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Speaker 1: This is Bloomberg Daybreak Cure for this Wednesday, the twenty

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Speaker 1: five January in London. Coming up this hour, Microsoft's softer

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Speaker 1: forecast great clouds ahead signal to change in the weather

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Speaker 1: for its Azure business, making a material difference. The US

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Speaker 1: and Germany gets set to send tanks to Ukraine. Priceless

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Speaker 1: trades New York Stock Exchange shares go haywire after a

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Speaker 1: glitch at the open budget black Holes. This issue starts

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Speaker 1: at home and time to get active. Those are the

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Speaker 1: stories we're looking at sin today's papers. I'm James Wilcock.

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Speaker 1: Plus Equity Incentives. Bank in America awards staff with stock

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Speaker 1: in a bid to retain talents. That's all straight ahead

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Speaker 1: on Bloomberg day Break Europe on DAB Digital Radio London,

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Speaker 1: Bloomberg eleven three oh New York, Bloomberg Washington, d C,

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Speaker 1: Bloomberg one O six one, Boston, Bloomberg nine six, San Francisco,

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Speaker 1: cyrus XM Channel one nineteen and around the world on

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Speaker 1: Bloomberg Radio, dot Com and var the Bloomberg Business Set.

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Speaker 1: Good morning, I'm Stephen Carroll and I'm Caroline Hedger. Here

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Speaker 1: are the stories that we're following today. Just some breaking

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Speaker 1: news from the chip maker a SML this morning, a

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Speaker 1: red headline on the terminal net sales in the first

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Speaker 1: quarter six point one billion to six and a half

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Speaker 1: billion euros. The estimate had been for less than that.

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Speaker 1: Six point zero seven billion euro was the estimate for

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Speaker 1: a SMALS net sales in the first quarter, the company

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Speaker 1: seeing the three net sales to grow over twenty five

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Speaker 1: compared to two. A big reading for a major chipmaker

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Speaker 1: here in Europe, and interesting reading on how things are

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Speaker 1: moving in that sector. Alright, let's go onto our top

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Speaker 1: stories now. Microsoft shares swung into the red and late

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Speaker 1: trading after the texture ants said that revenue growth in

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Speaker 1: its cloud computing business is now slowing. Reacting to the results,

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Speaker 1: senior software analyst that d A. Davidson gil Luria said

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Speaker 1: that the tech giant had done a good job of

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Speaker 1: flagging the issue to investors. I think MR check to

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Speaker 1: prepares for that over the last few weeks, telling us

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Speaker 1: that the enterprise fund environment is probably going to be

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Speaker 1: lower for the next couple of years. That is still

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Speaker 1: the case. There's going to be a deceleration in that

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Speaker 1: kind of spending across the board, well beyond Microsoft and

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Speaker 1: it is going to impact the results, gil Luia. They're

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Speaker 1: speaking to Bloomberg as Microsoft reported revenue growth of two

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Speaker 1: percent in the second quarter. That is the lowest, the

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Speaker 1: slowest rather in six years. Sales did rise to fifty

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Speaker 1: two point seven billion dollars for the period, roughly in

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Speaker 1: line with what analysts had projected. And we'll have a

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Speaker 1: lot more on this story and the broader tech issues

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Speaker 1: with Bloomberg's Alex Webb in just a moment. The US

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Speaker 1: Justice Department in eight states are suing Google in a

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Speaker 1: bid to break up its advertising technology business. The antitrust

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Speaker 1: suit accuses alphabout Search Giant of illegally monopolizing the digital

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Speaker 1: ad market. Attorney General Merrick Garland says Google is killing competition.

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Speaker 1: As a legend our complaint for fifteen years, Google has

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Speaker 1: pursued a course of anticompetitive conduct that has allowed it

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Speaker 1: to halt the rise of rival technologies, manipulate auction mechanics

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Speaker 1: to insulate itself from competition, and force advertisers and publishers

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Speaker 1: to use its tools. And so doing, Google has engaged

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Speaker 1: in exclusionary conduct is severely weakened, if not destroy, competition

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Speaker 1: in the airtech industry. Garland's allegations are perhaps unsurprisingly rejected

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Speaker 1: by Google and a statement the company said the legal

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Speaker 1: action will slow innovation and raise advertising fees. Now, the

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Speaker 1: United States is poised to announce that it will provide

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Speaker 1: its main N one Abraham's battle tank to Ukraine. That

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Speaker 1: have been growing cools to send Ukraine more advanced weapons,

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Speaker 1: including from the NATO Secretary General Yen Stoltenberg. The only

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Speaker 1: way to lausting peace is to make it clear to

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Speaker 1: put In that he will not win on the battlefield.

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Speaker 1: Stoltenberg hopes that the tanks will help Ukraine punch through

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Speaker 1: the Russian lines and blunt a possible Spring offensive. Sources

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Speaker 1: say that Germany, which had insisted that it didn't want

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Speaker 1: to be the only one to make the offer, will

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Speaker 1: send a fourteen of its Leopard tanks. The New York

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Speaker 1: Stock Exchange says some trades will be declared null and

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Speaker 1: void after a technical issue. Yesterday's open with more Herespionberg's

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Speaker 1: Charlie Palace, a glitch caused hundreds of securities to commence

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Speaker 1: trading without an opening auction price. The n y C

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Speaker 1: said transactions in a swath of stocks will be reviewed

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Speaker 1: as clearly erroneous under n y C rules. The Exchange

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Speaker 1: did not elaborate on what prompted the system issue, as

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Speaker 1: the Exchange dubbed it, that set off wild swings and

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Speaker 1: trading halts as the session opened, causing dozens of the

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Speaker 1: biggest US companies to suddenly plunge or spike, in some

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Speaker 1: cases veering twenty five percentage points between a high and

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Speaker 1: low in a matter of minutes in New York. Charlie

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Speaker 1: Pellett Bloomberg Day Break, Europe. Bank of America is rewarding

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Speaker 1: the majority of its staff with a pool of restricted stock.

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Speaker 1: The incentive, which comes on top of normal compensation. We'll

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Speaker 1: go to staff who earn less than half a million

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Speaker 1: dollars a year. It's the sixth year that the firm

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Speaker 1: has paid this kind of share award, which now totals

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Speaker 1: more than four billion dollars. Bloomberg understands that around ninety

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Speaker 1: of Bank of America's global workforce are eligible for the scheme.

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Speaker 1: Inflation in Australia has had a thirty two year high

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Speaker 1: in the final three months of last year. Treasury Jim

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Speaker 1: Chalmers says it's too early to say if price price

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Speaker 1: pressures have peaked This is very high inflation by historical standards.

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Speaker 1: Has no use pretending otherwise. It's unacceptably high. Now, this

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Speaker 1: is likely the peak in inflation, but we won't know

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Speaker 1: that for sure until we get the numbers for this

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Speaker 1: March quarter that we're in now. Chimas were speaking, as

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Speaker 1: the data show that cp I rose by seven point

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Speaker 1: eight percent from a year earlier. That's exceeding the consensus estimate,

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Speaker 1: which was for its seven point six percent. Okay, therese

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Speaker 1: are a few of our top stories for you this morning.

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Speaker 1: So um a Bloomberg story that I think is going

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Speaker 1: to be very widely quoted today, so I want you

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Speaker 1: to watch out for it, and I'm going to give

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Speaker 1: you the details. It's Bloomberg's UK leveling Up Scorecard. It's

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Speaker 1: by Joe Mays and team. So remember back to May two,

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Speaker 1: Joe Mays is diligent work, Data driven work was first

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Speaker 1: published and it really changed the conversation about the government's

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Speaker 1: main aims. To even this idea of leveling up the country,

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Speaker 1: they went sort of constituency to constituency. They've updated the

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Speaker 1: scorecard and I'm afraid to say the result is pretty dismal.

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Speaker 1: It looks like um, a lot of areas across the

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Speaker 1: northwest and southwest of England have actually managed to lose

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Speaker 1: additional ground compared to London and the south East. Yeah,

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Speaker 1: that is perhaps a main meal of your news today,

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Speaker 1: But can I offer you some cake with the latest

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Speaker 1: piece from our opinion columnist Andrea Fel's Dead, who is

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Speaker 1: pushing back on this suggestion from the UK government's Food

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Speaker 1: standards agency that Susan that Susan jeb saying that bringing

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Speaker 1: cake into the office should be seen as harmful in

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Speaker 1: the same way as passive smoking. Andrea Fel's Dead disagrees.

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Speaker 1: She says that these sorts of treats, of course in moderation,

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Speaker 1: is good for the soul and fine workplace management. It

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Speaker 1: is a fascinating and hilarious piece from Andrea who talks

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Speaker 1: through the kind of importance for morale in the office

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Speaker 1: of having little treats like this and how feeding people

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Speaker 1: can be good. Of course, not as a replacement for

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Speaker 1: anything else that replacement for for higher pay or proper incentives,

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Speaker 1: but it can be something. Okay, Yeah, no, I I

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Speaker 1: did read that piece and I really really like the

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Speaker 1: line about red velvet cake. Apparently it's a bit like

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Speaker 1: red lipstick. It's one of those treats if you can't

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Speaker 1: afford the really fancy mission, start restaurant a little bit

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Speaker 1: of cake. They're a great combination. They okake and lipstick,

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Speaker 1: but still fans of the brand. Right up next, offers

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Speaker 1: for budget responsibility, Who was the kindness of households? And

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Speaker 1: why Alaka is investing is on the table now the

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Speaker 1: paper review on blue Bird Daybreak Europe. The news you

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Speaker 1: need to know from today's papers most James Walcock joins

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Speaker 1: us now with the details. James, let's start with the

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Speaker 1: piece in the Times about the gloomy UK economic outlook

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Speaker 1: and how it leaves Jeremy Hunt with a black hole

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Speaker 1: in his budget caravan. I mean, but first of where's

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Speaker 1: my cake was? There was no offer for me. So

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Speaker 1: we were talking a bit sort of yesterday about how

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Speaker 1: there were some sort of brighter signs for the UK

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Speaker 1: economy and how that's leading some ongoing sort of Tory

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Speaker 1: and P's on the back manage to push for tax cuts.

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Speaker 1: Now the Times have got on hold of this private

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Speaker 1: submission to the Treasury from the O b R and

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Speaker 1: they are downgrading the estimates for medium term growth. That's

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Speaker 1: some sort of the growth that's about two to five

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Speaker 1: five years out that would wipe out all the government's

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Speaker 1: nine point two billion pounds of headroom. And given we had, yes,

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Speaker 1: there's public sector net borrowing figures were so much higher

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Speaker 1: than estimates. Government building is now nine point eight billion

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Speaker 1: pounds higher than projections from the OBIAR. The autumn statement,

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Speaker 1: it basically is saying kind of there is no room

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Speaker 1: to play with for tax cuts, spending, etcetera. And the

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Speaker 1: former government the bank of being the Mark Karney said

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Speaker 1: yesterday that the UK was the most difficult position of

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Speaker 1: all major world economies. So that's that kind of gloomy

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Speaker 1: outlook that we were hoping this year would be bad

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Speaker 1: and then growth would improve. The o B are that

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Speaker 1: increasingly seems to say is not the case. Well except

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Speaker 1: Dan Hansen of course, who is a top forecaster, says

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Speaker 1: that actually the UK was session in three is no

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Speaker 1: longer nailed on. So this is the rub, isn't it?

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Speaker 1: For the UK? How gloomy do we need to be?

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Speaker 1: With the Telegraph meanwhile writing about how the Treasury is

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Speaker 1: turning to households for cheaper borrowing, So this is really interesting.

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Speaker 1: One Stephen as prices and interest rates get higher, and

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Speaker 1: we just talked about how the cost of servicing government

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Speaker 1: debt is going up so much, especially with the big

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Speaker 1: energy substance they've been giving out. Going to the markets

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Speaker 1: there's a very pricey choice, but going to consumers and

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Speaker 1: households are looking increasingly more attractive. So the National Savings

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Speaker 1: and Investments Bank, which is where the government issues it's

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Speaker 1: premium bonds, which is where sort of your ordinary household

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Speaker 1: would buy, is increasing its rate for the highest rate

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Speaker 1: in fifteen years, to three point one in February. Now

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Speaker 1: that is hoping it will attract more people from sort

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Speaker 1: of the increased rates of sort of consumer retail banks

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Speaker 1: and also diversify the government's portfolio. We had the pension

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Speaker 1: crisis last year and a lot of sort of people

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Speaker 1: in government apparently saying instead of relying on the kinds

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Speaker 1: of strangers, maybe we should be looking at the kindness

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Speaker 1: of homeowners because it's less risky and away of sort

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Speaker 1: of giving them more thoughts of income when there are

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Speaker 1: problems in sort of the wider financial markets. Okay, turning

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Speaker 1: then to the f T next, muhammadalarians right on passive investing.

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Speaker 1: Muhammad alone is hungry. I mean, we're all about cake today,

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Speaker 1: and it's not just returns. He's after. He has this

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Speaker 1: column where he compares passive investing to his days of

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Speaker 1: traveling around Europe. You could go for all these ala

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Speaker 1: carte menus because you knew that it was gonna make

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Speaker 1: you sick. It was good food, it was low price,

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Speaker 1: and you a long list of dishes to choose from,

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Speaker 1: and it was a good way to keep expenses down.

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Speaker 1: And now it is now imagine a different Europe where

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Speaker 1: some of the dishes will give you a stomach ache.

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Speaker 1: There's a high risk. He's like, there, you might want

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Speaker 1: to be a bit more selective about what you're choosing.

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Speaker 1: And he's like, so that's not just an eating problem,

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Speaker 1: it's a central bank problem. In this kind of fluid

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Speaker 1: world where now the interest rates are going up and

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Speaker 1: there is no easy common variable boosting asset prices, you're

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Speaker 1: more likely to get overshoots. And he gives you a

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Speaker 1: bit of economic theory. Of course Clarian does. He says,

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Speaker 1: go and reread the market for lemons, which is where

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Speaker 1: if the seller doesn't know what they're buying, it's often

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Speaker 1: the seller who's getting this worse deal. And lemons like

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Speaker 1: in the U S terms for like a worse car.

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Speaker 1: And so therefore you shouldn't do your best as a

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Speaker 1: trader to get better to beat information asymmetry. Otherwise you're

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Speaker 1: going to get left behind, whether a path of trader

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Speaker 1: or a bad investor. Okay, yeah, very interesting. I like

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Speaker 1: that argument. I mean, it's the fight back, isn't it

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Speaker 1: this year in volatile markets for for active investing rather

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Speaker 1: than passive investing. Thank you so much, James Walkott for

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Speaker 1: a look through. Then the top stories in the newspapers

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Speaker 1: this morning, let's dig into the results out today. Microsoft,

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Speaker 1: the software giant, warning of a slowdown in revenue growth,

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Speaker 1: and it's cloud computing business, Azure Fueling, concerned about a

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Speaker 1: steeper decline in key products. For more, Let's speak to

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Speaker 1: Bloomberg's Alex web Alex, good morning, Good to have you

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Speaker 1: with us. How big a slowdown is Microsoft expecting it's

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Speaker 1: going to be a four or five percentage point slowdown

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Speaker 1: in the growth gains were a percentage in the sort

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Speaker 1: of mid thirties in the previous quarters, so you know,

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Speaker 1: probably looking at somewhere in the twenties. And obviously this

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Speaker 1: has been the business that's been driving so much of

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Speaker 1: their growth in recent years. But it sort of indicates

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Speaker 1: how much of the demand that they were perhaps expecting

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Speaker 1: to surface in these two years was pulled forward by

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Speaker 1: the COVID nineteen pandemic. As people work from home, demand

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Speaker 1: for cloud services jump through the roof accelerated far more

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Speaker 1: quickly than would otherwise have been expected, and now that

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Speaker 1: is having an effect today. What about the outlook then

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Speaker 1: for Microsoft? Of the products they've not been terribly bullish on,

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Speaker 1: you know, things like software sales. The thing that remains

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Speaker 1: often quite resilient is the ability to sell things like

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Speaker 1: office M through sixty five to to companies you know

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Speaker 1: who want to to use word no matter where their

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Speaker 1: employees are. That's going to slow down as well. Gaming

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Speaker 1: as well, you know they at the cost of living

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Speaker 1: crisis here in the UK is a good example of

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Speaker 1: how people maybe have less disposable income to spend on games.

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Speaker 1: So not a huge amount of optimism elsewhere in the

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Speaker 1: business to to offset some of that sewing growth from Azure. Okay, um,

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Speaker 1: did we learn anything more about the purchase of the

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Speaker 1: company that owns chat GPT. Everyone's focused on this. Well,

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Speaker 1: we should be clear it's an investment in open ai,

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Speaker 1: but they will be the biggest investor and it will

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Speaker 1: give them essentially first DIBs and a lot of open

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Speaker 1: aiyes technology, not least Chat GPT, the conversational AI that's been,

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Speaker 1: you know, having a real moment since it was released

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Speaker 1: as a beta just before Christmas. Sat An Adela said

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Speaker 1: on the Earning School that they're going to lead in

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Speaker 1: the AI era. The expectation is though that we're not

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Speaker 1: going to see it anytime soon in for instance, Microsoft

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Speaker 1: Word where you'd get an assistant or giving you AI prompts.

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Speaker 1: It's more likely to be as a service, an add

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Speaker 1: on for as you, So if we see some of

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Speaker 1: the slowdown and as you, if you want to build

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Speaker 1: a business that you know leans on chat GPT, then

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Speaker 1: you have to be doing it on the Microsoft Cloud,

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Speaker 1: not on competition competitors offering from say Amazon or Google.

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Speaker 1: So it's really seen as a way of beefing up

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Speaker 1: the as your lineup and it will therefore plug into

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Speaker 1: other AI built businesses. This is Bloomberg Daybreak Europe, your

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Speaker 1: morning brief on the stories making news from London to

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Speaker 1: Wall Street and beyond. Look for us on your podcast

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Speaker 1: play Bloomberg thirty. I'm Caroline Hitka and I'm Stephen Carroll.

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Speaker 1: Join us again tomorrow morning for all the news you

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