Transcripts For BLOOMBERG Bloomberg 20240704

Good morning, welcome to daybreak australia. We are counting down to asias major market opens. Kathleen good evening from bloombergs World Headquarters in new york. Top stories this hour. China traders shun a risk ahead of the u. S. Inflation report with oil hitting a high for the year. Bond investors willing to settle for a 10 year yield before below 4 in the latest round of the refunding options. Disney having gains after the bell after the prophets be the lower spending outlook. Chinas reopening helping themepark revenue. Kathleen the u. S. Is weaponizing trade after President Biden signs an executive order limiting investments in some of its companies. Lets take a quick look on wall street. It was a down day ahead of the cpi report. Nasdaq closing down more than 1. 2 . Nvidia laid the way but tesla, amazon and apple apple also losing ground. Theres a big jump in energy stocks. 28 surge in the european lng price was what led that. Also help push oil to a 10 month high. After the bell, disney reporting earnings that exceeded the expectations, even a streaming Subscriber Services slowed down. As for the bond market, the second leg of a quarterly refunding went pretty well. Theres a lot of demand out there. 10 year yield falling below 4 in the 20 year, we will hear more about that but its becoming a redhot instrument to purchase. You can see weve got the green on the screen after that decline in stocks bouncing back a bit here. Weve got the 10 year yields about where close. Crude closing above 84 bucks a barrel. A lot of concern about the war and ukraine, more conflict between russia and ukraine could boost that hike. Theres a lot going on in dollars pretty steady. The cpi report were validate these hopes. Maybe it will be closer to the end of rate hikes. Haidi a precarious position investors find themselves in. Is a story in the aggregate, even the numbers we got from disney as you mention, pretty favorable reaction on the markets at the moment. We are seeing gains of just shy of 3 . It was on a balance of two things, that china reopening the demand for theme parks was really a big winners story for disney, but we also saw pullback when it came to capex expectations, cost of content, not to mention that 20 jump in streaming pricing for their most expensive advertising free Disney Streaming product. Lets get more on those earnings. We will bring in some analysis. What really jumped out to you from these numbers . Profits were absolutely at the front and center and we saw that with them kind of taking down their content cost expectations for the full year to 27 billion. That is down from 30, 30 one billion earlier. Theres obviously a lot of cost rationalization going on. The boost that profitability picture even further, we have them really flexing their pricing power. They are, as you just pointed out, taking a 27 increase or so on their streaming product. Kind of really showing the market how much they think the disney product is actually worth. And they dont expect that is one thing they said. So this is a musthave product for most of the folks is kind of what they are telling us. Kathleen what do they say about the Writers Guild of america strike . Does it have any impact on them . It does have an impact from a financial perspective. It is a contributor to the lower content cost budget. That said, they do want an early resolution to the strikes because it does then start affecting their product by plan when we get into next year. So they are still working towards it. But as of right now, it has been favorable in terms of the financials and other profitability metrics. Haidi what will be there pressure points of the labor strikes, content pipeline will be one of them. Are there concerns about the strength of the consumer in a key market like china . Actually, you brought up a really good point about International Parks really over performing or outperforming expectations. Obviously shanghai and Hong Kong Disneyland bolstered out. Reese on 94 increase in the revenue numbers. This is the first time they are fully open after all of those covid closures. It offset some of the pressure. There is some softness domestically, they are seeing that inflow there, plus they are comping off against a tough quarter when they had the 50th anniversary celebration. There were pressures and softness in the domestic part. But international outperforming and really holding up that park segment really well. No concerns about a sewing consumer in any of the International Markets as far as management is concerned. Kathleen bloomberg into limited intelligence wrapping up those big disney earnings for us. Look at Broader Markets. A site in big and Higher Energy weighed on sentiment ahead of Inflation Numbers that will shape the feds next steps. What is the feeling in the market right now . We see nvidia down, its like they dont know what to do. Especially when you mention these big tech and growth type of names, are we heading into the cpi report. A lot of this macro data points activity with cpi and other inflation metrics havent had the same effects downward effects on the Broader Market like last year. Not surprisingly because inflation has continued to this year. The big thing here is not only is it coming to the cpi report. We do have jackson hole in a another couple of weeks starting on the 24th and going through the 26th. But right now, theres more dynamics at play. Its not just what this inflation print will be, its positioning coming into this month. We are typically in the weakest month of the year when you look out august and september. The pendulum has swung, Bloomberg Intelligence has a tracker when it comes to sentiment. It was a little bit more in the man in the manic mode in july, it doesnt necessarily mean it bodes well for the equity market, just when you have sentiment frothy like this, its more likely to see basically a pullback, especially you think about high fire names that have these lofty valuations. Not surprising that investors would end up taking those profits, especially in the Third Quarter heading into the final months of the year. Haidi that appetite weve been talking to a head of the treasury auctions, right . What did you take away from that . I thought there was a great story on the terminal from my colleagues when it comes to Liz Mccormick and katie in the newsroom, they were talking about what happens when it comes to the 20 year bonds. This was something that the treasury banned it in 1986 but they brought them back in 2020 and there wasnt demand for them but when you combined a couple of things that happened with treasury issuance as well as the fed getting closer toward the end of this great hiking cycle, you are starting to see those 20 year bonds actually yielding more to their 30 year counterpart. So, when you look at some firms, the fixed income are among the Fund Managers that seem more bright spots i want to capture the windfall when you are looking at this particular segment in the market. It has been such a hot topic, especially what kathleen was asking in the dynamics in the market, when you see higher yields, it will pressure more of these growth and tech oriented course of the market. Some of these correlations had broken down but you are starting to see it happening. When i speak with my sources, some on the equity side are seeing this as an excuse to take some profits at this point. Haidi that was bloombergs taking a look at the highly anticipated treasury sales. Lets look out this is feeding through asia markets thursday session. Australian futures are looking flat. Aussie dollar is steady at 6531. A mixed picture across a lot of Asset Classes overnight. Treasuries were mixed. The dollar was pretty mixed. Flip us ahead of the cpi data that was under pressure. We see how that downlights to the asian currency pairs. Kiwi stocks doing absolutely nothing. Also watching dollaryen. We had weakness when it comes to the yen. This is expectation that the boj has on those tenyear yields that are starting to shake up the outlook as to potentially the bets for the negative rate policy will be abandoned in as little as eight months. That is really a story we are watching. Watching for the big oil majors, especially trading in this sydney session after crude hit a nine month high with these escalating concerns that the war new crane could further check off global supply. Overlaying all of this is geopolitics. We have china earnings including the likes of alibaba, smic as well as washing for the impact of this. One of our top stories after almost two years of discussion, President Biden has signed a u. S. Investment in some chinese companies. China has responded to the embassy in washington accusing the u. S. Of weaponizing trade. Lets bring in bloombergs International Economic reporter. Of course we have been anticipating this order for some time. Lets start off with what was actually in the substance of the year. Just kind of amazing that we are finally here. This is a day that has been long delayed. Weve had heard for months rumors and speculations that its executive order on that investment was imminent, finally unveiled by the white house and by the administration today. And what this covers is more narrow than what people at some points believe we might see. Biotech in energy, not in here. Weve known for some weeks that they would be excluded. What we do see is Certain Applications of quantum computing as well as Artificial Intelligence and advanced semiconductors. But the language from treasury is important. They say they are considering this, and that they are reaching out to the public for public, so this is still two years of construction, this is still somewhat preliminary in that businesses and stakeholders will get a chance to respond in through the rulemaking and regulatory process, a chance to provide feedback on what ultimately gets put into place here sometime in 2024. Kathleen a lot of public, we have had already and expect to get more from china, what have we heard from the Chinese Government and what is the impact expected from this on u. S. China relations . The Chinese Government has been very critical, as you just mentioned, i can read this statement from Embassy Spokesman in washington saying that china is very disappointed in whats been announced, and that scientific and technological issues are being deliberately made obstacles to normal economic and trade exchanges and technological cooperation. So a very critical statement we are seeing from the Chinese Embassy. We know this is something secretary of the treasury janet yellen, on her trip to china early july, was laying the groundwork and preparing people, her counterparts in beijing for what was going to ultimately be announced here today, but this is still something weve seen china be very critical of the impact. Weve also seen some views expressed through treasury, the reporting is that treasuries sought to soften the blow and the impact from these rules ultimately, and seems to have prevailed in terms of this being relatively narrow as well as preliminary, and not outright prohibition in all cases, but more notification in some cases so that hesitation from treasuries seeming to have some impact here in where this proposal in this plan ultimately has wound up. Haidi bloombergs International Economics reporter eric martin there with the latest. Coming up, we will get more analysis on the disney earnings, the company shedding subscribers. We have those few. Plus, wendys is cooking up Expansion Plans in australia. The Restaurant Group ceo joins us a little bit later. This is bloomberg. Kathleen markets are counting down to july u. S. Cpi report out thursday. Economist expecting headline cpi to rise with a modest decline in the core figures. Lets bring in Wealth Enhancement Group Senior Vice President and Financial Advisor nicole webb. Great to have you back in the studio with us. So, big picture, we are all waiting for the report because that might determine what the fed doesnt september, etc. How much does this mean to the stark market stock market in particular. Is this something you check off the list and move on to the next or could it determine the next move, the next direction . I think there is a lot to unfold in the coming months. August is a lame month and a lot of story will be told. I think the most important thing coming out of tomorrow is, does it start to appear like we could have yearoveryear positive inflation . When you start the driver digest 2023, so now looking in the Rearview Mirror and you say, this year was a lot of expansion, multiple expansion led by tech, now as we get further and further into the back half of the year does the conversation go the tenure could creep higher . So now we are taking a 10 that creeps higher and higher for a longer story and we start to think, what does that really mean for tech valuations. At the same time we seek oil prices coming back up, we see shipping costs coming back up and i think we start to say, do we need a little bit of inflation to get the earnings that we need in 2024 . So, it becomes a little bit of a paradox in how one thinks about positioning in the back half, and the trading that might start to transpire after september. Kathleen it seems like if the landing is too soft, thats a problem for the markets and it must have something to do with where people are thinking now. We arent done with 2023 yet but we are looking to 2024. When you think about durable good cost so we see shipping increases from shanghai to los angeles, just exponential cost movement, at the same time you see oil prices move, so you go, if we have a lot of this disinflation coming from goods, what then . If services are staying step staying sticky, what are we thinking about from inflationary perspective . We think about positioning, you start going back to some of these value names, some of the sectors like financials and energy where perhaps a little bit of inflation, a little bit of conversation back in that regard could be positive from an earnings perspective to offset some of the drawdown we might see for a longer narrative pushing against these Mega Technology companies. Haidi do you stay positioned in any part of tech if you accept the proposition that Ai Semiconductors will be a part of the narrative Going Forward . I think thats a really interesting question in our stance is that we remain in technology always, but we start to look at the excess return from positioning we moved in at the end of q4 last year and play into this narrative of what are the options for the backout of we think about rounding out trade. So, again, when it comes to the Technology Trade and ai in particular, what we started to see, a very tiny incremental movement in the jobs report last week was, could we start seeing productivity come back . One of the underlying stories of the last year has been that productivity has really been at an alltime low. So could automation, could ai bring productivity back in the spring revenue numbers pushing soaring upward . So, we still believe in the technology play in what remained fairly u. S. Centric as a result of that. Haidi how are you accounting for potential volatility when it comes to currencies . We are talking about that ad nauseam. And actually, when we think about the currency positioning, one of the things we keep coming back to was, we had this conversation last year as well. And what we played into was, from a fairly u. S. Centric perspective, thinking about sick consumers staying pretty large cap focused in saying who has the pricing power, who can absorb some of the currency risk that plays out, and then where are the consumer bases, so again, its just falling back under into what are the names that we are positioning towards in this specific sector. Kathleen that was Wealth Enhancement Group Financial Advisor nicole webb. Thank you so much for joining us, forward to getting you back soon. As for you, you can get around up of the stories you need to know to get your day going in todays edition of daybreak. Terminal subscribers can go to dayb. You can customize your settings so you only get news on the industries and assets you care about. This is bloomberg. If youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. Haidi alibaba is to to post Quarterly Earnings with annans list analysts expecting the strongest growth. Annable is here for a preview. We havent been this optimistic about sector result for quite some time. Annabelle the focus has been on the government of crack down, chief political concerns, to but it does appear we have turned a corner and we have seen the rally with Alibaba Tencent on the signs of that. The concern or the earnings today, the focus will definitely be on those Growth Numbers because we could see the strongest results now in more than a year. As you can see in the revenue breakdown, it really just shows how much china commerce accounts for the profitability of alibaba, you are talking about two thirds of total sales. For straight quarter for straight quarterly declines for the segment but in the earnings we will see growth of about 5 . Kathleen Consumer Sentiment week in china, thats one of the big stories, right . So how does that affect the results . Annabelle it really could have a significant bearing on the numbers coming through today because, firstly youve had chinas consumers being reluctant to dip into their wallets to get them out and to spend. Secondly, intense competition in china between its rivals like tencent, jd as well. To try to address that, the focus for alibaba has been on offering incentives to shoppers and merchants alike to try to get them to list their products on the platform within the group. Analysts and our Bloomberg Intelligence team is one of those that have really been highlighting the impact it could have on profitability in particular because alibaba has been focused on things like cost cutting, creating operational efficiencies, unlocking value, as we been discussing him that huge group reorganization, so the risk is that that could end up being out shunned or end up outshining its lifted sales in china. Haidi what are the other challenges . Annabelle the intense competition between alibaba, tencent inside china because particularly as you had that crack down the light of those tech giants, you had those ones pulling back, starting to cut jobs and reprioritize and refocus, but that left a void and others inside china came into fill the gap, so we are in a situation where the question is, who will be dominated the internet sector. And other rivals like baidu and mates want have turned ahead. When you look at generative ai, this is a key area where baidu is has really become quite prominent because is the first one to release its version of chatgpt rival called earnie about. Certainly competition within china will be watch closely. Earnings call, theres a lot of Different Things we can discuss for china tech giants, whether we will see more action from regulators, investor appetite for the sector abroad. You still see a lot of investors very rely didnt to invest in mainland chinese stocks. Really key set of earnings across the week. Haidi you can get more on the bloomberg for more on those alibaba results when they drop. Tliv is where the commentary and analysis is that from our team of expert editors at bloomberg. Kathleen lets take a look at other Company Earnings we been watching. Sony raising its fullyear forecast as its playstation and entertainment armed sustained momentum despite the sluggish Global Economy that has been hurting other operations. Its net income forecast jumped 2 , still short of analyst estimates. Outside of its core game, sony cut its outlooks on image sensors due to sober recovery in china and worsening u. S. Demand. Roblox plunging by wednesday one percent after reporting that people spent less time playing the video games and the second quarter. The customers spent 14 billion on the platform while the number of daily active users fell by 1 to 65 point 5 million. Coming up, disneys hiking prices for its streaming services as it seeks to make disney profitable by next year. We will get indepth analysis from cfra coming up next. Keep it right here. This is bloomberg. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Haidi . Movies are coming in lower than projected. 27 billion is below prior forecast and Capital Spending is being rescheduled as well. This on top of gains from its theme park business thanks to that reopening momentum in china. Lets get more analysis beyond those headline numbers. I know you want to get the numbers out of the way because theres Bigger Picture fundamental structural themes that you want to talk about. What did you make of this release . Bob iger is back and he did deliver in terms of cutting costs, reducing Capital Spending , and generating 1. 6 billion of free cash flow. Theres more to come on that side. Its more interesting to see what they are going to be doing with such Diverse Businesses to try to get higher shareholder value. Thats the interesting part. It moves away from the operating results and analysts are still reducing earnings for this year and next year as i did. Also looking at the spinoffs of espn. Hes doubling down on streaming with direct to consumer. They will buy the part that they dont own from hulu, comcast. They have to figure out how to make money from films to gastric will to broadcast to streaming. Thats tough. Its very different than their dominant position that they have with disney parks. This quarter on the numbers again, only did really well because you had a 94 increase in the International Parks while domestic parks, growth was only 4 . They are haidi we spoke a little bit about espn. Do they need to be bolder . Kenneth they wont be. Investors want to see a greater relief of value. This is not a Growth Company anymore. They will finally have a modest dividend increase, since the beginning of the pandemic. Theres no buybacks. Why would you want to be in disney other than that it has great assets and we need catalysts to recognize those . In the world of the movies and entertainment industry, its not just copying or doing what netflix does get really, you have different businesses that have different valuations and the hotel, parks, cruise ships is very different than video streaming. Kathleen so the path forward then. What does bob iger need to do to remain the sort of wizard bob iger . Kenneth first of all, its a new playbook. Its different than what he succeeded at doing in his previous time as ceo. He needs time which is why there was the press release a month ago that hes going to stay on for two years. Its not just for succession but it takes time to figure out how youre going to really create different organizational structures, what kind of strategic partners, whether disney wants to keep a majority interest. Some of the businesses that are declining such as abc or other broadcast tv stations. Kathleen in terms of longterm investment in disney, for years people have given a grandchild or something a shared disney stock. It has been that kind of company. Is it going to continue to be that kind of company . If bob iger doesnt quite meet up to the kind of steps he needs to take that you just mentioned. Is it going to still be that place . Its like a bluechip. Kenneth no. I think its because theres a catalyst to realize the underlying valid asset value. I think he should be speaking. He ought to be speaking to larry culp at General Electric and ed breen at dupont. They know how to get value for investors. In many instances, it means separating and spinning off businesses that are not aligned with others area others. Haidi how high is execution risk for all of this . Kenneth not really in terms of the Management Team which is excellent, nor they clearly have a leading position in many of these businesses. But its the disruptors. Its really the risk, the secular risk with the change from streaming. Streaming is just not as profitable. Its hard to come out with blockbuster billiondollar movies, which they think they can do. Avatar will be one of them that they did. So its a more difficult dance to really get better execution. But its a good Management Team. Kathleen how vulnerable is disney to global forces, global recession . Heidi mentioned china and demand from china. Europe could go under recession. Even the u. S. Is in question right now. Kenneth first, you could always have the risk of cyclical downturn which weve seen even now with a Slower Economy and lower advertising. China is no longer a big contributor in terms of u. S. Company producing movies. We did see that with Mission Impossible and others. China is creating their own film world. Thats good for them. The last point here really is, the concerns that the Media Industry is changing and it requires new thinking and dominant players coming in our alphabet, google, youtube, amazon prime video, possibly apple. These are much Larger Companies in disney. One may say that they do need strategic partners. In some cases, its either going to beat for be for distribution or platforms and technology that they are trying to do but not as well as the companies ive mentioned. Haidi are you satisfied with the amount of price increases for streaming . A bulk of these cost cuts came from the fact that there were production and acting strikes. Thats beneficial when it comes to the bottom line. That koreans are content pipeline issue Going Forward. Kenneth one on spending on content. They know this year will be down from 33 billion to 27 billion, partly because of the actor and Writer Screen Guild strikes. And then also related, moving the needle to higher revenue for streaming direct to consumer. The price increases are modest. They are getting a 40 take rate on new subscribers coming from add pay plans. Theres a slice of advertising revenue coming from sponsors. Kathleen we could ask you many more questions. Thank you for joining us. Giving us not just the take on this Earnings Report but the big picture longterm view of disney. As for you, watch us live. See our past interviews on our interactive tv function. You can dive into any of securities and bloomberg functions we talk about. Plus become part of the conversation by sending us instant messages during our shows. This is for bloomberg subscribers only. Check it out. This is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Thanks to avalara, we can calculate sales tax automatically. Avalarahhhhhh what if tax rates change . Ahhhhhh filing sales tax returns . Ahhhhhh business license guidance . Ahhhhhh crossborder sales . Ahhhhhh item classification . Ahhhhhh does it connect with acc. . Ahhhhhh ahhhhhh ahhhhhh kathleen oil prices to the highest in nearly nine months over concerns that an escalation of the war in ukraine may strain supplies. We are joined by su keenan and paul allen. I want to start with you. This is an ongoing concern but it has heated up at a time when oil prices are important in many ways including to inflation and all the rest of it. Heating up because of whats going on in ukraine. You drop it in the bloomberg and what we see is west texas jumping to the highest in nine months before trading just a bit in asian trading. A lot of this has to do about concerned that the possible escalation of the conflict could choke off more supplies in an already tightening market. What we saw was west texas rising above 84 before pulling back just a bit and that increases bites the latest u. S. Inventory data which showed an increase in inventories which would normally be bearish but investors chose instead to focus on the decrease, the following crude products which fell the most in three months. Analysts say its the market tightness narrative. Conditions and the black sea are adding to that. The latest threat to supplies is the risk to russia flows from the black sea from various attacks. We heard the ukrainian president Volodymyr Zelenskyy saying that ukraine would retaliate to prevent prussia russia from blocking their waters. That Ukrainian Drone attack on an oil take her over the weekend. The iea and opec released reports later this week that should provide a snapshot of how tight the oil market is. The fact that they have broken the high of a350 made in april means that those doubters who thought opec efforts to prop up the oil market wouldnt work have been proven wrong. Weve seen wheat fall back a bit after rising dramatically earlier in the week. Again because of the situation in the black sea. There does seem to be a bit of moderation there. Haidi european futures spiked on news of a possible strike action from workers in australia. Thats right. Workers voted to strike. If they go ahead, it would be the first time that has happened in 30 years. Its not a certainty at the moment. It is ensure that its definitely going to happen. Almost all of the workers on the production side voted for a range of industrial accident that includes a potential strike. There should be seven days notice before it happens if it happens. The workers want improved pay conditions. They want to stop the outsourcing of jobs to contractors. Negotiations not in a good place at the moment. Its a familiar story. The union is accusing what of dragging its feet, engaging in surface bartering. With side says its engaging in good faith. At the same time, chevron workers potentially moving toward strike action as well. Australia is one of the largest lng exporters in the world. The fact that reaction has been profound, we saw european natural gas futures at 28 percent higher. Thats the biggest jump weve seen since the early days of russias invasion of ukraine. Kathleen amazing to see that overnight. I couldnt believe it. With that, an interconnected Union Getting ready to strike. What is the outlook now for Natural Gas Prices . Does it all depend on australia . Yeah. It very much depends on what happens next. Thats an open question. Theres a possibility it all gets resolved amicably. Theres a possibility that it doesnt. All this is piling on more pressure on the supply side. Theres other risks as well. Theres a diminishing pool of lng available in europe so those buyers will be competing with asia as well. When you get a price surge like this, positioning from investors as well who are betting that natural bass gas prices would come down. Volatility ahead in the natural gas markets again. Haidi in terms of price urges, upside risks on protectionism, whether discontinue just continue to build. Kathleen rice prices in asia rising to the highest in 15 years on both of those factors. Once again, you drop into the bloomberg and you can see the dramatic rise. This is a big situation. Youve got growing concern over supplies as dry weather threatens production in thailand. Then after the top shipper band some exports. 5 broken, nation benchmark jumped to 648. Thats the most expensive since october october 2008. That brings the increase in prices to almost 50 in the past year. Rice is a big staple to many diets in asia and africa so the surgeon price could also add to inflationary pressures and boost import bills for buyers. The latest threat not coming from india but thailand. They are the secondbiggest shipper and authorities are encouraging farmers to swept across switch to crops that need less water as the nation is bracing for drier conditions ahead with the onset of an el nino. Haidi lets take a look at some of the other global stories we are tracking this morning. The u. S. Is signaling theres a long way to go before saudi arabia officially recognizes israel in exchange for security guarantees. The Spokesman Says the signs have not agreed on a set of negotiations or a framework for normalization. Israeli markets have rallied after wall street journal reported washington and readd had agreed on the broad outlines of a deal. China has warned japan over remarks made by the former Prime Minister during his visit to taiwan. He said, japan, the u. S. , and taiwan must show beijing they resulted deter any possible invasion. The Chinese Embassy reported that the former official interfered in chinas internal affairs and undermined security. The Foreign Ministry called the comments [applause] irresponsible. Tune into Bloomberg Radio to get indepth analysis from the daybreak team. You can listen in on radio plus or Bloomberg Radio. Much were ahead more ahead. Stay with us. How can you sleep on such a firm setting . Gab, mine is almost the same as yours. Almost is just another word for not as good as mine. Save 50 on the sleep Number Limited Edition smart bed. Plus, 36 month financing on select smart beds. Shop now only at sleep number. Haidi the u. S. Fast food chain wendys has signed a new Master Franchise Agreement to develop 200 outlets in australia through 2034. Lets get more on the Expansion Plan with greg flynn. Always great to have you with us. Im curious about the timing. It comes at a time when there are so many mounting uncertainties for the australian economy, concerns about consumer confidence, business confidence, the rate hike cycle. Why now . Where do you see the opportunities . We are playing a very long game. There are concerns about this economy and all economies in the short run always. We operate continuously in an environment of uncertainty and risk. We view this as a measure of risk. We think the prospects for wendys in the long run are very good in australia. It will take time for us to build a pipeline and open restaurants. What happens in the next couple years doesnt matter to us. Haidi when you take a look at costs at the moment, do you feel like the worst of inflation pressures are behind us at this point . Whether you are talking about u. S. Our markets like australia. We are very much so. We operate in six brands. Most of them are seeing inflationary costs for our commodities between zero and 2 . Pizza hut is actually down over 2 and only one taco bell is higher than single digits. Overall, inflation seems very under control right now. Its a tailwind in our business. Kathleen so when you look at the math of these kind of businesses around the world, are there difficulties in other parts of the world . Even the u. S. With opening or expanding that makes you look to australia as a good place . For us, its a push and a pole. The push is, we have 4400 restaurants in america, we are and 44 states. We have ongoing opportunity here. As we fill out the country, it gets harder to find it and grow at the rate weve been growing. Australia itself is a very attractive market. Its culturally similar to the United States. Same language, the rule of law. They have a demonstrated affection for american brands. Pizza hut is established and successful. There are 22 existing lending rate Wendys Restaurants in new zealand that have been there for decades. They are very successful. Im very confident that wendys will be very successful over time in australia as well. Kathleen what makes a brand take hold in another country, in another part of the world . In japan, you have 7eleven everywhere. Wendys was a big history. What does it take . Does it pillow spillover from the rest of the world . Is it something you have to do every time you go into a new region . I think success in the restaurant entry industry is determined by how well you execute in your restaurants, day in and day out. That sounds simple but its actually very hard to do. It has more to do on sustained traffic in your restaurants than anything else. Then theres brand. Wendys has demonstrated success all over the United States for 40 years. In many countries in the world. Its a strong brand with strong product offering. Very good marketing. I think its a brand that will be welcomed by australians. They have welcomed mcdonalds and hundred hungry jacks. I see no reason they shouldnt welcome wendys. If anything, we are better than both. Haidi the americanization continues. I joke. Wendys did make a foray into australias in the 80s. I suppose you will say that is ancient history. Going forward, whats next . The pizza hut deal was only a couple months ago. This is a very quick turnaround. Will we see taco bell, arbys, any of the other brands within your group . We have no plans right now to lay around anymore brands. Weve bitten off plenty. The great thing is that the 100 person Pizza Hut Team on the ground in australia is a great team. They are fully capable of doing more and they are eager to do more. We dont want to distract them from their mission of executing well. But we can layer on this additional brand and resources needed to do it. I think it will make them stronger and will make our chances of success greater than if we were starting from scratch. We already have a large i. T. Team. We have a marketing team. We have a menu team. We have finance, add, payroll. Anything you need. Thats very different than in the 1980s when whoever did it tried to do it starting from scratch, which is a harder proposition. Kathleen we wish you luck. You gave us plenty to chew on as well. Thats it for daybreak australia. Daybreak asia is next. Keep it right here. This is bloomberg. So, youve got the power of xfinity at home. Now take it outside with Xfinity Mobile. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. No wonder Xfinity Mobile is one of the Fastest Growing mobile services. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com