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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis and I'm Doug Krisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 1: Advanced micro Devices reporting second quarter earnings that did top

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Speaker 1: analyst estimates. AMD says it's making further inroads in the

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Speaker 1: race to develop artificial intelligence technology. More from Bloomberg's tom busby.

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Speaker 3: AMD earning fifty eight cents a share, beating estimates by

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Speaker 3: a penny, with revenues of five point three six billion

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Speaker 3: dollars just topping estimates. It's also forecasting revenue for the

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Speaker 3: current quarter at upwards of six billion dollars thanks to

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Speaker 3: gains in making AI accelerators, an area now dominated by

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Speaker 3: rival in Vidia, which CEO Lisa Sue said in a

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Speaker 3: statement increased by more than seven times in the quarter

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Speaker 3: as customers initiated or expanded program supporting future deployments of

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Speaker 3: its Instinct accelerators at scale. Tom busby Bloomberg, day Break Asia.

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Speaker 1: And Doug the Stalk is firm in late trading at

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Speaker 1: the moment, up two point four percent.

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Speaker 2: We go to Starbucks next after the beld. The company

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Speaker 2: reported quarterly sales below analyst estimates. We have more from

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Speaker 2: Bloomberg's Charlie Pellett.

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Speaker 4: It is a sign that momentum may be slowing for

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Speaker 4: the coffee giant amid higher prices and tighter pocketbooks. The

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Speaker 4: results contrast with those of McDonald's, which topped estimates despite

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Speaker 4: warnings of slowing growth. Starbucks earnings show that American consumers

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Speaker 4: may be starting to cut back on discretionary services such

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Speaker 4: as dining out. International same store sales grew twenty four

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Speaker 4: percent in the quarter, in line with estimates, power by

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Speaker 4: higher traffic That included higher than anticipated growth in China,

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Speaker 4: which is still recovering after extended COVID nineteen restrictions in

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Speaker 4: New York, Charlie Pellett Bloomberg Daybreak Asia, and.

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Speaker 1: In late trading their Starbucks down just a little more

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Speaker 1: than one percent. Well investors looked beyond China sales weakness

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Speaker 1: for Caterpillar to send shares up to a new high,

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Speaker 1: and we'll get you details on that in just a moment.

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Speaker 1: More from Bloomberg's Tracy Junkie.

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Speaker 5: Demand for Caterpillars earth moving equipment is still going strong

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Speaker 5: on much of planet Earth, but China is an exception.

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Speaker 5: While Caterpillar's second quarter earnings and revenue climbed well about estimates.

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Speaker 5: Sales in China were softer than the company anticipated. The

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Speaker 5: Caterpillar CEO called out weakness in excavators most used for

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Speaker 5: Chinese construction projects. Even so, he says the company's full

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Speaker 5: year earnings will be better than expected. Tracy Jonkie Bloomberg,

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Speaker 5: Daybreak Asia.

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Speaker 2: US lawmakers on Capitol Hill are investigating two firms over

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Speaker 2: there China investments. The story from Bloomberg's and Kates.

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Speaker 6: How Select Committee is looking into whether black Rock and

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Speaker 6: MSCI allegedly helped to facilitate American investment into Chinese companies

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Speaker 6: that have been blacklisted by the federal government for human

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Speaker 6: rights abuses and aiding the military. Black Rock, the world's

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Speaker 6: largest asset manager, has been ordered to turn over information

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Speaker 6: about the inclusion of Chinese firms and its mutual and

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Speaker 6: other funds. Financial services provider ms C is reviewing the

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Speaker 6: panel's request. Lawmakers say American companies should not be profiting

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Speaker 6: from investments that fuel the military advancement of the US's

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Speaker 6: foremost foreign adversary. In Washington and Kates Bloomberg, day Break Asia.

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Speaker 1: China's oil demand may have peaked for twenty twenty three.

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Speaker 1: Bloomberg's Joan Wong has more from Hong Kong.

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Speaker 7: Crude imports reached a three year high in June after

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Speaker 7: exceeding twelve million barrels a day in May. That may

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Speaker 7: seem like music to the ears of the bulls, but

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Speaker 7: a lot of that oil has been stockpiled as buyers

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Speaker 7: took advantage of lower prices to replenish inventories. Energy Aspects

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Speaker 7: says China's oil demand likely peaked at about sixteen million

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Speaker 7: barrels a day in the last quarter. The possibility of

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Speaker 7: more stimulus looms and that would propel prices higher, but

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Speaker 7: analysts say that might be more of a twenty twenty

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Speaker 7: four story in Hong Kong and joined Wong Bloomberg day

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Speaker 7: Break Asia.

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Speaker 1: So, Doug, if we take that story there that Joan

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Speaker 1: just did about oil perhaps having peaked given the slower

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Speaker 1: growthing China, and put that with the comments from Caterpillar,

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Speaker 1: it doesn't sound too good. Caterpillar is saying that equipment

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Speaker 1: sales in China were worse than expected. But then again,

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Speaker 1: once again, looking at Starbucks and McDonald's, you know it's

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Speaker 1: a different area. It's these are smaller purchases, you know,

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Speaker 1: people going and buying a cup of coffee or or

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Speaker 1: you know, a Mickey Di's burger. It's a different kind

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Speaker 1: of sales outlook in China based on what you're.

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Speaker 2: Doing most definitely, So if you're an official in Beijing, Brian,

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Speaker 2: how do you begin to target stimulus based on those

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Speaker 2: data points that you've just laid out there? What do

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Speaker 2: you do if you want to apply a little bit

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Speaker 2: more juice to get the economy going.

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Speaker 1: Well, particularly when you know one of the one of

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Speaker 1: the approaches is they want to get consumer spending. But

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Speaker 1: we see consumer spending on things like travel and restaurants

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Speaker 1: and that sort of thing, the big purchase items. That's

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Speaker 1: a little different. Confidence in investing for the future. A

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Speaker 1: lot of that is tied up in the in the

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Speaker 1: property market. And even though Caterpillar spoke of weakness in China,

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Speaker 1: the shares rocketed today up eight point nine percent, and

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Speaker 1: so you can tell that at least in the US

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Speaker 1: there is confidence about the future. We know that there's

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Speaker 1: been a lot of deficit spending and on the fiscal

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Speaker 1: side is a lot of juice there. And Caterpillar over

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Speaker 1: the past month up sixteen point seven percent. So if

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Speaker 1: you're looking for a broadening in the market in the US.

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Speaker 1: You're seeing it in industrial.

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Speaker 2: Yeah, speaking of deficit spending it we want to remember

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Speaker 2: that after the bell here in the US, Fitch lowered

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Speaker 2: the long term debt rating of the US to double

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Speaker 2: A plus from triple A. Even so, Fitch calls the

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Speaker 2: outlook stable. It says the downgrade does reflect the expected

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Speaker 2: fiscal deterioration over the next three years and a high

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Speaker 2: and growing general government debt burden. So could be some

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Speaker 2: tough times for the bond market ahead.

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Speaker 1: Yeah, all right, the big story of the hour. Now

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Speaker 1: it's time for Global News. Donald Trump charged in the

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Speaker 1: January six Special Council investigation at Baxter has Global News

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Speaker 1: from a nine to sixty newsroom in San Francisco.

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Speaker 8: Yeah, big day in history. You're right, Brian. I. We're

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Speaker 8: joined by Bloomberg Sound on Balance of Power co host

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Speaker 8: Joe Matthew. Joe, thanks for staying with us. Donald Trump indicted.

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Speaker 8: I want to go through the charges with you and

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Speaker 8: get political stuff, but I want to play first. A

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Speaker 8: quick cut from Special counsel Jack Smith.

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Speaker 9: Today, an indictment was unsealed, charging Donald J. Trump with

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Speaker 9: conspiring to defraud the United States, conspiring to disenfranchise voters

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Speaker 9: and conspiring and attempting to obstruct an official proceeding.

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Speaker 8: All right, Joe, that's a pretty straightforward and a punch

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Speaker 8: to the jaw that Donald Trump first participated in a

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Speaker 8: conspiracy to the fraud. Now, this needs to be adjudicated.

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Speaker 8: But in my thinking of it, and I want to

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Speaker 8: know whether it's your thinking as well, that means that

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Speaker 8: Donald Trump knew that he had lost the election, but

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Speaker 8: he went ahead with the attempt to overturn.

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Speaker 10: Well, that's right, and you know, we do have to

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Speaker 10: remind our listeners here that this is the beginning of

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Speaker 10: yet another long process. But these four charges are severe,

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Speaker 10: as you just heard from the Special Council, coming right

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Speaker 10: down to this conspiracy against the right to vote. That

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Speaker 10: was one that really jumped off the page for us.

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Speaker 10: And we can talk about that a little bit more.

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Speaker 10: But you know the fact that there was also no

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Speaker 10: charge related to the actual day of January sixth. There

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Speaker 10: was no insurrection charge for instance, that some thought might

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Speaker 10: be part of this package. It was, you know, affectionately

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Speaker 10: known as the January sixth investigation, but it's in fact

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Speaker 10: the attempts to overturn the election results. You know, think

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Speaker 10: about the pressure campaign against Mike Pence, the slates of

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Speaker 10: so called alternate electors. That's what these charges are getting

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Speaker 10: down to.

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Speaker 8: Yeah, so I do want to talk more about disenfranchised

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Speaker 8: voters and disrupt a proceeding. So I mean, yeah, they

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Speaker 8: were saying that basically, that he would say that people

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Speaker 8: who voted their vote didn't count, and then when that

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Speaker 8: didn't work, you know, going to the sending people to

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Speaker 8: the Senate. So you're right, there's a thin line between

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Speaker 8: whether he instigated the insurrection or whether he was separate

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Speaker 8: from it, isn't there.

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Speaker 10: Well, that's absolutely right, and it's a case that they

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Speaker 10: decided not to try to make here in terms of

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Speaker 10: inciting an insurrection or some other similar activity. These conspiracies,

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Speaker 10: and I will read directly from the indictment targeted a

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Speaker 10: bedrock function. It writes of the US federal government the

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Speaker 10: nation's process of collecting, counting, and certifying the results of

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Speaker 10: the presidential election. That would be the federal government function,

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Speaker 10: in this case, electing the president. It is remarkable to

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Speaker 10: read that on the page, even though many predicted that

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Speaker 10: this would be essentially where the grand jury was headed,

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Speaker 10: where this indictment was headed, but for a former president

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Speaker 10: to be running for reelection while this narrative is coming

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Speaker 10: from the Department of Justice.

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Speaker 8: Is historic now a recurring theme of sound on and

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Speaker 8: balance of power that you talk about almost every day.

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Speaker 8: Is it these things when they come down seem to

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Speaker 8: help Donald Trump? You know? So does this do the

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Speaker 8: same or are these more severe than the others?

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Speaker 10: Well, you better believe he's going to be fundraising off

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Speaker 10: of this. But the interesting wrinkle there is that many

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Speaker 10: of these folks who put in an average of thirty

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Speaker 10: four dollars and twenty cents based on his quarterly report

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Speaker 10: to sending money to the campaign and money spent by

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Speaker 10: the Political Action Committee, is in fact going to pay

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Speaker 10: his lawyers to the tune of forty million dollars. So

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Speaker 10: there are questions about what the feeling is going to

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Speaker 10: be right now, while motivated potentially by what some supporters

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Speaker 10: see as the weaponization of government, that's what he'll call

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Speaker 10: this third indictment. And again we are at number three

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Speaker 10: now with the potential for four to come. Number four

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Speaker 10: to come in August.

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Speaker 4: But they might.

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Speaker 10: Wonder where their money is going. Is it going to

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Speaker 10: help elect the former president or are we simply funding

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Speaker 10: his legal defense mechanism.

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Speaker 8: Well, I know it's not going to stop him. He's

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Speaker 8: going to want to get back out of the campaign

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Speaker 8: trailig would you think absolutely?

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Speaker 10: I'd say that he probably will schedule a roule tonight

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Speaker 10: as a matter of fact, and do whatever he can

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Speaker 10: to seize on this moment. Incidentally, and for just something

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Speaker 10: to note, by the way, Joe Biden, who's on vacation

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Speaker 10: in Delaware this beach this week on the beach, is

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Speaker 10: going to see Oppenheimer tonight. So two very different tracks

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Speaker 10: for these gentlemen.

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Speaker 8: Yeah, that really is ironic. So just very quickly going back,

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Speaker 8: does this hurt Donald Trump or no?

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Speaker 10: Well, it really depends on what timeline we asked that

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Speaker 10: question in and how we decide to, you know, kind

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Speaker 10: of fill in the blanks on what the reaction will be.

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Speaker 8: Here.

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Speaker 10: Look, if history is any short term history here, any guide,

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Speaker 10: it's going to help him in the meantime. We could

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Speaker 10: even go further to say that it might help him

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Speaker 10: win the nomination at it. But what happens in a

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Speaker 10: general election. We had to pull out today from the

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Speaker 10: New York Times and Seeena College a second round of

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Speaker 10: numbers that show him tied with Joe Biden in a

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Speaker 10: presumptive rematch forty three percent each. This is not going

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Speaker 10: to help him add to his base or win over

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Speaker 10: independent voters. So maybe I'll say no and yes in

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Speaker 10: the same answer.

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Speaker 8: All right, and we appreciate that. Joell, thank you for

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Speaker 8: staying with us and standing up. We really appreciate it.

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Speaker 8: That is the host of Sound on and Balance of Power.

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Speaker 8: Joe Matthew here on Bloomberg in San Francisco. I'm at

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Speaker 8: Baxter and this is Bloomberg.

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Speaker 2: Dave Breay, Kasha, and our guest this hour is George Bevoris.

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Speaker 2: He is executive director also the head of research at

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Speaker 2: K two Asset Management. He joins from Melbourne. George, thanks

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Speaker 2: for being with us. Were you surprised by that decision

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Speaker 2: on the part of the RBA yesterday?

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Speaker 11: Not so much. I mean the part of the RBI,

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Speaker 11: they've been quite aggressive with the right hawks and what's

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Speaker 11: unique to Australia very quickly for non Australian residences mortgages,

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Speaker 11: which are the key part of our economy on the

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Speaker 11: housing sector. I really prossed off the cash right unlock

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Speaker 11: the US example, and there's a lot of there's a

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Speaker 11: lot of fixed guide to floating. That's tripling the right

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Speaker 11: and so there's a lot of demand destruction underway and

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Speaker 11: the trajectory of in flash and will why to you

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Speaker 11: high from a purest point of view. From our point

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Speaker 11: of view, it's in the right direction and the poor

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Speaker 11: through the hawkish time seem like a reasonable outcome. But

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Speaker 11: the thing to reinforce I think Australians need to understand

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Speaker 11: is rates are staying higher for much longer and that's

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Speaker 11: a consequence of our soft landing.

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Speaker 4: Yeah, I'll have.

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Speaker 2: Issues Harby keeping rates on hold at four point one percent.

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Speaker 2: That's the target for the key rate there. In terms

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Speaker 2: of what happened after the bell here in the US,

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Speaker 2: we had Fitch, the ratings agency, lowering the long term

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Speaker 2: debt rating for the US to double A plus from

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Speaker 2: triple A. The outlook has been labeled stable. Fitch says

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Speaker 2: that this adjustment really reflects the expectation for some fiscal

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Speaker 2: deterioration in the US over the next three years. We're

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Speaker 2: going to be dealing with a high and growing general

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Speaker 2: government debt burden.

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Speaker 4: We knew that was the case.

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Speaker 2: One of the things that we're expecting tomorrow is the

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Speaker 2: government's plan for quarterly financing. What is your outlook for

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Speaker 2: the US bomb market right now? If the FED is

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Speaker 2: near the end of its tightening cycle, and maybe some

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Speaker 2: policy makers appearing to be a little confident that at

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Speaker 2: least in terms of direction, inflation is coming down, we

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Speaker 2: may not get much more in the way of tightening.

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Speaker 2: What's your outlook for the US bond market?

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Speaker 11: Yeah, and of the good question, and the FITCH is interesting,

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Speaker 11: but high level the FED. Hats off to the Fed.

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Speaker 11: So far it's done quite well. There is stubborn inflation

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Speaker 11: services component that's seventy two percent of that core index

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Speaker 11: that is stubbornly too high, but that's been again pedantic,

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Speaker 11: while we acknowledge its way too high. The core the

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Speaker 11: trajectory is in the right place. And then the resilience

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Speaker 11: throat across the North American economy and the pragmatism with

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Speaker 11: corporate America and winding down inventories, adjusting and pivoting to

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Speaker 11: protect margins, et cetera. Reflecting in the aggurate earnings basically

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Speaker 11: says that the bond market and yield inversion was way

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Speaker 11: too pessimistic, and it seems like that soft landing implies

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Speaker 11: high for longer rates, which is an issue for equity valuations,

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Speaker 11: but the pitch rating. The key point here is that

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Speaker 11: that the nuances the stateness can be unwound a bit

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Speaker 11: and reverse a little bit because of the warning shot

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Speaker 11: from a rating agency and plays be a bit more

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Speaker 11: prudent on the fiscal side. And that's an important discussion

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Speaker 11: to reinforce right across the developed world because it hasn't

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Speaker 11: been the case from rating agencies this open for a

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Speaker 11: number of years, and that's the question to ask for

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Speaker 11: both sovereigns and the developed world, and also provincial and

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Speaker 11: semi governments in Australia.

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Speaker 2: Speaking of being overly pessimistic, a number of analysts for

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Speaker 2: the US equity market have been calling for correction. Today

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Speaker 2: I noted the JP Morgans saying that the US equity

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Speaker 2: market may be pulling back in the coming weeks, although

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Speaker 2: JP Morgan Chase is expecting the S and P five

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Speaker 2: hundred to reassert itself around September before climbing to an

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Speaker 2: all time high. A lot of the earnings that we

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Speaker 2: have seen have been positive. And just to go back

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Speaker 2: to the point that we were discussing a moment ago

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Speaker 2: about the FED being near the end of its tightening cycle.

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Speaker 2: Do you think there is a lot to argue for

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Speaker 2: higher US equities.

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Speaker 11: Yeah, we're cautiously optimistic and we are overweight as not

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Speaker 11: as overweight as earlier on this year, but we like

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Speaker 11: the overweight and coarsely optimistic on the equities and underweight

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Speaker 11: the high yield and overweight the scene un security for

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Speaker 11: its worth. But going back to the equities, it's navigating

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Speaker 11: itself into that soft landing. Again, it was higher cash

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Speaker 11: rates for longer, so therefore that's not price into the

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Speaker 11: equity market. That could be a negative, but the positive

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Speaker 11: is the resilience again that Corporate America is pivoting, protecting margins,

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Speaker 11: running down inventory. We're required and obviously it's got the

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Speaker 11: tech rally to has been a bit of a tall wind,

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Speaker 11: and that narrow rally. Acknowledge that, you know, it's a

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Speaker 11: multi decade narrow rally for the SMP five hundred or

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Speaker 11: pretty much in Nasdaq as well. It is broadening out

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Speaker 11: because soft landing more predictability that the fedce engineered to

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Speaker 11: date calls that why doesn't that rally go into undervalued

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Speaker 11: stocks and say the Russell two thousand, where there's more

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Speaker 11: economic sensitivity. So there's a number of nuances playing there,

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Speaker 11: but the overweight and that measured overweight cautiously optimistic to

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Speaker 11: be maintained into next year. But that high for longer

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Speaker 11: rate levels, I should say, are basically a function of

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Speaker 11: success and that soft landing that's been engineered because of

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Speaker 11: the silience. Again, week by week we just get more confirmations. Yes,

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Speaker 11: IM is a little bit weaker, but in the aggregate

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Speaker 11: of the past few months, overwhelmingly there is a resilience

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Speaker 11: across there. And notwithstanding there is demand destruction happening, but

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Speaker 11: at a much much slower pace. And the Bears were

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Speaker 11: looking at earlier this year.

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Speaker 2: George, in the time we have left, let's take a

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Speaker 2: quick look at China. We did have numbers from Caterpillar

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Speaker 2: that cited very weak sales there. On the other hand,

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Speaker 2: if you look at the numbers from both Starbucks and

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Speaker 2: McDonald's Brian and I were talking about this a moment ago,

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Speaker 2: the consumer seems to be holding up reasonably well. What

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Speaker 2: is your outlook for China going forward? And talk to

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Speaker 2: me a little bit too about the extent to what

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Speaker 2: you would like to see a little bit more in

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Speaker 2: the way of targeted stimulus.

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Speaker 11: Yeah, very quickly, so bias here. So we're underweight China,

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Speaker 11: but we did pick up some short term alibarba in

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Speaker 11: the past five weeks or so, but underway structurally overweight

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Speaker 11: Southeast Asia as the consequence, but very quickly targeted policy.

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Speaker 11: They've been trying to do targeted policy now for two years.

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Speaker 11: It's not working. And if I can paraphrase Larry Summers

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Speaker 11: is always on your shows, it's all about the ultimate

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Speaker 11: confidence of mainland China.

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Speaker 4: It's just not there.

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Speaker 11: It's not coming through that animal spirits. So Beijing's got

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Speaker 11: to continue to pivot and be innovative and how it

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Speaker 11: targets this. And obviously these sentiments linked to a labor market,

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Speaker 11: then employment optimism, and obviously the housing market, which is

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Speaker 11: the largest housing market correction we've seen in the world

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Speaker 11: on the planet. So there's a lot of nuances there.

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Speaker 11: Beijing's just going to keep working at being innovative finding

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Speaker 11: how to target it because we're all waiting for to

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Speaker 11: be pretty much domestic demand to be a bigger proportion

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Speaker 11: of a jdpay for the decades ahead. That's an obvious

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Speaker 11: statement given where they've been coming from the export sector

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Speaker 11: of the path two and a half decades, but it's

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Speaker 11: got an nuance there, and it's very difficult to be

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Speaker 11: overweight long duration in mainland China, but tactically in a

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Speaker 11: very very short term, you can play it there.

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