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Speaker 1: Good morning. I'm Doug Chrisner and I'm Brian Curtis.

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Speaker 2: Here are the stories we're following today. Google parent Alphabet

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Speaker 2: reported second quarter revenue that beat analyst expectations and the

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Speaker 2: stock sword sales are boosted by advertising on the company's

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Speaker 2: search business. Google Search has weathered an advertising slowdown and

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Speaker 2: continues to dominate despite new competition from AI chatbots. Bloomberg's

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Speaker 2: Mendeep Singh says the company will have AI in mind

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Speaker 2: as it moves forward.

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Speaker 3: Everyone talks about Google Search and how effective it is.

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Speaker 3: I think they will incorporate the features from chat GPT

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Speaker 3: into their search page. Remember, whatever chat schipt is doing

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Speaker 3: will get commoditized eventually. There is like no nothing that

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Speaker 3: I feel Google cont replicate on their search page. So

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Speaker 3: my view is they're going to enhance a search page.

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Speaker 2: Separately, Alphabet said that its chief financial officer, Ruth Porat,

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Speaker 2: will fill in in a newly created role as president

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Speaker 2: and Chief Investment Officer, and that will start in September. Poraight,

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Speaker 2: we'ill serve as CFO for the next month as the

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Speaker 2: company searches for her replacement. We mentioned that the shares

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Speaker 2: had moved up there now six point one percent higher

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Speaker 2: in late trading.

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Speaker 1: We'll go to Microsoft next. We're looking at the stock

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Speaker 1: bouncing around here in late US trading down about nine

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Speaker 1: tens to one percent right now after the company reported

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Speaker 1: tep at fourth quarter sales, Microsoft saying it was held

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Speaker 1: back essentially by a deceleration in demand for the company's

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Speaker 1: cloud computing services. And now Microsoft is hoping its new

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Speaker 1: AI powered products will help boost revenue. Here is Bloomberg's

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Speaker 1: anarog runna.

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Speaker 4: When you look at anything generative AI, Microsoft is the

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Speaker 4: number one choice for a lot of the software Windows.

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Speaker 4: I mean, when you look at the when you want

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Speaker 4: to play AI in generative AI, when you want the chip,

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Speaker 4: you're going to go to Nvidia. Well, when you come

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Speaker 4: to software, Microsoft has a lead in terms of intellectual

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Speaker 4: capacity where they have shown no matter compared to everybody else.

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Speaker 4: Now they have to show that they can add revenue

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Speaker 4: to it, they can add more cloud usage to it,

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Speaker 4: et cetera.

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Speaker 1: That is bloomberg'sundrog rana. Now, by the way, Microsoft has

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Speaker 1: already invested about thirteen billion dollars in its partnership with

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Speaker 1: the startup open Ai, and Microsoft is planning to overhaul

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Speaker 1: most of its products and I would include on this

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Speaker 1: list Office, Windows, Azure, and the bing search engine all

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Speaker 1: around the OpenAI language model that is GPT four, which

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Speaker 1: is the latest Microsoft also adding a chat pot technology

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Speaker 1: similar to OpenAI's virtual hit Chat. GPT shares right now

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Speaker 1: in Microsoft took down about one point nine percent.

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Speaker 2: Right well, the social messaging app Snap posted a slight

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Speaker 2: earnings beat. The stock was hammered in late trading, and

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Speaker 2: we'll get to that in a moment. Snap surprised Wall

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Speaker 2: Street with a dismal sales forecast. We get that story

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Speaker 2: from Bloomberg's tom Buzzby.

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Speaker 5: Snap, the owner of Snapchat, reporting second quarter revenue of

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Speaker 5: one point zero seven billion dollars, just topping analyst forecast,

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Speaker 5: and it says it now has three hundred ninety seven

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Speaker 5: million daily users and expects to reach up to four

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Speaker 5: hundred and six million in the current quarter. But with

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Speaker 5: its digital advertising business struggling after recent changes to its

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Speaker 5: ad platform, including new kinds of ads and measurements, it's

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Speaker 5: projecting losses of between fifty to one hundred million dollars

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Speaker 5: in the third quarter, far more than the two million

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Speaker 5: dollars Wall Street was looking for. Tom Buzby Bloomberg Daybreak Asia.

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Speaker 2: Snapshare is now down seventeen point eight percent in late trading. Done.

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Speaker 1: We go to pac West next. The bank is being

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Speaker 1: acquired by Bank of California. This is an all stock

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Speaker 1: deal and we have more from Bloomberg's than these Pellegrini.

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Speaker 6: Well PacWest Bancor is the larger of the two, but

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Speaker 6: it is being bought by its smaller rival as instability

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Speaker 6: and regional banking continues to haunt the industry. Warburg Pinkis

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Speaker 6: and center Bridge Partners are investing four hundred million dollars

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Speaker 6: as part of the deal. They'll get about twenty percent

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Speaker 6: of the combined company and warrants to buy more shares.

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Speaker 6: Packwest stockholders will get about two thirds of a share

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Speaker 6: of Bank of California common stock, preach of their shares,

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Speaker 6: and the banks together will sell assets with the aim

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Speaker 6: of repaying thirteen billion dollars of wholesale borrowings. The combined

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Speaker 6: bank will have about thirty six billion dollars in assets,

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Speaker 6: that is less than what Paquest alone had at the

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Speaker 6: end of March, and the firms will carry the Bank

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Speaker 6: of California name and the deal is expected to close

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Speaker 6: by early next year. Denise Pelgritty Bloomberg day Break Asia.

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Speaker 2: Switching directions here at China has named Pan Gong hung

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Speaker 2: as the new governor of the People's Bank of China.

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Speaker 2: Bloomberg's Joan Wong has more on the appointment.

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Speaker 7: It's not a big surprise as Pan has already been

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Speaker 7: named the Communist Party Secretary at the PBOC, but it

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Speaker 7: is the first time in five years that the top

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Speaker 7: two positions are held by one person. Among Pond's top

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Speaker 7: priorities will be steering the economy through the current downturn.

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Speaker 7: The key could be recovery in the property market. Pan

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Speaker 7: is seen as being more hawkish on property regulation, but

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Speaker 7: the party's polar bureau has signaled a shift and stands

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Speaker 7: and that may mean policy e sing in the coming months.

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Speaker 7: In Hong Kong, I'm joining Wang Bloomberg Day Brigeisia, I'm Brian.

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Speaker 2: Curtis along with Doug Christners. So just a flurry of

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Speaker 2: developments in China. Just briefly. You have transparency there with

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Speaker 2: Pangong Chong, because after he was named party secretary, it

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Speaker 2: was pretty well leaked that he would become governor. You

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Speaker 2: have a complete lack of transparency on Tin Gung, the

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Speaker 2: former Foreign minister who has now disappeared, has been out

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Speaker 2: of action and out of sight for a month, and

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Speaker 2: now the old Foreign Minister Wangi steps back into the post.

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Speaker 2: And then you have the Pullet Bureau call which we

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Speaker 2: reported on extensively yesterday, which did have quite a bit

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Speaker 2: of transparency to it. So you put it all together, that's.

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Speaker 1: China, yeah, most definitely. And the Securities Regulatory Commission saying

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Speaker 1: that China will maintain stable financing channels in capital markets

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Speaker 1: for those real estate developers. And it's this sentiment on

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Speaker 1: maybe better times ahead for the property market in China

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Speaker 1: that has been the key driver of a lot of

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Speaker 1: the price actions, certainly that we saw overnight in Hong

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Speaker 1: Kong with Hang Sang up about four percent. And I

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Speaker 1: was talking earlier Brian about this property market index that

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Speaker 1: has been put together by the Shanghai Stock Exchange and

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Speaker 1: as near six and a half percent gained yesterday.

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Speaker 2: Well they all sored. Ten Cent was up more than

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Speaker 2: six percent, Ali Baba up six and a quarter percent,

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Speaker 2: JD dot Com up seven point seven percent. You know,

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Speaker 2: some analysts, Doug think that it's the bold call saying hey,

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Speaker 2: not so fast, on China stocks. But it's actually boulder

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Speaker 2: to say that it's different this time. It's something has

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Speaker 2: changed at the very top of the Communist Party. A lot, though,

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Speaker 2: as I heard you mentioned a short while ago, depends

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Speaker 2: on the implementation of the new measures, and as Morgan

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Speaker 2: Stanley said, the speed of the acting. But I think

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Speaker 2: it would be premature to be either all in or

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Speaker 2: all out as a result of what we got from

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Speaker 2: the Pullet Bureau. We just have to wait and see

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Speaker 2: how it gets done.

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Speaker 1: You're absolutely right. And over at Misoho Bank, the strategists

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Speaker 1: were saying that from what they understand coming out of

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Speaker 1: the readout from the met looks like more stimulus maybe

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Speaker 1: in the pipeline, and there is a risk that we

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Speaker 1: could see a much stronger offshore currency in the process.

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Speaker 2: Yeah, definitely a seven thirteen seventy two and the onshore

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Speaker 2: and the offshore virtually the same now, so the offshore

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Speaker 2: not trading at a big discount. That's a big deal.

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Speaker 2: All right. Now, it's time for global news. The change

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Speaker 2: at China's Foreign minister post has officially now taken place.

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Speaker 2: At Baxter has the story and the rest of the

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Speaker 2: news from the nine to sixty newsroom in San Francisco ed.

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Speaker 8: Yeah Bran, China's replaced farmer rising star Cheng Gong after

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Speaker 8: a mysterious one month absence. A veteran diplomat, Wang Yi,

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Speaker 8: will take over as foreign minister. The ministry had said

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Speaker 8: that Chin was off work for health reasons, without giving details,

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Speaker 8: and Bloomberg's Amrie Hordern reports a US as saying it

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Speaker 8: is still a mystery.

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Speaker 9: Well, we still don't know is what happened to Chang Goong.

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Speaker 9: This is the former US ambassador. He was elevated at

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Speaker 9: a very young age, the one of the youngest we've

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Speaker 9: seen in seventy year years to be a foreign minister

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Speaker 9: in China, handpicked, and he's been missing for a month.

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Speaker 9: We have not seen him since he took some diplomatic

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Speaker 9: engagements on June twenty fifth, and there's been a lot

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Speaker 9: of speculation.

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Speaker 8: Wang was Chin's predecessor and has filled in serving meetings

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Speaker 8: with national security advisors. Bid administration officials have a long,

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Speaker 8: times if sometimes combative relationship with Wang, and the US

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Speaker 8: State Department says Secretary Anthony Blincoln has met with Wang

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Speaker 8: several times and expects diplomacy to go on federal judges

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Speaker 8: struck down a stringent new asylum policy that Biden administration

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Speaker 8: is called crucial to managing the southern border. The rule

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Speaker 8: dis qualified most people from applying for asylum if they

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Speaker 8: crossed into the US without either securing an appointment or

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Speaker 8: approving they sought legal protection from another country along the way.

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Speaker 8: No words have yet on the condition of former US

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Speaker 8: Marine Trevor Reed, the American freed from America from Russia

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Speaker 8: in a prisoner swap last year, the State Department confirming

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Speaker 8: he was wounded fighting in the Ukraine War. State spokesman

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Speaker 8: vend And Patel.

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Speaker 10: Since the beginning of this war, we have warned that

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Speaker 10: US citizens who travel to Ukraine, especially with the purpose

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Speaker 10: of participating in fighting there, that they face significant risks.

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Speaker 8: Patel says they're trying to find out more information, but

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Speaker 8: that Reid was there on his own. Global surface ocean

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Speaker 8: temperatures in June were the highest in the one hundred

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Speaker 8: and seventy four years. Data has been kept. Fueled by

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Speaker 8: El Nino. Near Miami coastal Atlantic water temperatures are pushing

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Speaker 8: ninety degrees. Fahrenheights, eighteen year old son of Lebron James

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Speaker 8: Bronni James suffered a cardiac arrest during a basketball practice

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Speaker 8: at the University of Southern California. He was rushed at

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Speaker 8: the hospital where the latest word is that he's in

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Speaker 8: stable condition, that the family has asked for privacy and

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Speaker 8: the medical milestone in the US, for the first time

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Speaker 8: outside a clinical trial, a uterus transplant recipient has delivered

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Speaker 8: a healthy baby and now new mom named Mallory was

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Speaker 8: born without a uterus and was told that she would

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Speaker 8: never be able to biologically carry a child. She took

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Speaker 8: part in a program at the University of Alabama Hospital

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Speaker 8: and transplant surgeon doctor Page Poet says, yeah, success baby is.

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Speaker 6: Being born is always a special event.

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Speaker 3: But I'm using some strong words here, but I think

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Speaker 3: of these as our miracle babies.

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Speaker 8: The transplant followed nine months later by embryo transplant nine

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Speaker 8: months later. Mom and Baby Global News powered by more

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Speaker 8: than twenty seven hundred journalists and analysts in over one

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Speaker 8: hundred twenty countries. In San Francisco, I'm Ed Baxter, and

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Speaker 8: this is Bloomberg.

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Speaker 2: This is Bloomberg Daybreak Asia. I'm Brian Curtis in Hong

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Speaker 2: Kong along with Rashad Salamat in London, and our guest

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Speaker 2: is Anne Miletti, head of Active Equity at all Spring

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Speaker 2: Global Investments. And on a FED week, it's interesting and

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Speaker 2: unusual that we didn't have a FED story at the top,

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Speaker 2: so let me go there now. These next two FED

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Speaker 2: meetings will perhaps give us some interesting insight into whether

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Speaker 2: or not the FED is more interested in crushing inflation

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Speaker 2: or in engineering a soft landing. Now you can do both,

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Speaker 2: but I think these next couple of meetings will really

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Speaker 2: give us a good clear picture on how they're leaning

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Speaker 2: and how that affects markets. How do you think they're leaning?

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Speaker 11: Yeah, I think you're absolutely right. We're about to get

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Speaker 11: a clearer picture. And I still think they're leaning toward

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Speaker 11: making sure inflation is in check, and Chairman Powell has

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Speaker 11: tried to telegraph that, continues to telegraph that. I think

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Speaker 11: he's going to again try to telegraph that this week.

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Speaker 11: I don't think the FED can risk inflation getting out

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Speaker 11: of control again, and that is that's what he's going

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Speaker 11: to pay most attention to. I believe this week I

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Speaker 11: could be wrong, but that's my that that he's going

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Speaker 11: to be and remain hawkish on rates.

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Speaker 12: And absolutely you know, what was your takeaway? Then, ultimately,

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Speaker 12: when you saw the PMI numbers come out the other day,

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Speaker 12: did you see the signs of weakness creeping and cracks

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Speaker 12: in the US economy? If so, that reduces their wiggle

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Speaker 12: room in some in some parts of you will, because

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Speaker 12: if we see strength continuing as we have, it allows

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Speaker 12: them to elevate rates without really creating a recession headache.

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Speaker 11: Yeah, I absolutely think you're right, Chad. You know, we

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Speaker 11: are seeing weakness. Interestingly enough, I live in the middle

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Speaker 11: of the country in the US, and you know, work

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Speaker 11: around and live around a lot of people that really

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Speaker 11: have been feeling the pressures of inflation mid America. So

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Speaker 11: it's no secret to me that there is some signs

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Speaker 11: of slowing and we're seeing in some of the data

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Speaker 11: that has been coming out pm I included. However, I

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Speaker 11: think the Fed has again their focus has been on

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Speaker 11: the strength of the job market, the strength of the consumer.

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Speaker 11: Those things still make them a little nervous that although

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Speaker 11: the numbers are telling them things are going in the

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Speaker 11: right direction. You know, CPI inflation has been coming down,

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Speaker 11: that they've been you know, taking rates up has brought

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Speaker 11: things in the direction they want them. To go. They

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Speaker 11: still fear that if they release the pressure too early,

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Speaker 11: things could go back in the opposite direction, and I

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Speaker 11: just don't think they're willing to take that up.

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Speaker 2: So that has implemented, and that has obviously implications on

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Speaker 2: market action. So let's set out aside for just a moment,

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Speaker 2: because we do need to look at the earnings, not

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Speaker 2: so much specifically Google and Microsoft, but just generally from

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Speaker 2: the earnings. What's your takeaway on how the consumer is

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Speaker 2: holding up and how businesses through advertising holding up.

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Speaker 11: You know what's interesting is most of the signs in

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Speaker 11: the beginning of earning season have been fairly strong, although

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Speaker 11: we're starting to see some separation. Clearly snapped today is

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Speaker 11: showing us that not all companies are created equal, and

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Speaker 11: we know that.

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Speaker 3: I think that's.

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Speaker 11: Where our strength is having a lot of active management

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Speaker 11: on our platform, having portfolio managers and analysts that are

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Speaker 11: focused on company specific issues. That's where we can really

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Speaker 11: add strength. I think this is a market where you

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Speaker 11: want to look at individual companies and earning season. What

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Speaker 11: we're going to find is some companies are faring through

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Speaker 11: pretty well and adjusting to this changing macro environment, and

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Speaker 11: others really are going to be struggling, and I think

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Speaker 11: we're going to see that as earning season continues.

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Speaker 12: So which are the ones which are likely to struggle?

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Speaker 12: I mean, we're just looking at perhaps the industry groups

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Speaker 12: that you'd be looking at here. And how much does

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Speaker 12: it move the dial in the sense of I guess

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Speaker 12: your investment thesis because you know it's it's they may

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Speaker 12: already be priced in.

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Speaker 11: Yeah, you know. It's a really good point because the

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Speaker 11: market does have a good way of kind of anticipating

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Speaker 11: which companies might be what parts of the market might

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Speaker 11: be stronger than others. Right, And I think early on

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Speaker 11: the market was signaling to investors there could be some

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Speaker 11: strength at the upper end, larger cap companies for example, right,

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Speaker 11: And I know there's been a lot of focus on

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Speaker 11: the Big seven, magnificant Magnificent seven. However, large cap have

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Speaker 11: really outperformed small cap and I would say almost in

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Speaker 11: an overwhelming way. And I don't think that was so wrong.

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Speaker 11: But this has been going on now for over a decade,

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Speaker 11: and fundamentals really have kind of played out that the

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Speaker 11: larger you are, the better you can perform. But a

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Speaker 11: lot of those ten years were through a low rate,

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Speaker 11: low inflation cycle and the changing part of the cycle

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Speaker 11: that large cap also can carry on. I think as

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Speaker 11: we go into a slower economy, perhaps even if we

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Speaker 11: head into a recession on the other side of that,

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Speaker 11: on the other side of a recession, small cap companies

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Speaker 11: tend to grow faster. By the way, if you look deeper,

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Speaker 11: there are some small cap companies that are really good

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Speaker 11: free cash flow producers. Those are small cap companies that

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Speaker 11: don't need access to capital here. Those are the companies

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Speaker 11: that I think have been left out in the dark

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Speaker 11: where investors really could take advantage of opportunistic price.

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Speaker 2: We have seen a balance in the Russell two thousand

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Speaker 2: and some. But let me use a discussion of the

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Speaker 2: megacaps as a good transition into China stocks, because it

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Speaker 2: must have been hard to buy some of the megacaps

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Speaker 2: at the beginning of the year after the horrible year

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Speaker 2: that they had last year. The same dilemma faces us

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Speaker 2: now with China stocktion. We didn't get a lot of

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Speaker 2: carry through. On the second day today, the NASDAK Golden

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Speaker 2: Dragon index was only up a third of one percent.

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Speaker 2: So I guess investors are kind of like saying, show

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Speaker 2: me the money. Let's see what they do. Are you

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Speaker 2: in that camp or are you kind of like, hey,

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Speaker 2: let's get out there and buy.

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Speaker 11: Yeah, it's such an interesting point, Brian, and I think

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Speaker 11: when I talk to our experts in the emerging markets,

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Speaker 11: what they're saying to me is, look, it's not all

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Speaker 11: that different what we're seeing in China from what we

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Speaker 11: saw in domestic markets. The top down data from China

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Speaker 11: really has been sold, but when you look at the

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Speaker 11: bottom up analysis, earnings really have been resilient in some

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Speaker 11: of the companies. Right, So top down data tells one story,

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Speaker 11: but there are real big differences when you look region

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Speaker 11: by region, when you look at individual companies, and some

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Speaker 11: of these companies are adjusting to the change in environment

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Speaker 11: into the slower growth much better than others. And so

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Speaker 11: I do think it is a market that our you know,

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Speaker 11: teams believe they can invest in and they want to

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Speaker 11: take advantage of these prices. Look, there's a lot of

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Speaker 11: moving dynamics in China. I'm not the expert, but thank goodness,

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Speaker 11: we do have those experts and they believe, you know,

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Speaker 11: you got to take advantage. Is now the time to

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Speaker 11: extreme overweight China. I don't think they're quite there yet,

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Speaker 11: but there's so many other merging markets that are looking

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Speaker 11: attractive to us that I think it is a place,

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Speaker 11: you know, where investors have been underinvested and that can

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Speaker 11: provide real opportunity.

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