Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our day
Speaker 1: Break anchors all around the world. And straight ahead on
Speaker 1: the program, The Cavalcade of earnings continues on Wall Street
Speaker 1: and we take a deep dive into two closely watched companies.
Speaker 1: I'm Tom Busby in New York.
Speaker 2: I'm Stephen Cawen in London, where we're taking the temperature
Speaker 2: of the European oil and gas industry as we head
Speaker 2: into another week of big name earnings reports.
Speaker 3: I'm Doug Prissner looking at what the lunar New Year
Speaker 3: festivities will mean for the Chinese economy.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend.
Speaker 4: The business news you need to wramp up your.
Speaker 3: Week available on Apple, Spotify, the Bloomberg Business App, and
Speaker 3: everywhere you get your podcasts.
Speaker 1: Good day to you. I'm Tom Busby and we begin
Speaker 1: today's program with the world's biggest media company, Disney, reporting
Speaker 1: earnings this Wednesday, and boy, there's a lot to unpack there.
Speaker 1: Production still catching up from last year's twin with strikes,
Speaker 1: What to do about the ABC network and other non
Speaker 1: core units unprofitable streaming TV services, activists, investor Nelson Peltz's
Speaker 1: proxy battle with Disney's board, news that it's selling off
Speaker 1: most of its Indian broadcasting unit, and a real setback
Speaker 1: in Disney's feud with Florida Governor Ron DeSantis over control
Speaker 1: of the municipal district in Florida that includes the cash
Speaker 1: Cow theme park Disney World. It's a lot, and for answers,
Speaker 1: we turn to Getha raganathin US media analyst with Bloomberg Intelligence,
Speaker 1: and Getha, what is the headline? That's a lot? But
Speaker 1: what do you expect to see in disney second quarter
Speaker 1: earnings report?
Speaker 5: Yeah, Disney is a very very complex story, thom as
Speaker 5: you pointed out, and I think you know what we're
Speaker 5: really looking to see. There's no one specific catalyst, per se,
Speaker 5: but I think the sentiment for this talk has definitely
Speaker 5: turned and there's there's there's a variety of factors that
Speaker 5: play here. I think you have some real positive commentary
Speaker 5: coming out from them. In terms of cost cutting. We
Speaker 5: are seeing margin improvement and we're seeing improved profitability at
Speaker 5: the streaming business. Now, remember that there's still losses going
Speaker 5: on there, but they're better or they're less bad than feared,
Speaker 5: and I think the one thing that really kind of
Speaker 5: stood out and has investors kind of excited going into
Speaker 5: fiscal twenty twenty four was their free cash flow guidance.
Speaker 5: And they're guiding to whopping eight billion dollars in free
Speaker 5: cash flow, which kind of takes them back to pre
Speaker 5: pandemic levels and really supports the stock.
Speaker 1: And that is good news streaming. I know they've been
Speaker 1: counting on several properties, including ESPN, Hulu, Disney Plus. But
Speaker 1: it's not all good news, is.
Speaker 5: It for Disney Not at all. There are a lot
Speaker 5: of challenges that remain and you alluded to this just
Speaker 5: a short while ago in terms of at least the
Speaker 5: linear TV networks. You know that there is secular pressure
Speaker 5: on that part of the business. They are to you know,
Speaker 5: dispose of some of the networks, and I think that's
Speaker 5: that's the right thing that they're doing, especially as far
Speaker 5: as their India unit is concerned. But they have to
Speaker 5: kind of articulate a much better strategy for some of
Speaker 5: the US properties, the most famous of them of course
Speaker 5: being ESPN. Now this is you know, the juggernaut when
Speaker 5: it comes to sports networks in the US, but it
Speaker 5: is a cash cow it generates about three billion dollars
Speaker 5: in EBITDA. But there has to be a clear strategy
Speaker 5: from Disney in terms of the future of ESPN and
Speaker 5: how and when it goes over the top.
Speaker 1: Now, also there was talk last time, I think we
Speaker 1: spoke about Byron Allen making a ten billion dollar bid
Speaker 1: for the ABC network. Now that was obviously turned down,
Speaker 1: but is there any movement in the selling of that
Speaker 1: what is now a non core business for Disney.
Speaker 5: It is definitely a non core business for Disney. But
Speaker 5: actually after you know, there was initially some chatter about
Speaker 5: Disney maybe wanting to sell out some of its linear networks,
Speaker 5: including of course the ABC broadcast network. But after that,
Speaker 5: Bob Iger has kind of walked back the talk on,
Speaker 5: you know, the sale of the linear networks, and he
Speaker 5: has to be I think, really careful as he orchestrates
Speaker 5: any you know, any sale of assets, especially the linear networks,
Speaker 5: because again, remember they do definitely want to hold on
Speaker 5: to ESPN. That is a core property for them, a
Speaker 5: core brand name for them, and most of ESPN's revenue
Speaker 5: is tied to the linear networks. So they need to
Speaker 5: do it in a very very careful way and it's
Speaker 5: it's a very tricky balancing act for Bob Byger, and
Speaker 5: so I think he realizes that he does need to
Speaker 5: hold on to some of the linear networks for just
Speaker 5: a little while longer before he can kind of figure
Speaker 5: out a viable strategy for that entire TV network business.
Speaker 1: Well, let's talk a little bit more about Bob Biger
Speaker 1: and some of the challenges he's facing, especially from you know,
Speaker 1: try and fund managements. Nelson Peltz and his proxy fight
Speaker 1: with the board and in essence with Bob Iger is
Speaker 1: not so triumphant return.
Speaker 5: So I mean, this I think is a little bit
Speaker 5: of a distraction, I would say for the company. I mean, yes,
Speaker 5: we have Nelson Pelts, and he does make some fair
Speaker 5: points in terms of the stock price being very challenged.
Speaker 5: And of course there are a lot of things that
Speaker 5: Disney has to do and they have done that. Of course,
Speaker 5: one could argue that, you know, it maybe needs to
Speaker 5: be done even faster, and maybe even more needs to
Speaker 5: be done. But I don't necessarily see Pels having articulated
Speaker 5: anything specific that Disney hasn't already come up with. So
Speaker 5: he spoke about most recently spoke about you know, bundling
Speaker 5: ESPN Plus with Netflix. I mean, the Disney bundle is
Speaker 5: one of the most successful products out there in the
Speaker 5: streaming market right now. So it's going to be really
Speaker 5: interesting to see what exactly Pelts has to offer in
Speaker 5: terms of suggestions for Disney that you know, they haven't
Speaker 5: already that they're not already working on, or they haven't
Speaker 5: already come up with. But I think otherwise kind of
Speaker 5: having him, you know, lingering and having this this proxy
Speaker 5: battle is just an unnecessary distraction for for Disney's management team,
Speaker 5: right Yeah, and it.
Speaker 1: Keeps going on. There's always something Nelson Beltz has to say. Boy, Well,
Speaker 1: one thing I want to talk to you about, and
Speaker 1: I don't think you and I and we've talked before,
Speaker 1: have ever really talked about is the theme parks, which
Speaker 1: seems to be just a constant source of income of
Speaker 1: revenue theme parks and cruises. Does it still continue to
Speaker 1: be the cash cow for the company that it has
Speaker 1: always been?
Speaker 5: It absolutely does, And this is where you know, one
Speaker 5: really has to wonder, you know, if you just kind
Speaker 5: of look at Disney's you know, income statement, sixty five
Speaker 5: percent of this company's profits comes from the theme parks.
Speaker 5: And yet investors continue to obsess over ESPN, continue to
Speaker 5: obsess over the linear TV networks, you know, even though
Speaker 5: they don't make up such a big portion of the
Speaker 5: company's revenue or profits, and so that's kind of really baffling.
Speaker 5: But anyway, going back to your point, you know, parks
Speaker 5: absolutely are the key growth driver for Disney in the
Speaker 5: coming years. They're planning to invest about sixty billion dollars
Speaker 5: in their parks busines is over the next ten years
Speaker 5: or so. And what we've seen is, of course, after
Speaker 5: the pandemic, we saw this huge rebound in the domestic parks,
Speaker 5: you know, so much of pent up demand, continued growth,
Speaker 5: a lot of cost efficiencies, operating margins touching record high levels.
Speaker 5: And now what we're seeing is we're seeing a lot
Speaker 5: of tailwinds actually coming from international parks, so you know,
Speaker 5: all of them are open and running right now. We've
Speaker 5: seen price increases implemented across the board, and we're seeing
Speaker 5: international revenue growth that is extremely strong as well as
Speaker 5: of course you mentioned the cruise ships. So we have
Speaker 5: five cruise ships right now for Disney that are in operation,
Speaker 5: but you have three new cruise ships that are coming
Speaker 5: on board from twenty twenty four through twenty twenty six,
Speaker 5: and so that is going to contribute significantly to the
Speaker 5: profit of this segment.
Speaker 1: It just never seems to amaze me how many people
Speaker 1: who will go to those parks and take those cruis
Speaker 1: as well. Our thanks to Geetha raganathin US media analyst
Speaker 1: with Bloomberg Intelligence. Geita, thank you so much. Next up
Speaker 1: on the earnings calendar is Uber teen Technologies posting its
Speaker 1: latest results this coming Wednesday, and for more on what
Speaker 1: to expect, we welcome Bloomberg Intelligence Senior technology analyst Mandeep sing.
Speaker 6: Now.
Speaker 1: Uber has been on a roll demand for rides, up,
Speaker 1: food delivery, up its share price more than doubling in
Speaker 1: the last year. What do you expect to see in
Speaker 1: its results this Wednesday?
Speaker 7: Yeah, Look, the mobility segment, which is the driver of
Speaker 7: profitability for Uber and it's driving all the optimism, continues
Speaker 7: to do very well. We're talking about, you know, above
Speaker 7: twenty five percent growth and that has been the case
Speaker 7: for the last three quarters. It's going to be the
Speaker 7: case in the holiday quarter, the four que that we
Speaker 7: are talking about and going forward. Also, I feel Uber
Speaker 7: mobility has an advantage in the sense it's gaining market
Speaker 7: share from Lyft, which isn't executing very well and it's
Speaker 7: actually struggling in terms of the supply side. So there
Speaker 7: aren't as many drivers on list platforms as they are
Speaker 7: on Uber right now. And we know with marketplaces, supply
Speaker 7: growth really makes a difference. If your supply growth keeps
Speaker 7: up with demand, that's very healthy for the marketplace. So
Speaker 7: net net mobility should continue to do well even in
Speaker 7: twenty twenty four, even though the comps get tougher.
Speaker 1: Now, is this a return of the business consumer people
Speaker 1: going back to work, needing rides all round?
Speaker 7: I think the thing about Uber is because they are
Speaker 7: a verb, and you know they have that one hundred
Speaker 7: and fifty million monthly active users. They cater to both
Speaker 7: airport rides, which are more business rides, but also the
Speaker 7: consumer rides where people are just using that more and more.
Speaker 7: And for a while, there was this kind of expectation
Speaker 7: that with inflation, people are going to cut back on
Speaker 7: the rights because there is that elasticity when it comes
Speaker 7: to you know, prices going up, people will take fewer rides.
Speaker 7: What that has done is really helped the inflationary aspect
Speaker 7: has helped Uber on board, more drivers on the platform.
Speaker 7: So in a sense, it's brought down the prices for
Speaker 7: Uber rights because their supply growth has been so good
Speaker 7: and people need supplemental income and Uber is one of
Speaker 7: the best platforms out there. If you want to work
Speaker 7: for two hours, you can earn decent money.
Speaker 1: That gig economy really has boosted. Now let's talk about
Speaker 1: something where there is a lot of competition, not just Uber,
Speaker 1: but food delivery, and you're up against some pretty big
Speaker 1: names when you're Uber eats, and what's the prospect there?
Speaker 6: Yees?
Speaker 7: So look, I think Uber delivery definitely is not a
Speaker 7: category leader like the mobility side is I mentioned how
Speaker 7: Uber is executing so much better than Lift on the
Speaker 7: mobility side. On the delivery side, door Dash definitely has
Speaker 7: an advantage in the suburbs. It has had that for
Speaker 7: a while now a few years. And what Uber is
Speaker 7: trying to do is to expand in multiple categories. So
Speaker 7: they have added grocery convenience and all kinds of other
Speaker 7: delivery that they could tag on to that online food delivery.
Speaker 7: And to me, the value proposition is a bundle. So
Speaker 7: Uber has really emphasized their Uber One subscription, which is
Speaker 7: like mobility plus delivery plus anything convenience, and it all
Speaker 7: comes with a nine to ninety nine subscription per month,
Speaker 7: which is quite attractive. If I had to go for
Speaker 7: a door Dash subscription that just does food delivery and
Speaker 7: grocery delivery, or an Instacart subscription, Uber is more attractive
Speaker 7: because it covers right sharing as well. So from a
Speaker 7: bundling perspective, I definitely see that value proposition and it
Speaker 7: is working. You can see the delivery take rates are
Speaker 7: getting better because of this bundling aspect. And they're layering
Speaker 7: ads as well on the platform. So the ads is
Speaker 7: the other kind of profitability driver.
Speaker 1: That looks like a big growth market the ads.
Speaker 7: Yeah, and that's where scale matters for a marketplace like Uber.
Speaker 7: As long as they maintain the scale through the supply
Speaker 7: acquisition I mentioned, as well as you know the bundling
Speaker 7: and the frequency of rides, they have an inherent advantage
Speaker 7: over all the smaller players.
Speaker 1: Thank you very much, our thanks to Bloomberg Intelligence Senior
Speaker 1: technology analyst man Deep Sing and coming up on Bloomberg
Speaker 1: Day Break weekend, we had to Europe for a look
Speaker 1: at upcoming earnings from several energy giants and the possible
Speaker 1: impact of the Israel Hamas war is having on the industry.
Speaker 1: I'm Tom Busby and this is Bloomberg. This is Bloomberg
Speaker 1: day Break weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York. Up later in our program, a major
Speaker 1: holiday kicks off this coming week and what that could
Speaker 1: mean for China's economy. But first, after Shell kicked off,
Speaker 1: earning season for the European oil majors will be focused
Speaker 1: on totel energies and BP in the coming days. Apart
Speaker 1: from their financial performances, questions remain about how the industry
Speaker 1: will respond to growing efforts to meet net zero targets
Speaker 1: and ongoing disruptions in the Middle East.
Speaker 8: For more.
Speaker 1: Now, let's go to London and bring in Bloomberg Daybreak
Speaker 1: Europe banker Stephen Carroll.
Speaker 2: Tom The big oil companies have spent much of the
Speaker 2: past four years grappling with existential problems from geopolitics to
Speaker 2: climate change. Record losses during the pandemic turned into record
Speaker 2: profits two years later. Activist investors have come and gone.
Speaker 2: Big oil's post pandemic playbook has been simple. Take cash
Speaker 2: from rising oil prices and hand it right back to shareholders.
Speaker 2: The challenge this earning season is to avoid missing expectations,
Speaker 2: but crude prices were down twenty percent in the final
Speaker 2: three months of last year, so that's easier said than done.
Speaker 2: In Europe, Shell kicked off the season with a big
Speaker 2: beat on adjusted net income, coming in a billion dollars
Speaker 2: higher than had been expected. Add to that another three
Speaker 2: and a half billion dollars of share buybacks. Here's what
Speaker 2: the Shell CEO, Whales Sauan, told Bloomberg's Tom mackenzie about
Speaker 2: the company's plans for further returns to shareholders.
Speaker 4: What we're guided to is thirty to forty percent of
Speaker 4: our cash flow from operations coming coming back to shareholders,
Speaker 4: so shareholder distributions. What we saw in twenty twenty three
Speaker 4: is we were slightly above the higher end of that
Speaker 4: range at forty two percent. As we continue to deliver
Speaker 4: the strategy, the whole point and the whole focus of
Speaker 4: the strategy is creating more free cash flow per share,
Speaker 4: So we will continue to stay within the thirty to
Speaker 4: forty percent or thereabats through the cycle, but continue to
Speaker 4: create the capacity to be able to reward our shareholders,
Speaker 4: as we have done in twenty twenty three and as
Speaker 4: we hope to continue to do in twenty twenty four.
Speaker 9: Okay, so you have the cash flow, you have the
Speaker 9: balance sheet. Many would look at that and say you
Speaker 9: are ready, you are primed for more M and A activity.
Speaker 9: Do you expect to be more active this year when
Speaker 9: it comes to mergers and acquisitions?
Speaker 4: Our focus is very much on delivering the first sprint
Speaker 4: that we announced. We are essentially just over two quarters
Speaker 4: into what is a ten quarter sprint, and what we
Speaker 4: have identified is that actually the largest value opportunity for
Speaker 4: us is in just unlocking the full potential of this company.
Speaker 4: And so while we will continue to look at bought
Speaker 4: onsto our current port for you, we expect to stay
Speaker 4: within the twenty two to twenty five billion dollar capex
Speaker 4: range that we have guided to, and we will continue
Speaker 4: to look at preferentially going after buybacks because, if I'm
Speaker 4: honest with you, Tom, the most attractive opportunity to allocate
Speaker 4: capital too in the sector I think right now is
Speaker 4: to buy back our shares at north to fifteen percent
Speaker 4: free cash flow yield, and that is with a company
Speaker 4: that is actually building the momentum that we have. It's
Speaker 4: not about buy for us, and that's why we're focused
Speaker 4: on ourselves from now.
Speaker 9: Okay, let me get your view on the on the
Speaker 9: oil price. We've seen gains and oil of about seven
Speaker 9: percent through the month of January. There is this tension,
Speaker 9: it seems, between the question whether that's softening and the geopolitics.
Speaker 9: How do you see that evolving in the months and
Speaker 9: quarters ahead.
Speaker 4: What we see at the moment is the market is
Speaker 4: well supplied. The demand has been remarkably resilient in twenty
Speaker 4: twenty three despite multiple headwinds. The supply side is the
Speaker 4: bigger question at the moment. Questions around ope cohesion, questions
Speaker 4: around how sanctions might play up. You'll have picked up,
Speaker 4: of course, a potential increase of sanctions against Venezuela and Iran,
Speaker 4: potential enforcement or tightening the enforcement of sanctions against Russia.
Speaker 4: All of that, I think is raising questions around the
Speaker 4: supply side. Not to mention the slide slowdown in the
Speaker 4: growth of the shales patch. All of that I think
Speaker 4: is just creating a bit more of tightening in the
Speaker 4: overall market, and we'll see how that plays at but
Speaker 4: a lot of it will be based on geopolitics more
Speaker 4: so than anything else.
Speaker 9: At the moment, the gas trading desk once again knocking
Speaker 9: it out of the park, doing very well, putting a
Speaker 9: very good performance in Is there anything that derails the
Speaker 9: strength that's coming through from the gas trading team.
Speaker 4: I think the Q four was indeed an exceptional quarter
Speaker 4: for our trading and optimization organization. We saw the opening
Speaker 4: of east west ARBs through the quarter and we had
Speaker 4: length as we typically do in the Northern Hemisphere winters,
Speaker 4: and that allowed us to take opportunity to take those
Speaker 4: opportunities and create real value. What you have seen so
Speaker 4: far this year at the start of twenty twenty four
Speaker 4: is the ARBs aren't as wide as they were, so
Speaker 4: less running room there and prices.
Speaker 2: Have come down.
Speaker 4: I think with fundamentals being reasserted now as you see
Speaker 4: a better storage balance in places like Europe and Asia
Speaker 4: and a milder winter.
Speaker 9: How do you see the lergy outlook or demand outlook
Speaker 9: kind of evolving and changing as well? Given the economy's
Speaker 9: growth is slowing, rates remain relatively high, the inventories are
Speaker 9: well filled here in Europe, What does the picture look
Speaker 9: like in terms of demand for LNG So far.
Speaker 4: We're in balance from what we see, But the biggest
Speaker 4: determinant of demand growth I think will come from China
Speaker 4: and how China responds through twenty twenty four, early signs
Speaker 4: are positive. While China hasn't essentially fulfilled with some people
Speaker 4: had expected coming out of COVID, they continue to grow
Speaker 4: and we see the LNG growth LNG import growth continue
Speaker 4: in particular at these lower prices now that they are
Speaker 4: able to buy at these levels, and so that's going
Speaker 4: to be a big determinant. What's I think key in
Speaker 4: twenty twenty four is there isn't a lot of new
Speaker 4: supply coming into the market, and so as you go
Speaker 4: back into stock refilling after the winter, I suspect you'll
Speaker 4: see robust demand. So for the coming year year and
Speaker 4: a half, I think there'll be some good demand. I
Speaker 4: think one thing to keep in mind in the medium
Speaker 4: term is China again will draw a lot of gas.
Speaker 4: To give you a sense of that, just in twenty
Speaker 4: twenty four and twenty twenty five, the volume of natural
Speaker 4: gas power generation capacity that China is building is equivalent
Speaker 4: to the entire installed capacity in the UK today, and
Speaker 4: that's just China China's built out, so there will be.
Speaker 9: A look at demand for energy is What is your
Speaker 9: reaction to this decision by the Biden administration to pause
Speaker 9: the build out the licenses, the approvals for export facilities
Speaker 9: LNG export facilities in the US. What's your reaction. Does
Speaker 9: it put any of your investment plans in the US
Speaker 9: at risk?
Speaker 4: I think the short medium term there will be very
Speaker 4: little impact to the LNG markets. What it does is
Speaker 4: it undermines confidence I think in the longer term when
Speaker 4: it comes to US l G, which is which is
Speaker 4: a real shame given the world demand for LNG is
Speaker 4: going to continue to grow and the US is the
Speaker 4: largest supplier of LNG today, So a pause like this
Speaker 4: can can always create more uncertainty, in particular when you're
Speaker 4: looking at long term investments. That and for example the
Speaker 4: behavior of venture glid Global in the US to not
Speaker 4: honor the contracts towards its off takers, all of that
Speaker 4: just undermines confidence in USLNG at the time when the world,
Speaker 4: including here in Europe, really need the stability of energy supplies.
Speaker 2: That's Shell's CEO ay Al Sauan speaking to Tom mackenzie
Speaker 2: discussing some of the big issues facing the sector as
Speaker 2: we look ahead to the next set of results in
Speaker 2: the coming days from BP and Total LG. Very interesting
Speaker 2: to hear his comments on the Biden administration's move to
Speaker 2: pause approving new LNG export facilities. That's something that came
Speaker 2: up at an industry gathering in Florence in recent days
Speaker 2: as well, the Begger Hughes Annual Conference. This year's theme
Speaker 2: was Energizing Change, addressing themes of affordability and sustainability. Our
Speaker 2: energy reporter Laura Hurst was there. I've been speaking to
Speaker 2: her about the atmosphere at the conference and whether she
Speaker 2: felt it was an industry that was ready for change all.
Speaker 8: Certainly there was quite a lot of buzz around LNG
Speaker 8: hydrogen and other new new low carbon rules, but there
Speaker 8: was not much love for the Biden administrations announcement last
Speaker 8: Friday that said there'd be moratorium on l G expert
Speaker 8: so a lot of backlash. They're in the room and
Speaker 8: basically a lot of the gas producers they're saying, this
Speaker 8: is the transition field that we need, and this is well,
Speaker 8: it's going to replace coal. So it essentially criticizing the
Speaker 8: administration for what looks like a political move.
Speaker 2: Yeah, Peny, you of focused on those policy shifts and
Speaker 2: how they're affecting this sector as well. When we think
Speaker 2: about the reporting that we've had from Shell around their earnings,
Speaker 2: is that a strength that we're likely to see in
Speaker 2: this earning seasons across the sector as we're looking ahead
Speaker 2: to the next set of oil majors reporting.
Speaker 8: Well, it really depends which company you're looking at. So
Speaker 8: for example, Shell, much of their beat was thanks to
Speaker 8: their gas trading. They had what the CEO called an
Speaker 8: exceptional quarter on gas trading, and Shells Tears like BP
Speaker 8: have quite a big, big trading unit as well, so
Speaker 8: it could be reflected there. But there are a lot
Speaker 8: of other areas which aren't looking so bright. So for example, chemicals,
Speaker 8: chemicals for Shell was down almost by a billion dollars Excellon.
Speaker 8: They've got a very big chemicals unit, so we're likely
Speaker 8: to see weakness there. So it's a bit patchy, And
Speaker 8: of course in general commodity prices are softer than they
Speaker 8: were this time last year.
Speaker 2: How are these companies when we think more broadly adapting
Speaker 2: to the energy transition as well, Laura, this is something
Speaker 2: that we look out for details of of how it
Speaker 2: affects their business when we gets earnings updates. But I'm
Speaker 2: keen given that you've been having those conversations at the
Speaker 2: Baker Hughes conference as well as you're reading us where
Speaker 2: the industry is now.
Speaker 8: Well, so you've got, on the one hand, the American
Speaker 8: majors that's on Chevron, who pretty much for the last
Speaker 8: few years to have stuck to their guns of oil
Speaker 8: and gas, saying, this is what we're good at, and
Speaker 8: we're not going to, you know, go into ash or
Speaker 8: win because that's where we're going to make money and
Speaker 8: that's not where our competency lives now. Shell and BP
Speaker 8: they both kind of went down the renewable route that
Speaker 8: have pivoted back to oil and gas as of late,
Speaker 8: so there's definitely a retreat there to Talentgy is probably
Speaker 8: the one that has a little more of a footing
Speaker 8: in the renewable side, with quite a big focus on
Speaker 8: power generations as well as having a very big print
Speaker 8: in the eland G market.
Speaker 2: One of the other factors that these companies are all
Speaker 2: having to deal with, as well as disruption to shipping
Speaker 2: in the Red Sea. How much is that a factor
Speaker 2: that we should be watching out for as we continue
Speaker 2: to look through the season of earnings results.
Speaker 8: Yes, absolutely, I mean it's an important trip point. At
Speaker 8: the moment, the industry is managing that they're shipping around
Speaker 8: the cape or rather the hon of Africa, and so
Speaker 8: at the moment it's kind of being managed. And while
Speaker 8: swan the video, Shehell said, they're also looking at other
Speaker 8: things like swapping tankers from one region to another. So
Speaker 8: at the moment it's manageable, but it's definitely something that
Speaker 8: could overstill into the wider region and could become more
Speaker 8: of a problem.
Speaker 2: This is something, of course, we'll continue to be looking
Speaker 2: for details of in these earnings reports as well as
Speaker 2: we look ahead to you you've mentioned BP and some
Speaker 2: of the sort of factors will be watching in their
Speaker 2: results as well when it comes to total Energy or
Speaker 2: other majors in the sector too. What are the other
Speaker 2: themes that you're going to be watching for as we
Speaker 2: get the next set of results.
Speaker 8: Well, definitely anything that talks to demand, because demand is
Speaker 8: looking a little bit weaker at the moment. We saw
Speaker 8: that again this morning from Shells results that product results
Speaker 8: were a lot softer than they were a few quarters ago.
Speaker 8: So that's something that will definitely be looking out for
Speaker 8: and on guess demand. You know, we've had since the
Speaker 8: rest invasion of Ukraine's gases obviously had some very volatile
Speaker 8: quarters and so far this winter has been quite soft.
Speaker 8: We've had a mild winter, so inventary levels in Europe
Speaker 8: were quite full.
Speaker 2: That's our energy reporter Laura Hurst. And of course we
Speaker 2: will have full coverage of those next set of earnings
Speaker 2: from the big oil companies BP and Total next week
Speaker 2: on Bloomberg Radio. I'm Stephen Carroll in London. You can
Speaker 2: catch us every weekday morning here for Bloomberg Daybreak Europe,
Speaker 2: beginning at six am in London and one am on
Speaker 2: Wall Streets.
Speaker 1: Tom, Thank you, Steven, and coming up on Bloomberg day
Speaker 1: Break weekend. The Lunar New Year kicks off at the
Speaker 1: end of the week. Could the holiday usher in a
Speaker 1: new wave of consumption. I'm Tom Busby and this is Bloomberg.
Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: The Year of the Dragon is upon us. The Lunar
Speaker 1: New Year falls on Saturday, February tenth, but it's the
Speaker 1: pre festival spending patterns that will give some hints to
Speaker 1: the state of China's economy, and for a preview, we
Speaker 1: turn to Daybreak Asia co host Doug Isner, who spoke
Speaker 1: with Shirley Joo, Bloomberg News reporter in Hong Kong.
Speaker 3: Tom the travel rush for the Lunar New Year holiday
Speaker 3: or Spring festival has already started. A key question is
Speaker 3: whether Chinese consumers are confident enough to give a much
Speaker 3: needed boost to the domestic economy. For a closer look,
Speaker 3: we're joined by Bloomberg Shirley Joo, who covers Chinese conglomerates,
Speaker 3: including companies focused on consumers, gaming, and telecommunication. Shirley, thanks
Speaker 3: so much for taking time to chat with us. I
Speaker 3: want to begin with the fact that as we enter
Speaker 3: the Year of the Dragon, I'd like to know a
Speaker 3: little bit more about the Year of the Dragon. What
Speaker 3: is it known for.
Speaker 6: Well, actually, the Year of the Dragon is supposed to
Speaker 6: be a year of particularly good luck in China. So
Speaker 6: you see more babies being born and you see people
Speaker 6: typically spending more than usual in the Year of the Dragon.
Speaker 6: So there is expectation that the recovery this year would
Speaker 6: be faster than last year.
Speaker 3: So a travel as we know, is obviously a big
Speaker 3: part of the story when it comes to celebrating and
Speaker 3: being with family and friends. Are the expectations pretty high
Speaker 3: this year?
Speaker 6: Well, I think for domestic travel in China, the expectation
Speaker 6: is certainly high because we've seen last year, even though
Speaker 6: you know, China's economy was slowing down and people spending
Speaker 6: power has declined and the consumer sentiment wasn't that good,
Speaker 6: travel was really one of the bright spots in China
Speaker 6: last year. So the expectation is that the trend will
Speaker 6: continue this year. People, you know, because they don't want
Speaker 6: to spend on any big ticket items and the demand
Speaker 6: for international travel is just starting to pick up but
Speaker 6: still pretty weak, so people tend to you know, seek
Speaker 6: entertainment and leisure for during domestic travel.
Speaker 3: Yeah, the most recent data that we had on the
Speaker 3: PMI services for China showed a bit of an improvement.
Speaker 3: It was small, but it may have been kind of
Speaker 3: a leading indicator that people are expecting some of the
Speaker 3: services industries to do well during the holiday period. Is
Speaker 3: that a fair statement.
Speaker 6: Yes, services industry, especially experience led activities. For example, last year,
Speaker 6: we saw the box office doing quite well and we
Speaker 6: saw people typically spending on food and drinks, like they're
Speaker 6: buying beer, going to restaurants, they're going to second tier
Speaker 6: or thirdier cities for barbecue and yeah, people tend to
Speaker 6: I think during an economic slowdown, when the outlook is
Speaker 6: still not very certain for a lot of people, they
Speaker 6: tend to splash out on just instant gratification activities.
Speaker 3: So when you look at things like ticket prices or
Speaker 3: movie tickets, are prices generally higher than they were a year.
Speaker 6: Ago, well, definitely, if you you know, buy China standards,
Speaker 6: movie ticket prices in China now would be higher than
Speaker 6: a few years ago, but the increase isn't that much,
Speaker 6: and generally ticket prices in China is still fairly low.
Speaker 6: For example, we're talking about fifty yue for seeing a movie.
Speaker 6: That's why a lot of people from Hong Kong, which
Speaker 6: is neighboring you some inland Chinese cities like Shinjin. A
Speaker 6: lot of people are going to Shinjin to watch movies
Speaker 6: because it's so cheap.
Speaker 3: When we looked at the latest activity data for the
Speaker 3: month of December, I think the unemployment rate was around
Speaker 3: five percent. So has there been an urge among companies
Speaker 3: in the services industry to bring back workers. Now, at
Speaker 3: least on a temporary basis.
Speaker 6: I think the demand is certainly picking up, and I
Speaker 6: think the reason why we've seen a lot of Hong
Speaker 6: Kong people going to Shinjin to shop and spend on
Speaker 6: entertainment partly is because the service industry there performs much
Speaker 6: better than in Hong Kong. And I've heard that that's
Speaker 6: cause because there because there were a lot of layoffs,
Speaker 6: the youth unemployment was pretty high, so people just went
Speaker 6: to Shinjen and started their started up their own businesses
Speaker 6: like street food stalls and restaurants are able to hire
Speaker 6: younger employees, and they typically are more creative and they
Speaker 6: you know, provide better services to customers. And that's one
Speaker 6: of the reasons why a lot of Hong Kong people
Speaker 6: who are used to the sort of subpar service quality
Speaker 6: in Hong Kong because you know, it's a very cut throw,
Speaker 6: very fast paced city, they feel that the service quality
Speaker 6: in Chinngin is much higher, so they all flocked to
Speaker 6: Hinjin to shop and to entertain themselves.
Speaker 3: Surely, one of the other destination points that I think
Speaker 3: of is Macau. Obviously, gaming a big part of that story.
Speaker 3: How do you think the gaming companies, the casinos will
Speaker 3: do this year during the holiday period.
Speaker 6: Well, last year for casinos it was a great year,
Speaker 6: so people sort of expected, you know, the recovery would
Speaker 6: do quite well. But actually the performance of Macau casinos
Speaker 6: exceeded the expectation. And I think it's because Macau is
Speaker 6: shifting to attract more, you know, mass market tourists after
Speaker 6: Beijing's crapdown on the VIP gamblers. So we saw casinos
Speaker 6: hosting more concerts and more conferences and more sports events
Speaker 6: to draw in a lot of people to Macau. And
Speaker 6: this year I think the growth will sort of start
Speaker 6: to stabilize, maybe because the Penta travel demand among Chinese
Speaker 6: to Macau could slow down at a certain point of
Speaker 6: the year. And also, you know, casinos typically are spending
Speaker 6: more to attract these people, so their earnings may you know,
Speaker 6: the growth may not be as fast as last year,
Speaker 6: but generally, I would say sentiment wise, it's still quite good.
Speaker 6: People are still going to Macau to see concerts and
Speaker 6: then they may just you know, drop by casinos to
Speaker 6: gamble and shop luxury. So I think, so far, I
Speaker 6: see Macau is still on the recovery track.
Speaker 3: Well, that's a great transition because I want to talk
Speaker 3: about gift giving next. Traditionally, aren't the red envelopes given?
Speaker 3: And that's just basically giving cash, right, You're not giving
Speaker 3: an item.
Speaker 6: Yes, so that's a you know, long time Chinese New
Speaker 6: Year traditions. So people just put very new newly either
Speaker 6: iron them or you go to bank for new banknotes
Speaker 6: and you put them in the red packets and you
Speaker 6: give it to your security guards, to your relatives, to
Speaker 6: any people seeing more junior to you, like you know,
Speaker 6: children of your relatives.
Speaker 3: So for friends and family members, And if you wanted
Speaker 3: to spend a little bit more money and you were
Speaker 3: interested in giving let's say, a particular item, whether it
Speaker 3: was a luxury good or something else, do you have
Speaker 3: a sense of kind of the price range that the
Speaker 3: average person would spend giving a gift to a family member.
Speaker 3: Is it less than fifty dollars us?
Speaker 6: I will say it would be more than fifty dollars US? Okay?
Speaker 3: And how might they spend that? Might they buy a
Speaker 3: device of some kind. Might it be a piece of
Speaker 3: technology or a piece of clothing. How would the average
Speaker 3: consumer go about choosing a gift.
Speaker 6: We saw the general trend last year is that people
Speaker 6: just sort of you know, they prefer to spend on
Speaker 6: less expensive items and they didn't spend as much on
Speaker 6: luxury items as before. So we've seen like a decline
Speaker 6: in spending over for example, jewelry, high fashion clothing, handbags,
Speaker 6: and these are actually not for traditional Chinese New Year
Speaker 6: gifting as well. So for Chinese New Year gifting, I
Speaker 6: would say, really people would spend more on the sort
Speaker 6: of healthcare products and medicine and you know, dried seafood.
Speaker 6: These are more like preferred by Chinese families.
Speaker 3: So the other question then that I have would be
Speaker 3: how do you acquire these goods? Is it going to
Speaker 3: a brick and mortar a physical store or is a
Speaker 3: lot of commerce being conducted online?
Speaker 6: A lot of commerce would be conducted online. So in China,
Speaker 6: e commerce is everything. That's why we've seen a lot
Speaker 6: of luxury brands they even though they want to maintain
Speaker 6: their very high and exclusive image, they have to set
Speaker 6: up shops on some of China's biggest e commerce platforms
Speaker 6: because they know that's the best access to Chinese consumers,
Speaker 6: especially after COVID, you know, during COVID. People just did
Speaker 6: everything online, and delivery in China is so fast and convenient.
Speaker 6: If you order, for example, at ten am this morning,
Speaker 6: it's likely that your products will be delivered by noon.
Speaker 6: So people just find it so convenient and you can
Speaker 6: find everything online. So e commerce is really a dominating
Speaker 6: force in China. That's why you've seen a lot of
Speaker 6: the mid range or low range shopping malls in decline.
Speaker 6: So if you go to China, chances are that you
Speaker 6: will see some shopping malls that have no people in
Speaker 6: and sometimes you know, maybe the lights aren't on because
Speaker 6: nobody's going.
Speaker 3: One of the things that's popular here in the US
Speaker 3: around holiday time and gift giving gift cards, where the
Speaker 3: gift giver doesn't actually have to purchase an item. They
Speaker 3: simply purchase a card with a dollar value that they
Speaker 3: can give the recipient, and then the recipient would in
Speaker 3: turn decide what they want to purchase with that card.
Speaker 3: Is that way of gift giving popular at all or
Speaker 3: is there the kind of the obligation to come up
Speaker 3: with a gift per se?
Speaker 6: I think the red packets would really cover a lot
Speaker 6: of that. So as we discuss just now, cash giving
Speaker 6: is a big thing, and particularly nowadays in China, cash
Speaker 6: giving on social media. For example, we chat is one
Speaker 6: of China's biggest social media platforms. It's actually got a
Speaker 6: virtual red packet giving service, so you can just you know,
Speaker 6: send your relative or your friends ten bucks or one
Speaker 6: hundred or even one thousand.
Speaker 3: Wow.
Speaker 6: Yeah, and you can spend you know, and they can
Speaker 6: spend anything.
Speaker 3: Surely, before I let you go, can you just tell
Speaker 3: me share with me how you're planning to spend the holiday.
Speaker 3: Are you planning to travel?
Speaker 1: Yes, I do.
Speaker 6: I'm planning to go back to England, China where my
Speaker 6: parents live.
Speaker 3: And when you get together with them, what's kind of
Speaker 3: the typical way that the family would celebrate the Lunar
Speaker 3: New Year?
Speaker 6: So first we would just have a big dinner and
Speaker 6: we will watch this you know, annual it's a big tradition,
Speaker 6: annual spring festival gala organized by state media, the quality
Speaker 6: of which I would say has been in decline every year.
Speaker 6: And the younger generation are you know, starting to not
Speaker 6: want to watch it anymore, but out of filial piety
Speaker 6: and out of family duty, because your parents are all
Speaker 6: watching that, you have to watch with them.
Speaker 3: Shirley, thank you so much for helping us preview the
Speaker 3: lunar New Year festivities. It's the Year of the Dragon
Speaker 3: coming up, surely. Jiao covers Chinese conglomerates, including companies focused
Speaker 3: on consumers, gaming, and telecommunications. I'm Doug Prisner. You can
Speaker 3: join Brian Curtis and myself weekdays here for Bloomberg day
Speaker 3: Break Asia beginning at nine am in Hong Kong, eight
Speaker 3: pm on Wall Street.
Speaker 1: Tom Our thanks to Doug, Anne Shirley, and that does
Speaker 1: it for this edition of Bloomberg day Break Weekend. Join
Speaker 1: us again Monday morning at five am Wall Street time
Speaker 1: for the latest on the market's overseas and the news
Speaker 1: you need to start your day. I'm Tom Buzzby. Stay
Speaker 1: with us. Top stories and global business headlines are coming
Speaker 1: up right now.