WEBVTT - Tech Earnings Disappoint and FOMO Rally Deflates

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Friday, February third

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<v Speaker 1>in Hong Kong, Thursday February two in New York and

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<v Speaker 1>coming up today. US equities rally as the market anticipates

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<v Speaker 1>the FEDS tightening cycle maybe nearing its peak. Apple, Amazon,

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<v Speaker 1>and Alphabet shares all slump that mixed earnings results, and

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<v Speaker 1>the ECB and BOE hike rates by a half point

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<v Speaker 1>to combat inflation. Jijian playing to meet with Anthony Blincoln,

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<v Speaker 1>and Beijing China moves to blunt new US alliances regarding

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<v Speaker 1>chips supply. Partisan politics roars are new in the house.

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<v Speaker 1>I'm at Baxter with Global News a P s G

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<v Speaker 1>Stars expecting to miss a key matchup due to an injury.

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<v Speaker 1>Dan schwarts been I'll have that story more coming up

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<v Speaker 1>in Bloomberg Sports. That's all straight ahead on Bloomberg Daybreak

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<v Speaker 1>Asia on Bloomberg eleven three on New York, Bloomberg Washington,

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<v Speaker 1>d C, Bloomberg one O six one, Boston, Bloomberg nine sixties,

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<v Speaker 1>sent frances Go Sirius XM one nineteen and around the

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<v Speaker 1>world on Bloomberg Radio dot Com and via The Bloomberg Business. Apple,

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<v Speaker 1>Good morning, I'm dead prisoner and I'm Brian Curtis. Here

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<v Speaker 1>are the stories we're following today. We begin with Apple,

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<v Speaker 1>the company reporting a steeper sales decline in its holiday

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<v Speaker 1>period than Wall Street feared. The story from Bloomberg's Charlie Pellett.

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<v Speaker 1>It shows the toll of an economic slowdown and lingering

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<v Speaker 1>supply snags on what was long one of the tech

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<v Speaker 1>industry's most resilient companies. Apple said revenue in the fiscal

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<v Speaker 1>first quarter dropped five and a half percent to one

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<v Speaker 1>hundred seventeen point two billion dollars. Now that was well

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<v Speaker 1>short of the average Wall Street estimate of one twenty

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<v Speaker 1>one point one billion. The iPhone and Mac were particular

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<v Speaker 1>weak spots for Apple during the quarter, dragged down by

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<v Speaker 1>a broader slump afflicting mobile devices and computers. COVID nineteen

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<v Speaker 1>restrictions in China added to Apple's woes, making it harder

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<v Speaker 1>to shipping off of the most popular versions of the

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<v Speaker 1>iPhone in New York. Charlie Pellette Bloomberg Daybreak Asia. Initially

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<v Speaker 1>is stock traded down about four percent, but when Tim

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<v Speaker 1>Cook talked about demand coming back in China, the stock

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<v Speaker 1>parrotage losses. It's still down one percent. Yeah, we also

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<v Speaker 1>heard from Amazon after the bell, though shares weaker by

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<v Speaker 1>about one point three percent right now, Mixed results after

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<v Speaker 1>the closing bell, and we have the story from tom Busby. Well,

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<v Speaker 1>even though holiday sales on Amazon's e commerce site rose

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<v Speaker 1>nine to one nine billion dollars in revenue, profits were

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<v Speaker 1>weaker than anticipated. Last quarter sales growth slowed at Amazon

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<v Speaker 1>Web Services, that's its cash cow cloud computing division. Another

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<v Speaker 1>big concern for investors. Projections for lackluster revenue in the

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<v Speaker 1>current quarter. That's on worries that tight fisted consumers may

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<v Speaker 1>pull back on their spending amid a lot of economic uncertainty.

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<v Speaker 1>Shares of Amazon down sharply, and after hours trading tom

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<v Speaker 1>Busby Bloomberg Daybreak Asia Tom Google parent Alphabet reported lackluster

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<v Speaker 1>earnings after the closing bell, and we get that story

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<v Speaker 1>from Bloomberg's and Kate's. Fourth quarter earnings at Alphabet came

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<v Speaker 1>in below forecasts and revenue missed the mark. Alphabet announced

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<v Speaker 1>last month that it's cutting twelve thousand jobs. Now, the

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<v Speaker 1>owner of Google says it needs less office space, Alphabet

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<v Speaker 1>is looking for ways to save money. Alphabet also says

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<v Speaker 1>revenue from its biggest sources. Add revenue from Google searches

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<v Speaker 1>and YouTube views slowed last quarter amid economic uncertainty in

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<v Speaker 1>Washington and Kate's Bloomberg day Break Asia. All right, and

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<v Speaker 1>thank you. Well, as we know, it's been a very

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<v Speaker 1>busy week for central banks. We had the Fed yesterday.

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<v Speaker 1>Today the European Central Bank lifted its key rate fifty

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<v Speaker 1>basis points a half point. Right, so the deposit rate

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<v Speaker 1>now at two and a half percent, the highest level

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<v Speaker 1>we've seen since two thousand and eight. Here's Christine Laguard

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<v Speaker 1>warning of a similar move next month. It should be

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<v Speaker 1>fifty this time around. It should be it intended to

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<v Speaker 1>be fifty in March. Now you will say, well, yes,

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<v Speaker 1>but what about after March? Does that mean that you

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<v Speaker 1>have reached the pinnacle or the peak? No, no, no, no,

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<v Speaker 1>we know that we have ground to cover. We know

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<v Speaker 1>that we are not done. Yes, Madame Legarde said, the

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<v Speaker 1>ECBs inflation outlook is improving given that drop in energy prices. Now,

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<v Speaker 1>the ecb is Governing Council gave more details on plans

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<v Speaker 1>to shrink that five trillion euro bond portfolio a monthly

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<v Speaker 1>cap of fifteen billion euros and maturing debt will now

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<v Speaker 1>be allowed to expire between March and June. In the meantime,

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<v Speaker 1>the Bank of England policymakers voted to raise the benchmark

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<v Speaker 1>lending right there to four percent. That's the highest we've

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<v Speaker 1>seen again since two thousand and eight, the majority saying

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<v Speaker 1>that strong pay growth and an ongoing shortage of workers

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<v Speaker 1>were driving price pressures in the economy. However, the b

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<v Speaker 1>always latest forecast show that inflation is likely to fall

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<v Speaker 1>sharply this year, down to around four percent, and that's

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<v Speaker 1>down from a level percent last October. Those findings suggested

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<v Speaker 1>policymakers may not need to raise rates much more. Today.

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<v Speaker 1>BOE Governor Andrew Bailey struck an optimistic yet cautious tone.

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<v Speaker 1>We are kind of react to the information and the

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<v Speaker 1>evidence that we see. We're not on We're not We

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<v Speaker 1>haven't pre announced an intention because we have reached a

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<v Speaker 1>point and as I've said for I think we have

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<v Speaker 1>started to turn a corner that's encouraging. There's a long

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<v Speaker 1>way to go and there are a lot of risks.

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<v Speaker 1>Bailey also pointed out that the bank's projections were inherently

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<v Speaker 1>uncertain because of volatile energy and commodity markets. Still, the

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<v Speaker 1>BOE dropped guidance that it was willing to respond forcefully

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<v Speaker 1>to inflation if needed. That could be a sign that

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<v Speaker 1>the Bank of England maybe near the end of its

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<v Speaker 1>rate height cycle. And Doug I was struck by the

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<v Speaker 1>incredible drop in the tenure UK guilt thirty basis points

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<v Speaker 1>lower and the tenure German bun down twenty basis point. Yeah,

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<v Speaker 1>it seems like the market is really expecting us to

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<v Speaker 1>move beyond this tightening regime that we've been in globally,

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<v Speaker 1>whether it's the FED, whether it's the E c B

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<v Speaker 1>or the b o E. And maybe it's spells optimism

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<v Speaker 1>for risk assets, but you wouldn't know it with the

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<v Speaker 1>earnings that we had after the bell, we talked about Apple, Amazon,

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<v Speaker 1>and Alphabet. We didn't touch on Qualcom. That stock got

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<v Speaker 1>hit a little bit in the late session after a

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<v Speaker 1>pretty lackluster quarterly sales forecast, And it kind of intersects

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<v Speaker 1>with the Apple story, Brian, because it's suggests UH sales

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<v Speaker 1>in terms of mobile handsets. I mean, we're going to

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<v Speaker 1>continue to see a drag well into the year. Well,

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<v Speaker 1>there's those individual stories, but then there's the big macro overhang,

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<v Speaker 1>and whether you're buying stocks or handicapping China or trying

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<v Speaker 1>to analyze the FED, you can look beyond the next

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<v Speaker 1>six months, but you still have to go through them,

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<v Speaker 1>and we're going to see a lot of volatility, and

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<v Speaker 1>I think that is is something that there's just no

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<v Speaker 1>way to escape. Yeah, and a big question mark on

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<v Speaker 1>the reopening story in China. It's not just Apple talking

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<v Speaker 1>about navigating its way through that. But look at star

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<v Speaker 1>our Bucks. I mean weakness there that contributed to a

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<v Speaker 1>big drop in sales. Yeah, and Kennedy Goose the story

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<v Speaker 1>I'll tell later that stock down in New York and

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<v Speaker 1>it spoke of weakness in China. It's time for global news.

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<v Speaker 1>A lot of movement around the issues facing the U. S.

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<v Speaker 1>China relationship, from chips to military bases. And Baxter has

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<v Speaker 1>Global News in the nine sixty newsroom in San Francisco. Ed. Yeah, Brian,

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<v Speaker 1>it's a big basket. And let's add surveillance balloon. The

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<v Speaker 1>Pentagon says it is tracking a suspected Chinese high altitude

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<v Speaker 1>surveillance balloon. The Pentagon says for several days it has

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<v Speaker 1>made its way over the northern US. The Pentagon says

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<v Speaker 1>it has decided not to shoot it down at this point,

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<v Speaker 1>and but it will not say where it is now,

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<v Speaker 1>so a surveillance balloon. Meanwhile, on his trip to Beijing,

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<v Speaker 1>Anthony Blincoln, the Secretary of State, expected to meet with

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<v Speaker 1>President hijimping the f TC the ft story. Says it

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<v Speaker 1>would be making him the first U. S Secretary of

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<v Speaker 1>State to sit down with she in the nearly six years.

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<v Speaker 1>B Lincoln is scheduled to be there Sunday and Monday.

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<v Speaker 1>Beijing meanwhile, as trying to blunt US moves to form

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<v Speaker 1>new alliances regarding chip manufacture and supply. This comes just

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<v Speaker 1>days after Japan and the Netherlands joined the US and

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<v Speaker 1>agreeing to restrict some high technology exports to China. The

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<v Speaker 1>Foreign Ministry says China will continue upholding market principles and

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<v Speaker 1>openness towards ties. There's some growing thought in the US

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<v Speaker 1>that between what's happening in Ukraine and trying to contain

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<v Speaker 1>China around the issue of Taiwan, that the U. S

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<v Speaker 1>military may be spread too thin. Republican Representative Josh Holly.

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<v Speaker 1>If China invaded Taiwan today, Taiwan would fall. So that's

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<v Speaker 1>just the that's the honest truth. We cannot both carry

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<v Speaker 1>the main burden in Ukraine, which we're doing currently, and

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<v Speaker 1>get to where we need to be to deter war

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<v Speaker 1>with China. But US Defense Secretary Lloyd Austin, who made

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<v Speaker 1>yesterday's announcement regarding the Philippines, says the US has to

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<v Speaker 1>prepare for ats around the globe and the speaking of that,

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<v Speaker 1>the US will now begin the process of building four

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<v Speaker 1>new military bases in the Philippines. This in the wake

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<v Speaker 1>of granted access the US as it will allow more

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<v Speaker 1>rapid support for humanitarian and climate related disasters in the

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<v Speaker 1>Philippines and respond to other shared challenges. So that would

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<v Speaker 1>be a direct reference to security in the South China

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<v Speaker 1>Sea and threats from China. US House Republicans are systematically

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<v Speaker 1>removing Democrats from important committee positions. Democrats Adam Schiff and

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<v Speaker 1>Erik Swalwell recently and today Representative Ilhan Omar ousted from

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<v Speaker 1>the Foreign Affairs Committee. Republican leadership says she's made offensive

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<v Speaker 1>remarks in the past. Bloomberg's Genie Schanzano she is apologized

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<v Speaker 1>for those does that rise to the level of removal?

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<v Speaker 1>These are conversations that have to be had, and unfortunately

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<v Speaker 1>we don't see those moving forward. So I says Beeckman,

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<v Speaker 1>Democrats get the House back. At some point there will

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<v Speaker 1>be some form of retribution. And even the former Republican

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<v Speaker 1>National Committee Commit Communications director Linda Kamuso Miller on Balance

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<v Speaker 1>of Power says this is all just a distraction. The

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<v Speaker 1>difficulty in Washington is that partisanship is absolutely reached an

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<v Speaker 1>all time high and it makes it almost impossible to

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<v Speaker 1>get anything done. But these kinds of UH tactics that

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<v Speaker 1>we're using in order to vote others off of committees

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<v Speaker 1>is absolutely a distraction and not the work that people

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<v Speaker 1>want us to do. The fair being, it will spill

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<v Speaker 1>over the bipartisan passage of important legislation and the FBI

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<v Speaker 1>seeking information regarding the cyber attack on London based I

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<v Speaker 1>on on trading in the UK. The cyber attacks snard

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<v Speaker 1>global derivatives trading, and the FBI has reached out asking

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<v Speaker 1>how customers were affected. Global News twenty four more than

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<v Speaker 1>with more than twenty seven hundred journalists and analysts and

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<v Speaker 1>over one hundred twenty countries. In San Francisco, I'm ed Baxter,

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<v Speaker 1>this is Bloomberg. This is Bloomberg, Gabrika Asia. Hi, everybody

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<v Speaker 1>on Bran Curtis along with Richard Salam and our guest

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<v Speaker 1>is Jack McIntyre, portfolio manager at Brand DeWine Global. Jack,

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<v Speaker 1>you've made the point that central banks are not as

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<v Speaker 1>important markets this year as they were last year. What. Yeah.

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<v Speaker 1>The reason being, Brian is you know last year it

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<v Speaker 1>almost didn't matter what the data was. I mean, we

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<v Speaker 1>were in an inflation storm. Central banks, Uh, just tighten

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<v Speaker 1>the incredibly aggressively. Twenty three will be a year where

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<v Speaker 1>that tightening works its way into the real economy. In

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<v Speaker 1>part I think was that was part of the reaction

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<v Speaker 1>you had today or yesterday in response to the FED

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<v Speaker 1>response to the ECB in the Bank of England. Right now,

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<v Speaker 1>on the surface, they were still hawkish, but you know,

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<v Speaker 1>the markets are more forward looking, and I think the

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<v Speaker 1>central banks gonna have to be more forward looking. They're

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<v Speaker 1>going to be more data dependent, They're gonna probably follow

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<v Speaker 1>the markets as opposed to the markets following the Fed.

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<v Speaker 1>Jack absolutely, Because we're getting to a point where you know,

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<v Speaker 1>they still pools. Then the conversation really goes away from them.

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<v Speaker 1>Let's say they didn't think it's all about them and

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<v Speaker 1>do so thing rash. Yeah, I think it's it's a

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<v Speaker 1>good point in the sense that you know, we're getting

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<v Speaker 1>you know, not surprisingly, you know, we're getting closer to

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<v Speaker 1>that that pause, and they've got to set the narrative

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<v Speaker 1>that pause does not automatically mean that they're going to

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<v Speaker 1>be cutting rates, although the markets have kind of gotten

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<v Speaker 1>ahead of them from that standpoint. But you know, I

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<v Speaker 1>was just thinking about it. You know, as central banks

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<v Speaker 1>tightened today, in theory, that's not going to impact the

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<v Speaker 1>economies until so it was all about the tightening from

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<v Speaker 1>last year. Well, and I think that is a point

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<v Speaker 1>that you know, being the devil's advocate, rejects what you

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<v Speaker 1>say that central banks aren't as important this year because

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<v Speaker 1>their actions from last year will weigh in this year

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<v Speaker 1>and thus they will be more important. Well, and I

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<v Speaker 1>would not push back on that because I agree it

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<v Speaker 1>reinforces the accents that they did last year. We're important

0:12:52.880 --> 0:12:56.280
<v Speaker 1>because my my thesis is that in reasons I like

0:12:56.800 --> 0:13:00.360
<v Speaker 1>treasuries in particular, is that this lag of act from

0:13:00.400 --> 0:13:03.520
<v Speaker 1>all this tightening financial conditions is going to impact in

0:13:03.520 --> 0:13:06.360
<v Speaker 1>this case, the US economy at a time where we

0:13:06.360 --> 0:13:10.080
<v Speaker 1>already know it's slowing. We're way beyond peak inflation. Inflation

0:13:10.160 --> 0:13:12.880
<v Speaker 1>is already coming down. So it's gonna be kind of

0:13:12.920 --> 0:13:18.520
<v Speaker 1>a trifecta of slowing economy, uh putting more downward pressure

0:13:18.520 --> 0:13:20.600
<v Speaker 1>on inflation, and that that's gonna be good for bonds

0:13:20.800 --> 0:13:23.840
<v Speaker 1>and has been good for bonds this year. Perhaps the

0:13:24.000 --> 0:13:26.600
<v Speaker 1>jobs are gonna be as important has been in the

0:13:26.600 --> 0:13:29.920
<v Speaker 1>month's pass, but certainly will be. Um, you'll take on that,

0:13:30.040 --> 0:13:32.000
<v Speaker 1>and then you take also when you know this huge

0:13:32.040 --> 0:13:35.440
<v Speaker 1>rise in productivity and what it means, so you'll strategy. Yeah,

0:13:35.520 --> 0:13:38.640
<v Speaker 1>so the employment report, it's another hurdle we kind of

0:13:38.640 --> 0:13:41.640
<v Speaker 1>have to to get through. Um. You know, every cycle,

0:13:42.120 --> 0:13:44.640
<v Speaker 1>employment is a lagging indicator. I feel as though this

0:13:44.679 --> 0:13:49.079
<v Speaker 1>cycle is probably extra lagging, just because companies are struggled

0:13:49.200 --> 0:13:52.360
<v Speaker 1>to find workers. My view is if it comes in

0:13:52.559 --> 0:13:56.680
<v Speaker 1>close to expectations, and I haven't tracked anything that suggests

0:13:56.720 --> 0:14:00.719
<v Speaker 1>that it shouldn't be close to expectations, but it uh

0:14:00.720 --> 0:14:03.000
<v Speaker 1>as that just means that we're at a slow pace,

0:14:03.360 --> 0:14:07.000
<v Speaker 1>we are seeing less job growth. I think markets will

0:14:07.080 --> 0:14:10.080
<v Speaker 1>like that. So, yeah, it was very interesting today. You know,

0:14:10.160 --> 0:14:13.680
<v Speaker 1>the unit labor cost coming in week Um, again, this

0:14:13.800 --> 0:14:18.720
<v Speaker 1>gets us a little bit more towards mild recession, maybe

0:14:18.720 --> 0:14:21.200
<v Speaker 1>a soft landing. I think that's the big issue that

0:14:21.240 --> 0:14:24.320
<v Speaker 1>markets have to figure out to really get inflation down more.

0:14:24.760 --> 0:14:28.560
<v Speaker 1>Do we need the recession? Do we need a soft landing? Um?

0:14:28.600 --> 0:14:31.760
<v Speaker 1>And that unit labor cost tells us, you know, maybe

0:14:32.360 --> 0:14:36.040
<v Speaker 1>we don't need quite as harder recession to get inflation lower,

0:14:36.080 --> 0:14:38.840
<v Speaker 1>particularly because the central banks and the FED in particular

0:14:38.880 --> 0:14:42.560
<v Speaker 1>talk about that service inflation and that's really driven by labor.

0:14:43.240 --> 0:14:45.600
<v Speaker 1>I can definitely see that line of thinking. But you

0:14:45.640 --> 0:14:47.920
<v Speaker 1>wonder whether or not both the bond in the stock

0:14:47.960 --> 0:14:52.800
<v Speaker 1>markets are looking beyond what the actions are too later

0:14:52.880 --> 0:14:56.440
<v Speaker 1>in the year when conditions could be better, when you know,

0:14:56.600 --> 0:14:59.360
<v Speaker 1>you you really still have to live through the effects

0:14:59.360 --> 0:15:02.720
<v Speaker 1>of what they did last year. Um, are we reacting

0:15:02.720 --> 0:15:06.360
<v Speaker 1>too soon? Yeah, that's a tough one. That that's a

0:15:06.760 --> 0:15:09.080
<v Speaker 1>you know, this is it's part of the art of

0:15:09.160 --> 0:15:12.280
<v Speaker 1>money management versus the science trying to figure out when

0:15:12.360 --> 0:15:15.280
<v Speaker 1>exactly is sort of the lag effect and and again

0:15:15.320 --> 0:15:18.240
<v Speaker 1>it's not it shouldn't be off to the races in

0:15:18.400 --> 0:15:22.120
<v Speaker 1>terms of risk assets doing well. Uh, you know again

0:15:22.280 --> 0:15:25.920
<v Speaker 1>you look at Apples earnings, Amazon, Googles. I mean that

0:15:26.080 --> 0:15:31.480
<v Speaker 1>there's the challenge of bottom up impacting companies versus maybe

0:15:31.480 --> 0:15:34.880
<v Speaker 1>the inflationary backdrop at the forty foot level. Uh, it

0:15:35.040 --> 0:15:39.280
<v Speaker 1>is improving, but I just think the macro backdrop is improving.

0:15:40.720 --> 0:15:43.480
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