WEBVTT - Apple Suffers Downgrade, Tencent Buybacks Hit Record High

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<v Speaker 1>Good morning. I'm Doug Chrisner. Here are the stories we're

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<v Speaker 1>following today, and we begin with Apple. Those shares suffered

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<v Speaker 1>a downgrade today for the second time this week, Piper

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<v Speaker 1>Sandler cutting Apple to neutral. The bank cited a weak

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<v Speaker 1>macro environment in China, saying that that will damp and

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<v Speaker 1>demand for iPhones. It was only on Tuesday that Barclays

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<v Speaker 1>lowered its rating on Apple shares. We spoke with Jay

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<v Speaker 1>Woods earlier. He is the chief Global strategist at Freedom

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<v Speaker 1>Capital Markets. He gave us his outlook on Apple moving forward.

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<v Speaker 2>Two downgrades to kick off the years, not how you

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<v Speaker 2>want to start things. We'll see how it cycles through

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<v Speaker 2>the earning season. Over the long term, yeah, I don't

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<v Speaker 2>worry about Apple, but the day to day for the

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<v Speaker 2>day traders. Yeah, he could pull back a little bit.

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<v Speaker 2>Watch it two inner day moving averages support, but over

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<v Speaker 2>the long term it will find another like high.

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<v Speaker 1>He is Jay Woods from Freedom Capital Markets. Now Bloomberg

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<v Speaker 1>Data show. Coming into this year twenty twenty four, Apple

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<v Speaker 1>was the big tech stock with a least number of

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<v Speaker 1>bullish recommendations. Apple is also the only tech giant to

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<v Speaker 1>see revenue contract for the past four quarters. Apple shares

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<v Speaker 1>today down about one point two percent.

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<v Speaker 3>Here in New York, Paul Qualcom has announced the new

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<v Speaker 3>chip designed for virtual reality headsets. The goal is to

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<v Speaker 3>compete with Apple's Vision Pro mixed reality headset, and Qualcom's

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<v Speaker 3>chip will be used by Samsung and Alphabet on products

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<v Speaker 3>under development. Bloombergsy and King says this will help Qualcom

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<v Speaker 3>expand their offerings.

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<v Speaker 4>They've promised investors that they will be more than just

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<v Speaker 4>a mobile phone chip company, and they're trying desperately for

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<v Speaker 4>you know, in a number of areas. None of them

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<v Speaker 4>are really taken off so far. Perhaps this is the one.

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<v Speaker 4>We're up to version two point five right now. Usually

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<v Speaker 4>for chip makers, version three is the one that is

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<v Speaker 4>going to win.

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<v Speaker 3>That is Bloomberg se and King there, Qualcomb shares closing

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<v Speaker 3>down about one percent in New York.

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<v Speaker 1>We go next to Ammer Sports. This company makes the

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<v Speaker 1>Wilson Tennant racket line. Along with Solomon Ski Boots. Amor

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<v Speaker 1>has now filed for an inch initial public offering here

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<v Speaker 1>in the US. That story from Bloomberg's Charlie Pellett.

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<v Speaker 5>According to a press release confirming in an earlier Bloomberg

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<v Speaker 5>News report, amer has picked Goldman Sachs, Bank of America, JP,

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<v Speaker 5>Morgan Chase and Morgan Stanley as book running lead managers

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<v Speaker 5>of the share sale. Sources have said that amer is

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<v Speaker 5>targeting an IPO of more than one billion dollars and

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<v Speaker 5>a listing could value the firm as much as ten

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<v Speaker 5>billion dollars. The Finland founded company is banked by China's

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<v Speaker 5>largest athletic apparel producer and a sports products in New York,

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<v Speaker 5>Charlie Pellett Bloomberg Radio.

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<v Speaker 3>The Federal Reserve Bank of Saint Lewis has named its

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<v Speaker 3>new president. We've got all from Bloomberg's Michael.

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<v Speaker 6>McKee Alberto Mussalam. He is a PhD economist and has

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<v Speaker 6>worked on Wall Street for a significant amount of his career,

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<v Speaker 6>also at the IMF and also at the New York Fed.

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<v Speaker 6>He was most recently the executive chair at the Man

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<v Speaker 6>Group and a member of the board at Freddie Mack.

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<v Speaker 6>He says he'll resign those two positions. He was the

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<v Speaker 6>CEO of Evin's Asset Management, and he was a managing

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<v Speaker 6>director and partner at Tutor Investments. Broad Wall Street background

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<v Speaker 6>and it looks like some experience at the Fed. So

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<v Speaker 6>he has straddled both worlds.

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<v Speaker 3>That's Bloomberg's and Michael McKee, Muslim will take over at

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<v Speaker 3>the Saint Louis fed on April the second, and he,

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<v Speaker 3>of course succeeds Jim Bullott. He's now the dane of

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<v Speaker 3>Purty University's Business School.

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<v Speaker 1>Ten Cents spybacks have now hit a record high. That

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<v Speaker 1>story from Bloomberg's Joanne Wong.

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<v Speaker 7>In Hong Kong, ten Cent boughtbacker record one point three

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<v Speaker 7>billion dollars of shares in December. The pace of the

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<v Speaker 7>buybacks accelerated further this month after Beajing surprised investors with

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<v Speaker 7>a raft of new regulations and triggered a broad tech

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<v Speaker 7>sell off. Daily repurchases more than doubled since the new

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<v Speaker 7>roles were announced on December twenty second. The controversial regulations

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<v Speaker 7>include caps on in game spending and a ban on

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<v Speaker 7>rewards for frequent lock ins. These rules brought back fears

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<v Speaker 7>that China was reverting to a tech crackdown similar to

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<v Speaker 7>that and twenty twenty one in Hong Kong joined Wong

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<v Speaker 7>Bloomberg Radio.

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<v Speaker 1>Let's move to Global news next, and we begin with

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<v Speaker 1>the Islamic state taking responsibility for those deadly bombings in Iran.

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<v Speaker 1>Dan Schwartzman's here, Denny.

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<v Speaker 8>Thanks Doug, You're right. Islamic State claiming responsibility for Wednesday's

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<v Speaker 8>bombing in Iran that killed at least eighty four and

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<v Speaker 8>wounded two hundred and twenty others. The blast occurring near

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<v Speaker 8>the grave of Iranian Revolutionary Guard commander Cassam Solimani, who

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<v Speaker 8>was killed in a US drone strike in Iraq back

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<v Speaker 8>in twenty twenty. According to the state run Islamic Republic

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<v Speaker 8>News agency, one bomb was planted in a suitcase, the

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<v Speaker 8>other in a car, with the two detonating fifteen minutes apart.

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<v Speaker 8>Secretary of State Anthony Blincoln will be traveling to the

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<v Speaker 8>Middle East for a fourth time since Hamas's October seventh

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<v Speaker 8>attack on Israel as a US looks to keep the

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<v Speaker 8>war from spiraling into a regional conflict. Blncoln will visit

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<v Speaker 8>eight countries, including Israel, Saudi Arabia, Egypt, and Turkey. Blincoln

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<v Speaker 8>is looking to facilitate more aid getting to Palestinians in Gaza,

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<v Speaker 8>while also conferring with Israel on the next phase of

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<v Speaker 8>their war versus Hamas. Police say a seventeen year old

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<v Speaker 8>shot and killed a sixth grader and wounded five others

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<v Speaker 8>in an Iowa school shooting. That story from Bloomberg's Charlie Pellett.

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<v Speaker 5>Students had to barricade in offices, many fled in panic.

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<v Speaker 5>The suspect is a student at the school in Perry.

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<v Speaker 5>Authority say he died of what investigators believe was a

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<v Speaker 5>self inflicted gunshot wound. At least one of the victims

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<v Speaker 5>was a school administrator. Perry has about eight thousand residents

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<v Speaker 5>and is about forty miles northwest of Des Moines, on

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<v Speaker 5>the edge of the state capitals metropolitan area. Charlie Pellett,

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<v Speaker 5>Bloomberg Radio.

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<v Speaker 8>Thanks Charlie. New York City Mayor Eric Adams announcing the

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<v Speaker 8>city is suing seventeen bus companies for a total of

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<v Speaker 8>seven hundred and eight million dollars. Adams says the companies

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<v Speaker 8>have violated state law by not helping to pay the

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<v Speaker 8>cost to care for the migrants after bussing them from Techis.

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<v Speaker 8>So far, almost thirty four thousand migrants have been bussed

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<v Speaker 8>from Texas to New York. A report from House Democrats

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<v Speaker 8>says that former President Donald Trump ow owns hotels owned

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<v Speaker 8>hotels received at least seven point eight million dollars in

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<v Speaker 8>payments from more than twenty countries, including China and Saudi Arabia,

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<v Speaker 8>during a two year stretch of his presidency. The Democrats

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<v Speaker 8>say that those payments violate the Constitution's Foreign m A

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<v Speaker 8>Lumence Clause, which prohibits federal officials from accepting gifts or

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<v Speaker 8>money from foreign governments without Congress's permission. The payments were

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<v Speaker 8>made to Trump hotels in New York, Washington, and Las Vegas.

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<v Speaker 8>Around forty six hundred soldiers, firemen, and emergency personnel are

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<v Speaker 8>making a last ditch effort to find survivors after the

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<v Speaker 8>New Year's Day earthquake in Japan. The seven point six

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<v Speaker 8>magnitude quake killed at least forty eight people, with at

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<v Speaker 8>least another fifty or more people who have yet to

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<v Speaker 8>be accounted for. Thirty thousand residents of the region close

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<v Speaker 8>to two hundred miles northwest of Tokyo are still without power.

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<v Speaker 8>Global News twenty four hours a day and whenever you

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<v Speaker 8>want it with Bloomberg News Now Schwartzman, and this is.

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<v Speaker 1>Bloomberg Daybreak Asia. We're about ten minutes past the hour

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<v Speaker 1>now as we bring in our guest Edward Harrison. He

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<v Speaker 1>is Bloomberg team leader for FX and Rates for the Americas.

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<v Speaker 1>He joins us from here in New York, ed thanks

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<v Speaker 1>for being with us. I think we have to begin

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<v Speaker 1>with the employment report that we're going to get tomorrow

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<v Speaker 1>morning in the US, the numbers for December. I was

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<v Speaker 1>struck by the fact that Bloomberg Economics is saying the

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<v Speaker 1>data will likely show strength only in concentrated pockets of

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<v Speaker 1>the US labor market and perhaps reveal some weak underlying fundamentals.

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<v Speaker 1>Is that a pretty accurate assessment, do you think?

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<v Speaker 9>Yeah?

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<v Speaker 10>I think that what we've seen is a weakening in

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<v Speaker 10>the labor market, but ever so slightly, it hasn't been

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<v Speaker 10>broad based enough to know on an individual print level

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<v Speaker 10>what these specific reports are going to say, meaning that

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<v Speaker 10>you know this it could go either way in terms

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<v Speaker 10>of this particular report. We haven't had a interior raise

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<v Speaker 10>enough in the broader labor market to be able to

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<v Speaker 10>say with any certainty, and so that leaves the bond

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<v Speaker 10>market in particular on tenor hooks about what could possibly

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<v Speaker 10>come out tomorrow.

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<v Speaker 3>Yeah, the job is myket holding up quite well? What

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<v Speaker 3>are the implications here for FED policy going forward.

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<v Speaker 10>I think that what we're seeing with regard to growth

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<v Speaker 10>two point five percent is the GDP now figure for

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<v Speaker 10>Q four is an excess of where they would feel

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<v Speaker 10>they would want to cut. And so you know, if

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<v Speaker 10>this job's report isn't it isn't very negative, then I

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<v Speaker 10>think it means for the FED that they're going to

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<v Speaker 10>be on hold for a longer period of time. The

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<v Speaker 10>bond market has March as the first cut. There's a

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<v Speaker 10>sixty two percent chance according to the swaps market, but

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<v Speaker 10>really that's very aggressive relative to you know, the state

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<v Speaker 10>of the economy at this point, and so I think

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<v Speaker 10>the Fed is probably looking to cut later than that

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<v Speaker 10>unless we see this number.

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<v Speaker 9>Undershoot expectations.

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<v Speaker 1>So yesterday we were looking at the minutes of the

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<v Speaker 1>last FED meeting, and I think one of the takeaways

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<v Speaker 1>higher for longer, maybe the market to kind of lost

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<v Speaker 1>track of that, at least temporarily, when you look at

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<v Speaker 1>the fact that perhaps some of these higher rates have

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<v Speaker 1>the total impact has yet to be fully felt. What

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<v Speaker 1>does that mean for momentum as we move into twenty

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<v Speaker 1>twenty four.

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<v Speaker 10>I think that you know, the Fed, it means for

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<v Speaker 10>the FED in particular that we're going to be on hold,

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<v Speaker 10>and therefore they're looking for the momentum of the economy

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<v Speaker 10>to slow.

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<v Speaker 9>Two point five percent.

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<v Speaker 10>Which is what we see for the data that we

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<v Speaker 10>have currently through Q four, that's too fast. They think

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<v Speaker 10>that it's going to slow from there. We had about

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<v Speaker 10>five percent in Q three. We're at about two to

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<v Speaker 10>two and a half percent.

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<v Speaker 9>For Q four.

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<v Speaker 10>They think it's going to slow if it goes below

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<v Speaker 10>say one point eight percent, which is the level that

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<v Speaker 10>the FED thinks is, you know, the the the economic

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<v Speaker 10>potential for the economy, then as long as inflation comes down,

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<v Speaker 10>we could actually get some rate cuts. But until we

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<v Speaker 10>get to those levels, it's gonna be very They're gonna

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<v Speaker 10>be on hold. And so the economic momentum is waning,

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<v Speaker 10>but it may not wane enough for the Fed to

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<v Speaker 10>act very aggressively.

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<v Speaker 3>Yeah, what are the signals around inflation at the moment

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<v Speaker 3>and hitting that target.

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<v Speaker 10>Pend Yeah, the signals are that we have goods inflation

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<v Speaker 10>going down. We have the overall the normal overall level

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<v Speaker 10>of inflation going down as a result of that, as

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<v Speaker 10>well as energy and food, but core services is not

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<v Speaker 10>coming down to the same level. We're in a three

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<v Speaker 10>ish almost four percent level for the super core services number,

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<v Speaker 10>and that's way too high for the Fed. We need

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<v Speaker 10>to see that number come down by a lot for

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<v Speaker 10>the FED to feel comfortable that inflation is coming back

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<v Speaker 10>to trend very quickly.

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<v Speaker 1>So there were many calls last year that we were

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<v Speaker 1>going to see a recession manifest in Q four. Obviously

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<v Speaker 1>that didn't happen. The narrative that the market has been

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<v Speaker 1>operating under right now has to do with the soft landing.

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<v Speaker 1>Have we completely dodged the possibility of a recession? Do

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<v Speaker 1>you think ed?

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<v Speaker 9>No?

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<v Speaker 10>I think that actually what we need to see is

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<v Speaker 10>is we need to see the market say that actually,

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<v Speaker 10>no recession is coming for the recession to actually come

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<v Speaker 10>to fruition, because you know, this has been the recession

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<v Speaker 10>that has been watched and anticipated like no other, and

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<v Speaker 10>only now are people saying, Okay, we've given up, the

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<v Speaker 10>recession is not going to come. That's actually the sign

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<v Speaker 10>that you know, we could get a recession, because you

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<v Speaker 10>need to have that surprise for these kinds of things

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<v Speaker 10>to happen.

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<v Speaker 3>We've got the US dollar continuing to strengthen five days

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<v Speaker 3>in a row now doesn't really seem to be buying

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<v Speaker 3>into this narrative coming from other parts of the market

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<v Speaker 3>that we're going to get a whole heap of rite

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<v Speaker 3>cuts in twenty twenty four.

0:11:58.600 --> 0:12:01.480
<v Speaker 10>No, I think that really what's happened is is we

0:12:01.520 --> 0:12:06.360
<v Speaker 10>went to access on rates up to five percent. Then

0:12:06.679 --> 0:12:09.200
<v Speaker 10>we backed away from that very aggressively at the end

0:12:09.240 --> 0:12:11.720
<v Speaker 10>of last year, too aggressively in fact, and now the

0:12:11.760 --> 0:12:14.040
<v Speaker 10>market is in a quandary as to what does it

0:12:14.080 --> 0:12:16.920
<v Speaker 10>really mean. This particular jobs number is going to be

0:12:17.000 --> 0:12:18.079
<v Speaker 10>very important in terms of.

0:12:18.000 --> 0:12:21.120
<v Speaker 9>That because we've seen the rates market.

0:12:20.880 --> 0:12:25.040
<v Speaker 10>Sell off somewhat and the dollar has followed that path higher.

0:12:25.480 --> 0:12:28.200
<v Speaker 10>And when we see this number, if the number is

0:12:28.240 --> 0:12:32.520
<v Speaker 10>actually better than expected, we could see a very nasty

0:12:32.559 --> 0:12:37.360
<v Speaker 10>backup and yields in the treasury market tomorrow. So this

0:12:37.440 --> 0:12:39.960
<v Speaker 10>is a very important number. It's going to tell us

0:12:39.960 --> 0:12:43.080
<v Speaker 10>whether or not there is any possibility that the Fed

0:12:43.120 --> 0:12:45.680
<v Speaker 10>can cut as early as March, which is what's priced in,

0:12:46.240 --> 0:12:50.400
<v Speaker 10>And if we don't see some softness in the labor market,

0:12:50.600 --> 0:12:52.719
<v Speaker 10>then it tells us that the Fed's not going to

0:12:52.800 --> 0:12:55.520
<v Speaker 10>cut as early, and we could see a very aggressive

0:12:55.559 --> 0:12:56.920
<v Speaker 10>reaction as a result of that.

0:12:57.160 --> 0:12:59.480
<v Speaker 1>So we're talking about an economy that's losing a bit

0:12:59.520 --> 0:13:02.560
<v Speaker 1>of a moment momentum, and that recession is possibly still

0:13:02.559 --> 0:13:04.800
<v Speaker 1>in the cards. I'm wondering what that means about the

0:13:04.840 --> 0:13:07.000
<v Speaker 1>equity market. I mean, at the end of last year

0:13:07.040 --> 0:13:10.280
<v Speaker 1>we saw some very very powerful gains. Toward the last

0:13:10.320 --> 0:13:13.439
<v Speaker 1>week of twenty three and the first trading week of

0:13:13.480 --> 0:13:15.800
<v Speaker 1>the new year, things have been a little rocky, But

0:13:15.920 --> 0:13:17.880
<v Speaker 1>I think you would have to say that the equity

0:13:17.880 --> 0:13:21.640
<v Speaker 1>market has held up reasonably well. Do we need to

0:13:21.679 --> 0:13:23.920
<v Speaker 1>see a repricing of risk assets right now?

0:13:24.840 --> 0:13:27.800
<v Speaker 10>Well, you know, it is interesting that were you were

0:13:27.840 --> 0:13:30.160
<v Speaker 10>just talking about Apple right before I came on. I

0:13:30.200 --> 0:13:32.640
<v Speaker 10>was looking at the PE ratio for Apple, which is

0:13:32.679 --> 0:13:36.240
<v Speaker 10>about twelve point four percent at the end of twenty eighteen.

0:13:36.760 --> 0:13:41.120
<v Speaker 10>It rocketed up to over thirty percent in twenty twenty,

0:13:41.160 --> 0:13:44.800
<v Speaker 10>and it stands now at about thirty thirty times. So

0:13:45.280 --> 0:13:48.160
<v Speaker 10>we're looking at thirty times earnings for Apple, which is

0:13:48.200 --> 0:13:51.720
<v Speaker 10>not growing tremendously well, versus twelve times at the end

0:13:51.720 --> 0:13:53.320
<v Speaker 10>of twenty eighteen.

0:13:53.200 --> 0:13:54.440
<v Speaker 9>Which was five years ago.

0:13:54.840 --> 0:13:57.960
<v Speaker 10>So in the last five years, even though interest rates

0:13:57.960 --> 0:14:02.680
<v Speaker 10>have gone up somehow, Apple, the same company, which is

0:14:02.920 --> 0:14:06.880
<v Speaker 10>valued much more highly, has a PE ratio much higher.

0:14:07.080 --> 0:14:10.640
<v Speaker 10>That tells you that the Magnificent seven, those stocks like Apple,

0:14:11.000 --> 0:14:15.640
<v Speaker 10>they're richly valued, and unless the economy continues to chug along,

0:14:16.280 --> 0:14:19.760
<v Speaker 10>you could see some air pockets in the equity market.

0:14:20.000 --> 0:14:21.960
<v Speaker 3>Yeah, and as we've been reporting, we had to pop

0:14:22.040 --> 0:14:26.040
<v Speaker 3>a sandllite cutting it's writing to neutral on Apple. Well,

0:14:26.080 --> 0:14:29.520
<v Speaker 3>we got about thirty seconds remaining. What can we expect

0:14:29.520 --> 0:14:31.360
<v Speaker 3>in terms of earnings in twenty twenty for do you

0:14:31.400 --> 0:14:32.680
<v Speaker 3>think I.

0:14:32.720 --> 0:14:36.200
<v Speaker 10>Think that the market is pricing in a very high

0:14:36.320 --> 0:14:42.840
<v Speaker 10>level of earnings going up, and likely we're not going

0:14:42.880 --> 0:14:47.760
<v Speaker 10>to meet that. Unless the economy powers forward, You're not

0:14:47.800 --> 0:14:49.880
<v Speaker 10>going to be able to see the FED cutting and

0:14:49.920 --> 0:14:51.880
<v Speaker 10>getting the number of cuts that we have in there

0:14:52.160 --> 0:14:53.680
<v Speaker 10>and the earnings at the same time.

0:14:53.800 --> 0:14:54.960
<v Speaker 9>One of those two has to give.

0:14:55.600 --> 0:14:57.560
<v Speaker 1>We'll leave it there with Ed Harrison, and it's always

0:14:57.560 --> 0:14:59.280
<v Speaker 1>a pleasure. Thank you so much for being with us

0:14:59.320 --> 0:15:02.240
<v Speaker 1>in Happy New year. Ed Harrison Bloomberg team leader for

0:15:02.640 --> 0:15:05.880
<v Speaker 1>FX and Rates for the Americas, joining us here on

0:15:05.960 --> 0:15:09.640
<v Speaker 1>day Breakasia. This is Bloomberg day Break Asia, your morning

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