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Speaker 1: This is Bloomberg Daybreak Asia for this Thursday, April twentieth

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Speaker 1: in Hong Kong, Wednesday April nineteenth in New York and

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Speaker 1: coming up today.

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Speaker 2: Tesla's first quarter profit misses expectations after a series of

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Speaker 2: aggressive price cuts.

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Speaker 1: The FEDS Beige Book survey shows the US economy stalled

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Speaker 1: in recent weeks.

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Speaker 2: And BOJ officials are said to be wary of tweaking

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Speaker 2: or scrapping yield curve control.

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Speaker 3: McCarthy proposes that limit plan with cuts that has already

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Speaker 3: been rejected by Democrats. China denies supplying drones to Russia.

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Speaker 3: India surpasses China as the globe's most populous nation. I'm

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Speaker 3: at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Asia, the business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast available on Apples, Spotify, the Bloomberg Business app,

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Speaker 4: and everywhere you get your podcasts.

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Speaker 2: Good morning, I'm Doug Chrisner and I'm Brian Curtiz.

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Speaker 1: Here are the stories we're following today. Tesla reporting first

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Speaker 1: quarter earnings that just missed analyst estimates, and it's operating

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Speaker 1: margin fell sixteen percent from last quarter. This comes after

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Speaker 1: a series of aggressive price cuts by.

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Speaker 4: The ev maker.

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Speaker 1: We heard from Bloomberg's David Welch.

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Speaker 5: With all of these price cuts that they've been doing

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Speaker 5: in order to gain market share, keep the plans running

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Speaker 5: and kind of take a whoop and stick to their

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Speaker 5: long established rivals, they're cutting profits and at some point

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Speaker 5: we're going to have to see where Tesla decides they're

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Speaker 5: going to stop with that.

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Speaker 1: Separately, Tesla said that output this year will meet previous

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Speaker 1: guidance for average annual growth of fifty percent over multiple years.

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Speaker 1: The company also said it's on track to deliver about

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Speaker 1: one point eight million vehicles this year. Still, investors are

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Speaker 1: showing some nervousness here about Tesla's aggressive pricing strategy. Shares

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Speaker 1: were down more than four and a half percent in

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Speaker 1: late trading after the results came out. And I can

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Speaker 1: just give you the latest here at the moment, we're

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Speaker 1: trading down four point four percent and that price is well,

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Speaker 1: it's off about seven to eighty for the session.

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Speaker 2: Well, some indications today that the American economy may be stalling.

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Speaker 2: That seems to be one of the conclusions from the

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Speaker 2: fed's latest Beige Book. We have Bloomberg's Denise Pellegrini tracking

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Speaker 2: those developments.

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Speaker 6: The Fed's Beige Book survey said hiring and inflation have

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Speaker 6: slowed in recent weeks, and access to credit is narrowing.

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Speaker 6: The Cleveland Fed indicated straight on nonprofits to provide food.

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Speaker 6: The San Francisco Fed said workers were increasingly burned out

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Speaker 6: and suffering mental health strains, and the New York Fed

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Speaker 6: noted arise in mortgage delinquencies. The report track data through

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Speaker 6: April tenth. Several districts noted bank Titan lending standards amid

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Speaker 6: concerns about liquidity, but some districts supported lending activities actually

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Speaker 6: stabilizing now following an initial pullback. Denise Pelgriney, Bloomberg, Day

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Speaker 6: Break Asia.

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Speaker 1: Morgan Stanley reported first quarter profit that beat analyst expectations.

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Speaker 1: The bank was aided by its wealth management business, which

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Speaker 1: record Or had six point five six billion dollars in revenue.

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Speaker 1: That's up eleven percent from a year earlier. The firm's

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Speaker 1: wealth business adding one hundred and ten billion in new

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Speaker 1: net asset net new assets. Morgan Stanley, however, reported net

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Speaker 1: income that slid twenty percent from a year ago. Profits

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Speaker 1: were dragged down by a drop off in deal making

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Speaker 1: and a jump in loan loss provisions. Speaking to analysts

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Speaker 1: on a conference call, the CEO James Gorman said he

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Speaker 1: sees more market shoppiness ahead. Any thinks that that may

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Speaker 1: include another one or two rate hikes from the Fed that.

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Speaker 7: Gets you to sort of high five six percent type

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Speaker 7: interest rate. I got is whether it's a modest recession

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Speaker 7: or we dodged that bullet sort of doesn't matter that much.

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Speaker 7: What really would matter is if inflation's not tamed, it

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Speaker 7: has to go much higher than people are expecting, you

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Speaker 7: go into a much deeper recession.

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Speaker 1: Morgan san Ley shares closed up about two thirds of

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Speaker 1: a percent in New York.

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Speaker 2: Well after the closing bell. Here in the States, we

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Speaker 2: had IBM delivering a forecast for annual revenue in line

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Speaker 2: with projections. The story is from Bloomberg's Charlie Pellett.

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Speaker 8: It is a cautiously optimistic signal about tech spending in

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Speaker 8: an uncertain economy. IBM said sales will increase three to

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Speaker 8: five percent in twenty twenty three, meeting analyst forecasts. CEO

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Speaker 8: ar Vin Krishna has worked to reorient the century old

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Speaker 8: company around higher margin services. Like hybrid cloud computing software

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Speaker 8: sales in the quarter increase two point six percent to

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Speaker 8: five point nine billion dollars, although growth at the red

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Speaker 8: hat unit was eight percent in New York Charlie Pellett

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Speaker 8: Bloomberg Daybreak, Asia.

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Speaker 1: And again, the market embraced these results to a certain degree,

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Speaker 1: with the stock trading up one point five percent in

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Speaker 1: late trading. We're hearing that Bank of Japan officials are

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Speaker 1: wary here of tweaking or scrapping their yield control stimulus

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Speaker 1: at a policy meeting next week. BOJ officials instead see

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Speaker 1: a need to keep their cap on government bond yields

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Speaker 1: in place for now to support the economy. They're also

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Speaker 1: in no rush to make any big policy changes, as

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Speaker 1: they see increasing uncertain resulting from the failure of banks

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Speaker 1: in the US and Europe. Officials are likely to discuss

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Speaker 1: whether the Bank of Japan needs to tweak the wording

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Speaker 1: of its guidance at the meeting or if it can

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Speaker 1: wait until later. And we're hearing that even if a

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Speaker 1: change is made to the guidance, the bank intends to

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Speaker 1: indicate its stance will continue with easy policy. I'm Brian Curtis,

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Speaker 1: along with Rashad Salamat and Doug Krisner. So, Doug, one

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Speaker 1: of the obvious questions this morning is whether or not

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Speaker 1: the slowing of the economy indicated in the Beies Book

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Speaker 1: will get the FED.

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Speaker 2: To pause sooner than thought.

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Speaker 1: If you look at FED fund futures still showing nearly

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Speaker 1: a slam dunk rise of twenty five basis points in May,

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Speaker 1: and we're up to twenty nine percent in June, so

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Speaker 1: no really big changes there. I'm not sure we can

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Speaker 1: draw too much from that.

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Speaker 2: Yeah, I think you're right about that, Brian. You have

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Speaker 2: to be careful here because just the fact that we

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Speaker 2: may get a lot of economic slowing doesn't necessarily mean

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Speaker 2: that inflation is going to come down in a way

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Speaker 2: in which the FED would like to see. But I

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Speaker 2: think you're right when you look at what the Beige

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Speaker 2: Book is kind of indicating, it reinforces the chance of

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Speaker 2: the FED pausing after that main meeting when we're expecting

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Speaker 2: a twenty five basis point increase. It's kind of interesting

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Speaker 2: that we had a big move up today in the

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Speaker 2: not big, but five basis points. I think is considerable

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Speaker 2: given the fact that you know there was so much

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Speaker 2: kind of stagnation on the equity trade today with the

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Speaker 2: two year at four to twenty four.

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Speaker 1: Yeah, absolutely, And my point was just that it raises

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Speaker 1: some questions here I don't and at the end I said, really,

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Speaker 1: I don't think it changes the calculus all that much.

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Speaker 1: It'll be interesting to see what the guests all throughout

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Speaker 1: the program. We talked to about twelve to fifteen guests

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Speaker 1: live every day on this program, so people should stay

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Speaker 1: with us right through. I wanted to comment a little

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Speaker 1: bit on the LVS numbers and take a look at

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Speaker 1: whether or not Macau is anywhere near coming back, and

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Speaker 1: to be honest, it doesn't really look like it's happening yet.

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Speaker 1: The two LVS properties that are really superb there is

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Speaker 1: the Venetian and the Londoner Macau. And if you look

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Speaker 1: at their ebit dah, two hundred and ten million for

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Speaker 1: the Venetian, fifty six million for of the Londoners, so

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Speaker 1: it sets up pretty good two hundred and sixty six million.

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Speaker 1: Yet if you look at sans Macau overall, the ebitdah

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Speaker 1: was only ten million. Now look at Marina Bay Sands

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Speaker 1: in Singapore three hundred and ninety four million. That's forty

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Speaker 1: times the business that Sands is doing in Macau, so

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Speaker 1: there's a long way to run there.

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Speaker 4: Yeah.

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Speaker 2: I think overall, Chinese consumers seem to be celebrating the

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Speaker 2: end of those restrictions on the pandemic. It's not just gaming, right,

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Speaker 2: If you look at flight bookings, liquor sales, hotel occupancy,

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Speaker 2: everything is up.

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Speaker 1: Yeah, it's true, and I think that the retail sales

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Speaker 1: number will end up winning the day that we saw

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Speaker 1: the other day. You know, we had some people saying

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Speaker 1: that the full range of data wasn't all that positive.

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Speaker 1: The GDP number was quite noticeably positive, but there were

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Speaker 1: some other things like factory output. But I do think

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Speaker 1: that the sales number, that's what people were really waiting for,

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Speaker 1: is whether or not the consumer is moving here.

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Speaker 5: It looks like like they are.

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Speaker 1: Time for Global News. US House Speaker Kevin McCarthy has

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Speaker 1: proposed a bill today to raise the debt limit for

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Speaker 1: about a year and to cut federal spending. At Baxter

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Speaker 1: with Global News from the nine to sixty News from

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Speaker 1: in San.

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Speaker 3: Francisco, d Yeah, right, Brian, this is the plan the

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Speaker 3: Republicans hope will answer President Joe Biden's call for something

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Speaker 3: to look at for.

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Speaker 2: President Biden and Senate Democrats waste time.

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Speaker 8: House Republicans are taking action.

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Speaker 3: The plan would increase the debt ceiling by about one

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Speaker 3: point five trillion dollars. This is enough to stave off

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Speaker 3: to fault until the latest March thirty. First, the plan

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Speaker 3: would roll back discretionary spending back to twenty twenty two levels.

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Speaker 3: One hundred and thirty billion dollar cut is what that

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Speaker 3: figures to be, roughly, but then future increases would be

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Speaker 3: capped at one percent annually for the following decade.

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Speaker 1: Today, I'm proud to announce that we are introducing the

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Speaker 1: Limit Save Grow Act of twenty twenty three.

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Speaker 4: These spending limits are not they're responsible.

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Speaker 3: The plan would end clean energy electric vehicle tax breaks.

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Speaker 3: Democrats have already rejected it, saying debt ceiling is a

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Speaker 3: separate issue from the cuts. Bloomberg's White House Report of

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Speaker 3: Josh Winingrove says the White House has been steadfast and

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Speaker 3: saying that debt relief is separate.

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Speaker 8: Now.

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Speaker 9: The question, of course, that we're all waiting on in

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Speaker 9: the next couple of weeks or so is figuring out

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Speaker 9: when that revised X state projection is, When that deadline

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Speaker 9: is Goldman is out there warning it could be even

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Speaker 9: sooner than we thought, you know, maybe coming up to

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Speaker 9: that June thing, a lot of people kind of whisper

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Speaker 9: it would be more like July August. So once we

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Speaker 9: have that, it's going to add urgency. Congress never reacts

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Speaker 9: until its Arch, so we'll see what happens.

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Speaker 3: So first, up here, President Biden, talking about the economy

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Speaker 3: broadly today at an event, says Republicans are traveling down

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Speaker 3: the wrong road.

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Speaker 2: Trickle down economics doesn't work, and together we've been doing

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Speaker 2: everything we can to turn things around.

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Speaker 3: And McCarthy politically now has been rejected by Democrats, but

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Speaker 3: also may have a problem in his own party because

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Speaker 3: the cuts don't go far enough. So we'll see how

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Speaker 3: this goes. China's denying reports say in a Western media

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Speaker 3: that it's applying drones to aid Russia's invasion of Ukraine,

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Speaker 3: saying they are groundless and are fake information. India has

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Speaker 3: overtaken China as the world's most populous nation. The UN

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Speaker 3: Data now says India's population is one point four two

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Speaker 3: six billion, China one point four two five seven. China's

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Speaker 3: numbers do not include Hong Kong and Macau. US Supreme

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Speaker 3: Court is extended the pause on a lower court ruling

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Speaker 3: seeking to limit access to commonly used abortion pill. It

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Speaker 3: basically is two extra days of kicking a decision down

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Speaker 3: the road. White House spokesman Karine Jean Pierre says, a

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Speaker 3: White House will continue to fight for its use.

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Speaker 6: What we can tell American women is that we're going

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Speaker 6: to continue to fight. We've been very clear about that.

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Speaker 6: We feel that the law is on our side here.

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Speaker 3: The extension is through Friday evening, Global News powered by

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Speaker 3: more than twenty seven one hundred journalists and analysts and

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Speaker 3: over one hundred and twenty countries. In San Francisco, I'm

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Speaker 3: at Baxter and this is Bloomberg.

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Speaker 1: I'm Brian Curtis along with Rashad Salama. We are here

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Speaker 1: in our Hong Kong studios, and our guest is Aaron Gibbs,

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Speaker 1: Senior Partner and CIO of Main Street Asset Management. Erin

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Speaker 1: I always look forward to talking to you because I

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Speaker 1: really put you in the straight Talker Camp wanted to

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Speaker 1: raise this question again about whether this softness indicated in

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Speaker 1: the Beige Book would in any way deter the FED

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Speaker 1: from its current plan. My suggestion was that not likely,

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Speaker 1: but I'd like to hear yours.

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Speaker 10: I have to agree with you. I think it's not likely.

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Speaker 10: I think they're extremely focused on obviously their PC indicators,

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Speaker 10: their other inflation and unemployment. You know, occasionally they'll pay

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Speaker 10: attention to the stock market, but I don't think this

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Speaker 10: is going to be one of those big points that's

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Speaker 10: going to push them either way when we finally get

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Speaker 10: to April's meeting, sorry, May's meeting, Karen.

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Speaker 11: And you know, while of course certain parts of the

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Speaker 11: market are pricing in a mild recession, the big four

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Speaker 11: banks of predicting a mild recession later this year, and

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Speaker 11: what's more, officials at the fact who advise their bosses

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Speaker 11: as it were, also likewise warning of the same things.

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Speaker 11: They really would see that as perhaps a badge of

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Speaker 11: honor because it may well then cure the inflation problem.

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Speaker 10: What's the deal, right, I think we've the idea of

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Speaker 10: a soft landing. Is the other word for it, is

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Speaker 10: mild recession, and that's very much what we see in

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Speaker 10: the forecast, what we see in the bond markets, you know,

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Speaker 10: just like you said over and over, that's what's out there.

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Speaker 10: And I think it would be surprising if that doesn't manifest,

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Speaker 10: or you know, perhaps we just get two quarters of

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Speaker 10: just very slightly negative GDP. I think that's what everybody's

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Speaker 10: sort of hoping for in order for us to finally

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Speaker 10: get past this inflation story.

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Speaker 1: Yeah, corporates are doing a pretty good job keeping keeping profits.

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Speaker 1: American companies are pretty good at making their adjustments when

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Speaker 1: they see cost rising. Does that continually? This earning season

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Speaker 1: looks pretty solid, But what about when we get to

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Speaker 1: the next one.

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Speaker 10: Well, this quarter Q or Q one, what we're reporting

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Speaker 10: for is expected to be the worst for the year.

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Speaker 10: We have expected two quarters of profit contractions and then

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Speaker 10: two quarters of profit expansion in the second half of

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Speaker 10: the year. As we know, GDP and profit growth, particularly

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Speaker 10: when you're talking about large cap profit growth don't always match.

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Speaker 10: They're not always perfectly correlated. So we could see a

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Speaker 10: very slight downturn in US GDP, but not necessarily see

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Speaker 10: that in your large cap when we're talking about your

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Speaker 10: S and P five hundred companies. Even so, we're still

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Speaker 10: looking at very tight profit growth for the year and

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Speaker 10: well below the influation levels. So we're i think looking

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Speaker 10: maybe at about three percent profit growth for the year,

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Speaker 10: which looks like it's going to be below what we

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Speaker 10: might see the average for the inflation rate for the year.

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Speaker 11: Gives us sense of also a bit more on what

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Speaker 11: you're making. The earning season in its nacencies are pretty

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Speaker 11: early on.

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Speaker 10: Right we've just got the financials, so we're just getting

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Speaker 10: a clearer picture of what the banking sector looks like.

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Speaker 10: And obviously it's just really more of the big banks

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Speaker 10: right now, but that is a very important to us

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Speaker 10: right now because they're the ones that can really make

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Speaker 10: a difference on just potentially how hard this forecaster recession

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Speaker 10: could be. I think it's interesting just the variance that

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Speaker 10: we're seeing across banks, just depending on where their revenues

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Speaker 10: are coming from. Obviously, investment banking has been really hurting

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Speaker 10: many companies, but if you're looking at money met wealth management,

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Speaker 10: that's been more of a bigger boost. The JP Morgan

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Speaker 10: obviously did extremely well, and so I think it's it's

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Speaker 10: a mix again as you've really got to Unfortunately, the

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Speaker 10: stocks really haven't moved no matter how they've reported where

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Speaker 10: their revenues have come from. It's been a pretty stable

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Speaker 10: ho hum reaction to these earnings reports. And we might

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Speaker 10: see that for the rest of the quarter.

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Speaker 1: We have seen what looks like a bottoming of the

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Speaker 1: regional bank share price.

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Speaker 2: Is just looking at.

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Speaker 1: Kr E here, you know, we've bounced in the past

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Speaker 1: ten days or so from around forty two to forty four.

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Speaker 1: Yet you know that's that's a long way from you know,

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Speaker 1: where they were, they were up in the mid sixties

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Speaker 1: before all of this started happening back in March. Is

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Speaker 1: it at least a good sign that the regional banks

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Speaker 1: have stabilized.

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Speaker 10: Yes, And I think just the lower volatility that we've

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Speaker 10: seen in the past five trading days is a good

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Speaker 10: sign as earnings reports come out. If we continue to

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Speaker 10: see lower volatility and not such big swings, I think

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Speaker 10: that's great because again that's a signaling that we're seeing

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Speaker 10: a potential bottoming or you know, a really continuation of

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Speaker 10: a really finally a bull market for the rest of

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Speaker 10: the year. So I think just stability is wonderful and

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Speaker 10: a very positive sign. And elsewhere, of course, free cash

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Speaker 10: flows rather, yes, that's one of my key points. So

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Speaker 10: as we're facing we're expecting credit tightening, and we know

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Speaker 10: that banks are increasing their ratios, increasing reserves, so and

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Speaker 10: and so forth. They are still concerned about how the

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Speaker 10: fallout is going to be and obviously increasing rates for

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Speaker 10: however long a period that might be. And so the

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Speaker 10: companies that have great free cash flowers that don't have

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Speaker 10: to borrow often of the companies that can weather out

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Speaker 10: these types of storms and also weather out any type

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Speaker 10: of inflate recession as well. And so typically software companies

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Speaker 10: always have some of the best free cash flow ratios

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Speaker 10: out there, but there were some also some you know,

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Speaker 10: unique winners like Chipotle actually has exceptional free cash flow,

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Speaker 10: which is unusual for a restaurant chain. But some other

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Speaker 10: winners like Apple and Adobe also very good and not

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Speaker 10: over price. You know, there's some great software companies with

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Speaker 10: great free cash flow, but they're a little pricey right now.

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Speaker 10: So those are some of my top top picks.

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Speaker 1: I would say, you're the second second person in two

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Speaker 1: days recommending Adobe, so that caught my attention in the notes.

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Speaker 1: So I just haven't a look at the stock price

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Speaker 1: from two seventy five to three eighty since October. So

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Speaker 1: it's been really quite a very solid run. It doesn't

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Speaker 1: scare you. You don't think it's still you don't think

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Speaker 1: that it's maybe had its gains.

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Speaker 10: No, I think there's still room Joing. Yes, this has

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Speaker 10: been one of my top picks for about a month now,

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Speaker 10: so I've been very happy with it, but I think

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Speaker 10: we still have room to run. I think it's still

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Speaker 10: and I don't remember it's from today's pricing, but I

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Speaker 10: think it has another thirty three percent from the analyst

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Speaker 10: target price, so I think there's still some more potential

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Speaker 10: upside there.

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Speaker 11: All right, what else you're looking.

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Speaker 4: At as well?

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Speaker 10: So I still like European stocks. I feel that while

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Speaker 10: some have had a nice run and certainly as as

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Speaker 10: gotten stronger, they took a bit of a hit, but

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Speaker 10: they've been still outperforming most US markets for the year.

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Speaker 10: I like anything that has to do with travel and

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Speaker 10: also luxury, so Ryanair has been one of my favorites

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Speaker 10: for the year as well as LVMH, just in another

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Speaker 10: stock that's had a very good run, but I think

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Speaker 10: still has room to grow and LVMH.

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Speaker 1: Does that mean that you have a positive view on

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Speaker 1: the Chinese.

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Speaker 10: Economy, Yes, or at least I think any type of

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Speaker 10: increased tourism, increased spending on the obviously on the higher end,

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Speaker 10: I think ELMH just has such a diversified portfolio of companies.

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Speaker 10: It doesn't have to all come from China. Just increase spending,

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Speaker 10: and we've seen that even in the US that at

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Speaker 10: the higher end consumers are still willing to spend more,

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Speaker 10: and I think they're really poised to take advantage of that.

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Speaker 1: Yeah, we're seeing quite a good run for LVMH. Just

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Speaker 1: indicating the prices here if you look at the ad

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Speaker 1: rs from about one twenty up to one ninety four

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Speaker 1: here after the two thirds of a percent game today,

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Speaker 1: out of time, erin, but thanks very much for joining

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Speaker 1: us here on Bloomberg Daybreak Asia. Aaron Gibbs, Senior Partner,

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Speaker 1: chief investment Officer at main Street Asset Management. This is

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