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Speaker 1: Good morning. It's finday, the fifth of August here in London.

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Speaker 1: This is the Bloomberg Daybreak. Here at podcast, I'm Caroline Hepka.

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Speaker 1: Coming up today, Apple's core takes a hit as iPhone

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Speaker 1: sales slump and revenue declines yet again. The Bank of

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Speaker 1: England Governor Andrew Bailey says it's far too soon to

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Speaker 1: bet on an interest rate cut, and we speak to

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Speaker 1: one of the designers of the iconic Twitter bird logo

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Speaker 1: after it's replaced by x. Let's start with a roundup

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Speaker 1: of our top stories. Apple has reported sluggish iPhone sales,

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Speaker 1: jarring investors. Third quarter revenue fell by one point four

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Speaker 1: percent and came in below Wall Streets expectations. Shares in

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Speaker 1: Apple fell in extended trading. Daniel Flagg's, a senior research

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Speaker 1: analyst at Newburger Berman, says that the tech gant woes

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Speaker 1: are actually part of a broader trend.

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Speaker 2: I think the resultso replect the fact that the environment

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Speaker 2: is challenging. Consumers face pressure from general interest rates, higher inflation,

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Speaker 2: and so there are a lot of crosscurrents that Apple,

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Speaker 2: like all other companies, cannot outrun.

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Speaker 1: Newberger Berman's senior research analyst, Daniel flax there. He still

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Speaker 1: likes the stock, saying that it has a vibrant ecosystem.

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Speaker 1: If the stock slide continues, though in regular trading today,

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Speaker 1: Apple does risk losing its three trillion dollar valuation. Amazon

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Speaker 1: shares have sawed in after hours trading as it generates

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Speaker 1: strong revenue growth in the core e commerce business whilst

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Speaker 1: also cutting the pace of spending. Since taking the reins

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Speaker 1: two years ago, CEO Andy Jesse has focused on raining

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Speaker 1: in costs at Amazon while still investing in the core

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Speaker 1: businesses and also how to make money from AI.

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Speaker 3: Think that the business has grown to be pretty large already,

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Speaker 3: and I still think we only have a fraction of

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Speaker 3: the features that we need. I don't think we're close

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Speaker 3: to being done growing there, and that is a very

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Speaker 3: strong area of focus. First team in for our senior

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Speaker 3: leadership team as well.

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Speaker 1: That was Amazon CEO Andy Jasse, who also sees stable

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Speaker 1: growth in the profitable cloud computing business. The Bank of

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Speaker 1: England Governor Andrew Bailey says that interest rates will have

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Speaker 1: to stay high for a long time to bring inflation

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Speaker 1: to heal, as the central Bank arraysed interest rates the

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Speaker 1: fourteenth time in a row to five point two five percent.

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Speaker 1: He told Bloomberg. The outlook is improving.

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Speaker 4: It's the last mile, if you like, I used the

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Speaker 4: sort of term, sort of bit leoslee. It's the last mile,

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Speaker 4: which obviously where policy is really doing the work, and

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Speaker 4: we're going to have to see policies stay restrictive.

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Speaker 1: Now.

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Speaker 4: The question that is for how long, I'm afraid the

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Speaker 4: answer is because we don't know at the moment. That's

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Speaker 4: why we say for sufficiently long to have its effect,

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Speaker 4: because it's too soon to judge really how long that's

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Speaker 4: going to take.

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Speaker 1: Governor Bailey added that it's clear monetary policy is now

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Speaker 1: bringing inflation down. Donald Trump has pleaded not guilty in

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Speaker 1: a Washington courtroom to charges that he conspired to overturn

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Speaker 1: the twenty twenty election. This is the third criminal case

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Speaker 1: brought against the former president in less than six months.

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Speaker 1: Trump is running for the White House again, and speaking

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Speaker 1: after his court appearance, he claimed that he is the

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Speaker 1: subject of persecution.

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Speaker 5: This is the persecution of the person that's leading by

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Speaker 5: very very substantial numbers in the Republican primary and leading

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Speaker 5: Biden by a lot. So if you can't beat him,

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Speaker 5: you persecute him, or you prosecute him, we can't let

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Speaker 5: this happen in America.

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Speaker 1: That was Donald Trump making a brief public comment before

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Speaker 1: getting back on his plane. He is next to you

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Speaker 1: in court. On the twenty eighth of August, Barkleys could

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Speaker 1: shift its European Union headquarters from Dublin to Paris. The

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Speaker 1: bank says that it's exploring switching its EU base to

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Speaker 1: its rapidly growing hub in the French capitol. Barkleys has

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Speaker 1: expanded its Irish office in recent years to maintain access

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Speaker 1: to the Single market. The company says that any move

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Speaker 1: would only affect a small number of in its Dublin office.

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Speaker 1: And lastly, the artist who designed Twitter's now defunct bird

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Speaker 1: logo says that he hopes it can be preserved as

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Speaker 1: a cultural artifact. Martin Grasser was part of a three

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Speaker 1: person team who came up with the blue symbol in

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Speaker 1: twenty eleven. He told us here on BlueBag Daybreaku that

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Speaker 1: he was sad to see his design replaced as part

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Speaker 1: of the platform's rebrand to X, but he hopes that

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Speaker 1: it can live on.

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Speaker 6: I think the bird belongs in a museum somewhere. I

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Speaker 6: think it's an important cultural artifact, you know. I think

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Speaker 6: It's like it's an incredible symbol of an era of

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Speaker 6: the internet. You know, it just represents to me a

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Speaker 6: certain time, and I would love to see the birds

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Speaker 6: sort of live on in culture. Twitter's at its best

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Speaker 6: when it celebrates its users, and I hope that the

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Speaker 6: bird becomes something that belongs to the people who use

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Speaker 6: Twitter and it sort of existing culture in that way.

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Speaker 1: Martin Grasser says he'll continue to use the platform, but

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Speaker 1: he admits that the change to X is going to

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Speaker 1: take a while to get used to. Okay, those are

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Speaker 1: our top soyz en for you today, but look, I

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Speaker 1: think we need to think about the big issue in

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Speaker 1: markets today surely is the eyewatering moves that we've seen

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Speaker 1: in the US bond markets. Over this week. We've seen

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Speaker 1: a surge in long term US Treasury yields about twenty

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Speaker 1: five basis points actually for the thirty year yield since Monday.

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Speaker 1: Investors are demanding more to hold longer dated bonds. Why

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Speaker 1: are markets changing their minds or so skittish around this

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Speaker 1: issue now? Well, the US Treasury is issuing more bonds,

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Speaker 1: for one, so there are worries about a supply deluge.

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Speaker 1: Also concerned about US government debt overall, the sort of

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Speaker 1: longer term fiscal outlook, that's the big picture think about today.

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Speaker 1: Though we've got the US labor market. It may be

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Speaker 1: so hot that the Fed might have to raise interest

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Speaker 1: rates further to rein it in, So that's a factor

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Speaker 1: more eminently, and plus there are lots of big finance

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Speaker 1: names who are weighing in and commenting on it. Of

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Speaker 1: course Elon Musk making the obvious point that shorter dated

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Speaker 1: treasuries are quote a no brainer, something that Warren Buffett

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Speaker 1: has also talked about. More interestingly though, and we've reported

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Speaker 1: on this on the big big terminal Pershing Square Capital's

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Speaker 1: Bill Ackman, something of a social media provocateur, says that

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Speaker 1: his firm is shorting thirty year treasury bonds basically a

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Speaker 1: hedge against the impact of higher interest rates on stocks,

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Speaker 1: but also a kind of standalone bet. So that's a

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Speaker 1: bit more of an interesting perspective. What's the upshot of

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Speaker 1: all of this? The bond market rarely sees a week

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Speaker 1: that we've had this week. Far from being the Year

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Speaker 1: of the bond, as a lot of people were hoping

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Speaker 1: for this year, actually we're seeing losses for longer term debt,

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Speaker 1: the treasury markets have basically retreated and seen all of

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Speaker 1: their gains for twenty twenty three now wiped out. And

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Speaker 1: we're at the sharp end today because you've got US

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Speaker 1: payrolls data. If the jobs and ages data comes out

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Speaker 1: stronger than markets expect, does that mean more treasury market losses.

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Speaker 1: So it's a very important week in terms of bond

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Speaker 1: markets to think about. And so yeah, I think that

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Speaker 1: is one that market participants and really everyone interested in

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Speaker 1: markets is thinking about. Having said that, of course, also

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Speaker 1: coming to the end of a very big week for earning.

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Speaker 1: So let's dive into the tech earnings now. Amazon shares

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Speaker 1: surge in post market trading. The company manager slash costs

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Speaker 1: and grow revenue eleven percent in the second quarter. Apple

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Speaker 1: shares those slumped declining sales as the industry wide slump

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Speaker 1: in smartphones has really weighed on Apple, of course, the

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Speaker 1: market leader. Let's go live now to Germany. Bloomberg's tech

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Speaker 1: reporter in Berlin, Aggie Cantrell, joins me this morning. Aggie,

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Speaker 1: great to have you on the program. Let's start with

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Speaker 1: the good news, shall we. It's Friday? Why not Amazon

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Speaker 1: online sales, the cloud business doing extremely well yes.

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Speaker 7: So yeah, let's start with the good news, and that

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Speaker 7: is very much the case with AWS, which is still

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Speaker 7: the driver of Amazon's profits and has been for quite

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Speaker 7: a while. It is interesting to look at how they

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Speaker 7: are talking about AI being integrated into AWS. This is

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Speaker 7: of course something that their competitive Microsoft has focused on

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Speaker 7: with their investment and open Ai and their Azure cloud. Similarly,

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Speaker 7: AWS has also been talking about how AI is going

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Speaker 7: to be supporting their applications, but interestingly, yesterday Andy Jesse

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Speaker 7: said that he wouldn't put a date on exactly when

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Speaker 7: that would be a potential boon for the company. There

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Speaker 7: is also this other thing as well, which is that

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Speaker 7: in the online stores, something that I thought was interesting

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Speaker 7: is we have seen sales growth in the online stores

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Speaker 7: year on year. Typically, Amazon has done quite well in

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Speaker 7: the online stores, even in times when times are tough,

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Speaker 7: because they have such a range of prices on their stores.

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Speaker 7: And something that I thought was quite interesting is that

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Speaker 7: consumers seem to be trading down, which goes into a

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Speaker 7: broader consumer story about people who are actually struggling to

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Speaker 7: pay for higher price items. And so it's interesting that

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Speaker 7: while they have seen sales growth in the online stores,

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Speaker 7: consumers are actually going for the cheaper options.

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Speaker 1: Yeah, that is interesting, perhaps when you contrast the Amazon

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Speaker 1: results with Apple. Revenue from iPhone, mac and iPad sales

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Speaker 1: all fell year on year, and they also expect another

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Speaker 1: week quarter to come. So those expensive items struggling a

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Speaker 1: little bit.

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Speaker 7: Yeah, absolutely, I mean, this is the thing. We've seen

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Speaker 7: a broader slump in the smartphone market since the pandemic

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Speaker 7: really and Apple, of course, their items are definitely not cheap.

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Speaker 7: They are seen as high end items within the smartphone

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Speaker 7: market and they are priced higher than a lot of

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Speaker 7: the others, so they are exposed more to any slump

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Speaker 7: in consumer demand because people may either be opting for

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Speaker 7: cheaper options or choosing to out with the older with

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Speaker 7: their older iPhones. And so this is the worst sales

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Speaker 7: slump in twenty years, and it is something that is

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Speaker 7: quite significant because that's the entire time that the iPhone

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Speaker 7: has been around. They have never seen such weak demand

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Speaker 7: for their products, and the iPhone is such a crucial

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Speaker 7: part of this. The iPhone is really the center point

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Speaker 7: of their sales portfolio, and there is a concern that

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Speaker 7: even as they're bringing out new products that there is

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Speaker 7: just not the same demand as there was before.

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Speaker 3: Yeah.

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Speaker 1: Absolutely, we're expecting the new iPhone fifteen in this current quarter. Yeah,

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Speaker 1: does Apple risk losing then the three trillion dollar valuation,

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Speaker 1: you know, quite a bit was made, you know when

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Speaker 1: Apple reached that eyewatering figure.

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Speaker 7: Well, as you say, we're receiving this new iPhone this quarter,

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Speaker 7: and also at the same time, we're noticing that the

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Speaker 7: company is fearful that the sales slump will continue into

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Speaker 7: this quarter. So that is a lot of the reason

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Speaker 7: why people are looking at Apple's share price and the

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Speaker 7: question if there is sort of a mismatch between what

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Speaker 7: the company is actually delivering versus what their evaluation is.

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Speaker 7: And of course huge three trillion dollar valuation, which has

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Speaker 7: benefited a lot from this broader tech rally earlier this year,

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Speaker 7: and I think, as we've seen in a lot of

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Speaker 7: the other tech earnings this quarter, it's really come down

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Speaker 7: to a question of the fundamentals and is this company

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Speaker 7: actually delivering on sales and that are nonprofit and that

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Speaker 7: is really the concern for Apple right now.

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Speaker 3: Yeah.

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Speaker 1: Absolutely, Agie, thank you so much for being with me

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Speaker 1: this morning. Bloomberg's Tech reporter in Berlin. Aggie Cantrell just

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Speaker 1: taking us through the Amazon and Apple results and some

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Speaker 1: of the key ones this week. Let's turn our attention

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Speaker 1: though to the Bank of England Governor Andrew Bailey, who

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Speaker 1: has told Bloomberg that it is too soon for the

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Speaker 1: UK to declare victory in the battle against inflation. Speaking

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Speaker 1: to our editor large Farcine Laqua, he said that the

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Speaker 1: last mile of the fight will require a prolonged period

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Speaker 1: of restrictive interest rates. Have a listen to that key interview.

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Speaker 4: It's going to have to remain restricted to have this

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Speaker 4: effect of bringing inflation down, and particularly next year. A

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Speaker 4: lot of this year we're going to see inflation come

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Speaker 4: down rapidly, but that's a lot of that is the

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Speaker 4: unwindening of things that happened last year, energy and so on.

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Speaker 4: It's the last mile, if you like. I used the

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Speaker 4: sort of term sort of a bit loosely. It's the

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Speaker 4: last mile, which obviously where policy is really doing the work,

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Speaker 4: and we're going to have to see policy stay restrictive. Now.

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Speaker 8: The question that is for how long great, That's a question.

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Speaker 4: I'm afraid the answer is because we don't know at

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Speaker 4: the moment. That's why we say for sufficiently long to

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Speaker 4: have its effect, because it's too soon to judge really

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Speaker 4: how long that's going to take. And the reason is that,

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Speaker 4: I think because we've now, you know, I think I'm

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Speaker 4: much more confident now that it's on the downslope. But

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Speaker 4: of course people want to see that, they want to

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Speaker 4: really believe it, they want to build, and then it

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Speaker 4: gets built into people's expectations, it gets built into price setting,

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Speaker 4: it gets built into wage setting. We've got to see

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Speaker 4: that happen.

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Speaker 8: But government, so do you believe it? Could you say, actually,

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Speaker 8: you're victorious right now.

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Speaker 4: No, I'm not so victorious. That's that's that would be.

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Speaker 4: I think, you know, far too soon to say that.

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Speaker 4: What I see is much more solid evidence that it's

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Speaker 4: coming down. We've been in a way, we've been in

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Speaker 4: the number we had a couple of weeks ago. We've

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Speaker 4: been waiting for this number for some time because there

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Speaker 4: are a number of puzzles to us in the in

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Speaker 4: the inflation numbers which just didn't seem to really reconcile

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Speaker 4: with what we were hearing. And this gave us more

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Speaker 4: confidence that we're seeing it.

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Speaker 8: But why put that warning in the guidance? What are

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Speaker 8: you worrying about?

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Speaker 4: Well, I think what we're saying to it too. There's

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Speaker 4: a path in the market where our rates go up

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Speaker 4: and then they come down. There's another path, which we

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Speaker 4: laid out today for illustration, where what happens if you

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Speaker 4: keep put rates essentially where they are today, and that's

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Speaker 4: interestingly both of them return inflation to target. And there's

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Speaker 4: no doubt some other parts we could draw on a

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Speaker 4: piece of paper to get the same effect. What we

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Speaker 4: wanted to say is look before, before we get to

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Speaker 4: the point when we can really say we're confidence this

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Speaker 4: is getting behind us, we can start to, you know,

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Speaker 4: to maybe bring rates down, We've got to see a

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Speaker 4: lot more evidence. So they will have to stay. Policy

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Speaker 4: will have to stay restrictive for a sufficient period of

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Speaker 4: time to get to that point.

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Speaker 8: But is this a new normal in terms of interest rates?

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Speaker 4: Oh? The current level?

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Speaker 8: Yeah, the current level more or less. Like will we

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Speaker 8: ever go back to what we had in the last

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Speaker 8: ten years?

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Speaker 4: Well, I would be surprised if we go back to

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Speaker 4: near zero interest rates. I think something's going to have

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Speaker 4: to happen that we currently don't know about. I think

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Speaker 4: if you do all the work that's done on sort

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Speaker 4: of equilibrium rates, where it might the rates settle. That

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Speaker 4: would suggest it's lower than it is today as a

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Speaker 4: sustainable rate, but actually nowhere near down to where we

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Speaker 4: were in the sort of the period post the financial crisis.

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Speaker 4: But we're not. That's uncertain that we're not yet there

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Speaker 4: to the point where we can start reaching.

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Speaker 8: I think firm views on that Governor is the guidance

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Speaker 8: preparing the the way for a Parson interest rate.

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Speaker 4: We're not there yet. I would say we're going to

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Speaker 4: have to see the evidence as it emerges for the

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Speaker 4: next meeting. So it's not designed to do that, but

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Speaker 4: it is designed to say we're really seeing the effects

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Speaker 4: now of policy working that we're going to have to

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Speaker 4: go on seeing those effects. We think there is a

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Speaker 4: you know, the clear downward path of inflation happening. Those

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Speaker 4: things need to complex now. Unfortunately, of course, as we

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Speaker 4: said in what we issue today, if of course I'm

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Speaker 4: afraid we get news going the other way, then of

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Speaker 4: course we'll have to afraid respond and rates we have

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Speaker 4: to go up again. So we're not there yet to

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Speaker 4: make a definitive judgment.

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Speaker 8: So by September twenty first, I think we'll have two

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Speaker 8: new cpis and a couple of government reports what are

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Speaker 8: you expecting those to show?

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Speaker 4: Well, the next one's out two weeks time. We do

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Speaker 4: expect to see a drop in inflation because one of

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Speaker 4: the two remaining annual energy base effects from the month's

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Speaker 4: energy policis comes out of the July number released in

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Speaker 4: August is the first one. The October number released in November,

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Speaker 4: which we think is going to be somewhat bigger one

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Speaker 4: actually will come out. And those two things are pretty

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Speaker 4: firmly baked in, So we do expect to see that happen.

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Speaker 4: What we see beyond that, well, we'll wait and wait

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Speaker 4: for it.

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Speaker 8: What would give you comfort to actually say that you've

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Speaker 8: done the right decision so far, Well.

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Speaker 4: We've said what we're looking at very carefully. We've pointed

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Speaker 4: to three things in the past, and I would continue

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Speaker 4: with those services prices and services inflation because it has

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Speaker 4: a domestic labor content and it particularly the labor market

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Speaker 4: where we are seeing signs of loosening as the law market.

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Speaker 1: So that was the Bank of England Governor Andrew Bailey

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Speaker 1: speaking there to Bloomberg TV's franc In Laqua after the

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Speaker 1: twenty five bases point rate rise. I mean quite interesting, though,

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Speaker 1: Bloomberg has compiled some data which shows that not everyone

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Speaker 1: thinks that higher interest rates are you know, a sure

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Speaker 1: thing to come from the Bank of England. One investor's

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Speaker 1: got a six one hundred and twenty five thousand pound

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Speaker 1: bet that the Bank of England's going to stick to

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Speaker 1: five point twenty five percent when it meets in September.

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Speaker 1: I not raise interest rates again. It pays out eight

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Speaker 1: times that amount if that bet is correct. So interesting

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Speaker 1: to see one investor taking a particularly strong position unlike

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Speaker 1: the rest of the market. That's something that we've reported

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Speaker 1: on the Bloomberg terminal for you. Twitter's iconic bluebird logo,

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Speaker 1: we know it's disappearing from our screens as the social

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Speaker 1: network is being rebranded as X. One of the designers

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Speaker 1: who actually created that iconic symbol has told us he's

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Speaker 1: sad that it's being replaced, but that he won't stop

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Speaker 1: using the platform. Martin Grause has started by telling us

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Speaker 1: Harry actually arrived at that design when we interviewed him.

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Speaker 4: Have a listen.

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Speaker 6: We started with simple pencil drawings and really trying to

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Speaker 6: get the gesture or sort of the basic shapes of

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Speaker 6: the bird figured out, and quickly we kind of found

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Speaker 6: this sort of pleasant curve on the the belly of

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Speaker 6: the bird. And you know, I think it was somewhere

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Speaker 6: in between like a humming bird and like a blue

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Speaker 6: mountain bird. But that really nice little curve, that round

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Speaker 6: belly was sort of the spark that sort of sent

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Speaker 6: us in the direction that we went in with the

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Speaker 6: sort of upturned optimistic bird made from like really a

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Speaker 6: group of circles to give that you know, optimistic, joyful,

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Speaker 6: round filling.

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Speaker 1: Okay, And why do you think then it worked so well?

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Speaker 6: I think that it works so well because it's a

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Speaker 6: very simple drawing. It's constructed from thirteen different circles of

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Speaker 6: three different sizes, so it's all doing the same thing.

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Speaker 6: I think that's really easy for the human eye to

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Speaker 6: understand when a form is simplified. I think it also

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Speaker 6: is so familiar to us. We push the button every

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Speaker 6: day on our phone two hundred times or whatever. And

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Speaker 6: I think that, like you know, I've been saying, it's

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Speaker 6: like the tree on the corner that after ten years

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Speaker 6: you walk by and it's being cut down and you're

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Speaker 6: sad and you don't know why, and it's just because

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Speaker 6: it's been part of our life and it's familiar, And

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Speaker 6: I think third is that it's I think round, circular

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Speaker 6: forms convey a sense of optimism and joy. And it

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Speaker 6: was also a bird, it wasn't an abstract drawing. I

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Speaker 6: think that it makes it really easy to sort of

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Speaker 6: relate to.

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Speaker 1: How did you feel them when you heard that it

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Speaker 1: was being replaced?

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Speaker 6: I was sad, you know, I have to be honest,

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Speaker 6: there's like a bit of joy every time you see

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Speaker 6: it on the news or in the NBA finals or

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Speaker 6: at the World Cup, or on a bag of potato chips.

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Speaker 6: It's really super fun to see your artwork in the world.

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Speaker 6: That being said, I think it had an eleven year run,

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Speaker 6: which is really hard to do these days.

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Speaker 1: What's your view of the new X logo. It was

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Speaker 1: created in quite an unusual way, essentially just cridsourced on

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Speaker 1: the platform.

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Speaker 6: Yeah, I mean, I think a little bit of that

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Speaker 6: is Elon's sort of personality. I mean, I know he

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Speaker 6: has tweeted things like sees the memes of production, and

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Speaker 6: he's very into this sort of jpeg meme vernacular, and

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Speaker 6: I think it's going to take a while to get

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Speaker 6: used to, I guess, is my first answer. I think,

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Speaker 6: like with any logo, changes just takes a little while

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Speaker 6: to grow on you. I think with the letter form itself,

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Speaker 6: it's a tough solve that they have to come up

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Speaker 6: with because it's angular and sharp, and it has these

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Speaker 6: sort of aggressive it has an aggressive construction, and so

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Speaker 6: I think the challenge that they'll have is how to

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Speaker 6: define what X means, how to make it feel welcoming

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Speaker 6: and approachable in its own way.

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Speaker 2: Do you think you'll ever work with bird imagery again?

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Speaker 3: Oh?

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Speaker 6: Sure, I mean I've seen some really amazing artistic tributes.

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Speaker 6: I you know, I think the bird belongs in a

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Speaker 6: in a museum somewhere. I think it's an important cultural

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Speaker 6: artifact and a incredible I you know, I think it's

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Speaker 6: like it's an incredible symbol of, you know, an era

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Speaker 6: of the Internet, or an era of sort of this,

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Speaker 6: like what we hoped it could be or what we

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Speaker 6: thought it would be, or you know, it just represents

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Speaker 6: to me a certain time and I would love to

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Speaker 6: see the birds sort of live on in culture or

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Speaker 6: you know. I think it's like Twitter is at its

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Speaker 6: best when it celebrates its users, and I hope that

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Speaker 6: the bird becomes something that belongs to the people who

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Speaker 6: use Twitter and it sort of existing culture in that way.

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