Speaker 1: Good morning.
Speaker 2: I'm Brian Curtis and I'm Doug Krisner. Here are the
Speaker 2: stories we're following today.
Speaker 1: Advanced micro Devices reporting second quarter earnings that did top
Speaker 1: analyst estimates. AMD says it's making further inroads in the
Speaker 1: race to develop artificial intelligence technology. More from Bloomberg's tom busby.
Speaker 3: AMD earning fifty eight cents a share, beating estimates by
Speaker 3: a penny, with revenues of five point three six billion
Speaker 3: dollars just topping estimates. It's also forecasting revenue for the
Speaker 3: current quarter at upwards of six billion dollars thanks to
Speaker 3: gains in making AI accelerators, an area now dominated by
Speaker 3: rival in Vidia, which CEO Lisa Sue said in a
Speaker 3: statement increased by more than seven times in the quarter
Speaker 3: as customers initiated or expanded program supporting future deployments of
Speaker 3: its Instinct accelerators at scale. Tom busby Bloomberg, day Break Asia.
Speaker 1: And Doug the Stalk is firm in late trading at
Speaker 1: the moment, up two point four percent.
Speaker 2: We go to Starbucks next after the beld. The company
Speaker 2: reported quarterly sales below analyst estimates. We have more from
Speaker 2: Bloomberg's Charlie Pellett.
Speaker 4: It is a sign that momentum may be slowing for
Speaker 4: the coffee giant amid higher prices and tighter pocketbooks. The
Speaker 4: results contrast with those of McDonald's, which topped estimates despite
Speaker 4: warnings of slowing growth. Starbucks earnings show that American consumers
Speaker 4: may be starting to cut back on discretionary services such
Speaker 4: as dining out. International same store sales grew twenty four
Speaker 4: percent in the quarter, in line with estimates, power by
Speaker 4: higher traffic That included higher than anticipated growth in China,
Speaker 4: which is still recovering after extended COVID nineteen restrictions in
Speaker 4: New York, Charlie Pellett Bloomberg Daybreak Asia, and.
Speaker 1: In late trading their Starbucks down just a little more
Speaker 1: than one percent. Well investors looked beyond China sales weakness
Speaker 1: for Caterpillar to send shares up to a new high,
Speaker 1: and we'll get you details on that in just a moment.
Speaker 1: More from Bloomberg's Tracy Junkie.
Speaker 5: Demand for Caterpillars earth moving equipment is still going strong
Speaker 5: on much of planet Earth, but China is an exception.
Speaker 5: While Caterpillar's second quarter earnings and revenue climbed well about estimates.
Speaker 5: Sales in China were softer than the company anticipated. The
Speaker 5: Caterpillar CEO called out weakness in excavators most used for
Speaker 5: Chinese construction projects. Even so, he says the company's full
Speaker 5: year earnings will be better than expected. Tracy Jonkie Bloomberg,
Speaker 5: Daybreak Asia.
Speaker 2: US lawmakers on Capitol Hill are investigating two firms over
Speaker 2: there China investments. The story from Bloomberg's and Kates.
Speaker 6: How Select Committee is looking into whether black Rock and
Speaker 6: MSCI allegedly helped to facilitate American investment into Chinese companies
Speaker 6: that have been blacklisted by the federal government for human
Speaker 6: rights abuses and aiding the military. Black Rock, the world's
Speaker 6: largest asset manager, has been ordered to turn over information
Speaker 6: about the inclusion of Chinese firms and its mutual and
Speaker 6: other funds. Financial services provider ms C is reviewing the
Speaker 6: panel's request. Lawmakers say American companies should not be profiting
Speaker 6: from investments that fuel the military advancement of the US's
Speaker 6: foremost foreign adversary. In Washington and Kates Bloomberg, day Break Asia.
Speaker 1: China's oil demand may have peaked for twenty twenty three.
Speaker 1: Bloomberg's Joan Wong has more from Hong Kong.
Speaker 7: Crude imports reached a three year high in June after
Speaker 7: exceeding twelve million barrels a day in May. That may
Speaker 7: seem like music to the ears of the bulls, but
Speaker 7: a lot of that oil has been stockpiled as buyers
Speaker 7: took advantage of lower prices to replenish inventories. Energy Aspects
Speaker 7: says China's oil demand likely peaked at about sixteen million
Speaker 7: barrels a day in the last quarter. The possibility of
Speaker 7: more stimulus looms and that would propel prices higher, but
Speaker 7: analysts say that might be more of a twenty twenty
Speaker 7: four story in Hong Kong and joined Wong Bloomberg day
Speaker 7: Break Asia.
Speaker 1: So, Doug, if we take that story there that Joan
Speaker 1: just did about oil perhaps having peaked given the slower
Speaker 1: growthing China, and put that with the comments from Caterpillar,
Speaker 1: it doesn't sound too good. Caterpillar is saying that equipment
Speaker 1: sales in China were worse than expected. But then again,
Speaker 1: once again, looking at Starbucks and McDonald's, you know it's
Speaker 1: a different area. It's these are smaller purchases, you know,
Speaker 1: people going and buying a cup of coffee or or
Speaker 1: you know, a Mickey Di's burger. It's a different kind
Speaker 1: of sales outlook in China based on what you're.
Speaker 2: Doing most definitely, So if you're an official in Beijing, Brian,
Speaker 2: how do you begin to target stimulus based on those
Speaker 2: data points that you've just laid out there? What do
Speaker 2: you do if you want to apply a little bit
Speaker 2: more juice to get the economy going.
Speaker 1: Well, particularly when you know one of the one of
Speaker 1: the approaches is they want to get consumer spending. But
Speaker 1: we see consumer spending on things like travel and restaurants
Speaker 1: and that sort of thing, the big purchase items. That's
Speaker 1: a little different. Confidence in investing for the future. A
Speaker 1: lot of that is tied up in the in the
Speaker 1: property market. And even though Caterpillar spoke of weakness in China,
Speaker 1: the shares rocketed today up eight point nine percent, and
Speaker 1: so you can tell that at least in the US
Speaker 1: there is confidence about the future. We know that there's
Speaker 1: been a lot of deficit spending and on the fiscal
Speaker 1: side is a lot of juice there. And Caterpillar over
Speaker 1: the past month up sixteen point seven percent. So if
Speaker 1: you're looking for a broadening in the market in the US.
Speaker 1: You're seeing it in industrial.
Speaker 2: Yeah, speaking of deficit spending it we want to remember
Speaker 2: that after the bell here in the US, Fitch lowered
Speaker 2: the long term debt rating of the US to double
Speaker 2: A plus from triple A. Even so, Fitch calls the
Speaker 2: outlook stable. It says the downgrade does reflect the expected
Speaker 2: fiscal deterioration over the next three years and a high
Speaker 2: and growing general government debt burden. So could be some
Speaker 2: tough times for the bond market ahead.
Speaker 1: Yeah, all right, the big story of the hour. Now
Speaker 1: it's time for Global News. Donald Trump charged in the
Speaker 1: January six Special Council investigation at Baxter has Global News
Speaker 1: from a nine to sixty newsroom in San Francisco.
Speaker 8: Yeah, big day in history. You're right, Brian. I. We're
Speaker 8: joined by Bloomberg Sound on Balance of Power co host
Speaker 8: Joe Matthew. Joe, thanks for staying with us. Donald Trump indicted.
Speaker 8: I want to go through the charges with you and
Speaker 8: get political stuff, but I want to play first. A
Speaker 8: quick cut from Special counsel Jack Smith.
Speaker 9: Today, an indictment was unsealed, charging Donald J. Trump with
Speaker 9: conspiring to defraud the United States, conspiring to disenfranchise voters
Speaker 9: and conspiring and attempting to obstruct an official proceeding.
Speaker 8: All right, Joe, that's a pretty straightforward and a punch
Speaker 8: to the jaw that Donald Trump first participated in a
Speaker 8: conspiracy to the fraud. Now, this needs to be adjudicated.
Speaker 8: But in my thinking of it, and I want to
Speaker 8: know whether it's your thinking as well, that means that
Speaker 8: Donald Trump knew that he had lost the election, but
Speaker 8: he went ahead with the attempt to overturn.
Speaker 10: Well, that's right, and you know, we do have to
Speaker 10: remind our listeners here that this is the beginning of
Speaker 10: yet another long process. But these four charges are severe,
Speaker 10: as you just heard from the Special Council, coming right
Speaker 10: down to this conspiracy against the right to vote. That
Speaker 10: was one that really jumped off the page for us.
Speaker 10: And we can talk about that a little bit more.
Speaker 10: But you know the fact that there was also no
Speaker 10: charge related to the actual day of January sixth. There
Speaker 10: was no insurrection charge for instance, that some thought might
Speaker 10: be part of this package. It was, you know, affectionately
Speaker 10: known as the January sixth investigation, but it's in fact
Speaker 10: the attempts to overturn the election results. You know, think
Speaker 10: about the pressure campaign against Mike Pence, the slates of
Speaker 10: so called alternate electors. That's what these charges are getting
Speaker 10: down to.
Speaker 8: Yeah, so I do want to talk more about disenfranchised
Speaker 8: voters and disrupt a proceeding. So I mean, yeah, they
Speaker 8: were saying that basically, that he would say that people
Speaker 8: who voted their vote didn't count, and then when that
Speaker 8: didn't work, you know, going to the sending people to
Speaker 8: the Senate. So you're right, there's a thin line between
Speaker 8: whether he instigated the insurrection or whether he was separate
Speaker 8: from it, isn't there.
Speaker 10: Well, that's absolutely right, and it's a case that they
Speaker 10: decided not to try to make here in terms of
Speaker 10: inciting an insurrection or some other similar activity. These conspiracies,
Speaker 10: and I will read directly from the indictment targeted a
Speaker 10: bedrock function. It writes of the US federal government the
Speaker 10: nation's process of collecting, counting, and certifying the results of
Speaker 10: the presidential election. That would be the federal government function,
Speaker 10: in this case, electing the president. It is remarkable to
Speaker 10: read that on the page, even though many predicted that
Speaker 10: this would be essentially where the grand jury was headed,
Speaker 10: where this indictment was headed, but for a former president
Speaker 10: to be running for reelection while this narrative is coming
Speaker 10: from the Department of Justice.
Speaker 8: Is historic now a recurring theme of sound on and
Speaker 8: balance of power that you talk about almost every day.
Speaker 8: Is it these things when they come down seem to
Speaker 8: help Donald Trump? You know? So does this do the
Speaker 8: same or are these more severe than the others?
Speaker 10: Well, you better believe he's going to be fundraising off
Speaker 10: of this. But the interesting wrinkle there is that many
Speaker 10: of these folks who put in an average of thirty
Speaker 10: four dollars and twenty cents based on his quarterly report
Speaker 10: to sending money to the campaign and money spent by
Speaker 10: the Political Action Committee, is in fact going to pay
Speaker 10: his lawyers to the tune of forty million dollars. So
Speaker 10: there are questions about what the feeling is going to
Speaker 10: be right now, while motivated potentially by what some supporters
Speaker 10: see as the weaponization of government, that's what he'll call
Speaker 10: this third indictment. And again we are at number three
Speaker 10: now with the potential for four to come. Number four
Speaker 10: to come in August.
Speaker 4: But they might.
Speaker 10: Wonder where their money is going. Is it going to
Speaker 10: help elect the former president or are we simply funding
Speaker 10: his legal defense mechanism.
Speaker 8: Well, I know it's not going to stop him. He's
Speaker 8: going to want to get back out of the campaign
Speaker 8: trailig would you think absolutely?
Speaker 10: I'd say that he probably will schedule a roule tonight
Speaker 10: as a matter of fact, and do whatever he can
Speaker 10: to seize on this moment. Incidentally, and for just something
Speaker 10: to note, by the way, Joe Biden, who's on vacation
Speaker 10: in Delaware this beach this week on the beach, is
Speaker 10: going to see Oppenheimer tonight. So two very different tracks
Speaker 10: for these gentlemen.
Speaker 8: Yeah, that really is ironic. So just very quickly going back,
Speaker 8: does this hurt Donald Trump or no?
Speaker 10: Well, it really depends on what timeline we asked that
Speaker 10: question in and how we decide to, you know, kind
Speaker 10: of fill in the blanks on what the reaction will be.
Speaker 8: Here.
Speaker 10: Look, if history is any short term history here, any guide,
Speaker 10: it's going to help him in the meantime. We could
Speaker 10: even go further to say that it might help him
Speaker 10: win the nomination at it. But what happens in a
Speaker 10: general election. We had to pull out today from the
Speaker 10: New York Times and Seeena College a second round of
Speaker 10: numbers that show him tied with Joe Biden in a
Speaker 10: presumptive rematch forty three percent each. This is not going
Speaker 10: to help him add to his base or win over
Speaker 10: independent voters. So maybe I'll say no and yes in
Speaker 10: the same answer.
Speaker 8: All right, and we appreciate that. Joell, thank you for
Speaker 8: staying with us and standing up. We really appreciate it.
Speaker 8: That is the host of Sound on and Balance of Power.
Speaker 8: Joe Matthew here on Bloomberg in San Francisco. I'm at
Speaker 8: Baxter and this is Bloomberg.
Speaker 2: Dave Breay, Kasha, and our guest this hour is George Bevoris.
Speaker 2: He is executive director also the head of research at
Speaker 2: K two Asset Management. He joins from Melbourne. George, thanks
Speaker 2: for being with us. Were you surprised by that decision
Speaker 2: on the part of the RBA yesterday?
Speaker 11: Not so much. I mean the part of the RBI,
Speaker 11: they've been quite aggressive with the right hawks and what's
Speaker 11: unique to Australia very quickly for non Australian residences mortgages,
Speaker 11: which are the key part of our economy on the
Speaker 11: housing sector. I really prossed off the cash right unlock
Speaker 11: the US example, and there's a lot of there's a
Speaker 11: lot of fixed guide to floating. That's tripling the right
Speaker 11: and so there's a lot of demand destruction underway and
Speaker 11: the trajectory of in flash and will why to you
Speaker 11: high from a purest point of view. From our point
Speaker 11: of view, it's in the right direction and the poor
Speaker 11: through the hawkish time seem like a reasonable outcome. But
Speaker 11: the thing to reinforce I think Australians need to understand
Speaker 11: is rates are staying higher for much longer and that's
Speaker 11: a consequence of our soft landing.
Speaker 4: Yeah, I'll have.
Speaker 2: Issues Harby keeping rates on hold at four point one percent.
Speaker 2: That's the target for the key rate there. In terms
Speaker 2: of what happened after the bell here in the US,
Speaker 2: we had Fitch, the ratings agency, lowering the long term
Speaker 2: debt rating for the US to double A plus from
Speaker 2: triple A. The outlook has been labeled stable. Fitch says
Speaker 2: that this adjustment really reflects the expectation for some fiscal
Speaker 2: deterioration in the US over the next three years. We're
Speaker 2: going to be dealing with a high and growing general
Speaker 2: government debt burden.
Speaker 4: We knew that was the case.
Speaker 2: One of the things that we're expecting tomorrow is the
Speaker 2: government's plan for quarterly financing. What is your outlook for
Speaker 2: the US bomb market right now? If the FED is
Speaker 2: near the end of its tightening cycle, and maybe some
Speaker 2: policy makers appearing to be a little confident that at
Speaker 2: least in terms of direction, inflation is coming down, we
Speaker 2: may not get much more in the way of tightening.
Speaker 2: What's your outlook for the US bond market?
Speaker 11: Yeah, and of the good question, and the FITCH is interesting,
Speaker 11: but high level the FED. Hats off to the Fed.
Speaker 11: So far it's done quite well. There is stubborn inflation
Speaker 11: services component that's seventy two percent of that core index
Speaker 11: that is stubbornly too high, but that's been again pedantic,
Speaker 11: while we acknowledge its way too high. The core the
Speaker 11: trajectory is in the right place. And then the resilience
Speaker 11: throat across the North American economy and the pragmatism with
Speaker 11: corporate America and winding down inventories, adjusting and pivoting to
Speaker 11: protect margins, et cetera. Reflecting in the aggurate earnings basically
Speaker 11: says that the bond market and yield inversion was way
Speaker 11: too pessimistic, and it seems like that soft landing implies
Speaker 11: high for longer rates, which is an issue for equity valuations,
Speaker 11: but the pitch rating. The key point here is that
Speaker 11: that the nuances the stateness can be unwound a bit
Speaker 11: and reverse a little bit because of the warning shot
Speaker 11: from a rating agency and plays be a bit more
Speaker 11: prudent on the fiscal side. And that's an important discussion
Speaker 11: to reinforce right across the developed world because it hasn't
Speaker 11: been the case from rating agencies this open for a
Speaker 11: number of years, and that's the question to ask for
Speaker 11: both sovereigns and the developed world, and also provincial and
Speaker 11: semi governments in Australia.
Speaker 2: Speaking of being overly pessimistic, a number of analysts for
Speaker 2: the US equity market have been calling for correction. Today
Speaker 2: I noted the JP Morgans saying that the US equity
Speaker 2: market may be pulling back in the coming weeks, although
Speaker 2: JP Morgan Chase is expecting the S and P five
Speaker 2: hundred to reassert itself around September before climbing to an
Speaker 2: all time high. A lot of the earnings that we
Speaker 2: have seen have been positive. And just to go back
Speaker 2: to the point that we were discussing a moment ago
Speaker 2: about the FED being near the end of its tightening cycle.
Speaker 2: Do you think there is a lot to argue for
Speaker 2: higher US equities.
Speaker 11: Yeah, we're cautiously optimistic and we are overweight as not
Speaker 11: as overweight as earlier on this year, but we like
Speaker 11: the overweight and coarsely optimistic on the equities and underweight
Speaker 11: the high yield and overweight the scene un security for
Speaker 11: its worth. But going back to the equities, it's navigating
Speaker 11: itself into that soft landing. Again, it was higher cash
Speaker 11: rates for longer, so therefore that's not price into the
Speaker 11: equity market. That could be a negative, but the positive
Speaker 11: is the resilience again that Corporate America is pivoting, protecting margins,
Speaker 11: running down inventory. We're required and obviously it's got the
Speaker 11: tech rally to has been a bit of a tall wind,
Speaker 11: and that narrow rally. Acknowledge that, you know, it's a
Speaker 11: multi decade narrow rally for the SMP five hundred or
Speaker 11: pretty much in Nasdaq as well. It is broadening out
Speaker 11: because soft landing more predictability that the fedce engineered to
Speaker 11: date calls that why doesn't that rally go into undervalued
Speaker 11: stocks and say the Russell two thousand, where there's more
Speaker 11: economic sensitivity. So there's a number of nuances playing there,
Speaker 11: but the overweight and that measured overweight cautiously optimistic to
Speaker 11: be maintained into next year. But that high for longer
Speaker 11: rate levels, I should say, are basically a function of
Speaker 11: success and that soft landing that's been engineered because of
Speaker 11: the silience. Again, week by week we just get more confirmations. Yes,
Speaker 11: IM is a little bit weaker, but in the aggregate
Speaker 11: of the past few months, overwhelmingly there is a resilience
Speaker 11: across there. And notwithstanding there is demand destruction happening, but
Speaker 11: at a much much slower pace. And the Bears were
Speaker 11: looking at earlier this year.
Speaker 2: George, in the time we have left, let's take a
Speaker 2: quick look at China. We did have numbers from Caterpillar
Speaker 2: that cited very weak sales there. On the other hand,
Speaker 2: if you look at the numbers from both Starbucks and
Speaker 2: McDonald's Brian and I were talking about this a moment ago,
Speaker 2: the consumer seems to be holding up reasonably well. What
Speaker 2: is your outlook for China going forward? And talk to
Speaker 2: me a little bit too about the extent to what
Speaker 2: you would like to see a little bit more in
Speaker 2: the way of targeted stimulus.
Speaker 11: Yeah, very quickly, so bias here. So we're underweight China,
Speaker 11: but we did pick up some short term alibarba in
Speaker 11: the past five weeks or so, but underway structurally overweight
Speaker 11: Southeast Asia as the consequence, but very quickly targeted policy.
Speaker 11: They've been trying to do targeted policy now for two years.
Speaker 11: It's not working. And if I can paraphrase Larry Summers
Speaker 11: is always on your shows, it's all about the ultimate
Speaker 11: confidence of mainland China.
Speaker 4: It's just not there.
Speaker 11: It's not coming through that animal spirits. So Beijing's got
Speaker 11: to continue to pivot and be innovative and how it
Speaker 11: targets this. And obviously these sentiments linked to a labor market,
Speaker 11: then employment optimism, and obviously the housing market, which is
Speaker 11: the largest housing market correction we've seen in the world
Speaker 11: on the planet. So there's a lot of nuances there.
Speaker 11: Beijing's just going to keep working at being innovative finding
Speaker 11: how to target it because we're all waiting for to
Speaker 11: be pretty much domestic demand to be a bigger proportion
Speaker 11: of a jdpay for the decades ahead. That's an obvious
Speaker 11: statement given where they've been coming from the export sector
Speaker 11: of the path two and a half decades, but it's
Speaker 11: got an nuance there, and it's very difficult to be
Speaker 11: overweight long duration in mainland China, but tactically in a
Speaker 11: very very short term, you can play it there.
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