Daybreak Weekend: US CPI, Cannes Festival, Bessent Visits Japan

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1:43This 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 look to some key inflation data in the U.S. I'm Nathan Hager in Washington. I'm Caroline Hepke in London, where we discuss whether the Cannes Film Festival can galvanize the business of cinema. I'm Doug Krishner, looking ahead to U.S. Treasury Secretary Scott Besson's visit to Japan. 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.

2:35Good day to you. I'm Nathan Hager. We begin today's program with some key economic data in the U.S. The April reading on consumer prices comes out on Tuesday. Then we'll get a look at inflation pressures on business in the producer price index Wednesday. And then we'll see how the consumer is holding up when April retail sales come out Thursday. A busy week for Edward Harrison, senior editor for Bloomberg News and author of the Everything Risk newsletter. Really pleased that Ed's got some time to join us here. Now, I'm sure I'm not the only one who sees inflation pressure, just driving by the gas station every day.

3:14Ed, is this the month we're going to see Iran war impacts show up in the data? Hey, Nathan. Yes, I think this is the month. The real question is whether or not it shows up less or more than is expected. Because if you look at the numbers on the Bloomberg Terminal, we had 3.3 last month. Expected for this month, year over year for CPI is 3.7%. And they also expect a 2.6 % core number to go up to 2.7%. So it's definitely baked into the cake, not only that gas prices will cause a big jump in the CPI year or year, but that it will translate into something overall in terms of the core CPI. And so ultimately, the question is, do we get more or do we get less than what's expected?

4:05How much would you expect that something like energy prices would feed into the core? It is something that can have an overall impact, can't it, when you think about diesel prices and the effect on shipping as well? Right, definitely. And, you know, we see all sorts of different effects. Helium prices having an effect on electronics because of the use of helium in large disk drives that drive the AI build out. You know, they use these disk drives potentially for AI and all sorts of other things. What I would say is that if you look at PCE, which is based off of personal consumption, the price increase there, that index was 3.2 % year over year.

4:54We got that a couple of weeks ago. And that's the number that the Fed looks at. 3.2 % is really high. And so what it says is that we're already at a high level. If the increase in energy prices adds to that, then it's going to be a very tough road for the Federal Reserve ahead and for interest rates overall. And how do you expect that to feed into what we could get from the producer price side as well when those numbers come out? That's where I think the market and I both expect to see the big jumps. So the numbers were pretty large already. You had 3.8 % in March. They're expecting 4.3 % core.

5:40This is not including food and energy. So you can see those are huge numbers, even if you don't include food and energy. And if you did include food and energy, then you've got 4.0 going up to 4.8 % to be expected. So almost 5 % increase in producer prices in the month of April. So potentially even bigger price increases on the producer side than on the consumer. Do you expect to see some of that feeding in to what consumers see, the idea that producers might be able to pass along some of their price pressures onto the consumer? Yeah, I think, you know, with the tariffs, it was unknown whether or not they would be legal.

6:27and we've seen that they've been struck down by various courts now. Here, you know that these, even though it's temporary, you know that the price pressures are for real and you must pass them through. And so to the degree that companies can pass them through, they're definitely going to do that. And then the question becomes, you know, how much can the consumer handle? And I guess we'll get some answers on that potentially in the Thursday retail sales print for the month of April. Are you expecting to see any shifts in consumer behavior reflected in those numbers? Yes, I think that, you know, the expectation from the market in particular, the ultimate number to look for is the control group.

7:14That's the number for retail sales that the market uses to say, this is the best number to look at in terms of the go forward approach. And that number is expected to decline to 0.4 % from 0.7%. If you take out autos, you go from 0.6 % also to 0.4%. Those are decent numbers. But when you take away inflation, it really adds up on a year-over-year basis to a middling economy. Anything lower starts to become very difficult. and then you start worrying about economic growth. Well, again, really appreciate your insights ahead of all this data. That is Edward Harrison, senior editor for Bloomberg News.

7:59Check out all his work on the Everything Risk newsletter. You can find it at Bloomberg.com slash newsletters. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager, joined by Bloomberg Markets Live managing editor Christine Aquino with more earnings on tap this week starting Monday with him's and hers health. Weren't they at a beef with Nova Nordisk recently, Christine? How are things in telehealth these days? That beef, though, is a thing of the past because they're cooperating with each other now, right? And so that is one of the reasons why the likes of J.P. Morgan initiated a stock with an overweight rating because of that deal.

8:36So now, before they had a beef, now they have a partnership. And so Hims and Hers will be selling WeGovi on its platform. And JP Morgan is saying that that deal could mark a turning point and remove a significant legal overhang. So that bodes well for its earnings potentially. And, you know, we have options, of course, starting to price that potential move there. We could see potentially a 13 % move in the share after the company reports earnings. And so if that is all fine and dandy, they meet or beat estimates, then that could be a 13 % share move higher. But otherwise, it could be a 13 % share move lower.

9:15So we'll see about that. Yeah, well, I mean, this stock has already been doing pretty well so far this year, hasn't it? I mean, where is the bar when it comes to what investors want to see from HIMSS this time around? Yeah, I mean, of course, the demand for the GLP-1s very much still sustaining the business model here. And I think the fact that, you know, they are able to pivot because potentially, you know, they're now in cooperation with Novo. And so they're kind of turning themselves from a competitor into a retailer in that space. And so, you know, I think investors will want to see, is that business model working?

9:55How much kind of gains could they expect from that sort of partnership? Is it something that could potentially also open up opportunities with other GLP-1 manufacturers and sellers in the market? And so, yeah, for HIMSS and HERS, it's going to be a question of how well are they able to pivot after this initial legal setback? I guess we could call HIMSS and HERS sort of tech adjacent, right? Because this is going to be kind of a busy week for tech earnings overall. We're going to hear from Applied Materials on Thursday. day. This has been a pretty crazy quarter for chip makers. Where are we expecting chip equipment makers to stack?

10:33Well, based on the movement in the semiconductor's index that we've seen, I mean, I think it's all going to be positive. So potentially high expectations for the earnings for applied materials here. And, you know, the options data that we're seeing at the moment implying about a 6 % move after those results. We have seen a spate of analyst moves for the stock. UBS raising its price target to 480 from 430 previously. Seaport Global Securities giving Applied Materials a new buy rating and a$500 price target. So it looks like a lot of expectations. Very positive, especially because of all the optimism that we've seen in the chip space.

11:14And our own Blooming Intelligence analysts weighing in as well. And they're looking for sales in fiscal second quarter, finishing higher, and also similar gains for operating profits. So it looks like there's going to be a lot of positivity baked in. We'll see if they can deliver on that. I mean, you could say that there's a lot of positivity baked in already. I mean, this stock is up serious double digits on the year so far. Is it priced to perfection? I mean, that is definitely the worry. Every time we see such big gains like these, Nathan, I mean, you always have the naysayers in the market, right?

11:48saying that this can't possibly keep going ad nauseum. But just, you know, if you look at kind of the plans of the biggest hyperscalers when it comes to their CapEx, right, the likes of your alphabets, your Amazons, your Apples, it seems like there is never-ending demand at the moment for any equipment, any infrastructure related to AI and the data center build-out. And so, you know, in some ways it could be priced to perfection, but it may be a while yet before we actually see that pullback in stock. Speaking of the AI build-out, we are going to hear from another beneficiary of that phenomenon on Wednesday when Cisco Systems reports.

12:28What are we expecting from Cisco? Absolutely, Nathan. Well, you know, similarly positive things. Our Blooming Intelligence analysts saying that they're focusing primarily on Cisco's optical and high-capacity networking products, And that has benefited from the AI infrastructure ramp up. As you've mentioned, the expectation is for that to keep benefiting from that. And specifically for Cisco, that could result in an increase to about$5 billion in its AI order outlook. So not too shabby for the stock. And that's really helped shield it as well from the software pessimism that we've seen in the start of the year.

13:08Right. Because they're very much levered to that build out that we've seen and given the demand for anything related to that, both hardware and software. Seems like it could be a positive season for Cisco once again. I guess one other question is whether Cisco is shielded from the hit we've seen from memory costs from so many of these companies that have reported so far. Yeah, absolutely. Definitely something that investors are going to be watching out for. How much of their margins are they going to be able to protect as costs rise and whether that shortage is set to continue? Is their supply chain something that is relatively insulated from that dynamic or is it something that they're going to have to contend with as well?

13:54So I'm sure that investors are going to be looking out for any comments from the company, from their CEO during the analyst call for sure. The tech earnings story continues. Thanks, Christine. Great having you on with us. That's Bloomberg Markets Live Managing Editor, Christine Aquino. And coming up on Bloomberg Daybreak Weekend, we'll look to the Cannes Film Festival, whether it can galvanize the cinema business. I'm Nathan Hager. This is Bloomberg.

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15:53Visit BloombergLive.com forward slash InvestHongKong to learn more. Supporting sponsor, Deutsche Bank. 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 Treasury Secretary Scott Besson's visit to Japan. But first, in the coming days, the great and good of the entertainment world will descend on the south of France for the annual Cannes Film Festival. It's a well-established hallmark of the industry calendar, but in an AI-driven landscape, is the business of film still lucrative?

16:30For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Nathan, the Cannes Film Festival is known for glitz and glamour amid the palm trees of the south of France. The nearly two-week-long event features beach parties, black tie affairs and plenty of celebrities. But outside of those trappings, the movies shown behind closed doors are typically quite intense. The Cannes line-up favours challenging works from important auteurs. And for the critics and journalists working at the festival, that means wrestling with those efforts, often on sometimes very little sleep.

17:08Throughout the festival, the focus is on who might win the Palme d 'Or, the top prize given by the jury, an impossible award to predict, but one that often contains clues about the upcoming Oscars race, at this point relatively far away on the calendar. But it is true that the whole event gets you excited about what's on the horizon. However, outside the sparkling world of the stars and the premieres, audience interest in traditional cinema going has generally declined compared to pre-pandemic levels, with many blaming the cost and the dominance of home streaming. Preserving the industry is a key concern for insiders.

17:52Vue CEO Timothy Richards has been discussing that issue on Bloomberg Television recently, saying that demand is returning. The good news is business is back. And the demand, our customers never left us, but business is back right now. And if you look at what happened with Michael opening weekend,$217 million. Devil Wears Prada is going to be very, very similar. in terms of how for consolidation it is fragmented and has been fragmented for quite a while and i think everyone's been waiting for business to return before they actually took that first step the contrarian investors are too late we're back but tim i mean you need content first and foremost so we'll talk about ticket pricing and you know ai and how you manage queues and stuff but you need content do you worry there's going to be less content out there less films being made because of the merger?

18:44Yeah, look, I think my biggest concern is demand. And I think we've proven certainly in the last few years that there is a massive demand for all movies of all genres, for all demographics. We've broken records for all kinds of movies. And if you look at Hamnet, Hamnet is going to do 20 million pounds in the UK. So I worry about demand. Where there's a demand, there's normally a supply will follow. If you look at what's happened, and I'm fresh back from Las Vegas and CinemaCon, and from meeting with studios in Los Angeles after that. And the commitment to feature filmmaking right now with the legacy studios is unprecedented.

19:21Then when you actually look at the three biggest names in tech, Tim Cook, Jeff Bezos and David and Larry Ellison, they've all now embraced theatrical releases and film production. They're coming into our industry. That was The View founder and CEO, Timothy Richard, speaking there to Bloomberg's Francine Lacroix. So how are we looking ahead to the upcoming Cannes Film Festival? How can the sector's leaders ensure the magic of Lacroixette is translated into the box office? Joining me now for more is Bloomberg's Benoit Bertolo, who is covering the festival this year. Well, lucky you, Benoit, to be going to this big event.

20:04Lots going on. What normally happens at the Cannes Film Festival? So I guess the public-facing side of the festival is really the competition. So about 20 films that are competing against each other to win the Palme d 'Or, that's awarded at the end of the festival. So it's really what gets the attention, because these are films that are carefully selected, that are going to be basically some of the bigger films in the year to come when it comes to release cinema, let's say, as an art form. But these are the most popular of the films that are going to come out in the year to come. If we take a side, it's blockbusters that are not typically shown in Cannes.

20:51So this is really seen as a celebration of cinema, independent cinema as an art form. And that's really the main focus, let's say. But there is also a less known side of the festival that's really the business side, really. And it's the film market. And it's happening underneath the Palais des Festivals in sort of an underground, very unglamorous area where films are shown to movie professional distributors from all over the world that are going to see films yet to be released and decide if they want to buy it and show them in their countries. So it's really the heart of the festival business-wise.

21:35and it's also a major thread of the festival because it's bringing tens of thousands of film professionals to Cannes every year. Yeah, absolutely. So in terms of the more glamorous side of things, what are the big releases that perhaps we'll hear more about for this year? So it's an interesting year for the festival because for a while there was no US film selected in competition. Meanwhile, one film has been added by James Gray. So that's going to be a film that's going to be very expected, I think, with Scarlett Johansson and Adam Driver featuring in the film. We don't know a lot about it yet.

22:22But that's going to be a point of attention. And then there is this mix of filmmakers from all over the world. Three films from Spain that I'm especially looking forward to. One by Rodrigo Sorbollén, another one, La Bola Negra, about the civil war in Spain. It's a lot of films inspired by the wars, actually. The Second World War theme is going to be very strong. Films from France as well. Asian films. like it's really a mix and there are some favorites um of the of can that are coming every time they select a film basically and that's one of the criticism of the festival is that you know they've got their their favorites uh and and they would come whatever film there it is um but truth is that they are carefully selected and and what's really interesting is we don't know yet because this has not been seen by anyone.

23:20We don't know yet which film is going to create the buzz and which film is going to come out with a bigger world. Yeah, that's the excitement, isn't it? And the Palme d 'Or, as you say, is the crown jewel of the proceedings and who might clinch that. I mean, I noticed it's the old boy director Park Chan-wook who is leading the jury that makes the selection for who is awarded the Palme d 'Or. What's it like then to win that accolade? accolade you know how how important is it I mean as you say the criticism is that there are sometimes favorites at Cannes but how important is it to win the Pemme d 'Or?

23:55It's absolutely major for a film because it's going to launch that film into the the season that's coming basically Cannes is always seen at the first event of the year in terms of awards and in terms of films that are going to be seen for the full year. So very often the films that are selected for the Palme d 'Or but also the major top prizes, right, the best scenario, best director, best actor, these films they're gonna be every year we see that they're gonna be launched into the award season and they can make it to the Oscars in the end and that's what happened with The Substance for example that was a very small film that made it to to the Oscars and got five nominations I think with Demi Moore the comeback of Demi Moore yeah that was extremely interesting and she's going to be part of the jury this year interestingly I think that's really interesting also that I mean Cannes is also the big you know film festival in Europe even kind of bigger than Berlin and Venice so interesting that You say it's such a launchpad then maybe into a bigger market into the US.

25:05But I have to say that in the backdrop of this, you know, talking about these individual movies, these small budget movies, maybe that get bigger. The backdrop in the industry is surely artificial intelligence and maybe movies that are emerging in that space. Do you think Cannes is going to be a buzz with chatter about AI films? it is every year and increasingly a topic in Cannes of course as it is across the industry really and interestingly there is one film that's using OpenAI's technology that's going to be shown to buyers in Cannes this year it's called Critters and it's an animation film that we're not going to see yet it's not finished yet but it's going to be shown to potential buyers so that's one example of one feature film that's going to use AI a lot that we're going to see in the coming months probably and of course it's always a chatter in Cannes you'll see panels this year about what AI means for cinema as a creative tool what it means for the IP of the actors and directors that are sort of prompted and that are sort of used in AI prompts.

26:29So what does it mean in terms of rights for them? So it touches on the creative side, on the business side, and all this also happening on the backdrop of a sort of difficult moment, a moment of crisis really for the cinema industry. Since COVID, the theaters have not seen the same level of tickets sold, Really, during the pandemic, people have grown used to see films on their home screen at home. And it's also one of the big threads every year in Cannes. It's really how well the industry is doing. We are talking about these very outhouse films that can make it to bigger markets sometimes. but there is also the huge category is blockbusters these are really carrying the cinema industry worldwide the big hollywood blockbusters before the pandemic you could see one or two of these every month it's really not the case anymore the studios are making less bets on on big films and we can see a devil wear prada too currently making big numbers for example but there are few of these films every year and interestingly no big blockbuster will have a premiere in Cannes this year.

27:54Last year we saw Mission Impossible premiering and it was a big event and a big buzz and this year it's kind of a snub for the big US studios and none of these are going to show big films in Cannes so that's also a sign that there's no film that's ready to be shown in Cannes this year. So it's really also the business backdrop of the festival. It's how well the industry is doing. Yeah, it's going to be very interesting, isn't it? Have a wonderful time. I'm looking forward to reading some of your reporting and your insights into the movie industry. Bloomberg's Benoit Bertelot. We will have full coverage of the Cannes Film Festival's twists and turns on Bloomberg platforms in the coming days.

28:39I'm Caroline Hepker here in London, And you can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. Nathan. Thanks, Caroline. And coming up on Bloomberg Daybreak weekend, a look at what to expect from Treasury Secretary Scott Besson's visit to Japan. I'm Nathan Hager, and this is Bloomberg.