Recapping the APAC Trading Week, Amazon Earnings, US Jobs Data
23:58 Share

With Amex Business Platinum, your dental clinic can really sparkle. With a flexible spending limit that adapts with your business, that's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more at americanexpress.com slash amexbusiness. We've all been there. Your flight was canceled and everyone is trying to rebook at the same time. Please hold. Estimated wait time is 25 minutes.

Sierra is different. We build AI agents that talk directly to your customers, so you can say goodbye to hold times and chatbots. Always friendly. Always helpful. Always ready. Visit sierra.ai to learn more. That's sierra.ai. Bloomberg Audio Studios. Podcasts. Radio. News.

Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. On today's episode, we'll break down fourth quarter results from Amazon. We'll be talking with Arun Sundaram, Vice President of Equity Research at CFRA, plus a preview of tomorrow's jobs report. We'll be talking with Keith Buchanan. He is a partner and senior portfolio manager at Global Investments. But we begin in the Lion City.

Joining us now is Mary Nicola. She's Bloomberg MLive strategist, joining from our studios in Singapore. I was reading your entry today in the MLive blog, and you're talking about how some Chinese e-commerce stocks are under pressure here because they could be facing an additional levy this week. Can you explain what's going on here? Sure. So earlier this week, when we had the Chinese tariffs, there came a report that the U.S. Postal Service was not going to accept

any packages that was coming from China and Hong Kong. That was quickly reversed, but there is also reports saying that now these companies are going to have to pay an additional 30% levy for any packages coming into the U.S.,

So obviously, there's going to be some pressure on e-commerce. The news on the U.S. Postal Service had already put some pressure on the e-commerce. That aside, though, we saw Chinese stocks do absolutely well on the optimism surrounding AI and robotics, not only from DeepSeek, but there was this other robotics company

dance, actually, that broke the internet, just getting people excited about the wave and the future of robotics for China. But irrespective, it still puts pressure on a lot of the e-commerce names and some of the bigger e-commerce names. To what extent is the government in China right now involved in supporting the equity market? Is that part of the story when you look at the major benchmarks, that there is just something underneath the surface where Beijing is kind of lifting prices a little bit?

Well, I'm sure there's an element of it because there was some sort of longer term plans of involving a lot of the mutual of the pension funds and the lifers, etc. But I think there is this underlying excitement about AI and about technology.

tech and that euphoria from DeepSeek is still really resonating among retail investors. Yesterday, the biggest supporters were robotics, and much of it was focused on a lot of the smaller names. So that's why you didn't see huge gains in the CSI 300 or in the Shanghai Composite.

because of the fact that a lot of it was going to smaller software companies and smaller robotics companies. But I think if we see any sort of significant downdrafts in Chinese equities, I think you would see a lot of support coming in from the government side. Have you seen any high-frequency data where the Chinese consumer is concerned during the Lunar New Year holiday? Do we know how well the spending was kind of helping to drive the economy?

Yeah, so there were some reports that arrivals at the box office were really, really strong. Travel was really strong as well. So it showed some sort of upside. But if you look underneath the hood and the per capita spending, it's still a little bit under what we saw in 2019. And that

is still an issue because you don't see that there's a complete relaxation or a motivation to continue with spending. The subsidies, the trade-in subsidies that the government had provided, the people where you can trade in some of your electronic goods for newer and more updated ones, that also showed some signs of resilience as well. So it's moving, but

very, very slowly, and they're still underlying, and underneath the hood, it's still confidence isn't as strong as you would expect. It's the final trading day of the week where you are, and I'm wondering, if you look to next week, is there anything that we should be paying close attention to that may end up driving the market? Yeah, I think next week it's going to be about retail sales and CPI data out of the U.S.,

Today, we have the labor market report, and that should give an indication of where risk assets are headed. Because at the end of the day, even trade noise aside, the drivers from the Fed is still really strong. So where the Fed is headed,

heading and how the market perceives the fed is heading because so far right now they're much more conservative than where the fed is thinking so market is looking for one to two rate uh rate cuts whereas the fed had told us that they would were looking for two cuts in 2025. so the the labor market report will be one the second one will be cpi and where the direction of inflation is going and then of course retail sales retail sales will not only be important in terms of

showing the resilience of the U.S. consumer, but also feed into the equity markets and, of course, the outlooks for equity more generally. You and I have talked a lot in the past about the strength of the U.S. dollar, and I'm kind of surprised at the strength of the yen this week. I mean, we're flirting with 151. What's happening with the yen?

Yeah, it's had a really good run and largely because we've heard little snippets from BOJ members talking about, so for example, one of the BOJ members, Tamora, yesterday had commented about seeing rates at 1%. And he retraced some of those comments and

But at the same time, if that's what the BOJ is thinking and they're moving in that direction, and then, of course, you had wage earnings and they were really, really strong. Today, household spending was really strong. That's all pushing the narrative towards more rate hikes for the BOJ. And I think that's also increasing expectations from traders that they are coming. So if you look at pricing, not

necessarily for the next meeting in March, but the following one on April 30, May 1st, you're seeing expectations rise for a hike coming then, which was a lot sooner than people had projected because projections were more for July. Does that necessarily spell trouble for the Japanese equity market?

Not necessarily. So it does for the big exporters, I would say. But we have seen a breakdown in the correlation between where the yen is headed and the directionality of the yen and the equity markets. So I think some of the bigger names will suffer. But remember, there's still a lot of importers within the Japanese equity markets who have been struggling as a result of

of a much weaker yen. So when you talk to analysts that focus on the Japanese equity market, are they highlighting certain industry groups or certain areas of the market that represent value right now? I mean, you were talking about a move to shy away from anything that may have exposure to a stronger currency, those big multinational exporters. But I'm wondering whether there is value in some other pockets of the Japanese equity market.

So, there's a lot of excitement on Japanese financials because they're going to be one of the big beneficiaries from a rate hike. So, financials have been doing well. They've actually surprised to the upside. Consumer discretionary have also surprised to the upside. That could continue as well.

earnings overall has been very much broad-based. So, there could be probably the main pockets that will outperform are probably financials, but at the same time, the others have plenty of room to catch up. Mary, we'll leave it there. Thank you so much. I hope you have a good weekend in Singapore. That is Bloomberg MLive strategist Mary Nicola joining us here on the Daybreak Asia podcast.

When you're with Amex Business Platinum, you have the card that works as hard as you do with a flexible spending limit that adapts with your business. That's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more at americanexpress.com slash Amex Business.

I'm Alpine skier, Michaela Schifrin. I've won the most World Cup ski races in history. But what does success mean to me? Success means discipline. It's teamwork. It's the drive and passion inside of us that comes before all recognition. And it's why Stiefel is one of the fastest growing global wealth management firms in the country. If you're looking for success, surround yourself with the people who will get you there. It's

Thank you.

If you're an advisor or investor, choose Stiefel. Where success meets success. Stiefel Nicholas & Company, Inc. Member SIPC and NYSE. For J.D. Power 2024 award information, visit jdpower.com slash awards. Compensation provided for using, not obtaining the award.

Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. After the bell, we heard from Amazon and the company issued a revenue forecast for the current quarter below estimates. For a closer look, I'm joined by Arun Sundaram, vice president of equity research at CFRA. Arun, thank you so much for making time to chat with us. I understand that you just jumped off the earnings call. What did you learn?

Yeah, I think one of the big takeaways from the earnings call is that this capex cycle that we started to see this past year, that's going to continue in 2025. I don't think that's that much of a surprise given that all the big tech firms have announced a pretty sizable acceleration in capex spending.

Amazon did announce that they're expecting probably about $105 billion to $110 billion of CapEx in 2025. The consensus going into the year was $85 billion. So it's about 20% to 25% higher than the street expectation.

Clearly, big tech is still investing and specifically investing in AI. And that's that's going to continue. What do we know about demand for these services and whether or not there's going to be a return on investment? Yeah, I mean, I don't think Amazon, as well as a lot of analysts, investors are overly worried about the return. I say that because one, I mean, this past year in twenty twenty four,

The margins in AWS have been quite attractive, despite the fact that they've been ramping up capex spending there. And Amazon also has, I think, a proven track record to generating returns on their investment. So I think it'll take time to fully see the full ROI on these investments. I think we'll likely see some headwinds in 2025, just given how much extra capex they're spending.

But I think by 2026, 2027, we should see some better returns of those investments. So how is the market for cloud computing changing right now? Is it a lot less competitive, more concentrated? How would you evaluate it?

No, I would say the demand side is still very strong. I think all the big tech players, the hyperscalers have announced that right now their demand is exceeding supply. So there's supply chain issues throughout the industry, Amazon included. I think it's going to take probably at least half a year to a full year for supply to catch up with demand. That's why these companies are investing so heavily.

But there's clearly a lot of demand for AI. I think the recent news with DeepSeat coming out of China, there's been a lot of jitter in the market regarding that. In Amazon's perspective, this is just going to accelerate the adoption of AI. If AI is cheaper, more companies are going to adopt AI and more companies are probably going to spend more on AI. And Amazon being the largest cloud provider should be a direct beneficiary of that.

So the AWS business is very large today. Amazon is the leading market share of that business. But that's likely going to see continued growth over the next foreseeable future. I'm looking at an item right now related to Amazon on the Bloomberg terminal. And Andy Jassy, the CEO, was talking about insufficient electricity. This seems to echo some of the concern that we heard from Microsoft. How does Amazon...

proposed to solve this problem the power that's required to drive a lot of these data centers yeah so they're even investing in their own power infrastructure themselves and they're partnering with with other companies clearly over the next you know say five to ten years it's gonna be a massive demand for for energy um and and that is a concern throughout throughout the industry so i expect

to see continued investments in that space from the hyperscalers, Microsoft, Google, Amazon. I think they'll start to also invest in energy infrastructure. So when you create these data centers, do you think it would behoove a company like Amazon to create a little bit more geographic distribution, not to have them concentrated in certain regions to kind of help address this problem with power? Yeah.

Yeah, I mean, right now, a lot of these data centers, so I live in the Washington DC metro area and Northern Virginia is like the hub for data centers. A lot of Amazon data centers are here. But right now, AWS is not just expanding in the United States. They're also expanding around the world.

I think Amazon just recently announced, I believe it's Thailand. That's going to be another data center hub for the Asia market. So I do expect over the next five to 10 years, you'll start to see more countries as essentially hubs for data centers as AWS expands.

What do we know about the rest of Amazon's businesses? How well are they performing right now? Yeah. So, I mean, the biggest business is their e-commerce business that, you know, had a phenomenal quarter. Um, that's not a surprise given that, you know, overall the holiday spending in the U S was really strong this past year. Uh, that business is, is, is on fire. Um,

Their advertising business has slowed down a little bit. Right now, Amazon generates most of their ad revenue from their e-commerce business. Their video ads business, or Prime Video, they just introduced ads to Prime Video this past year. So that's still a very portion of their overall advertising business. I think there's some excitement right now that in 2025, we could see a better monetization of Prime Video ads, especially as Amazon rolls out more live sports and their own content.

So that video ads business should see some some strong growth over the next few years. We're hopeful that the advertising business, that growth in that advertising business will reaccelerate. Because like I said, the last few quarters, we did see some deceleration in the ad business. I'm curious as to whether the company on the call addressed the issue of tariffs, particularly those that have been put on China recently. Is that perhaps a benefit to this company?

Yeah, so they didn't talk about it much on the call. I think it was a little bit baked into their outlook. One of the reasons the stock is down right now is because of the weaker than expected outlook. And I think it's due to tariff headwinds is one and also the stronger US dollar is another sizable headwind. But

Regarding tariffs, I think tariffs are a bad word in retail, but the silver lining is that tariffs impact everyone. It's not singling one retailer out. Typically, when you see tariffs like this, you tend to see the larger retailers outperform and find ways to better navigate through tariffs. I'm expecting Amazon as well as a

you know, Walmart, Target, you know, these I think these retailers will be able to better navigate and work through these tariffs than maybe some of the smaller retailers. And you have to remember, I mean, this is not their first go around with tariffs. You know, these companies experienced the trade war with China back in 2018, 2019. So

Overall, I think the industry is better prepared for tariffs this time around than compared to back in 2018, 2019. Arun, we'll leave it there. Thank you so much for being with us. Arun Sundaram, Vice President of Equity Research at CFRA, joining us here on the Daybreak Asia podcast.

Tomorrow's U.S. jobs report will be the focal point for markets and the Fed as well. Joining me now for a preview is Keith Buchanan. He is senior portfolio manager and partner at Global Investments, joining us from Atlanta. If you look at the consensus estimate right now, Keith, we're looking for nonfarm payrolls to rise by around 173,000. That doesn't sound like a lot. What do you think it says, if that were to come to pass, what would it say about the labor market?

Hi Doug and thanks again for having me. We've done a lot of work around you know what's going on in the labor market from a perspective of we're seeing on the margin softness that hasn't really materialized into the aggregate numbers. If we do hit 1.7 that's kind of sweet spot we've been you know the course of the last year or so if you look on a four-week trailing basis. So that's kind of par for the course anything shy of that we feel like we'll ride on markets and probably

re-institute some expectations of a more aggressive Fed. And also on the alternative, as we've seen a couple of beats that were higher than expected over the past several months, anything much higher than 200 to 10 could bring into question whether or not the inflation will be tame. And of course, that is going to come back to what wage growth does within the report, but also just what stance the Fed has in becoming more hawkish

And if their hawkishness is more warranted, given a very tight labor market, which they've communicated over the last couple of years. How do you define an aggressive Fed? Is that a Fed that stays higher for longer or is that a Fed that potentially could hike rates? Well, that's so the potential for a rate hike. We really are starting to creep into some of our expectations, not necessarily the odds on bet at this point.

But we're noticing the rhetoric tilt a little from the Federal Reserve and that they seem very concerned with the reemergence of inflation, as they have been over the course of this tightening cycle.

And they don't want to be too early and let 3% to 3.5% inflation kind of become the new norm. I think they still want to remain to keep pressure. And as long as the inflation rate is below the Fed funds rate, that continues to be the case that restrictive policy remains in place. So I think they want to keep it restrictive as long as they can continue to see progress. But a tight labor market kind of leads to that progress diminishing in a way that will make us more concerned with effectiveness.

of Fed staying higher for longer. And again, if it remains much tighter, possibly hikes being priced into what we expect for the Fed to do over the next 12 months. So it's a very pivotal point right now in the Fed cycle. One of our colleagues here at Bloomberg had a very interesting conversation today with Treasury Secretary Besson. And one of the things that he stressed was that the Trump administration is not really focused on whether the Fed will cut its policy rate. The focus for the administration today

is instead on achieving a lower 10-year Treasury yield. How does that square with your expectations of what we may see from the Trump administration?

I think that was a fascinating interview. And there are a couple of ways to get the 10-year treasury rate lower, whether inflation expectations come down or growth expectations come down or some combination of the both. And both of those scenarios, from a policy standpoint, there is a very delicate balance as to how we achieve those.

And with rates being, you know, inflation being where it is, that's really not anything that any central bank or any government can fix in one fell swoop. So the focus on the 10-year makes it feel a lot less month-to-month and quarter-to-quarter and meeting-to-meeting from the Fed standpoint. So there's some relief from that regard. But we've seen the 10-year take on the mind of its own. It's not anything that...

any one entity or Federal Reserve can control. So, you know, that interview was really perked our ears up to see what they're communicating as a focus is going to be almost a pivot away from what they think the market is thinking, which is more shorter term in nature. The other thing that the Treasury Secretary addressed in that interview was a strong U.S. dollar policy under the Trump administration. Besson said it was completely intact.

Now, I know you look at the earnings and the quality of earnings for the big multinationals in particular. So the question is whether the dollar is going to be a significant headwind here going forward. Just every economics textbook tells you that that is the case when a stronger dollar could affect international global companies and their overseas operations. It depends on the mixture of how we get to a stronger dollar.

If we are talking about inflation really aiding that path or tariffs kind of pushing the dollar higher, there's so many ways to get to a stronger dollar from where we are now. And it's really hard to say whether or not international marketplace will be better off or worse off with a stronger dollar 12 months down the road because there's so many pathways to get there. We're not as concerned with the absolute level

over the next 12 months. I'm not concerned with necessarily the path to get there. So, you know, the quarter-to-quarter earnings and what we can pick up from these corporations. Then there are plans for capital, working capital. Expenditures going forward is going to play a role in that as well. So, you know, we're less concerned about the absolute level of the dollar and more concerned with the path to get there and whether it's geopolitical driven or strength here in the U.S. with

without the rest of the world entering into a recession is also important as well. You mentioned tariffs there, Keith, and the conventional wisdom has been that this really has the potential to drive inflation higher. Tariff policy I'm referring to. Besant, during this interview, said that there could be a small one-time price adjustment as a result of these tariffs. How do you view tariff policy as it relates to inflation? There's typically a one-time

One adjustment, if the market is convinced that there's one set of tariffs, if the market thinks this is one of potentially many or several or more than one after this, then there's not one adjustment. The market continues to pursue that equilibrium where the tariffs are.

kind of between multinational corporations as far as nations and their sovereign banks. So if the expectation is for more tariffs down the road, there won't be one adjustment. If there is clear communication and clarity around the tariff policy and that there's one and it's one and done for sure, then that's the case for one adjustment. Problem is, I think that that is opposite of what

the typical negotiation is that we've seen on part of this administration and this administration as well as the last time up so i think those two are at play what what negotiates well doesn't typically set the markets up to trade well from expectations of inflation and how the market adjusts the tariffs so those two are eyes right now we're we're interested to see which one

wins the battle going forward of whether the market expects tariffs to continue to increase or we can price in one fell swoop and less inflation over time. So what is the level of confidence that you have right now that there will be a successful negotiation on the trade front to the extent that there will not be an increase in the tariff that has been applied on China and that the U.S. will not apply tariffs on Mexico and Canada?

We don't think there's any way, unless you're somehow plugged into the inner workings of these negotiations, to have a lot of certainty, better than a coin flip certainty, of any path forward when it comes to our negotiations with China and the tariff policies between the two nations. So I think the lack of confidence and the lack of certainty is a healthy check on how we view the world markets. And we're comfortable being uncertain until we have more clarity and more certainty about

coming out to the public as far as how those negotiations are going. So we're comfortably uncomfortable with our less than 50% certainty on where things land. Because anything beyond that we feel like is overconfidence, which is where you get in trouble. All right, we'll leave it there. Good stuff. Keith, thank you so much. Keith Buchanan there. He is Senior Portfolio Manager, also a partner at Global Investments, joining us from Atlanta here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

Feeling buried in a never-ending to-do list that comes with running a business, managing orders, tracking expenses? It's a lot.

That's where Amazon Business steps in. They've got smart buying solutions like Spend Visibility, a cloud-based system to track your buying patterns so you can optimize your savings, and Bulk Buying, so you can continue to save costs on select products with quantity discounts. Smart, right? Let Amazon Business take care of the admin so you can focus on what really matters, growing your business. Check out Smart Business Buying at AmazonBusiness.com. A Business Prime membership is required to access Spend Visibility.

Managing your workforce can be exhausting. Are you tired of a costly and lengthy hiring process? Simplify and speed up your recruitment by using the experts at Express Employment Professionals. Reduce time to hire, cut down on interviews, and lower your recruitment costs. Visit expresspros.com today. Express is more efficient than hiring on your own. And if you're listening to this podcast at work, check out expresspros.com to see how Express can take care of your hiring.