WEBVTT - Apple’s $113 Billion Problem & The BOE’s Quick Pivot

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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<v Speaker 1>DAYBAC podcast, available every morning on Apples, Spotify or wherever

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<v Speaker 1>you listen. It's Friday, the twenty second of March in London.

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<v Speaker 1>I'm Caroline Hepke and I'm Lizzie Verdon.

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<v Speaker 2>Coming up today.

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<v Speaker 3>Apple's value dropped by more than one hundred and ten

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<v Speaker 3>billion dollars as the tech giants legal challenges.

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<v Speaker 1>Mount, the Bank of England inches closer to rate cuts

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<v Speaker 1>as the Hawks retreat.

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<v Speaker 3>Plus Reddit pops Shares in the social media firm rise

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<v Speaker 3>by forty eight percent as investors embrace their AI pitch.

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<v Speaker 1>Let's start with a raundup of our top stories.

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<v Speaker 3>Apple's value has dropped by one hundred and thirteen billion

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<v Speaker 3>dollars as regulators in the US and EU accused the

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<v Speaker 3>tech giant of abusing its market dominance. Once the world's

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<v Speaker 3>most valuable firm, with a market cup of more than

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<v Speaker 3>three trillion dollars, Apple has under formed both the Nasdaq

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<v Speaker 3>and the SMP five hundred this year. The latest slide

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<v Speaker 3>in the tech firms share price comes after US Attorney

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<v Speaker 3>General Merrick Garland sued the company, accusing it of blocking

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<v Speaker 3>rivals from accessing hardware and software features on the iPhone.

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<v Speaker 4>We allege that Apple has employed a strategy that relies

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<v Speaker 4>on exclusionary anti competitive conduct that hurts both consumers and developers.

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<v Speaker 4>For consumers, that has meant fewer choices, higher prices and fees,

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<v Speaker 4>lower quality smartphones, apps and accessories, and less innovation from

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<v Speaker 4>Apple and its competitors.

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<v Speaker 3>Merrick Garland's US Justice Department's lawsuit has been strongly refuted

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<v Speaker 3>by Apple, who called it wrong on the facts and

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<v Speaker 3>the law. The iPhone maker also faces a competition probe

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<v Speaker 3>by the EU, which could lovey penalties of up to

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<v Speaker 3>ten percent of global annual revenue. Earlier this month, Apple

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<v Speaker 3>was hit by a one point eight billion euro penalty

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<v Speaker 3>from the Block of releegations that it shoulds out music

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<v Speaker 3>street rivals on its platforms now.

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<v Speaker 1>The Bank of England took a big step towards cutting

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<v Speaker 1>interest rates at its March meeting. Although the central Bank

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<v Speaker 1>kept interest rates on hold yesterday, none of its policymakers

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<v Speaker 1>are now voting full rate rises, and the Central Bank

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<v Speaker 1>governor Agie Bailey says that the Bank of England can

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<v Speaker 1>cut rates before reaching its two percent inflation target.

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<v Speaker 3>Yeah, we don't have to actually get inflation all the

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<v Speaker 3>way back to target sustainably to cut rates, for instance,

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<v Speaker 3>what we have to do is be convinced that it

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<v Speaker 3>is going to go there.

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<v Speaker 2>We should act ahead.

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<v Speaker 3>Of time in that sense, because we have to be

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<v Speaker 3>forward looking.

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<v Speaker 1>Reacting to those words from the Governor Ajie Bailey, markets

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<v Speaker 1>moved up their expected first rate cut to June Bailey's

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<v Speaker 1>comments bring the Bank Viglin more in line with the

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<v Speaker 1>Fed and the ECB.

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<v Speaker 3>And staying in the UK, we brought you the retail

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<v Speaker 3>sales numbers. UK consumers are the most confident they've been

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<v Speaker 3>about their personal finances in years. This is according to

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<v Speaker 3>the GfK measure, which tracks the way people feel about

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<v Speaker 3>their finances. It rose to plus two in the latest survey,

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<v Speaker 3>as the first positive reading since December twenty twenty one.

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<v Speaker 3>The figures indicate personal budgets remained strong even as the

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<v Speaker 3>Bank of England chose to hold interest rates at that

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<v Speaker 3>sixteen year high.

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<v Speaker 1>Chinese authorities are examining the role of PwC in Evergrand's

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<v Speaker 1>accounting practices after the developer was accused of a seventy

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<v Speaker 1>eight billion dollar fraud. The move ramps up pressure on

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<v Speaker 1>the global accounting giant that order to a slew of

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<v Speaker 1>Chinese property firms before the sector's melt down. Evergrand's alleged

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<v Speaker 1>forward dwarfs that of Enron and has added fuel to

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<v Speaker 1>concern about how widespread such accounting issues are in China.

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<v Speaker 3>Shares in the social media company Reddit have soared by

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<v Speaker 3>forty eight percent after its USIPO. Investors appear to have

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<v Speaker 3>embraced the company's vision of profiting from the growth of

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<v Speaker 3>artificial intelligence. The COO, Gen Wong, says the AI revolution

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<v Speaker 3>is at the center of reddits value proposition.

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<v Speaker 5>Large language models need data to train on, and when

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<v Speaker 5>you look at riddit's corpus nineteen years of human experience

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<v Speaker 5>organized by topic with well in moderation and relevance. That's

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<v Speaker 5>incredibly important to building both a chat capability and the

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<v Speaker 5>freshness of information. So that's an area where you know,

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<v Speaker 5>we see opportunity.

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<v Speaker 2>Read it's Gen Wong, they're speaking to Bloomberg.

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<v Speaker 3>The firm also says it's in the early stages of

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<v Speaker 3>allowing third parties to license access to data on the platform.

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<v Speaker 1>After six and a half years in exile, the man

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<v Speaker 1>who tried to break up Spain is making a comeback.

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<v Speaker 1>Carls Pouche demon led the Catalan independence movement and caused

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<v Speaker 1>Spain's worst political crisis since it became a democracy. He

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<v Speaker 1>is now planning to run for his old job as

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<v Speaker 1>President of Catalan in the May elections.

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<v Speaker 6>I'm not looking for what is most comfortable and less

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<v Speaker 6>risky on a personal level. Not explain to myself after

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<v Speaker 6>having spent six and a half years its defending the

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<v Speaker 6>presidency in exile, now that we have an opportunity to

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<v Speaker 6>restore the presidency, I think that was unjustly illicitly an

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<v Speaker 6>illegally destitute by Article one five to.

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<v Speaker 1>Five Prisdom while speaking there via a translator and referring

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<v Speaker 1>to Article one fifty five that is the controversial law

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<v Speaker 1>that the Spanish government used in twenty seventeen to force

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<v Speaker 1>the regional Catalan administration to obey national law after an

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<v Speaker 1>illegal independence referendum.

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<v Speaker 3>Finally, there are signs of progress towards a possible Guards

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<v Speaker 3>of Peace agreement at the same time as Israel is

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<v Speaker 3>threatening to invade Raffa. This is as the US Secretary

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<v Speaker 3>of State Anthony Blincn is in the Middle East attempting

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<v Speaker 3>to help breaker a deal between Humas and Israel.

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<v Speaker 2>Blomberg's Ed Baxter explains.

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<v Speaker 7>Delegations from Israel, the US, Cutter, and Egypt will meet

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<v Speaker 7>today to try to draw up a plan so that

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<v Speaker 7>the invasion doesn't have to happen. But Israel's Minister for

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<v Speaker 7>a Strategic Affairs, Ron Dermer, on a US podcast says,

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<v Speaker 7>Hamasha infrastructure remains in Rava.

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<v Speaker 8>Which you saw in October seventh, was a genocidal force

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<v Speaker 8>that wants to wipe out all the Jews. And it's

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<v Speaker 8>the first program that we've had since the birth of

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<v Speaker 8>the State of Israel. We have the ability to defend ourselves.

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<v Speaker 7>He says. If there is not a piece deal, the

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<v Speaker 7>assault will happen. Ed Baxter, Bloomberg Radio.

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<v Speaker 1>We're going to delve into the story around Apple and

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<v Speaker 1>the share price drop in just a moment. But there's

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<v Speaker 1>a very interesting piece on the Rumberg terminal from Dave Lee.

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<v Speaker 1>Now Dave I've known for many, many years, and he

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<v Speaker 1>writes on all things technology, and he's always just got

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<v Speaker 1>such a great turn of phrases, one of our opinion columnists,

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<v Speaker 1>and he's saying, look, you can't back Apple into a

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<v Speaker 1>corner that is not what the US should be doing

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<v Speaker 1>this after the case from the DOJS of looking into

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<v Speaker 1>anti competitive behavior. He's saying that actually Apple's authoritarianism is

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<v Speaker 1>what makes an iPhone iPhone and not an Android. He

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<v Speaker 1>talks about you know, fans of Android, you know, saying

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<v Speaker 1>that their phones can do everything that iPhone can do,

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<v Speaker 1>but they ignore that Actually the experience on an Android phone,

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<v Speaker 1>as Dave puts it, is a hot mess.

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<v Speaker 2>Yeah.

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<v Speaker 3>I'm of the Holy Trinity of Apple myself. I'm just

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<v Speaker 3>going to put it out there. I guess what you're

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<v Speaker 3>saying is that androids are clunky. That's what Apple loyalists

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<v Speaker 3>would say. And yeah, Dave puts it really well. He

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<v Speaker 3>says that you don't want the US to force Apple

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<v Speaker 3>to make a worse iPhone.

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<v Speaker 2>Through all this regulation.

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<v Speaker 3>If you level the playing field, it means adding complication

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<v Speaker 3>and friction and insecurity to a device, he says, whose

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<v Speaker 3>success is based on getting rid of those things. So

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<v Speaker 3>this is completely against the very best of the iPhone.

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<v Speaker 1>Well that's one perspective. Should we get the other perspective,

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<v Speaker 1>which is around the regulation. Shares in Apple Yesterday's slid

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<v Speaker 1>by more than four percent, so wiping out that Hunter

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<v Speaker 1>thirteen billion dollars off of Apple's market cap. Investors do

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<v Speaker 1>seem to be spooked by another US lawsuit, also a

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<v Speaker 1>European probe after a big EU fine. Let's bring in

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<v Speaker 1>Bloomberg's Oliver Crook, who's been following all of this for US.

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<v Speaker 1>I'm sure that's not the perspective of the Europeans who

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<v Speaker 1>want to regulate Apple a bit more thoroughly. But firstly,

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<v Speaker 1>what about this Justice Department lawsuit the Biden administration getting

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<v Speaker 1>a bit tougher on tech.

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<v Speaker 9>Yeah, this is very interesting because and there's a meaningful

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<v Speaker 9>set because it's coming out of the United States itself.

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<v Speaker 9>It's perhaps less of a shock to have regulation coming

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<v Speaker 9>out of Europe and having that happen to hit in

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<v Speaker 9>your US firms, as we've seen a lot of that

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<v Speaker 9>in the past, but now it's coming directly from the

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<v Speaker 9>heart of the United States and the DOJ. So this

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<v Speaker 9>is all looking at how you can access hardware and

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<v Speaker 9>software for their iPhone, distributing apps for developers, but also

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<v Speaker 9>harder for people who use the phone to switch it.

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<v Speaker 9>Of course, Apple is firing back, has a very different

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<v Speaker 9>view of thing that they're wrong on the fact, and

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<v Speaker 9>the laws has standardous precedent. They don't want the government

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<v Speaker 9>to get involved in, you know, designing of tech. But again,

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<v Speaker 9>you know, I think the Europeans would argue in a

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<v Speaker 9>number of people in tech is that our very concept

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<v Speaker 9>of how this technology work, our very concept of its experience,

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<v Speaker 9>what we think in our minds of its limits, are

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<v Speaker 9>actually governed by these companies and we, you know, we

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<v Speaker 9>need to be a little bit more expansive in the

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<v Speaker 9>way that we think about these things. The App Store

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<v Speaker 9>is a great example. This is at the heart of

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<v Speaker 9>the European probe and this for Margarete a Vesta here

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<v Speaker 9>is going to be front and center in her attack

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<v Speaker 9>of both yes, Apple, but also potentially Google.

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<v Speaker 3>Yeah, you say, it's less surprising that the EU would

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<v Speaker 3>crack down on big tech. But it's not just Apple

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<v Speaker 3>that's for bearing the brunt to this, it's also Google.

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<v Speaker 3>What exactly is the EU trying to pin them down

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<v Speaker 3>on to find them?

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<v Speaker 9>Yeah, so this is very interesting. So in burnas separate

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<v Speaker 9>this into kind of two different categories. So you remember

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<v Speaker 9>the fine we got about three weeks ago for Apple,

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<v Speaker 9>which is one point eight billion euros, right, and that

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<v Speaker 9>was about the App Store and Spotify and a complaint

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<v Speaker 9>that they had leveled. Since then, you have the Digital

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<v Speaker 9>Markets Act, which is a new regime of regulation coming

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<v Speaker 9>out of that has come into power. That came into

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<v Speaker 9>power in fact that week, the week that we spoke

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<v Speaker 9>to Margaret's investor, who is the architect of it. And

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<v Speaker 9>this gives all kinds of new rules in terms of

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<v Speaker 9>how to govern big tech to deal with exactly some

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<v Speaker 9>of these issues, the anti competitive behavior. And what's interesting

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<v Speaker 9>on this is it also gives us very clear consequences

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<v Speaker 9>if you violate this. They're talking about potentially ten percent

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<v Speaker 9>of international sales on the first violations, up to twenty

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<v Speaker 9>percent if you're a repeat violator. And they're also talking

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<v Speaker 9>about potentially breaking up these companies. So now we understand

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<v Speaker 9>that under the digital market sector, which again we've had

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<v Speaker 9>no legal action for yet from the EU, we understand

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<v Speaker 9>that both Google and Apple are in the crosshairs and

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<v Speaker 9>a lot of this is going to focus on the

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<v Speaker 9>apps and again their dominant position in the market.

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<v Speaker 1>Yeah. Absolutely, And so this is I suppose what investors

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<v Speaker 1>are most concerned about. I mean, how significant is the

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<v Speaker 1>share price drop and the worry about Apple's performance? Yeah?

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<v Speaker 9>Well, I mean, well, Listen, we still can't take away

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<v Speaker 9>from the fact that context of Apple and its absolute

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<v Speaker 9>size and its performance over the last you know, many

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<v Speaker 9>many years, and that is you know, so it's coming

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<v Speaker 9>up from a high base. But it's saying because if

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<v Speaker 9>you do take a step back and you look at Apple,

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<v Speaker 9>what's going on. More broadly, Europe and the US are

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<v Speaker 9>increasingly important markets for Apple because a there's sort of

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<v Speaker 9>much more concern about tech supremacy and China wanting to

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<v Speaker 9>develop its own tech, pushing its own iPhones. And we

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<v Speaker 9>saw that report out earlier this month or last month

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<v Speaker 9>about Apple sales the iPhone down twenty five percent in

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<v Speaker 9>China in just the first few months of the year.

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<v Speaker 9>That is absolutely huge. So that puts the focus on

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<v Speaker 9>Europe and the United States and if they're going to

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<v Speaker 9>be coming under intense regulatory scrutiny in both of those markets,

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<v Speaker 9>which are increasingly important, investors are going to pay attention

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<v Speaker 9>to that and clearly to the tune of over one

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<v Speaker 9>hundred billion dollars worth of market gap yesterday.

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<v Speaker 1>Yeah, absolutely, Oliver, thank you so much for being with

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<v Speaker 1>us this morning and take us through then the Apple story,

0:11:43.320 --> 0:11:46.360
<v Speaker 1>the European perspective, in more blue bags Oliver Crook there,

0:11:47.280 --> 0:11:50.000
<v Speaker 1>so that's one key story. But then also want to

0:11:50.080 --> 0:11:52.360
<v Speaker 1>think a bit about the Bank of England what happened

0:11:52.440 --> 0:11:54.840
<v Speaker 1>yesterday sort of moving closer to interest rate cuts?

0:11:55.000 --> 0:11:56.240
<v Speaker 2>Is there not in London?

0:11:56.280 --> 0:11:58.680
<v Speaker 1>I know you in Dubai, but it doesn't mean that

0:11:58.720 --> 0:12:02.200
<v Speaker 1>you haven't kept to be on Governor Andrew Bailey.

0:12:02.520 --> 0:12:04.480
<v Speaker 2>So he gave a.

0:12:04.200 --> 0:12:08.040
<v Speaker 1>Short sort of clip interview to TV stations yesterday, there

0:12:08.040 --> 0:12:10.800
<v Speaker 1>wasn't a full press conference and he's also there's a

0:12:10.840 --> 0:12:15.120
<v Speaker 1>piece in the Ft this morning from him too. He

0:12:15.200 --> 0:12:19.600
<v Speaker 1>did talk about and told broadcasts in the UK that

0:12:20.679 --> 0:12:23.160
<v Speaker 1>Rake huts and the UK's on the way to winning

0:12:23.200 --> 0:12:27.160
<v Speaker 1>its fight against inflation, so Rake cuts maybe on the way.

0:12:27.200 --> 0:12:29.400
<v Speaker 1>What did you make of the Bank of England decision yesterday?

0:12:29.920 --> 0:12:32.480
<v Speaker 1>I thought that it wasn't as devish as he did.

0:12:32.520 --> 0:12:35.120
<v Speaker 1>We did lose two Hawks in the form of Catherine

0:12:35.120 --> 0:12:38.400
<v Speaker 1>Mann and Jonathan Haskell, but it was still a hold

0:12:38.840 --> 0:12:42.400
<v Speaker 1>and the majority of the committee voted to hold. What

0:12:42.480 --> 0:12:44.920
<v Speaker 1>I thought was interesting in terms of the signaling that

0:12:44.960 --> 0:12:48.079
<v Speaker 1>you ask about, was that you had Andrew Bailey saying

0:12:48.320 --> 0:12:51.679
<v Speaker 1>the bank could cut rates and still be restrictive. So

0:12:51.720 --> 0:12:54.680
<v Speaker 1>you might say maybe that's not so surprising rates are high,

0:12:54.880 --> 0:12:57.440
<v Speaker 1>but actually I think that suggests that rates are coming soon.

0:12:57.520 --> 0:13:00.760
<v Speaker 1>You mentioned the ft interview with the Governor saying that

0:13:00.840 --> 0:13:04.080
<v Speaker 1>rate cuts are in play at future meetings, reiterating the

0:13:04.120 --> 0:13:07.800
<v Speaker 1>point that inflation doesn't need to be at target to cut.

0:13:08.080 --> 0:13:10.439
<v Speaker 1>For me, that acknowledges the point that's been made by

0:13:10.840 --> 0:13:13.240
<v Speaker 1>Swatty Dinger at the Dove on the Committee time and

0:13:13.320 --> 0:13:16.640
<v Speaker 1>time again that there's this lag in monetary transmission. You've

0:13:16.640 --> 0:13:19.880
<v Speaker 1>got to wait for people to refinance their cars, re

0:13:19.960 --> 0:13:23.480
<v Speaker 1>mortgage on their houses, for interest rates to transmit to

0:13:23.480 --> 0:13:26.400
<v Speaker 1>the real economy. That suggests you've got a lag. You

0:13:26.440 --> 0:13:28.560
<v Speaker 1>need to get ahead and you need to cut rates

0:13:28.559 --> 0:13:29.600
<v Speaker 1>sooner rather than later.

0:13:30.559 --> 0:13:30.760
<v Speaker 7>Yeah.

0:13:30.800 --> 0:13:33.160
<v Speaker 1>Absolutely, And I remember speaking to the M and S

0:13:33.280 --> 0:13:36.240
<v Speaker 1>chairman who was saying, look, you know, if a company,

0:13:36.320 --> 0:13:38.200
<v Speaker 1>I mean, if you think about that read across, if

0:13:38.200 --> 0:13:40.680
<v Speaker 1>a company doesn't have big debts, it's not going to

0:13:40.679 --> 0:13:43.760
<v Speaker 1>be you know, rate hikes or rate cuts that then

0:13:43.840 --> 0:13:45.960
<v Speaker 1>get passed through to the price of pasta, you know,

0:13:46.000 --> 0:13:48.280
<v Speaker 1>in his view straight away. So it does, you know,

0:13:48.280 --> 0:13:51.440
<v Speaker 1>it does take time. On the other hand, the Bank

0:13:51.480 --> 0:13:56.520
<v Speaker 1>of England looks to be versus yesterday pre the decision

0:13:56.800 --> 0:13:58.679
<v Speaker 1>actually closer to the FED now, doesn't it?

0:13:59.240 --> 0:14:02.480
<v Speaker 3>Yeah, more so now, But by comparison, both of them

0:14:02.520 --> 0:14:05.719
<v Speaker 3>pretty boring compared to all the other central banks out

0:14:05.760 --> 0:14:08.360
<v Speaker 3>there that surprised US overnight. So you had that quarter

0:14:08.440 --> 0:14:12.240
<v Speaker 3>point cut from the SNB, the Bank of Mexico with

0:14:12.360 --> 0:14:15.880
<v Speaker 3>its first quarter point cut this cycle, Turkey and Taiwan

0:14:16.320 --> 0:14:18.360
<v Speaker 3>with a five hundred basis point and a twelve and

0:14:18.400 --> 0:14:22.040
<v Speaker 3>a half basis point height, respectively. So all of those

0:14:22.280 --> 0:14:23.880
<v Speaker 3>This is why I think that the BOE is a

0:14:23.880 --> 0:14:25.000
<v Speaker 3>bit of a nothing burger.

0:14:25.040 --> 0:14:25.600
<v Speaker 2>Caroline.

0:14:25.840 --> 0:14:28.720
<v Speaker 3>Look, speaking to strategists, they flag the risk that the

0:14:28.800 --> 0:14:32.680
<v Speaker 3>FED lags European central banks in easing this year, and

0:14:32.880 --> 0:14:37.240
<v Speaker 3>HSBC was already warning that the pounds increasingly vulnerable even

0:14:37.280 --> 0:14:39.840
<v Speaker 3>though it's been the strongest in the G seven this year,

0:14:40.080 --> 0:14:44.760
<v Speaker 3>because it could be that the BOE seems dubbish by comparison.

0:14:45.000 --> 0:14:47.600
<v Speaker 3>Our economists conclusion here at Bloomberg Economics and the r

0:14:47.680 --> 0:14:51.000
<v Speaker 3>wise Head is that yes, the data justify a may

0:14:51.080 --> 0:14:54.440
<v Speaker 3>cut from the BOE, but the Military Policy Committee is

0:14:54.480 --> 0:14:56.880
<v Speaker 3>going to be very cautious and it's not going to

0:14:56.960 --> 0:14:59.920
<v Speaker 3>want to cut first of its major central banking pick.

0:15:00.520 --> 0:15:02.720
<v Speaker 2>They didn't get the credit going first.

0:15:02.480 --> 0:15:04.240
<v Speaker 3>On the way in, so they're not going to rush

0:15:04.240 --> 0:15:07.960
<v Speaker 3>to be the first on the way out. This is

0:15:07.960 --> 0:15:11.240
<v Speaker 3>Bloomberg Daybreak Europe, your morning brief on the stories making

0:15:11.280 --> 0:15:13.600
<v Speaker 3>news from London to Wall Street and beyond.

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