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Speaker 1: Robbie's find of the second of February here in London.

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Speaker 1: This is the Blueberg Daybreak you at podcast. I'm Caroline Hipkitt.

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Speaker 2: And I'm Stephen Carroll coming up today. Apple's China slump

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Speaker 2: deepens despite reporting stronger sales elsewhere.

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Speaker 1: Meta and Amazon rake in bump of profits as they

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Speaker 1: slash costs.

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Speaker 2: Plus following the Fed's lead, but at a slower pace.

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Speaker 2: The Bank of England's Andrew Bailey offers an oue of

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Speaker 2: caution on how fast rates will come down.

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Speaker 1: Let's start with a round up of our top stories.

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Speaker 2: Apple's latest quarterly results triggered investor fears that the company

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Speaker 2: is losing clout in China, a market that generates roughly

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Speaker 2: a fifth of its sales. Revenue from the region plunged

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Speaker 2: by thirteen percent last quarter, even as the iPhone maker

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Speaker 2: returned to revenue growth with the beat on expectations. Bloomberg's

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Speaker 2: Emily Chang has been speaking to those at the top

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Speaker 2: of the company.

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Speaker 3: I did just.

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Speaker 4: Speak with Apple CFO Luka mystre He said, we're not

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Speaker 4: happy with it, but we know that China is the

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Speaker 4: most competitive market in the world that we do still

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Speaker 4: see a lot of long term opportunity there. He did

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Speaker 4: call out that the iPhone declined less than the other

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Speaker 4: product categories, that is, the iPhone did better than the

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Speaker 4: other product categories in China. He said that there, you know,

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Speaker 4: they saw a record install base. They're still seeing strong

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Speaker 4: growth in upgraders. But again, you know, this is a

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Speaker 4: market that folks have been very concerned about, as.

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Speaker 2: Emily Chang alluded to. There, Apple is contending with cooling

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Speaker 2: consumer spending in China and widening government bands of foreign technology.

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Speaker 2: The struggles overshadowed and overall revenue gain of two point

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Speaker 2: one percent to just under one hundred and twenty billion

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Speaker 2: dollars at the world's most valuable list of company.

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Speaker 1: Meanwhile, Meta has reported strong fourth quarter results with a

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Speaker 1: twenty five percent gain in sales and profits that tripled.

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Speaker 1: The social media giant also announced plans to buy back

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Speaker 1: an additional fifty billion dollars in shares and issue its

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Speaker 1: first ever quarterly dividend. Bloomberg Intelligences Senior and Lisman Deep

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Speaker 1: Sea says that the signs are good, but that there

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Speaker 1: are still concerns.

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Speaker 3: Meta monetizers at a much higher rate because they are

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Speaker 3: targeting is better and they have better systems reflected in

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Speaker 3: the numbers. But I do think you know, you have

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Speaker 3: to think about user growth and engagement, and that's where

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Speaker 3: the blue app declining is still a concern. But for now,

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Speaker 3: I guess people don't care because they grew twenty five percent.

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Speaker 1: Man Deep Seeing, referring there to the fact that shares

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Speaker 1: in Meta jumped by more than fourteen percent in extended trading.

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Speaker 1: After seeing business shrink for the first time two years ago,

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Speaker 1: CEO Mark Zuckerberg made efforts to turn around the company

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Speaker 1: he famously dubbed twenty twenty three the Year of Efficiency,

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Speaker 1: and cut thousands of jobs in the process.

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Speaker 2: That's where Amazon's focus on cost cutting also helped it

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Speaker 2: to report strong quarterly results. Fourth quarter revenue increased by

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Speaker 2: fourteen percent to one hundred and seventy billion dollars, jumping

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Speaker 2: nearly twice as quickly as expenses. The consumer giant laid

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Speaker 2: off more than thirty five thousand people last year in

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Speaker 2: a bid to improve profits. The positive results from Meta

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Speaker 2: and Amazon sent their stock prices soaring by a combined

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Speaker 2: two hundred and seventy billion dollars in after hours trading.

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Speaker 2: The positive vote from investors validating belt tightening strategies that

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Speaker 2: have come to define the tech industries past sixteen months.

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Speaker 1: The Bank of England is on the path to rate cuts,

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Speaker 1: but some hesitation remains. Andrew Bailey told Bloomberg the factors

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Speaker 1: including Middle East turmoil and rising living standards could be inflationary.

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Speaker 1: The Bank of England government also made it clear that

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Speaker 1: policymakers aren't ready to say when cuts will come.

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Speaker 5: We have included a risk by the way, a new

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Speaker 5: risk cuturre, which is we're really reflecting obviously tragic events

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Speaker 5: of them at least and the impact that can have

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Speaker 5: through the red sea effects.

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Speaker 6: So I think now the question.

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Speaker 5: Is for us as really as for how long do

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Speaker 5: we need to maintain the stance going forwards. As you

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Speaker 5: know I've said a number of times we're going. We're

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Speaker 5: not making predictions.

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Speaker 6: At this point.

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Speaker 1: Bailey's comments come as the Muntaste Policy Committee saw its

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Speaker 1: first member voting to cut rates since the pandemic. Investors

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Speaker 1: are still betting that the Central Bank will reduce its

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Speaker 1: key rate by a full percentage point this year starting

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Speaker 1: in June.

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Speaker 2: Shares of New York Community Bank Corps slumped for a

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Speaker 2: second day over fears of its exposure to the commercial

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Speaker 2: property sector. The stock closed at its lowest level since

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Speaker 2: two thousand after falling by eleven percent on Thursday. Down

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Speaker 2: grades of the banker mounting. Moody's has put the lender

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Speaker 2: on review for a credit rating cut. The selloff in

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Speaker 2: NYCB shares began after its cut its dividend on Wednesday,

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Speaker 2: posted a quarterly loss and ramped up loan loss provisions.

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Speaker 2: Bad loans tied to US property have also hit banks elsewhere.

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Speaker 2: The Japanese lender Azora last a third of its value

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Speaker 2: in two days after warning of its first loss in

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Speaker 2: fifteen years over the issue.

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Speaker 1: President Biden's administration is making its intention to respond to

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Speaker 1: the death of US troops clear. The news comes off

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Speaker 1: three American soldiers were killed last week by Iranian proxies

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Speaker 1: in Jordan. Defense Secretary Lloyd Austin says that his forces

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Speaker 1: have a number of options at their disposal.

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Speaker 7: I will just tell you that, you know, we will

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Speaker 7: have a multi tiered response, and again we have the

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Speaker 7: ability to respond a number a number of times depending

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Speaker 7: on what the situation is.

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Speaker 1: Lloyd Austin's comments come as the US officials push back

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Speaker 1: on speculation that the US has approved plans for strikes

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Speaker 1: in Iraq and Syria. National Security Council spokesman John Kirby

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Speaker 1: called the talk irresponsible. Now in a moment, we'll be

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Speaker 1: diving into a big week for tech earnings with our

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Speaker 1: colleague Critty Gupta and also bringing you Bloomberg's interview with

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Speaker 1: the Bank of England Governor Andrew Bailey. But first, how

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Speaker 1: about a little bit of sports news, Hi, Jane, sports

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Speaker 1: news very high. Lewis Hamilton leaving Mercedes for Ferrari.

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Speaker 2: I mean, look, it's an absolutely huge move that he's

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Speaker 2: going to move at the end of the twenty twenty

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Speaker 2: four season, according to announcements from both teams on Friday.

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Speaker 2: So it's a release option that was in his Mercedes

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Speaker 2: contract that he's going to exercise now and Friesaid is

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Speaker 2: going to be joining on a multi year contract starting

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Speaker 2: in twenty twenty five. He's going to race alongside across

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Speaker 2: Charlie Clair.

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Speaker 6: Yeah.

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Speaker 1: You just wonder when Lewis Hamilton is going to become

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Speaker 1: the kind of megabrand that you sort of think he's

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Speaker 1: bound to become. Still focused on see not already it is,

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Speaker 1: but I would have thought that he could get bigger

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Speaker 1: surely and become you know, Taylor Swift billionaire status. Perhaps

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Speaker 1: the waits.

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Speaker 2: Maybe, Yeah, interesting to see that his comments from at

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Speaker 2: the end of the twenty twenty three seasons saying that,

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Speaker 2: you know, he didn't believe that on so it didn't

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Speaker 2: seem to be certain that Mercedes could challenge Red Bull

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Speaker 2: when it came to dominating F one, talking about them

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Speaker 2: having a nord Star to follow. Something interesting to see

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Speaker 2: how that pans out from Mercedes.

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Speaker 1: Yeah, absolutely, Okay, let's dive into the tech earning, shall we?

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Speaker 1: Apple see to rain on a parade of otherwise pretty

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Speaker 1: positive tech earnings. It's stick slipping three percent postmarket after

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Speaker 1: week sales in China, which overshadowed better than expected iPhone sales.

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Speaker 1: Meta and Amazon thoughd me well sort after beating expectations

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Speaker 1: in their latest quarterly results, joining us now to discuss

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Speaker 1: Bloomberg Tvanca Critique Gypta with us for more. Good Morning,

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Speaker 1: So sales beat from Apple, but a slow down in China,

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Speaker 1: and that seemed to leave something of a bitter after

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Speaker 1: taste for analysts.

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Speaker 8: Well, this has been a story that we've looked at

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Speaker 8: for a couple of quarters. Now that China has kind

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Speaker 8: of been the weak spot, and I think the context

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Speaker 8: is important here in that whereas we all know of

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Speaker 8: Apple and the iPhone is kind of the go to phone,

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Speaker 8: that is not the case in the EM world. Samsung

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Speaker 8: has really been the outperformer there and China absolutely has

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Speaker 8: been pushing the whahwet story as well. So there have

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Speaker 8: been regulatory concerns around the iPhone. We've known this for

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Speaker 8: a while because China and India, by the way, have

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Speaker 8: been the growth market for Apple, but also tied to

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Speaker 8: their supply chains that Tim Cook had then moved from

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Speaker 8: China to Apple.

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Speaker 9: Trying to India.

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Speaker 8: Excuse me, that is a story that comes with a

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Speaker 8: lot of criticism because if you can't tap into a

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Speaker 8: market of about at one point three billion people, then

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Speaker 8: how are you able to grow by the same margin

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Speaker 8: you've grown in the last ten years.

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Speaker 9: That's been the concern.

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Speaker 8: But this earnings report really shows that, well, actually you

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Speaker 8: can do that in a really big way. And I

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Speaker 8: think from a more macro perspective, it highlights the fact

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Speaker 8: that people are still buying new iPhones, they are still

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Speaker 8: having these sales beats for the company itself, and I

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Speaker 8: think it speaks to disposable income as well. Apple's one

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Speaker 8: of my favorite stocks because, yes, you view it as

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Speaker 8: kind of this iPhone sales story, you can look at

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Speaker 8: the supply chain stor you can also look at as

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Speaker 8: a consumer kind of foot traffic story as well. Thirty

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Speaker 8: percent of the revenue just comes from Genius Bar fixes.

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Speaker 8: So if you go in and say, you know, my

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Speaker 8: AirPods aren't working or my screen is cracked or whatever

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Speaker 8: that may be, and the Genius Bar charges you for

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Speaker 8: Apple Care or whatever that may be, that's thirty percent

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Speaker 8: of Apple's revenue right there. It's just repairs on their products.

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Speaker 8: So that in itself speaks to the fact that the

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Speaker 8: consumer is spending that money to engaging with it, they're

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Speaker 8: actually going into the stores making those repairs. And three

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Speaker 8: that you can kind of still have this tech growth

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Speaker 8: story without China.

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Speaker 2: Yeah, and a really interesting one to monitor as well

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Speaker 2: from here too. Turning to Meta though next Critty so

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Speaker 2: a stock buy back, first ever dividend. This is a

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Speaker 2: bit of a shift for Meta.

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Speaker 9: The first ever dividend is what's catching my eye.

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Speaker 8: And just to very quickly broaden it out, have you

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Speaker 8: noticed in the last i want to say, six months

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Speaker 8: or so, how many companies around the world are now

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Speaker 8: issuing dividends, and it's really to keep shareholders kind of

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Speaker 8: attached to their stock.

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Speaker 9: It's like a little bit of a sweetener.

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Speaker 8: Ryan Air, for example, and the last quarter did it

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Speaker 8: for the very first time four hundred million euros I believe. Obviously,

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Speaker 8: two very different stories go back to Meta. Mark Zuckerberg

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Speaker 8: started off twenty twenty three saying twenty twenty three was

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Speaker 8: going to be the year of cost efficiency, and everyone

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Speaker 8: kind of scoffed at him because he was kind of

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Speaker 8: the big mover behind the metaverse. Is the next new thing?

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Speaker 9: Is it the next new thing?

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Speaker 8: It doesn't really seem that way at the moment, but

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Speaker 8: it was enough for Mark zucker kind of have this

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Speaker 8: roller coaster on the stock right. The fact that he

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Speaker 8: has actually delivered on that is a pretty big deal.

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Speaker 8: I mean, for Meta, a lot of their revenue comes

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Speaker 8: from advertising in particular, so they have a similar story

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Speaker 8: to Alphabet, but they are not as diversified as Alphabet.

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Speaker 8: I mean, they have WhatsApp under the group, they have Instagram,

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Speaker 8: but at its core it is still ad spend. So

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Speaker 8: the fact that again bringing it back to the consumer,

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Speaker 8: bringing back to business, investment. They're saying, not only is

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Speaker 8: the consumer strong, but businesses are so confident that they're strong,

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Speaker 8: that AD spend is where it's coming from.

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Speaker 1: Yeah, I think it's really interest. Make that dividend point.

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Speaker 1: I'd point out to the companies that are being punished

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Speaker 1: for pulling their dividend or not being able to deliver

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Speaker 1: on their dividend, because on the flip side, you will say,

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Speaker 1: see some of that, right, Yeah, let's talk about Amazon

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Speaker 1: there also we saw some focus on cost cutting there also,

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Speaker 1: and not very much delivery results too.

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Speaker 8: Yeah, and I think and I should mention that you

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Speaker 8: mentioned the cost cutting story. Meta of course had a

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Speaker 8: big one as well. Apple has been talking about this

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Speaker 8: as well. This has been a big theme on Silicon Valley.

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Speaker 8: In just the last couple of months, twenty thousand workers

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Speaker 8: have been laid off. That is a massive number in general,

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Speaker 8: but an extra massive number in Silicon Valley, where the

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Speaker 8: talent pool has already is already so tight, the labor

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Speaker 8: demand is extra there. When it comes to Amazon, a

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Speaker 8: couple of stories here, because again, Amazon, like Apple, does

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Speaker 8: a million different.

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Speaker 9: Things in terms of consumer in terms of e commerce.

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Speaker 8: They were able to come back up because they did

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Speaker 8: have that dip in the last two quarters for Amazon

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Speaker 8: as well, so you did see this pain in the

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Speaker 8: consumption story. You also had a pain in their kind

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Speaker 8: of logistics story as well. Remember Amazon has their own

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Speaker 8: logistics network, and the spillover that Amazon Logistics can't carry

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Speaker 8: they outsourced to ups, so that the fact that they

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Speaker 8: were had to pay extra wages to their delivery workers,

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Speaker 8: the fact that they couldn't actually they had more delays.

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Speaker 9: That's a real issue.

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Speaker 8: If you'll remember back in the day when the Ever

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Speaker 8: Given was stuck in the Suez Canal, Amazon was one

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Speaker 8: of the initial people that were affected. We're now waiting

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Speaker 8: for the read through of the Red Sea in particular

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Speaker 8: on how that's effected as well, simply because they have

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Speaker 8: this network that is truly global. So that is one

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Speaker 8: part of the question. Look at consumption has been great.

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Speaker 8: The other piece is their Amazon Web Services business. The

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Speaker 8: new CEO, Andy Jasse, who of course succeeded Jeff Bezos,

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Speaker 8: has been very vocal about moving the shift of Amazon

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Speaker 8: away from the e commerce business and more into AWS

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Speaker 8: because that's where the growth is. But remember we just

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Speaker 8: got Microsoft earnings this week, where they, of course the

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Speaker 8: major player in cloud services, and they're also the ones

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Speaker 8: that we're seen as most capable of taking on the

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Speaker 8: AI story because that cloud infrastructure is already built in

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Speaker 8: a way that for example, Alphabet can't do because their

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Speaker 8: cloud infrastructure isn't as built. Who's the major competitor for Microsoft,

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Speaker 8: It's Amazon Web Services when it comes to the cloud business.

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Speaker 8: So if you actually look at some of the analyst's

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Speaker 8: commentary there, AWS isn't diving into AI as aggressively. They

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Speaker 8: do have a startup that they've invested in, but it's

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Speaker 8: not the same momentum you're seeing behind it. They are

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Speaker 8: still talking about having to grow that part.

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Speaker 9: Of the business.

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Speaker 8: And right now investors are still looking at the fact

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Speaker 8: that the e commerce business is outperforming the AWS business.

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Speaker 8: But in the long term, that AI story matters more

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Speaker 8: for Amazon because it's a great indicator of how company

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Speaker 8: that isn't your Microsoft or isn't your Apple and isn't

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Speaker 8: really prepared for an AI story can actually commercialize it.

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Speaker 2: Okay, tie this all together from everything we've seen this week,

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Speaker 2: what does what conclusions can we draw or what themes

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Speaker 2: can we draw from the Magnificent seven reporting?

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Speaker 8: Well, I think a lot of people look at the

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Speaker 8: magnificence seven to some sort of defensive trade. It's why

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Speaker 8: the conversation of breath comes up a lot that, oh,

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Speaker 8: these seven stocks are the ones that are carrying the

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Speaker 8: S and P five hundred, therefore not indicative of the

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Speaker 8: actual gains in the United States economy. I'm going to

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Speaker 8: push back against that because if you look at the

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Speaker 8: themes in every single earning story, even just today, Apple, Meta, Amazon,

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Speaker 8: you have seen that it's resilience across the board, Resilience

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Speaker 8: in the consumer, resilience in business investment. That's a really

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Speaker 8: big piece of the equation that a lot of people

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Speaker 8: don't talk about.

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Speaker 9: A lot of their revenue from all of.

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Speaker 8: The tech companies comes from businesses, businesses that are investing

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Speaker 8: based on how they're viewing the consumer. So it's kind

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Speaker 8: of a frame story a little bit. But I think

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Speaker 8: the takeaway here is resilience matters, and that's why a

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Speaker 8: lot of these investors are able to justify these massive

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Speaker 8: valuations for these tech companies because they're saying, look, the

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Speaker 8: growth is there. It's expensive to be exposed to it,

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Speaker 8: but the growth is there, and we still want a

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Speaker 8: part of it.

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Speaker 1: Okay, Chritty. Really great to have you on the program

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Speaker 1: this morning. Bloomberg's Critty group to then taking us through

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Speaker 1: well all the earnings that we've seen from the big

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Speaker 1: US tech names.

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Speaker 2: Now the Bank of England Governor Andrew Bailey has toil

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Speaker 2: Bloomberg there are still hurdles on the path to rate cuts.

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Speaker 2: He pointed to risks from turmoil in the Middle East

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Speaker 2: and wage pressures. Bailey's been speaking to Bloomberg's editor at large,

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Speaker 2: Francine Laqua. After the bank held interest rates steady, She

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Speaker 2: asked the governor when the bank will know how inflation

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Speaker 2: has gone down by enough.

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Speaker 5: I think we've now changed the question really from how

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Speaker 5: restrictive do we need to be for how long do

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Speaker 5: we need.

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Speaker 6: To be restricted? That's important.

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Speaker 5: We've also taken the upside byas off we have included

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Speaker 5: a risk by the way, a new risk actually, which

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Speaker 5: is we're really reflecting obviously sort of tragic events of

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Speaker 5: them at least and the impact that can have through.

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Speaker 6: The red Sea effects.

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Speaker 5: So I think now the question is for us as

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Speaker 5: really is for how long do we need to maintain

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Speaker 5: this stance going forwards? As you know I've said a

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Speaker 5: number of times we're going we're not making predictions at

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Speaker 5: this point. We're setting up the framework. The things that

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Speaker 5: we think are important to look at really haven't changed. Actually,

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Speaker 5: so services inflation, aspects of the labor market, the domestic

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Speaker 5: drivers of inflation. Because these global shocks, I think we're

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Speaker 5: now seeing the disinflation in side of the global shops.

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Speaker 10: Is there a specific is it wage growth? Is there

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Speaker 10: something specific in the set of numbers that you look

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Speaker 10: at that will give you the impetus.

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Speaker 5: To cut well, I think a number of things. I

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Speaker 5: mean services inflation. I mean it's still at six point

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Speaker 5: four percent, so it's still well above anything that I

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Speaker 5: would say. It's consistent with us consistently meeting the target.

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Speaker 5: First of all, I think with wage growth, we have

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Speaker 5: seen the official measure come down. It's below where we

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Speaker 5: thought it would be. Open question really as to whether

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Speaker 5: that was a sort of bit of an adjustment of

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Speaker 5: some anomalies in that index, or whether that's really is

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Speaker 5: a move, But it doesn't matter. It's now in line

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Speaker 5: with the other things we look at. Again, Yeah, there

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Speaker 5: are above frankly levels that are consistent with putting the target.

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Speaker 5: But I think the important thing there is look inflation

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Speaker 5: has come down a long way head might inflation.

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Speaker 6: We think it's going to come down further in the shop.

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Speaker 10: Is that thanks to the Bank of England policy?

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Speaker 5: Well, I think, well two things there. First of all,

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Speaker 5: I think it's the major driver of that is the

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Speaker 5: disinflation side of the global shocks.

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Speaker 6: What Bank of.

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Speaker 5: England policy has done, and I've been saying for some time,

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Speaker 5: I think, is to prevent it becoming domestically embedded technical

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Speaker 5: the second round effects.

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Speaker 6: That's what and we always said that's what we can do.

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Speaker 5: We can't stop global shocks, you know, I wish, obviously

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Speaker 5: we all wish we could stop wars, but we can't.

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Speaker 5: In that sounds free margly policy. So our job is

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Speaker 5: to stop it becoming embedded.

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Speaker 2: Governor so J.

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Speaker 10: Powell yesterday pushed back against expectations for a March rate cut.

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Speaker 10: Markets are pricing in some kind of cut in May

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Speaker 10: or June.

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Speaker 9: Is that fair?

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Speaker 5: Well, I think markets, I think, while responding to the

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Speaker 5: fact again that we have been we've now set out

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Speaker 5: in a sense our framework and said the question for

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Speaker 5: us is for how long? I think markets are coming

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Speaker 5: up with their own answer that which, of course they will,

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Speaker 5: and that's quite reasonable. Our full cost, of course, is

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Speaker 5: conditioned on their view, but it's not our only judgment,

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Speaker 5: and we will decide now meeting by meeting.

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Speaker 10: Why are you so afraid of actually committing to a

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Speaker 10: cut next time? Is it because you're worried about inflation

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Speaker 10: coming back? Are you worried about you know, the budget

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Speaker 10: that's coming up in March, or are you worried about

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Speaker 10: having to reverse course?

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Speaker 5: Well, there are two reasons. Actually, One is that was

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Speaker 5: the evidence. We always want to see the evidence, and

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Speaker 5: the world is And the second is the world is

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Speaker 5: still a fairly uncertain place. There are still things going

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Speaker 5: on in the world which you know, I would say,

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Speaker 5: are not the normal course of events in the world

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Speaker 5: and can have quite big effects, and so we want

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Speaker 5: to see how these how these influences, you know, the

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Speaker 5: evidence that is vital to us, like ANSU policy. It's

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Speaker 5: a question really of being too soon to conclude that

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Speaker 5: we're on that sustained path to target, but I hope

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Speaker 5: we'll be there, you know, for long.

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Speaker 10: Do you think that the UK was in a recession

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Speaker 10: in the last couple of months of twenty twenty three, Well.

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Speaker 5: We don't have a recession in the forecast we've published today. Frankly,

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Speaker 5: it's in the ballots, I think, you know, because you

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Speaker 5: can have small margins either way. We don't actually have

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Speaker 5: a recession, and I think I would just besize perhaps

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Speaker 5: a point that's even more important. I think there are

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Speaker 5: player signs with the indicators in the UK that we've

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Speaker 5: been seeing some pickup in indicators really around the turn

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Speaker 5: of the year and going through January. So you know,

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Speaker 5: I think that's a positive thing, and that's why it

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Speaker 5: helps to explain why in our projections, our forecast we've

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Speaker 5: actually got a gradual pickup in growth.

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Speaker 10: But it's quite difficult to explain to someone who needs

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Speaker 10: to decide whether to remortgage or not, given everything seen

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Speaker 10: to be really hanging on a balance. How would you

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Speaker 10: describe the economy?

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Speaker 5: Well, I think we are seeing still subdued growth, but

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Speaker 5: we're seeing some signs of a pickup at activity.

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Speaker 6: I think we've.

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Speaker 5: Seen actually stronger and unpleased about this than we expected.

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Speaker 5: How sold real incomes unemployment has not risen as we

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Speaker 5: thought it.

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Speaker 6: Well, that's good news obviously.

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Speaker 5: As well, and those things are now being reflected through

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Speaker 5: and to what we see as a gradual pickup in

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Speaker 5: economic activity going forwards.

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Speaker 2: This is Bloomberg Daybreak Europe. You're a morning brief on.

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Speaker 6: M