WEBVTT - Apple's China Push and Goldman Warns of Sharp Slowdown

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<v Speaker 1>This is Bloomberg day Break Asia for this Friday, June

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<v Speaker 1>second in Hong Kong, Thursday June first in New York

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<v Speaker 1>and coming up today. Apple is working on plans to

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<v Speaker 1>expand its retail chain with a deeper push into China

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<v Speaker 1>and India. Broadcom suffers a slowdown in sales despite gains

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<v Speaker 1>in Ai, and one FED official says the US Central

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<v Speaker 1>Bank should it least skip a rate hike in June.

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<v Speaker 2>The Senate continues to try to move closer to a

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<v Speaker 2>debt ceiling agreement, while in Asia, worries continue regarding the

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<v Speaker 2>relationship between the US and China. I'm Dan Schwartzman. I'll

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<v Speaker 2>have your news coming up.

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<v Speaker 3>That's all straight ahead on Bloomberg day Break Asia, the

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<v Speaker 3>business news you need to start your day, and just

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<v Speaker 3>one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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<v Speaker 3>Business App, and everywhere you get your podcasts.

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<v Speaker 1>Good morning, I'm Rishad Salama and I'm Brian Curtiz. One

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<v Speaker 1>of the stories we're following today.

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<v Speaker 4>All right, well, we're having a look now at Apple.

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<v Speaker 4>Apple planning a deeper push into retail in China and India.

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<v Speaker 4>Let's get details now from Bloomberg Joanna One who sent

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<v Speaker 4>us this from Hong Kong.

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<v Speaker 5>Apple is in toox you open fifteen new stores across

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<v Speaker 5>the APAC region through twenty twenty seven. Sources say the

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<v Speaker 5>idea is to build Apples brand in growth markets, especially

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<v Speaker 5>China and India. The APAC market generated about one hundred

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<v Speaker 5>and thirty billion dollars of Apple's revenue last year. That's

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<v Speaker 5>roughly a third of total sales. Currently, Apple has more

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<v Speaker 5>than five hundred and twenty stores in twenty six countries,

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<v Speaker 5>about half of them in the United States. Yet the

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<v Speaker 5>company gets most of its revenue from other channels, including

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<v Speaker 5>its e commerce site. So why the added stores while

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<v Speaker 5>they're more about building Apple's brand than actually selling goods

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<v Speaker 5>in Hong Kong, joined Wang Bloomberg Day Brigasia Well.

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<v Speaker 1>Broadcom says artificial intelligence spending is helping fuel sales, but

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<v Speaker 1>it wasn't enough to offset a broader post pandemic slow

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<v Speaker 1>down in the industry. Let's get the story from Bloomberg's

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<v Speaker 1>Charlie Pellett. Broadcom is one of the world's biggest chip makers.

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<v Speaker 1>It said revenue in the fiscal third quarter will be

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<v Speaker 1>about eight point eight five billion dollars of four point

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<v Speaker 1>six percent from a year earlier. Though that tops the

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<v Speaker 1>Analys estimate of eight point seven six billion, it would

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<v Speaker 1>represent its slowest growth in years. On the plus side,

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<v Speaker 1>the forecast suggests that Nvidia is not the only chip

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<v Speaker 1>maker benefiting from the AI frenzy. Broadcoms networking components helped

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<v Speaker 1>direct traffic between computers in giant data centers, and it's

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<v Speaker 1>a maker of custom chips for some of the biggest

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<v Speaker 1>cloud computing providers in New York. Charlie Pellett Bloomberg Daybreak Asia.

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<v Speaker 1>In late trading, the stock bounced around a little bit,

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<v Speaker 1>down two point four percent now at one point it

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<v Speaker 1>was higher and earlier we mentioned the Apple story during

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<v Speaker 1>the regular session, Apple gaining one point six percent.

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<v Speaker 4>Rish yep Blue Lulemon Athletica reporting better than anticipated profits

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<v Speaker 4>and sales for the first quarter, projecting four year results

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<v Speaker 4>that outpaced analyst estimates. It has been interpreted as a

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<v Speaker 4>sign that demand for the company's price the active way.

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<v Speaker 4>It's persisting despite emerging weakness among consumers. We've got reaction

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<v Speaker 4>from Bloomberg's Pudam Goyle.

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<v Speaker 6>What I think struck out to us to be very

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<v Speaker 6>very good was the international revenue growth, which was sixty percent,

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<v Speaker 6>and you can attribute a lot of that to China,

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<v Speaker 6>but remember China wasn't weak for them last year when

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<v Speaker 6>it was for everyone else, even before reopening. So just

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<v Speaker 6>you know, good numbers on top of good numbers here.

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<v Speaker 4>Put going from Bloomberg Intelligence there. Lululemon also been working

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<v Speaker 4>down bloated inventories since last year, reporting that levels are

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<v Speaker 4>up twenty four percent from a year ago in the

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<v Speaker 4>first quarter. It's an improvement from the fifty percent year

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<v Speaker 4>of a year gain reported last quarter, though it's still

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<v Speaker 4>higher than usual. Lululemon shares last timm I checked were

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<v Speaker 4>up thirteen percent in late trading.

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<v Speaker 1>Philadelphia Fedbank President Patrick Harker says the FED is close

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<v Speaker 1>to the point where it can stop raising interest rates,

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<v Speaker 1>and he thinks the FED can at least skip a

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<v Speaker 1>rate hike at the June meeting. Is Harker speaking at

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<v Speaker 1>an event with the National Association for Business Economics.

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<v Speaker 7>I do believe that we are close to the point

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<v Speaker 7>where we can hold rates in place and let monetary

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<v Speaker 7>policy do its work to bring inflation back to the

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<v Speaker 7>target in a timely manner. Along this path, I projected

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<v Speaker 7>we will see modest growth this year, with real GDP

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<v Speaker 7>coming in a bit below one percent.

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<v Speaker 1>Harker, who votes on monetary policy this year, said inflation

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<v Speaker 1>is way above the fed's two percent target. He emphasized

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<v Speaker 1>that he'll assess incoming data to determine whether additional tightening

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<v Speaker 1>is needed. One data point FED officials will be watching

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<v Speaker 1>tomorrow is the May jobs report in the United States.

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<v Speaker 1>Those numbers coming at eight thirty in the morning.

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<v Speaker 4>Wall Street time, Well, we are also looking at what's

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<v Speaker 4>happening with investment banking and if anything's to go by

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<v Speaker 4>looking great because Goldman Sachs is winning of a shop

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<v Speaker 4>slowed down in its investment bank and Kate's reports.

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<v Speaker 8>Goldman president John Waldron says the Wall Street giant is

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<v Speaker 8>preparing for a tougher economic environment and is taking additional

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<v Speaker 8>action on headcount. The bank's trading business is down more

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<v Speaker 8>than twenty five percent this quarter compared to a year ago,

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<v Speaker 8>and Waldron describes capital markets activity as sluggish. Analysa forcas

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<v Speaker 8>AT annual revenue at Goldman Sachs will be roughly in

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<v Speaker 8>line with what it posted last year at forty eight

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<v Speaker 8>billion dollars. That is more than ten billion dollars less

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<v Speaker 8>than what the firm notched in twenty twenty one during

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<v Speaker 8>a frenzied period of deal making and heightened trading activity

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<v Speaker 8>in Washington and Kate's Bloomberg Daybreak Asia.

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<v Speaker 1>I'm Brian Curtis along with Rashad Salamat a little bit

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<v Speaker 1>more on coming up later on China's home sales growth.

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<v Speaker 1>We had a little bit of a slow down in

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<v Speaker 1>May after a rebound in the previous couple of months.

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<v Speaker 1>Values up six point seven percent, and that gains that

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<v Speaker 1>compares to gains twenty nine percent over the previous couple

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<v Speaker 1>of months. And then Reuter is this reporting at Tesla

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<v Speaker 1>ceo Elon Musk before he left met with China's Vice

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<v Speaker 1>Premier Ding shu Chiang. That was yesterday in Beijing, and

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<v Speaker 1>it marked the first time that Ding was known to

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<v Speaker 1>have had a one on one meeting with a foreign CEO.

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<v Speaker 1>Those stories ahead, but let's take a closer look now.

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<v Speaker 1>At World News, the Senate is debating further the debt

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<v Speaker 1>ceiling agreement. Dan Schwartzman with more in the newsroom in

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<v Speaker 1>New York.

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<v Speaker 2>Dan, that's right, Brian. Senators have been working all day

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<v Speaker 2>to try to agree on a path forward to pass

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<v Speaker 2>the debt ceiling agreement ahead of a June fifth deadline

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<v Speaker 2>to averted default. The House was able to approve the

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<v Speaker 2>bill Wednesday evening. While passage through the Senate is considered

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<v Speaker 2>a virtual certainty, when that occurs is seemingly the question.

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<v Speaker 2>Some of the hold upstar military spending as well as

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<v Speaker 2>aid to Ukraine. Republican Senator Lindsay Graham says it needs

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<v Speaker 2>to be more funding for the military in Ukraine.

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<v Speaker 9>I'm not going to destroy our military in the name

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<v Speaker 9>of raising the debt. I'm not going to be part

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<v Speaker 9>of a political system in Washington that pulled the plug

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<v Speaker 9>on the UK at the time they're making advances. I'm

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<v Speaker 9>not going to be the savior of Putin.

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<v Speaker 2>Meanwhile, Independent Vermont's Senator Bernie Sanders things for spending too much.

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<v Speaker 3>We're talking about, over a two year period, a fifty

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<v Speaker 3>six billion dollar increase in military spending at a time

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<v Speaker 3>when we spend more than the next ten nations. Come on.

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<v Speaker 2>Senator Marco Rubio is calling on the Department of Justice

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<v Speaker 2>to investigate whether TikTok Ceo shoe Ze Chu made false

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<v Speaker 2>statements to Congress. The top Republican on the Senate Intelligence committees,

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<v Speaker 2>using a report from Forbes that claimed the social media

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<v Speaker 2>apps stored users financial information on servers in China that

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<v Speaker 2>were accessible to employees. Shoe had testified under oath before

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<v Speaker 2>a House panel that he has seen no evidence that

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<v Speaker 2>China has the ability to access TikTok user data. Cho

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<v Speaker 2>claims that US data is stored in Virginia and in Singapore.

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<v Speaker 2>Rubio has urged Attorney General Merrick Garland to investigate Chu

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<v Speaker 2>and his claims. Warries asked the relationship between the US

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<v Speaker 2>and China were on display at a defense conference in

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<v Speaker 2>Singapore as participants expressed nervousness regarding Taiwan. China, also rebuffing

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<v Speaker 2>attempts by the US to set up a meeting between

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<v Speaker 2>Defense Secretary Lloyd Austin and his Chinese counterpart, Lee Shang Fu,

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<v Speaker 2>has also worried those in attendance. Ever since an alleged

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<v Speaker 2>Chinese by balloon floated over the US and was later

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<v Speaker 2>shot down by a fighter jet, relationships between the two

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<v Speaker 2>powers have been at a low. President Biden, speaking at

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<v Speaker 2>the US Air Force Academy commencement, says the country is

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<v Speaker 2>not looking at conflicts with China.

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<v Speaker 10>The United States does not seek conflict or confrontation with China.

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<v Speaker 10>China and the United States should be able to work

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<v Speaker 10>together where we can solve some global challenges like climate.

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<v Speaker 7>But we are.

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<v Speaker 10>Prepared for bigous competition. We will stand stand up for

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<v Speaker 10>our interest, for our friends, and for our values.

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<v Speaker 2>That was President Biden at the US Air Force Academy commencement.

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<v Speaker 2>Global News twenty four hours a day, powered by more

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<v Speaker 2>than twenty seven hundred journalists and analysts in more than

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<v Speaker 2>one hundred and twenty countries. I'm Dan Schwartzman, and this

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<v Speaker 2>is Bloomberg.

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<v Speaker 1>I'm Brian Curtis with Rashad So. I'm not Aerin gibbs

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<v Speaker 1>Is with US. She's senior partner and CIO of Main

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<v Speaker 1>Street Asset Management. Aaron, it looks like the debt ceiling

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<v Speaker 1>and spending negotiations we'll be passing. We'll get through, and

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<v Speaker 1>that's at the same time that the FED will pause.

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<v Speaker 1>Is that enough to juice up these markets further or

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<v Speaker 1>is that more or less priced in?

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<v Speaker 11>I think that's very much priced in. I think right

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<v Speaker 11>now are the real concern for the most of the

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<v Speaker 11>markets is the FED rate hike and what's going to

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<v Speaker 11>come in the next two weeks.

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<v Speaker 4>All right, Well, you know, you look at that, where

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<v Speaker 4>would you think interest rates are going to be in

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<v Speaker 4>about six months or thereabouts? Because if they are low,

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<v Speaker 4>would that be an admission that actually the Fed got

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<v Speaker 4>it wrong?

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<v Speaker 11>Yeah? Absolutely. I think if we see any cuts within

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<v Speaker 11>twenty twenty three, I think that is an indication that

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<v Speaker 11>the Fed, you know, if they're reversing it just within

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<v Speaker 11>six months of the last hike, I think that's definitely

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<v Speaker 11>an indication that, you know, they're having to pull back,

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<v Speaker 11>maybe they've overtightened. And so I think right now, I

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<v Speaker 11>think we might still see another two hikes towards the

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<v Speaker 11>end of the year. I'm in more of that camp

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<v Speaker 11>that we might see a pause, but maybe not a

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<v Speaker 11>cut this year. It might be we might have to

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<v Speaker 11>wait until twenty twenty four to really see that reversal

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<v Speaker 11>of these recent hikes.

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<v Speaker 1>And what are your thoughts about whether or not we

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<v Speaker 1>get a recession and whether or not that's enough to

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<v Speaker 1>get the Fed to start cutting maybe towards the end

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<v Speaker 1>of the year.

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<v Speaker 11>I think that's still very much a risk, whether we're

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<v Speaker 11>looking through indications through the bond markets or through just

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<v Speaker 11>what corporate profits are doing. That's still out there. You know.

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<v Speaker 11>Obviously the opposing side is that we just have such

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<v Speaker 11>a strong jobs report and we're still dealing with very

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<v Speaker 11>high inflation, and so how quickly we could transform into

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<v Speaker 11>actually growth being into negative and having two quarters of

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<v Speaker 11>negative negative growth just within this year seems less likely

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<v Speaker 11>given sort of the types of strengths that we're seeing,

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<v Speaker 11>particular in the labor market. I think again, that might

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<v Speaker 11>be something that we might see maybe you know, the

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<v Speaker 11>beginning of it, maybe in the fourth quarter this year

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<v Speaker 11>and potentially you know, into twenty twenty four.

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<v Speaker 4>Erin I mean, we probably had the most aggressive manager

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<v Speaker 4>policy tighting in recent history take place globally. Why is

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<v Speaker 4>it that in the US we're not really seeing the

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<v Speaker 4>effects of it that much?

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<v Speaker 11>Yes, there is. I mean, I think we're just starting

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<v Speaker 11>to see some of the effects, and we're you know,

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<v Speaker 11>we're starting to see some big drops both in money

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<v Speaker 11>supply and inflation. You know, we've known that there's always

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<v Speaker 11>been sort of a nine to twelve month lag and

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<v Speaker 11>this this takes a while, and but it I think

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<v Speaker 11>ultimately it's because the FED is fighting a lot of

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<v Speaker 11>different you know, sort of opposing waves of posing flows

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<v Speaker 11>and part of that is federal spending, particularly in the US,

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<v Speaker 11>and so trying to counteract all of that money supply

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<v Speaker 11>that is going into the economy through tightening is just

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<v Speaker 11>you know, fighting a rather you know, difficult headwind.

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<v Speaker 1>I want to ask you kind of a complicated question

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<v Speaker 1>having to do with bubbles. First, do you think there's

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<v Speaker 1>a bubble in AI related stocks? Okay, but that's one

0:12:17.720 --> 0:12:21.080
<v Speaker 1>sort of bucket. The other bucket is, well, you don't

0:12:21.080 --> 0:12:23.920
<v Speaker 1>think there's a bubble in AI. It's very real and

0:12:23.960 --> 0:12:26.720
<v Speaker 1>it's going to be very important, but maybe the stocks

0:12:26.720 --> 0:12:29.160
<v Speaker 1>have run up or do you think the market is

0:12:29.200 --> 0:12:33.040
<v Speaker 1>actually looking at this quite rationally and that some of

0:12:33.040 --> 0:12:35.440
<v Speaker 1>these numbers, like even a Broadcom trading you know, with

0:12:35.520 --> 0:12:38.920
<v Speaker 1>pe of nineteen or twenty, it's not that expensive.

0:12:40.400 --> 0:12:43.000
<v Speaker 11>You know, so there are a few stocks where it

0:12:43.040 --> 0:12:47.360
<v Speaker 11>doesn't really look that terribly expensive. Just like you mentioned

0:12:47.400 --> 0:12:51.600
<v Speaker 11>Broadcom in video that's trading forty times earning. That's actually

0:12:51.960 --> 0:12:55.160
<v Speaker 11>you know, within its realm of averages. You know, prior

0:12:55.320 --> 0:12:57.439
<v Speaker 11>to now that we have this sort of almost doubling

0:12:57.440 --> 0:13:01.240
<v Speaker 11>of profits expectations and the forward forward pe get you know,

0:13:01.320 --> 0:13:04.719
<v Speaker 11>went from like a seventy to forty times, so that

0:13:05.200 --> 0:13:08.200
<v Speaker 11>it starts looking cheap when you double your profit expectations.

0:13:08.720 --> 0:13:12.520
<v Speaker 11>So I think there are companies where certainly the outlook

0:13:12.520 --> 0:13:16.240
<v Speaker 11>has so much improved that they may not be necessarily

0:13:16.280 --> 0:13:21.120
<v Speaker 11>bubble worth, but certainly expensive. So you know, are they

0:13:21.160 --> 0:13:24.239
<v Speaker 11>more at risk if we really hit a recession. Absolutely?

0:13:24.400 --> 0:13:28.000
<v Speaker 11>Is there really that possibility of growth in the future. Absolutely,

0:13:28.000 --> 0:13:30.480
<v Speaker 11>it's just you know, whether that's going to happen, if

0:13:30.480 --> 0:13:32.880
<v Speaker 11>they're going to have that downturn or a pullback, or

0:13:32.960 --> 0:13:35.200
<v Speaker 11>for this type of momentum is really going to be

0:13:35.240 --> 0:13:38.520
<v Speaker 11>able to continue. And so I think, you know, it's

0:13:38.520 --> 0:13:42.400
<v Speaker 11>really important for investors to be you know, selective about

0:13:42.400 --> 0:13:45.840
<v Speaker 11>which companies within this space, companies that don't have a

0:13:45.920 --> 0:13:49.640
<v Speaker 11>history of disappointing and you know, picking your points of

0:13:49.760 --> 0:13:52.319
<v Speaker 11>entry points because there obviously has been a big run

0:13:52.440 --> 0:13:54.800
<v Speaker 11>up and you might want to wait for some cooling off,

0:13:54.840 --> 0:13:57.480
<v Speaker 11>maybe some disappointing news with these high data types.

0:13:57.280 --> 0:14:01.760
<v Speaker 4>Of stocks erin. I mean, if you mentioned value there, well,

0:14:02.040 --> 0:14:05.400
<v Speaker 4>China and Hong Kong particularly looking very cheap. Are you

0:14:05.480 --> 0:14:07.880
<v Speaker 4>looking not right now?

0:14:08.200 --> 0:14:13.000
<v Speaker 11>I think given the overall expectations, you know, we've just

0:14:13.040 --> 0:14:17.280
<v Speaker 11>seen some really disappointing numbers. You know, obviously within manufacturing

0:14:17.400 --> 0:14:22.040
<v Speaker 11>and the economic growth. I think there's just so much

0:14:22.160 --> 0:14:26.400
<v Speaker 11>risk overall across the board. You know, we're still thirty

0:14:26.400 --> 0:14:29.680
<v Speaker 11>percent cash for a lot of our clients. I think

0:14:31.160 --> 0:14:35.680
<v Speaker 11>not just looking at you do US risk and European risk.

0:14:35.760 --> 0:14:39.320
<v Speaker 11>But though it's a good value, you know, you never

0:14:39.360 --> 0:14:42.320
<v Speaker 11>wanted to sort of buy that falling knife just yet.

0:14:43.440 --> 0:14:46.080
<v Speaker 1>Well, we've had some markets really gained so far this

0:14:46.160 --> 0:14:49.720
<v Speaker 1>year in Asia, markets like Japan and also in Taiwan.

0:14:49.800 --> 0:14:54.520
<v Speaker 1>Those are the two main leaders. Are those interesting at all?

0:14:54.560 --> 0:14:57.400
<v Speaker 1>Are you pretty much playing it from a domestic perspective

0:14:57.440 --> 0:14:57.880
<v Speaker 1>at the moment.

0:14:58.360 --> 0:15:01.880
<v Speaker 11>No, certainly Japan it does look very interesting, and so

0:15:02.680 --> 0:15:07.720
<v Speaker 11>I think it's more sort of the emerging markets, and

0:15:08.360 --> 0:15:10.840
<v Speaker 11>you know, sort of like with less transparency. I'm a

0:15:10.880 --> 0:15:15.600
<v Speaker 11>little more hesitant, but absolutely there are definitely good values

0:15:15.640 --> 0:15:17.200
<v Speaker 11>out there outside of the US.

0:15:18.520 --> 0:15:21.360
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