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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.

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Speaker 2: First and update on some key earnings after the bell

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Speaker 2: in the US. Apple's revenue in China fell well short

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Speaker 2: of street expectations for the latest quarter. But even with

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Speaker 2: that disappointment, Apple's overall revenue growth was eight percent. We

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Speaker 2: got reaction from Gil Luria, he is head of Tech

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Speaker 2: research at DA Davidson.

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Speaker 3: If we can count on anything China to contribute to Apple,

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Speaker 3: it's volatility the quarter to quarter results. They're very so

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Speaker 3: widely and often the checks that we hear ahead of

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Speaker 3: a quarter are directionally wrong or completely wrong, as is

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Speaker 3: the case this time. Some of that has to do

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Speaker 3: with some selling upfront last quarter. They had better activity

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Speaker 3: last quarter. They probably sold into the channel more than

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Speaker 3: than the market required, which is why we're seeing it

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Speaker 3: down this quarter.

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Speaker 2: That was Gilia of DA Davidson.

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Speaker 4: Now.

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Speaker 2: Apple also gave an upbeat forecast for the holiday season,

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Speaker 2: saying revenue in the current quarter will rise by between

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Speaker 2: ten and twelve percent. We also heard from Amazon the

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Speaker 2: company's cloud unit posted its strongest growth rate in nearly

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Speaker 2: three years. Revenue for the latest quarter thirty three billion dollars.

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Speaker 2: That's an increase of twenty percent from last year. Here

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Speaker 2: is Bloomberg analyst Punham Goyel.

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Speaker 5: They hit it out of the park. Sales were rarey

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Speaker 5: get across the board across all business segments AWUS, online advertising,

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Speaker 5: and physical stores. So from a top line perspective, very

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Speaker 5: very encouraging results. In fact, AWS was probably the bright

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Speaker 5: spot here. Twenty percent gains, we haven't seen that in

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Speaker 5: a while.

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Speaker 2: That is Bloomberg's Punham Goiel. In a moment, we'll take

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Speaker 2: a closer look at these earnings with Ross Mayfield. He

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Speaker 2: is investment strategist at bair To Private Wealth Management. We

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Speaker 2: turn next to US China trade Presidents Trump and She

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Speaker 2: striking a one year truce. Now the US has cut

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Speaker 2: the fentanyl tariff and extended the existing truth on reciprocal tariffs,

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Speaker 2: while China will resume buying soybeans and allow rare earth

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Speaker 2: minerals to flow. The agreement is likely to just stabilize

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Speaker 2: relations rather than resolve some fundamental differences. We caught up

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Speaker 2: with Max bauchus, former US Ambassador to China. He spoke

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Speaker 2: earlier with Bloomberg TV host Sherry On and Avril Hong.

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Speaker 1: Give us your reaction force to this agreement, because it's

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Speaker 1: not like we haven't heard this before a positive tone,

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Speaker 1: but when it comes to actually follow through not much later,

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Speaker 1: that's right.

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Speaker 6: Actually, there are some good news, and the good news

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Speaker 6: is there's one year truce. Things could be worse. At

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Speaker 6: least there's a one year and truth essentially right to

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Speaker 6: with whole judgment because you know, we've had words before,

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Speaker 6: agreements before.

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Speaker 4: They just haven't held up.

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Speaker 6: I'm a little market about this one too, because President

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Speaker 6: Trump is a little more whimsical than prior American presidents,

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Speaker 6: so it's unclear.

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Speaker 4: What he's going to do.

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Speaker 6: Add to that, you know, he's dismantled the National Security

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Speaker 6: Council in the United States, so there's much less coordination

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Speaker 6: above US departments, and there's really not much of a

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Speaker 6: long term strategic plan towards China as there really should be,

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Speaker 6: so we have reason to be concerned. Another real message

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Speaker 6: for me out of all this is this looks like

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Speaker 6: two world peers trying to figure things out together, and

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Speaker 6: we are peers, the United States and China. China show

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Speaker 6: that it's not going to back down. The United States,

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Speaker 6: China can stand tote to total of the United States,

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Speaker 6: and I think President Trump appreciated that.

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Speaker 4: I think it.

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Speaker 6: He gained their respective of President Trump. That is a

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Speaker 6: President She being strong because look at what Trump's done

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Speaker 6: in the past. He's bullied a lot of different countries

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Speaker 6: to back down.

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Speaker 4: He's bullied some institutions.

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Speaker 6: The United States to back down, like universities, media, and

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Speaker 6: even some companies.

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Speaker 4: But President She has not back down.

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Speaker 6: President She stood tall, and I think that President Trump

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Speaker 6: respects that a lot. That's going to help frankly, President

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Speaker 6: She down the road and maybe even establish a better

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Speaker 6: relationship between the two presidents.

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Speaker 1: That is interesting, right because we have been watching President

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Speaker 1: and She gene ping really play the long game. President

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Speaker 1: Trump is negotiating style. He won those short term gains.

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Speaker 1: Was it surprising to you then that he didn't really

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Speaker 1: concede anything When it comes to the most advanced and

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Speaker 1: Vidia Blackwell chips.

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Speaker 4: I think that.

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Speaker 6: Trump has to be concerned about the Hawks back home.

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Speaker 6: There's quite a drum beat at home that these chips,

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Speaker 6: the Blackwell chips, if Trump agrees they can be a

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Speaker 6: center over to China, would cause too much consternation among

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Speaker 6: the Hawks. The United States, and I do so that

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Speaker 6: does not surprise me. It's interesting to me to see

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Speaker 6: whether Jensen Wonk can negotiate some kind of agreement with

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Speaker 6: them with China, because as we know, at the summit,

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Speaker 6: President Trump said, well, that's up to Nvidio and Jensen

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Speaker 6: Wong and dealing with the Chinese.

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Speaker 7: So let's see, Ambassador. Do you perhaps think that then

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Speaker 7: the US President, following on from his trip in Asia,

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Speaker 7: runs the risk of not coming off hawkish enough on

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Speaker 7: the Chinese, which is something that both sides of the

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Speaker 7: all seem to be able to agree on.

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Speaker 6: I think there's a slight risk that he does not

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Speaker 6: come across hawkeyish enough. Whenever there are discussions in the

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Speaker 6: White House and the Oval Office about China, President Trump

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Speaker 6: is usually the most doubt dubbish in the room compare

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Speaker 6: with the other Hawks.

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Speaker 4: In the room.

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Speaker 6: But on the other hand, and I think some of

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Speaker 6: the Hawks of China see that Trump did not was

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Speaker 6: not as strong as he otherwise could it be. But

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Speaker 6: the other hand, both China the United States know they

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Speaker 6: need each other and there's a reason for this one

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Speaker 6: year suspension of difficulties between the two countries, and that's

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Speaker 6: because both countries want to buy time, and both countries

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Speaker 6: know they need each other as they grow and as

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Speaker 6: they decouple, probably even a little more, and as each

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Speaker 6: country becomes a very strong economic power. We have two

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Speaker 6: peers in the world today, and I think that there's

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Speaker 6: a good news there that is that each side now

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Speaker 6: respects each other more.

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Speaker 7: Do you think that whatever's been achieved out of his

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Speaker 7: Asia tour can be counted as a success, because the backdrop,

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Speaker 7: of course, is that he's embarked on this at a

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Speaker 7: time where we're coming up to a month of a

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Speaker 7: US government shut down. Does he have enough to show

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Speaker 7: for all this? The US president?

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Speaker 4: I think the two are unrelated.

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Speaker 6: He did get some achievements, some success, you know, trying

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Speaker 6: to integrate right some so it means I don't know

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Speaker 6: how much, but they're going to buy some so it

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Speaker 6: means vision China said it suspend its export controls and

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Speaker 6: rare earth. You have to see how much that will be.

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Speaker 6: So President Trump did get some success, and also the

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Speaker 6: agreement on ports that helped a little bit, and also

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Speaker 6: the agreement by China to try to address a fentanyl

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Speaker 6: But those, you know, I don't think, as has been

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Speaker 6: point up by many observers is there's no structural change

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Speaker 6: in the relationship. It's still going to be very complex,

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Speaker 6: very very difficult, and this was basically a time for

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Speaker 6: the two countries. It's going to pause, you know, take

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Speaker 6: a deep breath and see where we are, build up

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Speaker 6: our own economies, and then come back, hopefully in April

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Speaker 6: at the next summit, and maybe build on what we have.

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Speaker 1: At least after all of these tensions with China, has

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Speaker 1: President Trump finally realized that he needs a help of

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Speaker 1: global allies. I mean, he came into this meeting with

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Speaker 1: all of these agreements with Asian and Japan and South

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Speaker 1: Korea as well.

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Speaker 6: He knows that intellectually. That's why he would, you know,

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Speaker 6: visited Malaysia, create in Japan. But the question is follow

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Speaker 6: up when he goes back home to Washington. He's back

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Speaker 6: home already, you know, he faces a different reality, and

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Speaker 6: it's just it's difficult to follow through, especially with President

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Speaker 6: Donald Trump. It's very difficult to follow through. But that's separate,

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Speaker 6: I think from the problems he's facing the shutdown. I

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Speaker 6: very much hope that he sits down down with the

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Speaker 6: leaders and both parties in Washington to solve this shutdown

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Speaker 6: because a lot of people in America are getting hurt.

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Speaker 1: So what's next for this relationship. We've had this Trump

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Speaker 1: Chee summit and we understand that the leaders will meet

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Speaker 1: again if there are no structural changes at the moment.

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Speaker 4: What's next, Well, obviously we don't know.

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Speaker 6: First of the see look at the details. You know,

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Speaker 6: a lot of nice words, but let's see what implementation

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Speaker 6: is on xpart controls. I mean, it's very it's almost stunning.

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Speaker 6: Then President Trump backed off on a new export controls

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Speaker 6: that's a national security issue. It's the first time that the

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Speaker 6: national security issue export controls has been on the trade

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Speaker 6: on the table as an economic issue.

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Speaker 4: That's that's stunning.

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Speaker 6: As a big give by President Trump and the gain

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Speaker 6: for President she No. I think, well, both sides will

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Speaker 6: take advantage of this truth, the suspension of the difficulties

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Speaker 6: to try to build up their own economies kind of

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Speaker 6: figure out what they're going to do next.

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Speaker 4: But I do think that.

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Speaker 6: Because both countries realize neither could push the other country around,

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Speaker 6: that they're going to each has a healthier respect for

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Speaker 6: healthier respect for the other, and I think that should help.

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Speaker 4: I've every much hope that it is.

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Speaker 6: The big unknown here is is Trump's personality, because he

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Speaker 6: changes his mind so quickly.

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Speaker 4: And that's that's that's that's.

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Speaker 7: A concern, and that's you said earlier noting that in

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Speaker 7: this I guess changing relationship between the US and China

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Speaker 7: that is seen as China standing toll in your experience

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Speaker 7: and engaging with China, what is your sense of the

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Speaker 7: extent in which this trade war two point oh, and

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Speaker 7: the changing relationship differs from the first iteration.

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Speaker 6: Well, the first iteration is a so called Section free

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Speaker 6: one investigation and enactive tariffs against China if there are

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Speaker 6: significant tariffs against China, and also exactly a promise from

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Speaker 6: China to biolow American products and that never materialized. But

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Speaker 6: that the key point here is a big difference between

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Speaker 6: Trump's first presidency and now the second presidency. And the

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Speaker 6: difference is during that period of time six seven, eight years,

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Speaker 6: China has begun to take Trump's measure. China has begun

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Speaker 6: to understand Trump. China knows how to deal with Trump.

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Speaker 6: That may not always work, but that China has a

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Speaker 6: lot more confidence now than it did when it first

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Speaker 6: dealt with Trump.

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Speaker 4: In Trump's first term.

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Speaker 1: I was going to ask how much does that matter?

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Speaker 1: The majoring understands President Trump. I mean, I wonder how

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Speaker 1: long lasting the changes will be when it comes to

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Speaker 1: everything that he's setting up on the trade front, when

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Speaker 1: he's leaving in three years, or does the next government

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Speaker 1: also follow through?

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Speaker 6: Well we no, No, It's a lot depends on the

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Speaker 6: internal politics United States. And so far President Trump's got

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Speaker 6: free reigned. He virtually controls all three branches of government,

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Speaker 6: even to some degree the Supreme Court. Now, there could

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Speaker 6: be election changes in twenty twenty six November midterm elections.

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Speaker 6: In if either House, the Senate or the House for

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Speaker 6: Representatives turns Democrat, that's going to very dramatically change Trump's

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Speaker 6: control over not only the United States but also the world.

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Speaker 6: That's a big potential watershed development.

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Speaker 2: That's Max Baucus. He is former US Ambassador to China,

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Speaker 2: speaking earlier with Bloomberg TV host Cherry On and April Hong.

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Speaker 2: Bringing it to you here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner,

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Speaker 2: and as promised earlier, we'll take a closer look now

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Speaker 2: at the earnings from Apple and Amazon that were reported

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Speaker 2: after the bell. I'm joined now by Ross Mayfield. He

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Speaker 2: is investment strategist at Baird Private Wealth Management. Ross is

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Speaker 2: on the line from Louisville, Kentucky. Thank you so much

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Speaker 2: for making time to chat with me. I'd like to

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Speaker 2: begin with the earnings that we had after the bell,

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Speaker 2: Apple and Amazon. Breakdown what you think you heard from Apple,

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Speaker 2: because this China revenue figure I think obviously was disappointing

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Speaker 2: and that seemed to have rattled the stock of it

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Speaker 2: in late trading.

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Speaker 8: It did obviously a big market.

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Speaker 9: It's still a lot of interlinkages between Apple and China,

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Speaker 9: but I think resilient domestic demand is the big story.

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Speaker 9: And you know, Apple gets lumped in as an AI

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Speaker 9: stock as a mag seven, but this is really a

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Speaker 9: retail business and they are still proving that they have

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Speaker 9: the goods when it comes to pushing product and beating

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Speaker 9: estimates on that front. So I think the China news,

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Speaker 9: as you mentioned, disappointing, but I think there's going to

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Speaker 9: be a lot of disappointing quarters for companies operating in

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Speaker 9: China over the next couple of years. So it's good

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Speaker 9: to see that the domestic revenues and domestic sales can

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Speaker 9: backfill a little bit.

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Speaker 2: Yeah, and Apple also with an upbeat forecast for the

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Speaker 2: current quarter, the holiday season quarter. Apple is expecting revenue

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Speaker 2: to rise between ten and twelve percent for the current quarter.

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Speaker 2: That seems to be pretty strong given everything that you're

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Speaker 2: describing that this is essentially a high end consumer products company.

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Speaker 8: Yeah, exactly. I mean, I think for a lot of

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Speaker 8: this quarter, if not.

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Speaker 9: You know, most of this year, we've been consistently waiting

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Speaker 9: for the consumer to slow, to stop spending, and there's

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Speaker 9: been a little bit, there's been hiccups. It hasn't been perfect,

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Speaker 9: but by and large, the consumer socks have been strong

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Speaker 9: and the consumer has continued to chug along, particularly as

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Speaker 9: you mentioned, the high end consumer, you know, bolstered by

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Speaker 9: the wealth effect, strong stock market, strong housing prices, a

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Speaker 9: lot of home equity, but ultimately underpinned by a job

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Speaker 9: market that you know, isn't hiring as many people, but

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Speaker 9: isn't really firing either, and wage growth is still strong.

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Speaker 9: So it's not the perfect consumer environment, but it is

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Speaker 9: it is good enough and for a company like Apple

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Speaker 9: obviously able to capitalize on a decent consumer backdrop heading

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Speaker 9: into the holidays.

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Speaker 2: So we also heard from Amazon the company's cloud unit

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Speaker 2: with its strongest growth rate in nearly three years, Amazon

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Speaker 2: Web Services with revenue of thirty three billion, and that

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Speaker 2: represents a twenty percent increase from the prior year. What

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Speaker 2: does this say to you about the way that Amazon

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Speaker 2: is dealing with this AI trade right now?

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Speaker 8: I think it's exactly what the market needs.

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Speaker 9: Obviously, we got the update from Nvidia at GtC the

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Speaker 9: other day, but all of these updates around AI prove

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Speaker 9: that this theme continues a pace, that there's real money,

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Speaker 9: real demand, real spending, real earnings, that it is, in

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Speaker 9: my opinion, not close to a bubble, that it is

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Speaker 9: underlied by very real fundamentals.

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Speaker 8: And when you see companies.

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Speaker 9: At the size of Amazon and Nvidia still beating estimates

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Speaker 9: like this and having blowout quarter after blowout quarter in

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Speaker 9: the AI linked areas of their business, I think it

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Speaker 9: proves that we're still early in this AI cycle. I

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Speaker 9: think the calls for a bubble, while understandable, are a

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Speaker 9: little bit.

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Speaker 2: Misled, maybe premature. Do you think will eventually burst the bubble?

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Speaker 8: Sure, yeah, I think probably.

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Speaker 9: I mean, anytime you have a new technology, you get

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Speaker 9: an enthusiasm, you get a lot of spending without one

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Speaker 9: hundred percent certainty on what the end product or you know,

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Speaker 9: the software stat on top of it entirely looks like

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Speaker 9: so we might get there one day.

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Speaker 8: But certainly I think the fundamentals have matched.

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Speaker 9: Most of the price increases right now, at least in

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Speaker 9: the big AI link stocks. And then I don't, you know,

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Speaker 9: it's a little bit more anecdotal, but I don't sense

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Speaker 9: the kind.

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Speaker 8: Of broad enthusiasm or euphoria.

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Speaker 9: It still seems to me like there's a lot of

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Speaker 9: trepidation around this theme. And to me that means we're

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Speaker 9: not in a bubble yet. I mean, it's very much

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Speaker 9: a psychological thing, and I just don't see it yet.

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Speaker 2: Okay, fair enough. There has been some concern express though

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Speaker 2: about the ROI, the return on investment, and whether or

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Speaker 2: not users ultimately are willing to pay for the services

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Speaker 2: that are offered in these kind of AI systems. Is

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Speaker 2: that a reasonable kind of concern to have?

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Speaker 8: Yeah, absolutely, I don't think.

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Speaker 9: Just because I do think that we're not in a

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Speaker 9: bubble yet and that this theme could continue, I do

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Speaker 9: think it's fair to question what is the use case

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Speaker 9: for businesses across different sectors. I mean, we've seen so far,

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Speaker 9: you know, upticks and productivity.

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Speaker 8: We're seeing a.

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Speaker 9: Rapid advancement in agentic AI and other use cases for

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Speaker 9: this technology, and particularly, I mean, the important thing is,

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Speaker 9: all right, we're seeing the tech companies that are deeply

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Speaker 9: involved with this technology see growth, see revenue growth, ce

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Speaker 9: stock price appreciation. What does it mean for a consumer

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Speaker 9: staples company? What does it mean for an industrials company?

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Speaker 9: What does it mean for a small business in Louisville, Kentucky. Right, So,

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Speaker 9: it will be important to build the software layer on

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Speaker 9: top to see what the use cases are that unlock

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Speaker 9: the next layer of productivity. But I think it's too

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Speaker 9: early to determine that that's not you know, that that

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Speaker 9: won't happen or that's not being seen yet.

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Speaker 8: There are plenty of examples.

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Speaker 9: If you, you know, listen to some of these earnings

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Speaker 9: calls of companies finding really useful ways to for all

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Speaker 9: out AI products.

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Speaker 2: Ross We're getting some breaking news by way of Reuter's

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Speaker 2: The company is reporting that Netflix is actively exploring a

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Speaker 2: bid for Warner Brothers to discovery both the studio and

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Speaker 2: the streaming business. How are you feeling about the media

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Speaker 2: landscape right now? Are there opportunities where you would put

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Speaker 2: money to work here. I know that some of these

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Speaker 2: businesses are referred to as legacy media, and maybe you

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Speaker 2: don't believe it represents an opportunity, But I'm wondering how

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Speaker 2: you're thinking more broadly about media stocks in general.

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Speaker 9: Yeah, I think the media landscape is changing kind of

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Speaker 9: drastically underneath our feet. I mean the post COVID shift

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Speaker 9: in how people view going to the movies in the

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Speaker 9: cost of doing so. So anytime there's massive change, I

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Speaker 9: think there's opportunity. Now I'm hesitant to get involved with

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Speaker 9: the stocks doing big mergers, big acquisitions, you know, especially

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Speaker 9: if they involve taking on.

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Speaker 8: A lot of debt.

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Speaker 9: It's often a really hard hurdle to overcome. This would

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Speaker 9: be a big bite at the apple for a company

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Speaker 9: like Netflix. But I think there's plenty of opportunity here.

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Speaker 9: I mean even looking you know, not to say that

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Speaker 9: something Google is some unheard of company or undiscovered company,

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Speaker 9: but if you look at their results and see you

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Speaker 9: know what.

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Speaker 8: YouTube is doing.

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Speaker 9: I mean this is this is in theory or at

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Speaker 9: least adjacently a media company, and it's it's seeing rapid growth.

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Speaker 9: So I think the landscape is changing, the demographics are changing,

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Speaker 9: but there's plenty of opportunity out there.

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Speaker 8: I'm a little.

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Speaker 9: Hesitant about big acquisition. So that's just kind of a

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Speaker 9: rule of thumb across all industry.

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Speaker 2: So we had the FED rate decision on Wednesday and

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Speaker 2: a message from FED Shaer J. Powell where he kind

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Speaker 2: of pushed back on this idea that we may see

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Speaker 2: or it's a foregone conclusion that we will see a

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Speaker 2: December rate cut. Does do you think that represents a

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Speaker 2: significant headwind for the equity market, the idea that a

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Speaker 2: rate cut in December maybe off the table.

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Speaker 8: I don't think so.

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Speaker 9: I think broadly, directionality is more important than the pace

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Speaker 9: or the timing. So the fact that we know the

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Speaker 9: FED is like likely to continue cutting rates is the

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Speaker 9: more important thing than whether we get one in December

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Speaker 9: or not. I also think, you know, I understand chair pals,

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Speaker 9: you know, impulse to kind of tamp down some of

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Speaker 9: the rakehead speculation and maybe try to let a little

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Speaker 9: air out of the equity market or some of the speculation.

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Speaker 9: I understand that impetus fully, but I think it's still

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Speaker 9: likely we get a rake cut in December. I think

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Speaker 9: the labor market data that the FED is seeing kind

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Speaker 9: of demands it. The lack of upside pressure from inflation

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Speaker 9: demands it. And quite frankly, they're just even if we

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Speaker 9: were at a neutral place, the FED, the FED funds

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Speaker 9: rate is still in restrictive territory, so I think it

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Speaker 9: makes sense for them to at least get back to

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Speaker 9: a neutral stance and then evaluate the landscape from there.

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Speaker 9: So as long as we don't get to December, and

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Speaker 9: even if the FED doesn't cut, as long as we're

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Speaker 9: not hearing hawkish language about pause or potential hikes down

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Speaker 9: the road, I think the equity market's going to be

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Speaker 9: just fine with the FED stance.

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Speaker 2: Okay, Ross, we'll leave it there. Thanks so much. Ross

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Speaker 2: Mayfield is the investment strategist at Baird Private Wealth Management.

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Speaker 2: Joining today from Louisville, Kentucky on the Daybreak Asia Podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg