Daybreak Weekend: US CPI, London Tech, China Eco Data

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0:40This 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. and how they could affect Fed policy. I'm Nathan Hager in Washington. I'm Caroline Hepker here in London, where we're getting ready for the buzz of London Tech Week. I'm Doug Krizner looking at how higher energy prices will impact Chinese inflation. 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.

1:30Good day to you. I'm Nathan Hager. We begin today's program with some key economic data in the U.S. with a big focus on inflation. The May Consumer Price Index comes out Wednesday, followed by the Index for Producers the following day. And for more on what to expect, we're joined by Edward Harrison, senior strategist at Bloomberg News and author of the Everything Risk newsletter. Always great to speak with you, Ed. And I think it's no secret that just about everything is more expensive these days. So what are you expecting to stand out when it comes to the data this week? Hey, Nathan, I'm expecting to see the numbers be relatively elevated across the board, PPI more than CPI.

2:13And what we're looking for is we're looking for anything that's demonstrable below 3 % on any of the figures that we see, because the lowest expected number is 2.9 % for core CPI. If we can get something in the order of year-on-year increases, more 2.6, 2.7, that would be a very positive signal for the Federal Reserve, which is meeting later in the month. Why are you expecting producer prices to be higher this time around? Well, just because of expectations in terms of the Bloomberg average expectations, the average economist expectations for final demand is 6.4 % for the month of May. And we also have 5.4 % expected if you take out food and energy.

3:06And those numbers are higher than a 4.2 % number that's expected for CPI. What are you expecting that's going to be driving all this? Of course, you drive by a gas station these days and prices are still much higher than many of us would like to be spending. Is that really what's continuing to drive the inflation picture right now? No. And so that's why I think that the number that I'm looking for in particular is the core number for CPI. That number, which is currently at 2.8 percent, it's expected to go up to 2.9 percent. That's the number that says, here's what the economy looks like. If you take out these volatile food and energy items over the last year, here's the rise that we've seen.

3:53And if that number is decent, moving more towards the Fed's 2 % target, it changes the whole picture. Because last week on Friday, what we saw is we saw a jobs number that was very large. If you look at the last three months of job gains, it's the best that we've seen since the beginning of 2024. And so the market priced in a rate hike as soon as the end of this year on the back of that. Anything that we can see in terms of inflation that is more towards 2 % would therefore dial back those expectations and cause yields to go down. Coming off the back of those jobs numbers, we actually spoke with White House National Economic Council Director Kevin Hassett.

4:45He was saying that the Fed should be able to look past an oil-driven supply shock. Can it? No, it can't because those numbers are the best that we've seen for the jobs in almost three years or two and a half years, I should say. And the reality is that with what we're seeing in the Gulf, in addition to core numbers that have reaccelerated, if you looked at PCE, which is the Fed's preferred gauge, we bottomed 14 months ago in April 2025 at 2.6%. The most recent reading was 3.3%. So we've seen an acceleration in the core. This is taking out food and energy. So there's no way that the Fed can look over that because we're looking at a trend that's been going on for more than a year.

5:39And we've seen an acceleration in the rate of inflation. So what do you see potentially snapping that trend? Is there anything that the Fed can do at this point? No, the Fed can just sit and wait. And the reality, again, is that the Gulf only adds more problems there. The interesting bit is that when this war began in the Middle East, people were expecting it to have a very negative impact on consumer spending. But it hasn't had a negative impact. It hasn't had a negative impact on a job formation. So, you know, the steady state of the United States economy is very high. And that means that the ability of the Fed to try to counteract the inflationary impulses is much greater, which means that we should expect the Fed to hike before we expect them to lower rates.

6:39All right. Appreciate this, Ed. As always, that's Bloomberg News senior strategist Edward Harrison. Definitely check out Ed's The Everything Risk newsletter. You can find it at Bloomberg.com slash newsletters or by typing NI Every Risk Go on the Bloomberg terminal. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager joined by Bloomberg cross-asset reporter Valdana Hyrik. Valdana, we've got more tech earnings to look forward to this week, including Oracle after the close. Of course, this has been a company that's been a pretty big beneficiary of the AI buildout.

7:13So should we be looking for a blowout from Oracle? First, I want to say that every week we're looking forward to some sort of tech earnings, right? Seems like it, yeah. Every week there's something of interest happening. So for Oracle, that's ticker O-R-C-L. It's reporting on Wednesday, June 10th. The company was once best known for its namesake database software, but it's really found some success in providing the type of chips-filled data centers and other equipment that's necessary for training and deploying AI models. And the reason I mentioned that is just so that we get a sense of what kind of read-through it's giving us on a specific sector of the economy.

7:56Shares of Oracle are up some 18%, roughly 18 % year to date. Its last quarterly report was very strong in terms of what analysts had been expecting and what the company ended up delivering. Its last report was in March, and shares actually soared after it posted results. It said that its closely watched infrastructure business had jumped 84 % to$4.9 billion. The company also at the time said that revenue would reach$90 billion in the fiscal year beginning in June. Also at the time, it handily beat analysts' projections on a number of other measures. So the takeaway was that we were sort of seeing, we were getting this through line on AI spending.

8:47It gave investors a really good look at how demand for AI centers was going. There had been in the past some concern that maybe that a specific corner of the market was maybe slowing down. But then Oracle gave us those results. looking ahead. Of course, we don't exactly know what the company is going to be telling us, but we do have some analyst projections and we do have a report from Bloomberg Intelligence where the analysts there say Oracle's fiscal 4Q results will likely reflect another quarter of robust AI infrastructure demand. Also this week, after the close on Thursday, We're going to hear from Adobe.

9:32Now, you've got to think this company's got a lot to show for with all the fears around SaaSpocalypse or whatever we're calling it now. Yeah, exactly. And I love when a company can tell us a specific story, especially with bellwether companies that can tell us something that's happening within a certain sector of the economy or the market, like we were just saying with Oracle. So for Adobe, ticker ADBE, reporting on June 11th after the market close, shares are not doing so great this year. They're down some 25 % so far this year. When we think of Adobe, we think of its software, its creative tools, its digital marketing offerings, and also, of course, PDFs, which I can never figure out how to edit or save or print.

10:22Seriously. But a lot of Adobe's revenue is generated via those subscriptions. Analysts will be paying attention to that. But Adobe actually has a very interesting theme and story going on right now, which is that there are talks about who its next CEO will be. Bloomberg just reported that the company is eyeing two internal leaders for its quest for a new chief executive officer. And Adobe has hired a well-known search firm to look at some external candidates who could be suited to running the company in our AI era. And so there are two contenders of two of its main business units who are sort of like the leading in-house candidates.

11:12And then, you know, whoever else that they're looking at from the outside. So analysts really are thinking about, will we get some clarity around the CEO transition? It's sure to be a key focus on the earnings call. Yeah. So maybe more than just numbers when this earnings report comes out. Exactly. It might even supersede some of the financial metrics themselves, which is really interesting. Yeah, it certainly is. Not just tech. Later on this week as well, we're going to hear from Lenar reporting their earnings. It's been pretty tough for the homebuilders in this rate and price environment, Vildana.

11:49Exactly. Another great example of a company that's giving us a look at, in this case, the housing market, the homebuilding market, ticker LEN. Shares are also lower so far this year. The company is reporting after the close on Thursday, June 11th. This is one of the largest U.S. homebuilders by revenue. And again, another great read on homebuilder sentiment. So just in terms of some of the data that we've seen for new home sales, for instance, in April, they had fallen month over month, some 6 % to around 622 ,000. U.S. home builder sentiment had rebounded in May, but in general, it sort of remains pretty low, given affordability concerns weighing on a lot of consumers and also weighing on the spring selling season.

12:44And so it's important to keep those things in mind in terms of what the housing market looks like and whether or not people think we're going to potentially continue to see a lackluster housing market persist, you know, in future quarters. Yeah. So we're going to learn more about the AI buildout and the housing buildout this week. Thank you, Vildana. That's Vildana Heirich, cross-asset reporter for Bloomberg News. And coming up on Bloomberg Daybreak Weekend, we'll discuss what to expect from London's Tech Week. I'm Nathan Hager, and this is Bloomberg.

13:43Bloomberg Invest. Odd Lots podcast. Visit 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 the program, we'll look to some key inflation data in China. But first, London Tech Week starts Monday. Executives from AI labs like Anthropic, Perplexity and OpenAI are headed to Britain, which after the US and China sees the highest AI investment globally. Let's get more from Bloomberg Daybreak Europe anchor Caroline Hepger in London.

14:22Nathan, summer conference season has arrived in London. CEOs, politicians and innovators are rubbing shoulders at the likes of South by Southwest, Founders Forum and London Tech Week. But the regular gatherings mask a moment of deep uncertainty about the future. Artificial intelligence promises to reshape the business world. But for UBS's chief economist and captain, the new technology isn't yet even close to delivering on its promises. I think there are certainly a lot of corporates benefiting from this spending boom and top 20 % spending. But there's also, I think, a very large part of the population and businesses that is not benefiting from that.

15:03And so I think we're in this sort of still relatively fragile equilibrium. Okay. You mentioned productivity gains. Where are you seeing them in Europe from AI? Oh, I'm not seeing them anywhere yet. So I think it's way too early, right? So we're in the CapEx phase, what I call the figuring it out phase, right? So we are diffusing AI into organizations and the implementation model is to go to people like me, give them some AI programs and go figure it out, right? That's not a good implementation model. And if you look at the implementation rate, so we do an enterprise adoption survey, it's still very, very low.

15:37Less than 20 % of all the firms claim to be implementing at scale. So it just cannot be the case that anything is happening yet because no one's changed hiring behavior. No one's really figured it out yet. Now, the reason it shows up in the U.S. in productivity data is because if you create a lot of output with CapEx, you don't hire anybody. It looks like per employee, you're generating more output. But that's not AI productivity the way I think about it. That's just a shift from producing with labour to producing with capital. In Europe, of course, you don't even have that. Aaron Captain there speaking to me and James Wilcock on Bloomberg Radio.

16:08For Britain, add to that a somewhat more frosty relationship with the US, maybe growing wariness of Silicon Valley and a ship of state which seems to lack a rudder. So does Britain's pitch to be an AI leader increasingly look a little thin? Bloomberg TV anchor Tom McKenzie joins me now. You get the lucky job of going down to London Tech Week to take the temperature, rub shoulders with all of these big CEOs. What are you trying to find out? Look, I think this is an incredible moment, obviously, for the world of technology. When we think about what's happening in the US with the upcoming listings and IPOs of SpaceX and likely, of course, Anthropic and OpenAI as well.

16:48So that intense focus on the innovation and the build out of these companies. And so the key question really is, where does the UK play in all of this? And this is a really key annual gathering that pulls together the great and the good and ministers as well, senior government figures with leading CEOs across the UK tech ecosystem. So my key questions and what I'm really trying to find out is where does the UK play in the AI story? Do we have some advantages that other nations don't? What kind of companies are we building? What kind of support is the government giving to those companies? And can this be sustainable?

17:20Is this something that's going to have a broader macroeconomic impact as well? that will really be the key focus as i talk to ceos executives and government ministers as well next week yeah it comes after the uk government launched this 500 million pounds for ai in the uk that was in april it doesn't sound like very much money does it when you think about the billions in the ai space but it is intent isn't it what do you think about the uk and whether we can really claim to be a tech leader? How much does it show about impetus to be in that leadership role in the UK? I think there's a couple of metrics that you could point to that show that there is a really healthy momentum right now in the UK.

18:05And the UK really can claim to be playing a role, not sure if it's leading, but certainly a role, a significant role in terms of the build out of AI and innovation. You do have that fund from the UK government, the UK Sovereign Wealth fund, which, yes, you say, in comparison, the numbers we see in the US is minimal. But what they would tell you, James Wise is the chair, formerly and also at Balderton, which is a venture capital firm. What James would say is that, look, not only do we invest, but we also open the doors to government for you. That credential that you get, that stamp of UK government approval actually is meaningful.

18:37In fact, I was speaking to Isomorphic Labs, a drug discovery company that sits under Alphabet as a unit there and speaking to their president. He said it is meaningful. They've also had investment from the UK sovereign fund. So that is an important part. We have, you know, three of the top 10 universities in the world are in the UK, Cambridge, Oxford and Imperial. We have that talent, that deep research talent. We do have the capital of the city of London and we do have access, of course, in those connections to Europe as well. So on all those fronts, there is some supportive kind of muscle tissue there.

19:10What you're also seeing in terms of fund flows, I'll just give you a few statistics then that's come out of a recent Tech Nation report. The UK tech sector has a combined market value now of about 1.6 trillion US dollars. And AI's total UK tech market value is, in fact, more than doubled in the last five years. You have companies like Eleven Labs, like Synthesia, like Wave AI raising billions of dollars. And so in terms of adoption and the next steps, how far are we seeing the latest advances in AI filtering through into how startups are doing business, but also into how other businesses are adopting this technology and turning it into productivity gains.

19:54And I think that is a question that remains partly answered. And as you go around the UK's tech ecosystem and you speak to people working in those organisations, they are leaning in, they're using these platforms, they're using these AI solutions. No doubt you and I are using forms of AI probably on a daily basis as well. We may be as individuals be able to point to productivity gains. The harder question to answer is at the corporate level, to your point, at the enterprise level, are we yet seeing that filtering through to earnings to the bottom line? I think the jury is still out on that, but it is relatively early days in terms of adoption and smaller companies and smaller enterprises may be adopting more quickly.

20:37Bigger enterprises, particularly those that are regulated, heavily regulated, for example, in the financial services space may take a little longer. Though there are examples of banks that are leaning into AI adoption. And we've seen evidence of that in terms of their commitments and their spending. So I think we still need to see that evidence come through. And that is a really key point, because that comes down to the return on investment. Are we getting our bang for our buck as companies spend increasingly large amounts on AI solutions, on so-called tokens? Is that paying off? Yeah, absolutely.

21:09It's sort of thinking about adoption, also skills. What sort of skills do people need to be able to use AI? That's one of the issues that's been brought up a lot, hasn't it, in the UK? And you're right, how much does it cost a company actually to have AI tools that all of their workers can use those sort of token costs? Look, there's another sort of slightly darker issue, which is sort of the uncertainty around the Labour government. And I mean, I was speaking to the AI minister only a few weeks ago about that sovereign wealth fund. And I know you speak to a lot of players and policymakers. The future of the current prime minister is very uncertain.

21:47Andy Burnham, who seems at the moment like the front runner, maybe to replace him, sounds a bit tough on regulation in the AI industry, in the tech industry. Is that going to seep into issues if there's a kind of tougher view around technology in Britain? I think that is an important question. Clearly, it's a question that we're putting to company executives around political uncertainty in the UK and what that means for their investment plans and their hiring plans. So I think that's a valid question for those working and operating in the tech ecosystem as well. I think it's fair to say that the AI minister, Kanishka Narayan, is pretty well received within the tech ecosystem.

22:30I hear pretty solid responses off record and on record to what that government minister is doing, Kanishka, alongside the AI Sovereign Fund. And that is something that clearly AI leaders and entrepreneurs in the UK, they want to see that kind of commitment continuing. And there has been some evidence that the UK is and the UK government is trying to be on the front foot in terms of aligning the regulation with innovation, with adoption. You've got one example coming up at the end of this year, which is Waymo is very likely to be testing and actually rolling out its cars for the public. They're testing now, rolling out its cars for the public by the end of this year.

23:11I was speaking to them. That's still currently the plan. And that is because the UK has put in place a regulatory framework that allows them to do that for the first time out of the United States. So that is one example. It's not to say that there aren't others who say we need to have checks and balances around this technology. So I think it's an important question. Will that stability or question marks about the future government pose some kind of headwind is something that I will be addressing and bringing up with founders and CEOs next week. Yeah, it's going to be fascinating, isn't it? Watching Waymo for the first time outside a US city, you know, trying to kind of weave their way through the ancient streets of London.

23:50It's going to be a big test of the company. It's going to be really interesting to see how people in the UK react to that. But in terms of the other major tension, you have to also bring up the worries maybe around dependency, around sovereignty. These are lots of countries thinking about this, how dependent to be on Silicon Valley, on big US companies. Palantir, I can point to as the most recent worry. MPs have flagged that as a worry. Palantir's involvement, for example, with the NHS, the National Health Service. How important are those tensions? Well, I think those tensions are real. And I think one response to that, and we've heard this from some, would be, well, it's fine.

24:33We can rip out and replace Palantir with what? So we need to have an alternative. Palantir, the argument goes, is the best at what they do. And if we want to be able to align all the data across the NHS and make things like booking appointments and collecting all of that evidence that can help in terms of outcomes and better health outcomes, then we need this kind of technology. Of course, it is a controversial company and hence the scrutiny that it is facing. As yet, we do not have a company that can do what Palantir does. Maybe in the future we will. But I think the broader question about sovereignty is real.

25:08Do we need more data centres? Do we need more infrastructure? How much of that needs to be on a supply chain that the UK has greater control over? I'll be speaking to the likes of Brookfield's head of AI infrastructure about that point. We are a long way from getting the kind of investment commitments around data centres and infrastructure that the US is getting. Can we rely on the hyperscalers? Can we and are we relaxed about running our systems on Amazon's AWS or on Azure or on other parts of the Google Cloud system? or do we need to have our own sovereign capabilities? The European Union is coming up with their response to that and we're seeing that working through the system right now.

25:48So that is also a valid question. And then if we think about infrastructure, we have to think about energy. Our energy costs are about three times that of the United States, about two times that of China. Do we have the grid capacity? Are we building the energy that we need to support this kind of infrastructure? What is the solution on that front? Tony Blair has his views around the North Sea oil story. Others will have opposing views. So that is also part of the question that the UK is going to have to wrestle with. And certainly entrepreneurs and executives, they want to see cheaper, cleaner, more accessible energy.

26:18And that is a really key part of how we position going forward. Yeah, it's going to be a very interesting week and we look forward to all of your coverage from London Tech Week. That is Bloomberg TV anchor Tom McKenzie. Thank you. I'm Caroline Hepgit here in London. You can catch us every weekday morning for Bloomberg Daybreak here at beginning at 6am in London. That's 1am on Wall Street. Nathan. Thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to inflation data from the world's second largest economy. I'm Nathan Hager and this is Bloomberg.

26:58The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience, advancing climate adaptation and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions, interactive workshops, and networking opportunities. Learn more at bloomberglive.com slash SBS dash Singapore. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week.