one more thing to note is, of course, DoorDash and Uber just lost a bid to block a New York City law requiring a tipping option to be presented to customers at checkout from going into effect. So it's likely we're going to see perhaps management commentary on that front.

11:23DoorDash has been having a pretty hard start to the year. It's down something like 27 percent so far. Well, another big name we're going to hear from is a bellwether on the agriculture economy, Deere. has really been on a tear since the start of the year, Alex. Yeah, it has been a really interesting company to watch, given the fact that it's kind of been at the center of Wall Street's big rotation trade into sectors outside of technology. So it's actually trading at a record high now amid a rally that has come as interest rate cuts and strong U.S. growth push investors into sectors of the market closely linked to the health of the U.S.

12:01economy. So Deercell's construction equipment, in addition to its iconic farmer machinery, and that's been an industry that up until recently was really struggling. Investors are betting it could get a boost from the Fed's monetary easing and some data that showed that the U.S. economy is expanding at a healthy pace. So when the company reports earnings, Wall Street will be looking for any update on its industry outlook. Investors are still waiting for a rebound in the U.S. farm economy specifically. So something that would spur farmers to buy new tractors and other equipment. Deere's shares had hit a record last May on the same hopes, but that turned out to be a head fake.

12:43So the key question is, will this also be? The farm economy is projected to extend its downturn actually through 2026 so far, expecting net farm income to fall by 1 percent, according to the USDA. And Deere also said in November that it expected industry sales of large equipment to fall 15 % to 20 % in the U.S. and Canada. So we're going to see what it says on those fronts. It is up nearly 32 % year-to-date. Yet again, a company that has a really high bar going into report. Yeah, certainly sounds like it. Thanks for this, Alex. Great having you on with us. Great to be with you. That's Bloomberg News Equities reporter Alexandra Seminova.

13:24And coming up on Bloomberg Daybreak Weekend, we'll look ahead to jobs numbers in the UK. Is AI starting to affect productivity? I'm Nathan Hager, and this is Bloomberg.

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14:46This 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 for what to expect during the nine-day Lunar New Year holiday in China. But first, the U.K. economy is facing a tricky mix of slowing growth, stubbornly high unemployment, and mounting global uncertainty, from trade tensions to tariffs and political turmoil. But amid the gloom, there is a growing debate over whether artificial intelligence could help lift productivity and offset some of the weakness in Britain's labor market, even as questions mount about whether the technology is already displacing workers.

15:23After recent GDP data out of the UK showed sluggish growth, we get fresh jobs data from Britain next week. Let's get more now from Bloomberg Daybreak Europe anchor Caroline Hepker in London. Nathan, AI is talked about as both a coming storm, but also a potential solution to Britain's growth woes. The UK's unemployment rate has climbed to near COVID levels since Labour took power in 2024. But ahead of the UK jobs data in the next few days, there is a new quirk in recent data. Some economists increasingly think that productivity may actually be improving, and they wonder if artificial intelligence adoption may be playing a part.

16:03The Bank of England Governor Andrew Bailey is one of them. I'm an optimist on the potential for AI and robotics to move the dial on productivity and thus on economic growth. I'd like to think, though, that I'm a realistic optimist. My impression is that we've made more progress so far applying AI to well-defined task-based work rather than some of the more ambitious goals. But I'd also say I don't find that at all surprising. so is AI a panacea and what impact is it actually having on the UK economy joining us now in studio is Bloomberg's UK economy reporter Irina Angel and our Bloomberg opinion columnist covering technology Parmy Olsen welcome to both of you thanks for being with me Irina can I start with you just on the actual figures what are we expecting from the UK jobs numbers in the next few days?

16:54So next week, we'll get the jobs report for December. And the unemployment rate is actually expected to edge up again. It's now at 5.1%. Some economists were surveyed by Bloomberg think it will go up to 5.2%. And this is just so you have a sense of how important this is. It's the highest since sort of COVID times 2021 2020. And it will get worse in the next months but perhaps not for much longer. The Bank of England kind of sees unemployment peaking at 5.3 % in spring and you know now this is starting to raise important questions about the jobs costs of their you know fight to bring inflation back to the 2 % target.

17:36The party has been quite difficult for the labour market in the UK. What's your analysis about why that is? Well it's all pointing to one thing it's the the payroll tax rises. Chancellor Rachel Reeves' 26 billion payroll tax rises and you know those came on top of large consecutive increases in the minimum wage and you know the country has lost almost a quarter of a million jobs after these payroll costs were increased in Reeves' first budget in October 2024 and since then you know employers have blamed them for job cuts and hiring freezes in key sectors like retail and manufacturing. There's been a lot of talk about the number of young people who are not in work or employment or training of any kind that's got quite a lot of attention but how isolated is the issue with jobs when you segment things by age or gender or skill set?

18:34Well most of this increase in unemployment that I was just talking about has been due to a lack of hiring so far rather than mass layoffs. So, of course, this impacts young people looking for their first job or just other people moving out of economic activities straight into unemployment. And it's actually very interesting that because men are becoming unemployed at a faster rate than women. And, of course, in particular, young men, that's a big problem, but men in general. And it seems like that hiring freezes and layoffs fell particularly hard in male-dominated sectors. So, you know, construction, manufacturing, but also IT.

19:12And this is all kind of helping reform because while reform did not stand out among unemployed voters at the general election, it has become the dominant party for this group over the past six months. And it's particularly unemployed men who turn to reform. We have data from More in Common that showed that more than 40 % of men who are out of work support reform. And that's double the level in July 2024 and 10 points more than women. Gosh, that's interesting, isn't it? So the political ramifications then from the data. I want to layer into that outlook what AI might mean, because I know that the technology secretary, Liz Kendall, was speaking at Bloomberg's headquarters right here in London, talking about how the government's going to use AI to turbocharge different industries in Britain and pledging this idea that there will be AI training for all UK employees.

20:08Parmi, you've been covering AI companies and how their tools are really starting to unsettle the world of business, the world of work. What kinds of products, I suppose, first of all, are we actually starting to see being used? And then, you know, maybe we'll think about what that means for employment in a minute. Well, most people are using chatbots already, right? I think it's something like 800 million to 900 million people use ChatGPT on a weekly basis. That's something like 10 % of the global population every week are using these tools. But the most recent updates have been agentic AI. Of course, you might have heard that term agent a lot last year.

20:44It was very much hyped. Unfortunately, that didn't have much to show for it. Only a few companies actually released anything. They were a little bit unreliable. But actually, just in the last few weeks, we've seen a couple of product launches of these AI agents. And this is different to a chatbot. This is AI that can not just give you information, but carry out tasks for you. So the one that the market really got spooked by was a product called Claude Cowork, which came from a company called Anthropic. They were spun out of OpenAI a few years ago. And I've used it myself. I pointed it at some files on my computer and got it to create a PowerPoint presentation out of it, create a spreadsheet of all the people and all my interviews with all their areas of expertise, stuff I'd been wanting to do for years but just didn't have the time to do.

21:31It was even answering my LinkedIn messages. I didn't even have to go to LinkedIn, and it would just answer them for me. So those are just some examples of the kinds of things they can do. And this is what I think is kind of rattling the markets a little bit, is the sense that, okay, some of these tasks that certain jobs are doing could well be under threat. The thing is, traders and investors are reacting pretty strongly to the idea of these products, but they've not been fully adopted yet. As you say, lots of people are testing them out. Lots of businesses are trying them out. And they haven't really claimed much market share yet.

22:09but I suppose people are worried about whether that's coming or why that is. I think so. I think you're right. I think people just kind of want to get ahead of whatever disruption is coming and ride that wave. But this is so typical of the market, right? Like just a few months ago, everybody was freaking out that we're in an AI bubble and now the sentiment, the narrative has totally shifted to we're practically in the AI singularity. You know, it's like maybe not to that extent but it is funny how the pendulum has swung so far the other way. And if you remember in January last year, there was a huge drop in the share price of big tech companies when China's deep seat came out because there was a belief that that was going to threaten the status quo of all the infrastructure and data centers that was being spent by big tech.

22:55Now, of course, that was an overreaction. I think we're seeing the same thing here, a little bit of an overreaction. But there's truth to it. When people are selling off stocks like Salesforce or some of these other enterprise software makers, there is some truth that the application layer that those software makers have, that bit of their business is under threat, I think, from these new AI agents that are coming to market. OK, so let's bring that together then with the idea of jobs here in the UK. How far away is the future where artificial intelligence does actually make workers redundant? Because we're starting to see bits of reporting around that and bits of data in Britain.

23:35Well, the obvious casualty for now, maybe it's not quite showing up in the data yet, is the graduates, entry level workers whose companies are told, treat your AI like an intern. So they do. And that works really well. And then they don't need to hire interns or junior analysts or junior researchers. And I think that might just be the starting point. But I think it's very, I don't think it's going to be as simple as just jobs get replaced. I think jobs are going to change. So, for example, I was talking to the head of Zapier, which is a big software company in the U.S., and he was saying that the way they build product now, they used to have three people who would be on a team.

24:14And it's a very classic structure called EDP or EDM, so the engineer, the product marketer, and then the designer. Now, instead of three people, they just have one, but that one person has to cover all those three different areas. So the titles have been squished together into one person who's using AI to kind of augment themselves. It doesn't mean the other two people have been fired. They're just doing different things. So I think we're going to see a mixture of that, of roles just changing and morphing and blending together. But perhaps certainly elements of hiring freezes. I mean, there are some people who've been using this new Claude plug-in for legal work.

24:54and one person told me that they weren't using their fractional lawyer anymore for anything up to a commercial contract worth 50 ,000 you know anything higher than that you do need a human but if it's kind of low stakes they were using the AI now so of course that is job a job not going to a human so we're seeing I think a kind of mixture of those things happening. Yeah anecdotally I've certainly seen it with people I speak to that they are feeling that change and I will point to one bit of data Morgan Stanley in the last few weeks has talked about AI leading to an 8 % net job loss over the last 12 months in the UK so there's some tiny bits of research out there and Irina are we seeing any signs that AI is starting to affect the UK labour market is it you know people recently graduating what sorts of jobs might be affected first I think the problem is not necessarily job cuts, but the lack of job creation in the UK.