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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Day BAQ podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Friday, the

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Speaker 2: second of August here in London. I'm Caroline Hepkip and.

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Speaker 1: I'm Stephen Carroll. Coming up today, stock markets slump and

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Speaker 1: treasury's rally after week US economic data ramps up expectations

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Speaker 1: of FED interest rate cuts.

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Speaker 2: The AI story turns sour for two big tech names

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Speaker 2: as Intel and Amazon sparks separate concerns over how to

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Speaker 2: profit from the rise of the tech.

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Speaker 1: Plus, we'll bring you our interview with the Bank of

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Speaker 1: England Governor Andrew Bailey as the BOE cuts rates for

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Speaker 1: the first time since the pandemic.

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Speaker 2: Let's stop by the round up of our top stories.

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Speaker 1: Markets are gearing up for more volatility around today's US

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Speaker 1: jobs report after a week that saw three of the

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Speaker 1: world's largest central banks moving in different directions. That have

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Speaker 1: been major moves on stock and bond markets After weaker

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Speaker 1: than expected economic days are from the US. The jobs

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Speaker 1: report today could be the next catalyst for the bull

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Speaker 1: run in US treasuries. Gary Dugan, CEO of the Global

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Speaker 1: CIO Office says he thinks the Fed's making a Polsi mistake.

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Speaker 3: There's a real soft underbellog to the US economy at

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Speaker 3: the moment, compounded by the clear weakness in places like

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Speaker 3: Europe very recently and a course in China, and central

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Speaker 3: bankers are behind the curve and will have to accelerate

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Speaker 3: their cuts and interest rates.

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Speaker 1: That's Global CEO's Gary Dugan there to your. Treasury yields

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Speaker 1: fell as their lowest since May twenty twenty three. In

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Speaker 1: the ten year yield is back below four percent for

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Speaker 1: the first time since February. Bond traders are now fully

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Speaker 1: pricing in three rate cuts from the FED this year,

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Speaker 1: after the Bank of Japan raised rates and signals more

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Speaker 1: was on the table.

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Speaker 2: Meanwhile, the Bank of England's Andrew Bailey says that interest

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Speaker 2: rates won't go back to near zero. Speaking after the

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Speaker 2: central Bank's first rate cut since twenty twenty, he told

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Speaker 2: Bloomberg that boring costs will likely settle at above pre

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Speaker 2: COVID levels.

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Speaker 4: Don't expect we're going back to zero because zero was

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Speaker 4: the product of huge global shocks. It started with financial

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Speaker 4: crisis and obviously COVID as well. I think to get there,

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Speaker 4: something really bad has to happen that we're not currently expecting.

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Speaker 4: It will be lower than where we are today, but

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Speaker 4: I think it's very clear that we're not going.

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Speaker 5: Back to zero.

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Speaker 2: Andrew Bailey there, speaking to Bloomberg's Francine Laqua, he and

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Speaker 2: fellow Monetary Policy Committee members voted five to four to

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Speaker 2: cut interest rates to five percent. That's down a quarter

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Speaker 2: point from the highest level that we've seen in sixteen years.

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Speaker 2: Policymakers also signaled more reductions are lightly in the months ahead,

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Speaker 2: but did not offer specific guidance on how quickly they

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Speaker 2: will arrive.

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Speaker 1: Meanwhile, stock slump is deepening in Japan after the nasdak so,

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Speaker 1: it's biggest one day reversal in two years. Tech giants

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Speaker 1: are still betting on AI to bring in growth, even

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Speaker 1: as investors turned skeptical. In an earnings called Amazon's CEO

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Speaker 1: Andy Jazz Warren, profits will have to take a back

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Speaker 1: seat that the company can invest in new technology.

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Speaker 6: It remain very bolish on the medium to long term

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Speaker 6: impact AI and every business we know and can imagine.

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Speaker 6: The progress may not be one straight line for companies.

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Speaker 6: Generated AI especially is quite iterative, and companies have to

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Speaker 6: build muscle around the best way to solve actual customer problems.

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Speaker 1: Chase wraps up a week of tech earnings that saw

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Speaker 1: some of the giants giving a mixed picture on how

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Speaker 1: far they've managed to realize gains from the record amounts

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Speaker 1: of AI investment.

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Speaker 2: Well, let's go to Apple now. It's predicted that its

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Speaker 2: new artificial intelligence features will spur iPhone upgrades in the

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Speaker 2: coming months. The company had a not beat third earnings report,

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Speaker 2: beating revenue estimates and predicting sales growth. Bloomberg's Mark German

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Speaker 2: says that AI has become a core of the tech

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Speaker 2: giants phone offering.

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Speaker 7: Apple Intelligence is really the big upgrade on the iPhone

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Speaker 7: that they're trying to sell this year. They talked about

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Speaker 7: AI so much on this call. I haven't heard them

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Speaker 7: talking about AI so much since their developers conference in June,

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Speaker 7: or maybe ever.

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Speaker 2: But Mark as that the new AI features won't be

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Speaker 2: rolled out in China, where investors are concerned about apples

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Speaker 2: sluggish sales.

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Speaker 1: Intel showed the dangers of the AI era, announcing plans

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Speaker 1: to cat fifteen percent of its staff, and it suspended

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Speaker 1: its dividend for the first time in more than thirty years,

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Speaker 1: the chipmaker has been losing customers arrivals like Nvidia. Bloomberg's

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Speaker 1: Ed Ludlow spoke to Intel's CFO Dave Zisner.

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Speaker 8: The call with Dave started with the results weren't great

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Speaker 8: and it was a difficult phone call from there. I

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Speaker 8: think the point or the admission is that they were

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Speaker 8: very slow to adjust their business to the reality of

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Speaker 8: the environment that they're in and their own place in

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Speaker 8: the markets in which they operate.

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Speaker 1: That was Boomberg's Ed Ludlow. There, Intel's shares filbum more

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Speaker 1: than nineteen percent in after hours trading after the earnings

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Speaker 1: were published.

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Speaker 2: Now another news, Russia has freed Wall Street Journal reporter

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Speaker 2: Evan Gershkevich, as well as jailed Kremlin critics. It's the

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Speaker 2: country's largest prisoner excit change with the West in decades

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Speaker 2: and involved the release of a prized assassin sought by

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Speaker 2: President Putin. Gershkovich, who was arrested in March twenty twenty

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Speaker 2: three whilst reporting in Russia and later convicted of espionage

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Speaker 2: charges that he and the journal reject, was greeted by

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Speaker 2: President Biden I and Vice President Kamala Harris upon his

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Speaker 2: return the US National Security Advisor Jake Sullivan says that

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Speaker 2: work to free those still held abroad will continue most

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Speaker 2: of the time.

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Speaker 9: As you can imagine, those are tough conversations, but not

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Speaker 9: today today.

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Speaker 5: Excuse me.

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Speaker 9: Today was a very good day, and we're going to

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Speaker 9: build on it, drawing inspiration and continued courage from it

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Speaker 9: for all of those who were held hostage or wrongfully

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Speaker 9: detained around the world.

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Speaker 2: That was Jake Sullivan speaking there during the exchange, which

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Speaker 2: took place in Anchor and Turkey. Russia also let go

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Speaker 2: the former US Marine Paul Wheelan, who was jailed twenty

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Speaker 2: eighteen and later convicted on spying charges that he denies.

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Speaker 2: In total, the swap included twenty four people, sixteen going

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Speaker 2: to the West and eight being returned to Russia.

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Speaker 1: President Biden has promised to provide Israel with new defensive

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Speaker 1: US military deployments. According to the White House's summary of

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Speaker 1: a call with Israel's Prime Minister Benjaminetta and Yahoo, Biden

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Speaker 1: also stressed the importance of efforts to de escalate regional tensions.

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Speaker 1: It comes as hamashb and their sponsor Iran have all

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Speaker 1: vowed to event the assassinations of hesbela member forad Shuker

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Speaker 1: and Hamas leader Ismail Hanai, Hisbela's top leader in Hassan Israala,

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Speaker 1: said on Thursday that the conflict is now an open

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Speaker 1: battle on all fronts. He stopped short of declaring the

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Speaker 1: killings to be an act of war. And we will

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Speaker 1: dig into that recalibration in just a moment. Plus bring

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Speaker 1: you our interview with the Bank of England Governor Andrew

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Speaker 1: Bailey after the rate decision yesterday. But a brief word

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Speaker 1: on another story that caught a eye this morning, Approson

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Speaker 1: that perhaps could be a big concern for some of

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Speaker 1: the big European luxury Now this is in new gray

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Speaker 1: market for luxury goods in China. There are platforms out

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Speaker 1: there that are buying real, you know, authentic goods from

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Speaker 1: the likes of LVMH and Caring and selling them for

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Speaker 1: massive discounts in China as well. One of these platforms,

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Speaker 1: Dewey or dew Rather, grew by eleven percent the sales

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Speaker 1: of Louis Vatan groups alone on that as well. It

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Speaker 1: actually accounts for fourteen percent of Louis Vatan's total estimated

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Speaker 1: sales in China.

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Speaker 2: So I hang on a second. These are real good

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Speaker 2: So they're having to buy.

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Speaker 1: Abroad, bringing them into the country and reselling them at

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Speaker 1: a discount to what the companies themselves are selling in China.

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Speaker 2: Okay, so that doesn't make business sense to me, does

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Speaker 2: it? It must be expensive to do that.

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Speaker 1: Well, this is working around currency differentials and the way

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Speaker 1: that you can work with these the high prices for

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Speaker 1: some of these goods to sell them at a cheaper price.

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Speaker 1: Of course, the sales are still contributing overall to these

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Speaker 1: big companies' platforms, but it could be an interesting one

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Speaker 1: to watch as of course, many of these companies have

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Speaker 1: been struggling to see their growth maintained in China after

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Speaker 1: things happened slowing down there as well.

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Speaker 2: Well, look, maybe the Olympics in Paris might have helped

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Speaker 2: Louis writ on the French luxury names just a little bit.

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Speaker 2: But anyway, nice to run the terminal this morning.

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Speaker 1: Well, let's take into some of those tech earnings now

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Speaker 1: that have contributed to the selloff on markets. Our chief

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Speaker 1: correspondent Mark German is with us for more. Mark, great

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Speaker 1: to have you on the program. You know Apple inside

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Speaker 1: and out. Let's dig into their results. A return to

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Speaker 1: revenue growth but again, sluggish sales in China. How much

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Speaker 1: of a worry is that for the company?

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Speaker 7: Yeah, thanks for having me. I mean, overall, this was

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Speaker 7: a pretty good quarter for Apple. This is their June quarter.

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Speaker 7: It's usually a lull period as people are awaiting the

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Speaker 7: new products in the fall beat Wall Street A submits

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Speaker 7: grew five percent, so grew a little bit more than

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Speaker 7: Wall Street was anticipating in even Apple itself based on

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Speaker 7: their commentary ninety days ago. But you're right, Greater China

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Speaker 7: down six and a half percent, and so this is

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Speaker 7: yet another quarter. There's been several quarters in the last

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Speaker 7: couple of years where Greater China revenue has declined, very

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Speaker 7: much a concern. Typically, when Greater China revenue has declined

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Speaker 7: in recent years, Apple has said that the declines have

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Speaker 7: nothing to do with the iPhone. They didn't say that

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Speaker 7: this time, which leads me to believe that they're seeing

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Speaker 7: some iPhone specific softness in mainland China and probably other

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Speaker 7: parts of Greater China as well.

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Speaker 2: Yeah. Okay, So then, in terms of the signals about

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Speaker 2: the state of the smartphone market overall for Apple, what

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Speaker 2: did we hear on that front?

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Speaker 7: I think the smartphone market overall is pretty good. It

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Speaker 7: still generates, you know, sixty percent of Apple's revenue. What

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Speaker 7: was a little concerning is when they gave guidance, they

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Speaker 7: talked about how services would grow double digits. They talked

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Speaker 7: about how fourth quarter revenue growth on an annual basis

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Speaker 7: would be about five percent, same as the June quarter. Right,

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Speaker 7: They did not mention the iPhone one way or another. Now,

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Speaker 7: I can tell you that if it was going to accelerate,

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Speaker 7: if they were going to see positive momento on the

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Speaker 7: iPhone in this fourth quarter, they would have come out

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Speaker 7: and said it, because that would be pretty good for

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Speaker 7: the stock. The fact that I didn't say it leads

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Speaker 7: me to believe that you're going to see flat performance

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Speaker 7: year over year on the iPhone and probably the entire

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Speaker 7: products business as well.

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Speaker 1: That's a really interesting one to watch for the future

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Speaker 1: as well. And Mark, you've been reporting on how Apple's

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Speaker 1: delaying the rollout of its AI features. What did we

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Speaker 1: learn from this earnings report about that part of the

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Speaker 1: future growth of Apple's business.

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Speaker 7: We didn't learn anything new. What Apple did was mentioned

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Speaker 7: Apple Intelligence probably fifty times over the course of the call,

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Speaker 7: because they know that seeing Apple Intelligence and AI are

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Speaker 7: buzzwords that's going to excite the algorithmic trading and excite

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Speaker 7: analysts and excite Wall Street. But I'm seeing beyond that.

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Speaker 7: I've started testing these features, I'm not seeing anything available

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Speaker 7: right now that should spur demand for new handsets. I

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Speaker 7: do believe in about a year from now, and we're

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Speaker 7: talking about the iPhone seventeen cycle, there are going to

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Speaker 7: be people who are going to want to update for

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Speaker 7: the AI features because by then there'll be an entire suite,

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Speaker 7: it'll be a lot more locked in, and they'll be

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Speaker 7: better features. But as of right now, I think we're

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Speaker 7: talking about something that is more marketing hype than anything.

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Speaker 2: Okay, that's pretty interesting. In just lastly, if you could

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Speaker 2: give us your view though overall, Mark on the state

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Speaker 2: of the results we've had from the big tech shows.

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Speaker 2: Were obviously looking at the tech sell off that we

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Speaker 2: had yesterday. What are investors thinking now as we go

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Speaker 2: into this Friday morning where you also see a sell

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Speaker 2: off in Japan? What do you think investors are thinking

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Speaker 2: about now?

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Speaker 7: Well, I think investors are a little scared. I think

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Speaker 7: certainly we are heading into election sees in the United States,

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Speaker 7: and so I think investors are probably going to be

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Speaker 7: holding their bets for now. They want to see how

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Speaker 7: the election is going to turn out, and then they'll make,

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Speaker 7: you know, other decisions there. You know, one, you have

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Speaker 7: to understand that some candidates look at big tech differently.

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Speaker 7: Some candidates just are some political parties in the US

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Speaker 7: may not want to approve, you know, certain acquisitions. So

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Speaker 7: I think that, you know, investors are going to really

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Speaker 7: make decisions after the election about what they're going to

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Speaker 7: do in terms of their investments. But certainly it's a

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Speaker 7: scary time in terms of tech stocks. Of all the

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Speaker 7: earnings that we had yesterday between Apple, Amazon, Intel, and

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Speaker 7: some of the other big companies, you know, Apple was

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Speaker 7: really the only one you could come away from and saying, wow,

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Speaker 7: this was a success. Amazon and Intel were both disasters.

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Speaker 7: I mean, Intel they're laying off another fifteen thousand people

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Speaker 7: because their numbers were so bad. They're pausing their dividend.

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Speaker 7: I mean, that doesn't happen often. I'm sure there'll be

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Speaker 7: people calling for the head of the CEO soon at Intel,

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Speaker 7: but you know, we'll see what happens. You had Amazon

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Speaker 7: blaming the situation in the Middle East. You had Amazon

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Speaker 7: blaming the Trump assassination attempt is reasons why sales have

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Speaker 7: been done recently, and so these companies are really throwing

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Speaker 7: excuses out there when the reality is it's just a

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Speaker 7: tough economic backdrop.

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Speaker 6: Mark.

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Speaker 1: Great to have you with us on the program. That's

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Speaker 1: our chief correspondent, Mark German. They're talking is through some

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Speaker 1: of the tech aspect of this selloff.

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Speaker 2: Yeah, absolutely. And if you look at the Asian market

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Speaker 2: this morning, sk Heinix extending losses to ten percent amid

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Speaker 2: the Asia chip stock sell off, which is that convergence

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Speaker 2: of the story around the US election about what happens

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Speaker 2: in terms of the US and China and restrictions on

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Speaker 2: exports to China from the US.

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Speaker 1: Of course, it's just part of the story of what's

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Speaker 1: happening in the tech sector. The selloff extending across Asian

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Speaker 1: markets today, the Mscish Pacific Index down some three percent,

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Speaker 1: the rally and treasuries though extending into a seventh day,

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Speaker 1: the ten year yield breaking below four percent. Traders now

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Speaker 1: looking at today's US jobs report as a potential another catalyst,

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Speaker 1: cementing the view that federal cut rates in September. Let's

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Speaker 1: get more from Bloomberg's Garfield Ronalds, who leads our market's

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Speaker 1: live team in Asia. Garfield, can you put these treasury

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Speaker 1: moves in context for US below that four percent handle

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Speaker 1: and the catalyst involved?

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Speaker 5: Well, I mean the catalysts are that investors are seeing

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Speaker 5: a clear downturn for the US economy, and the concern

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Speaker 5: that had been bubbling under the surface for a while,

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Speaker 5: especially from the bond market, that the Fed was going

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Speaker 5: to as it traditionally has been too slow to cut

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Speaker 5: rates when a downturn comes. That's kind of been crystallized,

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Speaker 5: especially seeing as we had somewhat you're less dubbish and

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Speaker 5: expected FOMC statement this week, followed by yes, a dubvish

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Speaker 5: pal but still no certainty from the Fed anyway that

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Speaker 5: a rate cut would come in September. So there's still

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Speaker 5: wanting more data, wanting to wait and see and be

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Speaker 5: sure that they can cut. Meanwhile, the economic picture has

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Speaker 5: been darkening in the US and earnings as well. That's

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Speaker 5: something that feeds into what investors are looking at that

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Speaker 5: doesn't necessarily feed so directly into what policymakers are looking at.

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Speaker 5: So they've looked at all that and they've said the

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Speaker 5: Fed is going to cut rates three times this year.

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Speaker 5: That's now priced in, and there's definitely a pattern of

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Speaker 5: concern that not only will the Fed cut three times,

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Speaker 5: but they might end up having to go fifty basis

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Speaker 5: points one of those. Yeah, instead of having three twenty

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Speaker 5: five basis point cuts. They may well end up doing

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Speaker 5: a fifty basis point cut at some stage because they

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Speaker 5: are getting behind the curve.

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Speaker 2: Yeah, I think that's fascinating. So then, what do you

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Speaker 2: think are the key numbers that the market's going to

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Speaker 2: be watching out for, Because earlier this week it was

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Speaker 2: about the Jolts figures. Also that ism manufacturing figure out

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Speaker 2: of the US came as a bit of a shot

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Speaker 2: again sort of cementing the idea around a US slowdown.

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Speaker 2: What do you think we're going to be watching out

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Speaker 2: for today in terms of the key numbers that will

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Speaker 2: drive markets?

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Speaker 5: Yeah, well, I mean, the there's a lot of key

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Speaker 5: numbers there, but the first and foremost is going to

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Speaker 5: be what goes on with payrolls themselves to change in

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Speaker 5: non farm payrolls, expectations for that to ease lower to

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Speaker 5: one hundred and seventy five thousand jobs from just over

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Speaker 5: two hundred thousand the prior month. If you get a

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Speaker 5: serious under, if you come well under that, like your

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Speaker 5: one hundred and fifty thousand or below, that's going to

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Speaker 5: ramp up again those concerns that the slowdown is really

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Speaker 5: hitting hard. The unemployment rate could also be very important

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Speaker 5: in that context, in that it's close to triggering what's

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Speaker 5: called the sum rule, where if it rises by enough

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Speaker 5: in over a six to twelve month horizon, that's seen

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Speaker 5: as guaranteeing a recession. If we were to see the

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Speaker 5: unemployment rate tick up to four point two rather than

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Speaker 5: stay at four point one percent, which is a forecast,

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Speaker 5: that rule would probably be triggered, and you could see

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Speaker 5: more of these fear trades that are coming along. The

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Speaker 5: other thing that could occur that might scare people would

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Speaker 5: be if earning surprisedly ticked up or you know, came

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Speaker 5: in like little changed or even accelerated, because then you

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Speaker 5: would have these concerns that, oh, even though the labor

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Speaker 5: market is showing some weakness, it's also throwing up cost

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Speaker 5: pressures that might again increase the potential for a FED

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Speaker 5: policy error.

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