Daybreak Weekend: US Jobs, Winter Olympics, Japan Election

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

1:01This 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 to the January jobs report and how that could affect Fed policy. I'm Nathan Hager in Washington. I'm Caroline Hepker in London, where we're discussing snow, ice and geopolitics of the 2026 Winter Olympics in Italy. I'm Doug Krizner looking ahead to the snap election in Japan and what the outcome means for the Japanese economy. That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 1130 New York, Bloomberg 99.1 Washington DC, Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121 and around the world on Bloomberg Radio.com and the Bloomberg Business App.

1:54Good day to you. I'm Nathan Hager. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager with Mandeep Singh, Global Head of Tech Research at Bloomberg Intelligence. Great to have you on as we're going to be looking ahead to a lot more big tech stocks in the week ahead. What are we expecting when it comes to earnings from Google Parent Alphabet, Mandeep? Look, I mean, what we saw with Meta was, you know, accelerating top line growth. And in the case of Google, both the search business as well as the YouTube business have, I would say, modest expectations going in the quarter, you know, low to mid teens growth.

2:34So, I mean, we felt double-digit growth for Alphabet over the last few quarters was very impressive given, you know, the threat from ChatGPT. But I think Meta has really raised the bar in terms of digital ad growth in the fourth quarter. So I would be looking for accelerating top-line growth, at least high-teens growth for YouTube and low-to-mid-teens growth for the core search business of Alphabet. Since you mentioned meta-platforms, we should say that the AI spend from Microsoft seemed to spook a lot of investors last week. Given that Alphabet has its Google Cloud business, could that be a concern for investors there when it comes to AI spend in the cloud?

3:22You're right. I mean, what Microsoft Sprint has shown is you can't really miss the cloud growth numbers. So in the case of Alphabet, expectations are Google Cloud will have at least 35 % growth. And based on the work that we have done, I mean, Google really has had some very impressive deal wins this quarter in their cloud segment. So chances are they should do better. And remember, Google has their TPUs, so they shouldn't be as supply constrained as Microsoft probably was in the quarter with the GPU situation. So my guess is Google cloud segment would see sequential acceleration and they should be the consensus number handedly.

4:09How do you see Google's TPU processors faring compared to the GPUs that we get from NVIDIA? I mean, if there's one theme that we have heard so far this earnings season is AI infrastructure demand remains insatiable. And all these companies are wanting to get as much compute capacity as they can. So Google's TPUs are used both internally for Google overviews and across their family of apps, as well as they're used on Google Cloud. And so from that perspective, I do think Google should be able to show the most efficiency when it comes to AI infrastructure. And that should get reflected in their gross margins, which I expect to be better than the rest of the hyperscalers.

4:59We're also going to hear from Amazon this week. They report their earnings. What are you expecting from their cloud unit, AWS? Yeah, I mean, you want to see all these cloud companies show sequential acceleration. It didn't happen with Microsoft. Hence, we saw that negative reaction. And in the case of AWS, I would say expectations, again, are like for low 20 % growth. So given they are the largest cloud provider, I mean, they should be able to beat those numbers. But look, what we have heard so far is supply constraints are real when it comes to AI compute capacity. And that may have a bearing on whether AWS ends up beating those consensus numbers or not.

5:46Is low 20 % enough to wow investors? No, but you want to see that sequential acceleration. So I mentioned about the size of AWS. So that's almost$135 billion run rate business for Amazon. Contrast that with Microsoft, which is more$100 billion, and Google Cloud is like$60 billion run rate. So given their size, I mean, low 20 % would be in line, but anything more than that would be impressive. And I think that would help the stock. And along with Amazon and Alphabet, another A in big tech reports this week, advanced micro devices. How's the computer chip business looking right now, Mandit? I mean, look, Meta just told us they plan to spend up to$135 billion in CapEx, which is a 70 % increase from what they spent in 2025.

6:43so we were modeling like 50 % increase in CapEx from hyperscalers going into 2026 chances are that number will be revised upward and so it will trickle down to the likes of AMD which is the you know the second biggest GPU provider after Nvidia and so to my mind AMD deal with OpenAI and some of the other business that they have won over the last few months should help exceed expectations when they print their results. Does AMD need to show more market share compared to NVIDIA? I think this is such a big market that everyone is realizing that you don't need to win market share from NVIDIA, as long as you have a good product that companies are interested in buying and OpenAI has that deal with AMD now, that is a big leap of faith in terms of AMD's capabilities to supply six gigawatts of power that has all AMD chips.

7:56And I think that should help them win more enterprise business over time. Appreciate this, Mandeep. As always, that's Mandeep Singh, global head of tech research at Bloomberg Intelligence. We move next to some key economic data in the U.S. Our first full look at the labor market for 2026 so far comes out this Friday at 830 Wall Street time. We get non-farm payrolls for January. Ahead of that, we're joined by Michael McKee, our international economics and policy correspondent for Bloomberg Radio and television. Mike, the theme we keep hearing from the data leading up to this report is this is a low-hire, low-fire labor market.

8:35So are we expecting to see that reflected in the Big Daddy report coming out this week? That is what we are expecting to see. The interesting thing about this report, of course, is it's the first one since the government shutdown ended that isn't going to be distorted by the government shutdown. It's a full month of data collected and the normal processing time. So to the extent that it tells us something about where the labor market is, it should be relatively accurate. The Fed last week in their assessment of the economy at their meeting said that while we were still seeing low hiring, the unemployment rate seems to have stabilized.

9:15So they seem to think that things are getting a little bit better. Okay, so how could we see that reflected in the data itself? Where are we seeing signs of steadying in the labor market? Well, the biggest is in the unemployment rate. It fell last time, last month, for the December number to 4.4 percent. And we're not expecting that to change, according to the Economist survey by Bloomberg. It stays at 4.4 percent. So a sign of stability there. And the interesting thing is the December payrolls report was only 50 ,000. Obviously, we will get some sort of revision. But right now, we're looking at$70 ,000 is the forecast by economists for January.

9:57So that would be a little bit stronger than we saw in the month before. But still pretty subdued compared to where we've been historically. So what could this mean for the Federal Reserve going forward? Well, the Fed doesn't know. And that's one of the things that they're going to be looking at. the whole question that surrounds all of these low numbers, is it because companies don't want to hire right now or is it because they don't have people to hire? In other words, has the administration's crackdown on immigration and the ejection of people from the economy and scaring people into staying home from work, does that mean that there are fewer people to higher, and that's one of the big reasons that we're not seeing the same kind of payroll growth.

10:46And it's going to take a while to figure that out. We do, however, Nathan, get an update on the population estimates. This comes once a year in January, and that will make December and January numbers not quite comparable, and it does figure to change the labor force participation rate, perhaps a little bit. So we'll be starting fresh, but also having some sort of idea of what's going on. Yeah, there's also the big question about whether artificial intelligence is playing a role in labor market dynamics as well. We've heard that from a number of Federal Reserve speakers. Where's the thinking on that right now?

11:28Well, the thinking is that artificial intelligence will take a larger and larger share of the labor force, but we're not completely clear on where it is. The logical answer is that we'll see lower paid, lower skilled people lose their jobs to computers. But of course, people are talking about folks in the finance industry or folks in law, especially at the lower ends, the beginning, the interns, they would lose their jobs because then the computer can do it all. So we are expecting some sort of change, but the question is how fast? And that's where some people at the Fed are concerned that maybe we're getting ahead of ourselves in terms of the impact on today's jobs reports, because companies are starting to adopt this stuff, but they haven't had a lot of time to figure out who they don't need anymore.

12:27And of course, there's a lot of question, a lot of focus at the White House on job growth. The whole idea of trade policy coming out of the Trump administration is that it's going to boost manufacturing jobs. Are we seeing any signs that that is starting to take hold? No. Since the president came to office, we've lost manufacturing jobs, and that's been one of the flaws in their whole argument. We are not seeing manufacturing payrolls go up. Now, we don't have an estimate yet for the change in manufacturing payrolls. That'll come later in the week as we get closer to the release. But in December, we lost 8 ,000 manufacturing jobs.

13:06So there's still a lot of concern about where this all goes and whether or not we're going to see an increase in manufacturing jobs because what tends to happen is that if a company builds a new factory, they put a lot of machines and robots and things in there. And so you don't get the additional jobs that you thought you might. Thanks for this, Mike. As always, that's Michael McKee, Bloomberg International Economics and Policy Correspondent, ahead of the Nonfarm Payrolls Report for January this Friday at 830 Wall Street time. And coming up on Bloomberg Daybreak Weekend. We'll look ahead to the 25th Winter Olympic Games in Italy.

13:44I'm Nathan Hager and this is Bloomberg.

13:56As markets move and headlines break, what matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis and powerful tools that help you connect the dots. Visit bloomberg.com slash podcast offer to learn more. 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 a general election in Japan and we'll focus on a policy decision from the Reserve Bank of Australia. But first, the 25th Winter Olympic Games kick off in Italy in the next few days, Though the event promises fireworks on the sporting stage, could diplomatic tensions between the US and Europe threaten to upstage the proceedings?

14:44For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepger. Nathan, I'm tempted to say that delivering the Milano Cortina 2026 Winter Olympics may be as tricky as pulling off one of those wild stunts in the freestyle big air competition. The Olympics is meant to be unifying, of course, but it can also serve to highlight geopolitical tensions between countries with concerns often about sports washing. Then there's the issue of delivering the event, including all the venues in the Alps on time and in some way sustainably for this Olympics, which begins on the 6th of February, followed by the Paralympics a month later in March.

15:26There has been considerable attention and protests by Italian officials over US plans to deploy some ICE staff to this year's event. Bloomberg understands that ICE agents will be in Italy as part of the security details for the Vice President J.D. Vance and Secretary of State Marco Rubio, according to an official from the US Secret Service. But the agency's role in an immigration crackdown at home is stirring opposition overseas. Now this year's Olympics is also set against a backdrop of increasing division between the United States and Europe. Recently, the NATO Secretary General Mark Rutter told the European Parliament that the transatlantic alliance is vital to the region's survival.

16:12So when President Trump is doing good stuff, I will praise him. And I don't mind him publishing text messages. And if anyone thinks here, again, that the European Union or Europe as a whole can defend itself without the US, keep on dreaming. You can't. We can't. We need each other. That was NATO's Mark Rutter speaking there. So will Italy's Winter Olympics feature more ice than they bargained for? Joining me now to discuss is Bloomberg's Milan bureau chief, Tommaso Ebhardt. Tommaso, let's start by thinking about these Winter Olympics taking place in the Alps in the next few days. I suppose the first big question, and maybe it's always the case for the Olympics, are all the venues going to be ready?

16:58So those games will be spread all over the north of Italy, not just on the Alps. The main city where the opening ceremony will be Friday is Milan. And then you're going to have the different sports to be held in different locations. in Portina, where you're going to have the women's ski races, you're going to have in Lombardy, in Bormio, you're going to have games also in the Sudirol region. So what is interesting is that somehow to reduce the cost of the Olympics, they have been spread to a different location where essentially most of the venues were already built and ready. For example, the Biathlon will be held in Anterholz, which is already one of the most famous locations in the Alps for this kind of sport.

17:50There are some new venues, especially one in Milan for high soccer, which was just completed. There were just some criticism about how it is built, about the quality of the ice, but it looks like it's all almost ready. If you walk around the city in Milan, you see a lot of temporary buildings that will be used for the Olympics. while what I'm hearing, for example, that in Cortina, Adam Petz, on the Alps, not all the everything that was meant to be built for the Olympics is ready. But for sure, the infrastructure, there was a huge investment in infrastructure and this is what probably was the most important investment for those Olympics.

18:29It's also a really interesting Olympics because it's one of the first times in a long time that a Winter Olympics is going to be sort of within easy reach of US scheduling. And yet maybe a lot of the buildup to the Winter Olympics is going to have been dominated by this spat, this disagreement around ICE agents, maybe, or staff being involved in the Winter Olympics somehow, maybe just to protect high-ranking US officials who are going to be visiting. but there's been quite a lot of pushback about it. Can you describe how the Italian government's been handling it? In the last week, it was a high-hub on the debate in Italy, the involvement of ICE in the Olympics.

19:19There were some Italian officials who protested quite vigorously, including Milan mayor Giuseppe Sala, who, following the latest involvement of ICE in the US, said they're not welcome in Milan. Then for days, Italian officials somehow tried to keep the situation under control until there was a meeting between the Italian interior minister and the U.S. embassy in Rome. After that, it was clear that ICE agents will be involved just within their domestic offices. So that means they will be deployed in the U.S. consulate. And this somehow has come a little bit of attention. Some Italians are protesting, clearly, and the Italian government had clarified which will be the involvement of ICE in the Olympics.

20:13And I have to say that clearly the news creates a lot of attention. Yeah. And Giorgia Maloney, of course, the prime minister, is often seen as a Trump ally. I suppose there's also maybe a question that whilst the Olympic officials want to present this want to present sports as is so often the case as a kind of unifying message there's a danger that it will highlight the divisions between Europe and the US that we've seen you know geopolitically that's going to be surely quite hard to handle. Clearly Meloni is seen as one of the European leader closer to Trump. She is a key figure at the moment in Europe, also because of her closer ties than others with Trump.

21:08That doesn't mean that they are always on the same page. For example, on Greenland, Meloni was aligned with the rest of the European leaders while answering to Trump's request. I think that what you said is clearly an interesting aspect during Olympics, not only the Olympic Committee, but the buzz should be on sport and not on geopolitical tension, but we're living quite, I would say, a very interesting time in terms of geopolitical news, if you want to call them interesting. And so clearly this is part of the public debate and will be also during the Olympics for sure. The eyes of the world will be on Milan for the opening ceremony and then on the out for the Olympics.

21:51No doubt. I'm sure people are also getting very excited about it to watch. I mean, what are usually just spectacular events, aren't they? The acrobatics and the kind of aerial displays, snowboarding and skiing and so on. Which sort of brings me to snow. The other aspect of this is that climate change is affecting the Alps so deeply. And there's been a lot of anticipation about how much snowfall has been arriving. You know, there's been in the days leading up to this and the creation, obviously, of fake snow, you know, where you kind of generate it for the ski slopes. Climate change is also huge.

22:32Good news. In the last couple of weeks, there has been heavy snowfall on the Alps and on the Dolomites that were still in summer mood until a few days ago. So there will be White Olympics. It's quite happy, but for sure, as happens nowadays quite often in the Alps, most of the snow, which was prepared for the Olympics, is the snow that is also being prepared for tourists because, you know, the ski industry and the tourism industry is crucial. The atmosphere is changing the altitude when no snow is usually expected and it has some costs. Because if you want to ski and there is no snow, then you have to make the investment.

23:20And this is clearly a consequence of the higher temperatures we are seeing. Lastly, Tommaso, what do you expect in terms of the economic impact of the Games? There's also been, you know, this idea of sustainability. How do you make the Olympics every four years, whether it's frankly winter or summer, a bit more sustainable? You've sort of talked about that with the reuse or the using of current venues, but the economic impact, what do you think? So one of the main aspects of these Olympic Games, this winter edition, is that to avoid building new venues just for the Olympics that you won't be used anymore.

24:03That's why the games will be held in almost 10 different locations where you already had the infrastructure ready. In Italy, we had the Olympics, the Winter Olympics in 2006 in Turin and the Piedmont region. And there are some venues, especially one for the Bob, who has not been used since those Olympics. So the plan has been since the beginning to avoid this risk. And that's why you're going to have the Games in very different locations. So the cost will go down. And this is also a matter of sustainability. The impact of the Games, we're talking about 5 billion euros revenue and investment for the Games.

24:43The impact in this country is that essentially the Games were used to create new infrastructure. For example, road infrastructure to go to Cortina Danpezzo. A couple of new tunnels were just inaugurated a few days before the Olympics are starting. so it's a way somehow to boost infrastructure in Italy which is one of the main issues of the country. Yeah, absolutely. Great Britain sending 53 athletes to the United States, more than 200. Italy has actually got close to 200 athletes who are going to be going there but as you say, tourism numbers will be something that will be watched closely. It's a huge platform, isn't it, for Italy.

25:24Tommaso, thank you so much for being with me. It'll be an interesting few weeks. Thank you. Ciao. Wow, Bloomberg's Milan Bureau Chief, Tommaso Ebhardt. And we'll be bringing you any interesting news stories from the Olympics, 6th of February to the 22nd of February, of course, in the coming few days. I'm Caroline Hepker 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 to Japan, where a general election is set for February 8th.

25:58I'm Nathan Hager. And this is Bloomberg.

26:11This is Bloomberg Daybreak Week and our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. We go to Japan next where a general election is set for February 8th. Prime Minister Takeichi's Liberal Democratic Party is likely to increase seats and gain a majority in the lower house. For a look at what the outcome could mean for the Japanese economy, let's go to Bloomberg's Doug Krizner, host of the Daybreak Asia podcast. Nathan, in late January, Japanese Prime Minister Takeichi dissolved Parliament and called for a lower house election. It is now set for February 8th.

26:47Now, markets have already expressed a bit of unease. To help us understand what's at play, let's bring in Bloomberg's Paul Jackson. Paul is a member of the EcoGov team looking at Japan and South Korea. Thank you for being here. Can we begin with a backstory on how we got here and why Takeichi called for the snap election? The ruling party in Japan, the Liberal Democratic Party, has been struggling to hold on to power in recent elections. Voters are very unhappy about inflation. It's the first time they've been experiencing inflation in a generation. It's putting a lot of pressure on households.

27:23And they're wanting the government to kind of take control of this. Also, we have a country that's surrounded in Asia by various security concerns. And since she became prime minister just three months ago, she's been riding high in the opinion polls. Now, you could think it's a bit cheeky to go straight to the electorate when you're less than a quarter through your leadership. But she's clearly trying to take advantage of those high opinion poll ratings and the idea that, look, I am a leader with identity. I can be more assertive as a leader in Japan and I can make Japan more assertive, give more identity to Japan.

28:09And really, Takaiichi is gambling on this personal appeal to the electorate in the style of former leaders like Shinzo Abe and Junichiro Koizumi to appeal directly to the electorate rather than through the party and get people to vote for her. And she's put her career on the line because imagine if she doesn't extend a razor-thin majority that she's got at the moment. I mean, she's literally one-seat majority at the moment on 233 in the more powerful lower house. And she said that the goal is to extend that majority. And if she doesn't, then she's likely to step down. So among her objectives, you mentioned how inflation is affecting the average consumer in Japan.

28:56And she has proposed a tax cut on food. Is that right? Is that a part of this strategy? That is a part of the strategy. And the ruling party has been very reluctant to go down this path in previous elections, even though pretty much all the opposition parties have been calling for this, or something similar related to the sales tax. Instead, she's embracing it and saying, no, no, let's do this. We'll do it temporarily. We'll do it for two years. and it's to reduce an 8 % tax on food down to zero during that time. Now, that sounds okay so far. There's going to be a loss of revenue. This is not on the scale of some kind of like the former UK Prime Minister Liz Truss.