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

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

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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, we'll look at some delayed economic data in the U.S. and how they may impact Fed policy. I'm Nathan Hager in Washington. I'm Caroline Hepker in London, where we're looking at the global energy sector. I'm Doug Krizner looking at soft banks approaching earnings as well as the company's bets on artificial intelligence. 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 some key economic data in the U.S. 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, U.S. economist with Bloomberg Economics, starting to get a little used to this data coming a touch late with these recent government shutdowns.

2:38Are 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 15 ,000 jobs added during the month of January. And that's about a quarter of what the consensus 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.

3:24we're going to have an adjustment of the birth-death model. We're going to have the official re-benchmarking of the data. We've already seen a preliminary re-benchmarking showing that about 911 ,000 jobs are going to get stripped out of the data. So the total job number is going to be revised down by about 911 ,000 jobs. So there's just going to 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.

4:05And 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 120 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 Jolt Report, it really showed a major cooling in labor demand in the month of December.

4:46So 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 non-farm 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 hire, 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.

5:29I 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.

6:11Is this payrolls report going to raise questions for you about whether the Fed was right to pause on interest rate 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, you know, 1.2 unemployed workers per job opening. And so the Fed already understood that there was this excess supply of workers.

6:53I think that the decision to pause is really more contingent on what's going on on the good side of the market, whether we're going to see additional inflation pressure coming from tariff pass 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?

7:33I think that the monthly print is going to be hot. I think that we're going to see about a 0.3 % 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. 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.

8:14Thanks for this, Stuart. Good having you with us. That's Stuart Paul, U.S. 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. And Bailey, it looks like Wednesday is going to be a particularly busy day on the earnings. We've 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.

8:45And Cisco is going to be a big one, given the stock's up more than 30 % 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 broader sell-off? Yeah, we've seen this massive sell-off, particularly in 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 does management guide towards for the remainder of 2026? And everyone seemingly is marking down their software expectations, but as 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?

9:32Is there a capacity constraint? 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 gonna see that potentially hit an 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 irrelevant. Along with big tech, we're waiting for earnings from Big Macs. What do we expect from McDonald's this week, Bailey?

10:06There's a lot of optimism about how McDonald's is positioning benefiting from tax rebates for the lower-end consumer, benefiting potentially from your upper or middle class, downshifting some of their spending. This is a company that, if you look at the chart on a 12-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 U.S., but globally speaking.

10:37So, again, does it turn into, to your point of price to perfection example, remains to be seen, but a lot of excitement. There are a lot of questions, though, 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?

11:12But 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 sell 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 T-Mobile on Wednesday.

11:46I think we had some recent beats, didn't we, from Verizon and AT &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 T-Mobile, really moving sideways. Yes, it did rally from a low towards the end of January of$183. But when you compare or overlay their charts against AT &T, to your point, or Verizon, those stocks look like rocket ships. Verizon over the last week went from about$40 a share to$47 a share. On the flip side, AT &T is up pretty sharply after rallying after its results. So it does seem like investors maybe are baking in some optimism.

12:26There 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 12 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 chip as much as it could for a communications company. What we saw for Verizon, again, rallying 12 % last week after their results. And so what are the potential big growth drivers for T-Mobile in this quarter?

12:59Well, the big focus is going to be on how are they competing with AT &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 and 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.

13:35A lot to watch just on Wednesday for earnings. Thank you for this. Bailey Lipschultz, senior equities reporter for Bloomberg News. And coming up on Bloomberg Daybreak Weekend, we'll look ahead as global energy leaders convene in London for International Energy Week. I'm Nathan Hager, and this is Bloomberg.

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16:17on growth and security during an increasingly disordered energy transition. For more, let's go to London and bring in Bloomberg Daybreak Eurobanker Caroline Hepker. Nathan, in recent weeks, the conversation around global energy has been focused on the Middle East. Oil markets have been calibrating the prospect of a conflict between the US and Iran. The tension has built up as President Donald Trump has dispatched an armada to the region and a US jet shot down an Iranian drone. Trump said recently that the two sides are now talking and Iran's foreign ministry has expressed hopes that the process could bear fruit.

16:52There's also a growing standoff, though, between the White House and Iraqi politicians over who should be Iraq's next prime minister, which could destabilise 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 warned that energy is a limiting factor for AI deployment.

17:41Microsoft'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.

18:17But 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 megawatt and megawatt hour in the most efficient way possible. That was Bobby Hollis from Microsoft speaking there 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, Lara Williams, and our energy reporter, Eamon Farhat. Welcome to both of you and thanks for your time.

18:54Eamon, 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 centres and trying to power them and power economies. A lot of that is how do we build more generation, whether that's gas plants, solar farms, 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.

19:28I 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 are policymakers, are businesses to shift the conversation towards renewables? yeah well you know when it comes to policymakers i think it really depends on the policymaker you've got someone like ed miller band and 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 um for a lot of other policymakers i think net zero has become a politically charged thing and I think that makes it slightly harder to communicate so you know for example with with offshore wind we had the results of the latest subsidy 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 that kind of goes against the the overall story that has been in recent years that renewable prices are coming right down.

20:35And to be clear, 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, policymakers 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.

21:14In terms of the energy transition though, Eamon, last year I was speaking to Core Weaves, UK and Global heads, about their rapid data centre 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 data centres, which is really in line with what the government wants, you know, it's just about how quickly can they get power, they don't really care much about price, it's about can they connect to the grid. And, and as you've seen before, I mean, you know, we're talking about gas still being important.

21:50I mean, right now, you know, gas generation, building a gas power plant could be the fastest way to do that. And in the US, that's what you know, Trump has been talking about. You know, if we're trying to do 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 that data centers have right now so it really is all about getting that power as quickly as possible and trying to see how government can facilitate that for companies. Lara how much broad support is there still for the energy transition?

22:21Among 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 let's put the toxic political atmosphere makes it hard to kind of shout about climate change unless you want to draw the the wrath of of the the u.s president but you know the investments are still being made in renewables um 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 corporates and you know really it's a much more powerful one than than doing the right thing so while you might not hear businesses going on about climate change and carbon emissions the investments are still being made and I think there is still broad support for the transition.

23:08Eamon 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 worried 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 2030, 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 costs to build an offshore wind farm, how much the price of gas is.

23:44So companies who are making plans to maybe build a factory and do all this, they have to really be sure that, we'll really put in 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. Eamon, 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 the UK's policymakers? 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 power 2030.

24:20It does bring down bills, that's important because renewables are cheap, 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 a 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?

24:54Yeah, 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 an absolutely huge boom in solar installations. I think they jumped 54%. And that's, you know, both utility scale and ones, you know, on people's roofs. and so it is you know it is a there is a big focus on that in emerging markets more broadly I think that you know there's a huge opportunity people often talk about them you know leapfrogging fossil fuels because you know part of the motivation for these countries 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, expand energy access.

25:41But 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 um we're used to a kind of on-demand model and so now we've got to have uh much more capacity and also work in energy storage um 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 places where you know coal power plants 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 drag and it really just depends on which way that trend goes.