Daybreak Weekend: Fed Preview, MS Conference, Tencent Earnings
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This 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, a look ahead to this week's Federal Reserve Policy Meeting. I'm Tom Busby in New York. I'm Caroline Hepka in London, where we're asking, what is the place of Europe's financial services sector in an increasingly fragmented world? I'm Doug Krisner looking at what we may hear from China's Tencent when the company reports earnings in the week ahead.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App. ♪

Good day to you. I'm Tom Busby, and we begin today's program with the Federal Reserve wrapping up a two-day meeting on Wednesday with its latest decision on interest rates. And for more on what this means and a new dot plot, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent. Well, Michael, a lot goes into the Fed's decision. Inflation, jobs, egg prices, economic growth, a lot of moving parts right now, especially coming out of the White House.

Is there just too much uncertainty for the Fed to make any move this week? Exactly. They've all pretty much said, Jay Powell said, John Williams told me in an interview on Bloomberg, we just can't move at this point. But we don't feel there's a need to because the economy is still growing well and inflation is under control. And so there's no point to moving if we don't have to. Now let's talk about inflation because we have seen –

Still rising, but it's certainly moderating, right? Well, we got mixed signals from CPI and from the PPI this week. CPI was a little stronger than people anticipated, and PPI was weaker than people anticipated, especially considering that both of them feed elements into the PCE.

the personal consumption expenditures index, which is the Fed's inflation target data point. And so it looks at this point, unfortunately, the CPI is going to overwhelm the PPI and it's going to maybe push the PCE higher, which would keep the Fed on hold anyway.

So we don't get that till the end of the month. But the Fed will be able to do the same math that all the Wall Street economists are doing, and they'll have a justification now besides uncertainty. Well, the last PCE we saw did show the lowest level in seven months, right? So there was some progress made. There's been progress made, but it's been very, very slow. And now if we get a little bump up in it, it doesn't signal that inflation is going to break out again, but it does show

show that the Fed has more work to do. Let's talk about one thing I know is a favorite subject of yours: egg prices. Well, it's not me. It was the president who made a big deal out of it. During the campaign, he said, "I was elected to bring down egg prices."

And I'm sorry, but so far he's failed. In the CPI, egg prices were up in February by 10.4%. And in the PPI, you ready for this? They were up 54%.

For producers and manufacturers. From the producers. I mean, that's what the chickens are charging at this point. So the egg crisis is not behind us yet. It's not going anywhere just yet until we figure this out. All right, so that's inflation. Let's talk about jobs because we've seen kind of, you know, not a spectacular number in February, solid. But, of course, that doesn't include tens of thousands, tens of thousands of federal workers.

Right. And we don't yet have a good handle on how many. There are some estimates that maybe they've let go about 20,000 people between the layoffs and the buyouts. But there's no...

good compilation of that. The jobless claims figures we got last week showed 1,500 people filing because the federal workers are counted in a separate category and 8,000 on continuing claims. So that's nowhere near the numbers. We expect those to go up a lot. But then on Friday was the deadline for all of the federal agencies under Trump to submit plans to cut like half their workforce.

So we could see tens of thousands of people losing their jobs, but we just don't know. So the Fed has to kind of stand by and see and then see what impact that has on the overall economy. Well, let's talk then about interest rates and how it affects housing because, I mean, rates have steadily declined. Yeah.

Not by a whole lot, though. Still about 6.7% on average for anyone buying a home. I mean, is there any? Any green shoots in sight? And we're coming into the all-important spring housing season right now. There may be a stray dandelion here and there, but we've seen mortgage applications rise a little bit with the drop in rates. But

On a percentage basis, it's from very low to still quite low. It isn't, in terms of numbers, a lot of applications. There's just not a lot on the market these days. There's also a shortage of houses on the new home side. So prices are still staying high, even though we see interest rates, mortgage rates come down just a little bit. And it's a conundrum because

We never had this situation before where interest rates had gotten so low that people are now locked into their houses because they don't want to buy up a mortgage that's four percentage points higher. And nobody's quite sure how to make this work yet. And the hope is that the Fed can continue to bring down rates and eventually we'll get to a point where people want to move badly enough that they'll

accept a higher interest rate, a higher mortgage rate, and that builders will be able to produce more homes. But a lot of what's happening with them is on the local level and zoning and things like that. So people in the housing industry are not very excited about this spring selling season. Oh, boy. Yeah. Well, the Federal Open Market Committee meeting kicks off Tuesday at decision-expected 2 p.m. Wall Street time on Wednesday. Our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent.

We move next to corporate earnings from the logistics and shipping giant FedEx, reporting third quarter results after the closing bell this Thursday. And for more on how a lot of economic uncertainty may have impacted those results, and how President Trump's tariffs may impact the company in the future, we're joined by Lee Klaskow. He's Bloomberg Intelligence Senior Transport Logistics and Shipping Analyst. Well, Lee, thank you for joining us. What do you expect to see in this earnings report?

Yeah. Hey, Tom. Well, earnings are going to be up. It's really going to be driven by some margin improvement, especially in their express business. You know, that's really just being fueled by a bunch of restructuring programs and productivity programs that they have in place, something they call drive and network 2.0. You know,

What we're going to see, though, is probably not the full benefit of these programs because volume is going to be relatively tepid. Could be, you know, up 1%, down 1% in the quarter. Really, really don't know. But, you know, when volumes start increasing with a better backdrop, you really show the benefits from these programs.

cost cutting and productivity inducing initiatives that they've undergone. You know, FedEx is kind of going through somewhat of a transition. You know, they've walked away from less or lower margin business like from the U.S. Postal Service. That will create somewhat of a tougher headwind starting in April for, you know, when comparing year over year volumes.

Now, that's a reflection of consumers and businesses pulling back. If you look at or listen to a bunch of the large retailers, their earnings call, they've been, I guess, a little more cautious in terms of the appetite for consumers, you know, e-commerce while it's still growing. You know, if people have less money to spend and they're spending more money at the grocery store, you know, they're going to

They're going to be buying less stuff and therefore FedEx and UPS are going to be shipping less freight to people's doors. And also, you know, that trend of, you know, e-commerce and what we call B2C traffic is a lot less profitable than, you know, an envelope going from one law firm to another.

because that B2B traffic tends to have a lot more shipments associated with each of them. So, you know, a FedEx driver would go to a law firm and deliver 20 packages and then probably pick up another 20 packages, where when they come to our house to deliver, you know, a shirt that you ordered, they're probably only delivering one or, you know, if they're lucky, two packages at the same time. And those costs per packages are pretty,

pretty high. And that's really why the company has been so actively looking to improve its overall productivity to kind of deal with the reality of this new normal for them. Well, let me ask you, if those costly home deliveries, and certainly people are buying more on the internet, who is making up that slack? Is it Amazon or are there other players in the field? Yeah, well, obviously Amazon, you know, is doing a lot. If, you know,

There were some stats that said that they're the leader deliverer, but they are also delivering mostly their own stuff where FedEx and UPS are going after the businesses outside of Amazon. And that is still a large market that they can go after.

So, you know, they are delivering it. And so is the U.S. Postal Service for that matter. So, you know, there is competition within the market. You know, what I would also say, you know, not to pivot too hard on this, but, you know, their freight business, which is their less than truckload business, FedEx Freight is the largest less than truckload carrier in North America. That business is under pressure, too. The good news is that, you know,

tonnage might be down by mid single digits. Rates will probably continue to increase by mid single digits. That's a very consolidated market that has a pretty long history of good price discipline. So it won't be too corrosive to margins. Maybe

too corrosive to margins this time. And what I would also say on the pricing front is that FedEx, their express business, which is their parcel business, they've been doing a lot of things to improve the pricing on that business as well. Well, let me ask you back to that freight business. Last time we spoke, they were talking about spinning that off into a separately traded company. What's the status on that? And how has that, or will it help the signature parcel business?

Yeah, a couple months ago, they said it was going to be an 18-month process, so it probably won't happen until 2026. Not quite sure why it's going to take that long, but that's the outlook that they provided. The management has said that they're looking to...

hire a number of salespeople for that division. So, it looks like they're kind of getting prepared for when that becomes a standalone company. And the reason why they're doing that is probably twofold. Less than truckload carriers tend to have a higher multiple, so they're trying to unlock some value there with that asset. And then secondly, it'll allow management to really focus on their parcel business.

which is, you know, can be a very good business. But like I mentioned earlier, it's an industry under transition. And, you know, these companies, whether it's FedEx or UPS, are kind of doing a lot of things right now, whether it's investing in technologies, changing the way they deliver things, or even changing their air network will probably, you know, help them down the road.

FedEx Q3 earnings out this Thursday are thanks to Lee Glasgow, Bloomberg Intelligence Senior Transport, Logistics, and Shipping Analyst. And coming up on Bloomberg Daybreak Weekend, we'll look at where Europe's financial services sector stands in an increasingly fragmented world. I'm Tom Busby, and this is Bloomberg. ♪upbeat music playing♪

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, a look ahead to a rate decision from the Bank of Japan and earnings from a top Chinese tech giant. But first, as the European Union prepares to square up to President Trump's tariffs, the future of the region's financial sector remains uncertain.

This week in London, Morgan Stanley hosts the European Financials Conference, where international trade and geopolitics are likely to feature high on the agenda. Now for more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, Trump tariffs, economic growth and defense spending. There are some

major issues that bankers must reckon with. On tariffs, European Commission President Ursula von der Leyen says the EU is not the problem. That message came as she delivered a firm response to the Trump administration's tariffs, EU duties on up to 26 billion euros worth of American goods, after the US administration imposed 25% tariffs on steel and aluminium imports. The

The EU is also targeting goods from Republican-led states, according to a senior EU official. But it is also leading to downgrades in economic growth for major European economies such as France.

And there may be further escalations, with EU metals tariffs that had been put in place during Trump's first term and later suspended due to be reintroduced in full on the 2nd of April, along with some levies that have never previously been in force. So all of this situation leaves Europe's economy in flux.

Then there is the need for greater defence spending amidst renewed efforts to secure peace between Russia and Ukraine and questions about how that surge in military spending will be funded on the continent.

There are also more regular topics on the minds of the leaders in European finance who are due to gather here in London for the upcoming Morgan Stanley European Financials Conference. Think inflation, interest rates and deregulation, for example. How much will sweeping US rollbacks affect bankers here?

In the past, this Morgan Stanley event has attracted CEOs, including UBS's Sergio Amotti. Remember, he used the gathering last year to share part of the rationale behind his firm's acquisition of rival Credit Suisse. So how are the giants of the financial sector thinking about the future? It's a conversation I've been having with Bloomberg's finance reporter, Laura Noonan.

Yeah, it's pretty much got all the big names. I mean, they have a superb lineup every year. And this year, basically pretty much every important European bank CEO is going to be there and is going to be speaking. So you've got the likes of like Deutsche Bank CEO Christian Sowing, UBS Sergio Armati, Santander's exec chairman Anna Bottin, Unicredits Andrea Orchelle, who's, of course, very interesting at the moment, BNP CEOs. Basically, everybody is going. So we're expecting lots of news out of this.

Yeah. Deregulation is surely going to be a big theme for the financial industry this year. Do you think it will come up during the discussions? Yeah, I think the debate is really gaining pace here in Europe now. So I think obviously what's happening in the US is causing lots of banks to push quite hard on this. And we're definitely seeing early signs that the European Commission is

is listening and Europe at large is listening. So we had a story earlier this week or possibly late last week about them accelerating a review of the competitiveness of European banking. And that's going to now happen by the end of next year. They've also said that they will remain alert. They're looking at what they can do around the latest package of the bank capital rule. So I think there's a big push and there is some responsiveness. So I think now is probably the moment when we're going to see the European banks

take the early signs of indications that the EU is ready to act and really try to drive home as much change as they can. And certainly what's happening in the US is giving them a lot of power. The Europeans are big fans of the level playing field. And if the banks can argue that

banks in the US are getting concessions and that they will be disadvantaged on the global stage if they don't get the same, then that is going to be a persuasive argument. And the one thing I will say as well is people often say this is only an issue for the big banks who compete internationally, but it's not. It's also an issue for the smaller banks who are listed, who are competing for investment internationally. So they can definitely make those arguments and they will.

Okay, but how has Europe's financial services sector then reacted to the tariff news? I mean, if there's so much of the influence of the US coming to the European banking space, what are they thinking about when it comes to Trump tariffs? I mean, tariffs are bad in that tariffs are bad for the overall economy and banks are, if you take aside, if you exclude the investment bank portion, which does do well on volatility, banks are mostly pure plays on the economy.

And if you take the view that tariffs at a macro level hurt economic growth, then they are going to be bad for banks who are dependent on economic growth. They are especially bad for banks that do a lot of cross-border business in areas that could be affected by tariffs. So I think tariffs are a net negative

But they're also, you know, when you're in banks, you think about two things. There's the things that you can't control and the things there's the things that you can't. And there are maybe at the very, very senior level, some of the most senior bankers think that if they make big statements, they can help shape the narrative. But for most bankers, this is something which is outside of their control and they'll just have to try to work around it as best they can.

What about the geopolitics then? Obviously a big topic for us, for people in business in general. But again, do you think that's something that is driving trends or driving any thinking in the banking and financial services sector?

So I think banking has become more balkanized and that's something we've seen from the 2007-8 crisis onwards. Banks are less global than they were and European banks in particular are a lot less global than they were. And in a sense, that does leave them somewhat less exposed to geopolitical trends than they would have been two decades ago. Now, it's not to say it doesn't matter at all, but it doesn't matter as much anymore.

It will matter more to banks. We've already seen some of the banks who had exposures to Eastern Europe, and that has been a challenging period for them as they've tried to navigate that. I think banks who have big US businesses will be waiting to see how they're positioned on that. Geopolitical tensions then that hit the overall macro picture. Again, for banks, so much of this does come back to the macro picture. And if you have geopolitical tensions there,

spiking the oil prices and if that leads to inflation and that takes the economy to a certain place, that's the impact that they will, you know, that will inevitably have an impact on lots of these businesses. So yes, they're definitely thinking very hard about this, but also the investment banks, the trade banks, they will also spy an opportunity here. They will say, oh, we could have clients navigate these unprecedented times and they will try to use that to win advisory business. So probably a net negative, but with some positives built in there too, if that makes sense. Yeah.

Yes, absolutely. Meanwhile, of course, factored into that, maybe layered into that thinking will be the expectation of increased defence spending. That's a huge issue for Europe. Will helping to meet the funding deficit be on the minds of financial services leaders in Europe?

So I think, yeah, absolutely. I mean, one of the big questions is how much of this would be done through public money versus how much should be done through the private money. And then to the extent that it is not public money, will it be bank lending? Will it be capital markets? As your listeners will know, the Capital Markets Union is very much tied into the strategic need to fundraise around these things. At the same time, we are seeing a sea change in terms of how

investors and private equity funds and even banks themselves view defence assets. I mean, they have been assets that people have not really wanted to get too deep in previously because of ESG concerns, concerns that it looks bad. And I think...

We're definitely seeing a change in defence looking like something good to put money in versus something bad to put money in. I think that's something. And I was talking to someone about this yesterday who's in the market and they were saying, you know, how they have traditionally thought that, you know, they can't be seen to be doing this. But now there's quite a lot of money to be made here. And I think you will see these kind of pragmatic shifts.

take place, but also because there's such a clear public narrative around defence is a patriotic thing for Europe. But I think something that we are definitely seeing from the US trend is that there's more of a Europe first, America first, and having a common thing, which we are different to, I mean, I'm not going to say enemy, but having Europe kind of galvanised as one. People are quite hopeful that could be positive for European banks, for European policy, for Capital Markets Union, because it just makes everyone pull in the same direction. Often in Europe,

We suffer because people are all pulling in different directions. You know, we have the EU, but it is essentially a lot of different member states and they all want different things. Whereas in this case, they all want the same thing. And that can be a powerful galvanising force for the sector, I think. Yes. Well, defence being seen as far more existential, obviously, but also maybe more ethical, more necessary defence.

Look, these major issues aside then, how do you think about the ECB, ECB policy in all of this? In recent days, we had the ECB and its Watchers event in Frankfurt with Christine Lagarde talking about

the idea of inflation, whether or not 2% is possible, the pressures that there are on getting to that 2% goal. How does the European financial sector now think about ECB policy? So interest rates is always really interesting because there's this kind of hypothetical theory around banking, which is banks do better when interest rates are high because the gap between what you charge for lending and what you pay for deposits increases the net interest margin compression expansion.

In theory, it plays out a little bit differently. And what we will have seen throughout the last cycle is that European banks didn't take the kind of loan losses people expected as interest rates rose. And there is hope, I think, that if interest rates are now coming down in quite a systematic way, that means that the pain that some people thought was deferred will actually be just pushed out completely because people have managed to adjust to interest rates they haven't

began defaulting on their loans, there's always a time lag. But if interest rates are now cruising down the way, maybe that lag default won't actually come through, which would be beneficial for banks. So structurally, if we move to a lower interest rate environment, that is bad.

But I think in this case, there are reasons to see positives in it as well, because it does mean that those fears, because there's always been a fear about loan losses and it goes back to the crisis as well. Even when loan losses are low, people are like, but are they actually that low? Are the banks hiding something? Are we just waiting for misery around the corner? And I think some of those concerns about loans

unrealised loan losses or loan losses we haven't actually recognised yet. I think some of those are going to start to fade as we see interest rates come down. My thanks to Bloomberg's Laura Noonan and we will have full coverage of all the action for Morgan Stanley's 2025 European Financials Conference here on Bloomberg. I'm Caroline Hepkett in London. You can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6am in London. That's 1am on Wall Street. Tom.

Thank you, Caroline. And coming up on Bloomberg Daybreak Weekend to look ahead to a rate decision from the Bank of Japan. I'm Tom Busby and this is Bloomberg.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

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But don't just take anyone's word for it. IFR has named Stiefel U.S. Mid-Market Equity House of the Year five times in the last 10 years. When it comes to investment banking, Stiefel is the name you should know. To learn more about how Stiefel can help you address your most complex investment banking needs, visit StiefelInstitutional.com. Stiefel Nicholas & Company, Inc., member SIPC and New York Stock Exchange.

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. We'll be following a couple of stories out of Asia this week, including a rate decision from the Bank of Japan and earnings from Chinese tech giant Tencent. For more, let's get to the host of the Daybreak Asia podcast, Doug Krisner.

Tom, this report will come after Tencent unveiled an AI model last month. The company claims it outdoes the chatbot from DeepSeek. Now, we know that China's AI sector has been seeing rapid development, especially since last year's splash from DeepSeek.

So Tencent will join Alibaba and ByteDance in this race to capture market share in artificial intelligence in China. For more, I'm joined by Robert Lee. He is senior tech analyst for Bloomberg Intelligence. Robert, joining from Hong Kong. Robert, it's always a pleasure. Thanks for making time. Can we talk about the hype right now that may be happening in certain pockets of high technology in China? Are you seeing a lot of it? And is Tencent getting caught up in it?

So, I think we need to divide this up into two questions, really. One is relating to the progress that China's making in high tech and AI in particular. And I think the evidence is clearly there as exemplified by DeepSeek. China's well positioned as the number two globally behind the US in AI. And if anything, they're actually narrowing the gap.

It's perhaps a little bit meaningless to try and put an actual time at a six months behind, a year behind. They're very closely behind. I think the evidence, there's more than enough evidence there to suggest that. And obviously here in China, we've had the so-called two sessions or National People's Congress, where a lot of senior leaders stand up, give their view.

you know, where the future economic plans are developed and high tech and AI in particular has been the core focus of that. So if the weight of continued state behind these companies, you know, China's well placed to continue narrowing the gap. So that's the first question. The second is how are these companies going to monetize? So I think this is a question that applies to all tech companies globally at the moment.

The hyperscalers and others are spending humongous amounts on capex. I think the last number that was quoted for the big US tech platforms was around $350 billion in capex. Monetization is beginning to come through, but it's at a very low level at the moment. So tying that into Tencent, Tencent has a foundational AI model and a lot of sub models. And as you said in your preview, it's generating models almost week by week.

There's a proliferation of models out there at the moment. It's using those to generate cost savings and synergies within its business. So that will help to support margins, etc. going forward. But I would argue it's unlikely at this point to have a transformational impact on their business.

And then there's the third question or related to what I just said. What about the outside monetization? Are there enterprise clients or consumer clients going to pay for these things? Well, I think as most of us understand at the moment, the vast majority of AI tools available to the consumer at the moment are free to access.

So we need to overcome that in order to generate an ROI. So I'm wondering whether there is an important differentiation that we need to pursue here. In the US, we have these advanced AI data centers that are being powered by the GPUs manufactured by NVIDIA.

China is restricted from access to that. Is that an important point to kind of tease out a little bit here? It absolutely is, but I think probably things have moved a bit beyond that now. So again, if we had this conversation 12 months or so ago, well, which we probably did, and

You know, there were major worries on the China front at that point that these export controls, you know, would really forestall the AI developments, you know, of Chinese companies. And as we've already established, that hasn't been the case. So why? I think, first of all, these big platforms preemptively built stock before the sanctions, if you like, came into place.

Also, there are still a large number of countries globally on friendly terms with China. So I think there's anecdotal evidence at the very least that China's pulled in favors from friends. It's very, very hard to enforce these controls globally.

And then thirdly, you've got an increasing supply of domestic supplied AI accelerators from the likes of Huawei. So a combination of three factors have enabled Chinese companies on the software side to continue their developments relatively unhindered.

So I think we're probably through the worst of the uncertainty on that point. You know, sure, Chinese AI accelerators are still probably two or three generations behind Nvidia. But again, going back to the DeepSeek announcement,

This technological challenge, the potential shortage on chips has forced Chinese engineers and developers to innovate more and they've moved towards lower cost, less computationally intensive models that are more adept at running on these lower spec local chips. So again, that's enabled them to continue their developments. But the main question I keep coming back to, how are they going to monetize? The ROI that we're all waiting for. Let's get back to Tencent.

Compare the company's cloud performance and the revenue that we're expecting on that front with some of the things that Tencent is known for, like e-commerce and video games. Well, the numbers have been changing over the last two years, but Tencent over the last two to three years has been well positioned as China's second largest cloud computing company.

However, Tencent and Alibaba have progressively lost share over that period. The dynamics or competitive dynamics of the China cloud market are very different to the US. It's a far more fragmented market. And then obviously, you've got a lot of state involvement in the market, a lot of state owned companies or so-called SOEs.

So what we've seen over the last two or three years is these state-aligned companies, again, Huawei, the national telco companies, the big three, China Telcom, China Mobile, China Unicom, taking share progressively from Alibaba and Tencent. Now, with the new growth in AI, obviously that should help reignite growth for Alibaba and Tencent. But the issue both of them have, and there is incremental upside on that side of the business,

For Alibaba, the bulk of its earnings growth and earnings potential is driven by e-commerce, not cloud. And for Tencent, again, the bulk of their earnings is in social media, in video games and advertising. So the cloud business is a relatively small portion of the business.

So, AI demand and development should help drive incremental revenue on that, but I would argue it's not big enough portion of their overall group revenue to really move the needle to, again, to any significant degree. So, when we hear from Tencent this week, do you have a sense of how the company may guide us in terms of expectations on CapEx spending?

It's never a major feature for their business. And again, the reason for that is they're a software business and they're not particularly capitally intensive, excluding their cloud business. But absolutely, I'm sure the cloud spending, as we saw Alibaba, is going to increase. Whether it's going to increase to such a significant degree, and then just briefly for people who are not familiar with that,

At Alibaba's results three or four weeks ago, they disclosed they're going to spend over 50 billion US dollars on CapEx and cloud related spend over the next three years. So that amount exceeds what they've spent in the last 10 years. So that is a significant acceleration in investment there.

So I'm sure we'll see something similar at Tencent, but probably to a lesser degree. And that ties into who they are, where they are. They're a very conservative company. They've been playing the long game in AI. They're not in a rush. You know, they're taking a slow and steady approach.

Robert, thank you so much for helping us understand what the issues are for Tencent as we look ahead to the company's earnings this week. Robert Lee is Senior Tech Analyst for Bloomberg Intelligence. We move from Hong Kong to Tokyo, where in the week ahead, we'll get a rate decision from the Bank of Japan. Now, recent data show the Japanese economy expanded in the final quarter of last year at a slower pace than the preliminary report indicated.

This may give the Bank of Japan reason to hold policy steady. For more, let's bring in Paul Jackson. He is Asia Economy Editor for Bloomberg News. Paul joins us from our radio studio in Tokyo. Talk to me a little bit about any concern that may be there in the market right now in Japan, given this move up that we have seen in JGB yields.

Well, I think the market concerns largely reflect the reality that the BOJ has now pulled away a year ago from protecting these yields, keeping a lid on them so they can kind of go up and up and up.

Now, there has been an uptick to the highest levels in the benchmark yield to the levels that we last saw during the global financial crisis before then even. So these are levels that are much higher than they have been for a long time. That's causing some concern amongst market players and also for policymakers. Don't forget that.

Japan has the biggest debt load amongst advanced economies in the world. So rising yields on benchmark bonds is a problem for long-term financing of the debt. And I think what we're seeing here from policymakers, not only from the central bank governor Ueda, but also from the finance minister Kato,

is that policymakers are trying to just reassure, just say, hey, look, this is kind of natural. We're back towards a kind of more market-focused determination of yield pricing, and there's no need to get too overly concerned here. These market movements are normal. And it seems logical that it also would reflect expectations that the BOJ is going to begin raising interest rates soon, right?

Yeah, I think we're going to continue seeing interest rate rises in Japan. We've still got inflation. Inflation is going to be above or in line with the BOJ's target. We're getting close to three years now. So those interest rates are going to keep going up. Now, they're not going to go nuts. It's not like every meeting. It's not back-to-back rate hikes. We're not expecting anything at the March meeting.

But I think we are seeing pretty hard baked in expectations that the Bank of Japan is going to be raising rates every six months or so. MARK BLYTH: We had the February reading on producer prices. You and I were talking a moment ago.

This is pretty much in line with what the market was expecting, right? That 4% year-on-year increase in PPI? Yeah, I think so. I think that the main takeaway from this is we've got high input prices coming in that

means that's going to feed into inflation going forward. So inflation isn't going to disappear anytime soon. And so that feeds into the idea that the Bank of Japan will keep raising interest rates. Now, is inflation like six or seven percent requiring urgent attention? No. So I think we're going to see a continuation of gradual rate hikes.

That is Paul Jackson, Asia economy editor for Bloomberg News. And I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom? Well, thank you, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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