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Speaker 1: Good morning.

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Speaker 2: I'm Nathan Hager and I'm Karen Moscow. Here are the

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Speaker 2: stories we're following today.

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Speaker 3: The drop inequities this morning follows economic news out of Asia.

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Speaker 3: The prospect of deflation is wearing its head in China.

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Speaker 3: The country's consumer inflation rate ease to zero in June,

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Speaker 3: while producer prices fell further into deflation territory. Bloomberg Daybreak

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Speaker 3: Asia anchor Brian Curtis has more from Hong Kong.

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Speaker 4: The CPI was unchanged from last year. That was lower

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Speaker 4: than a Bloomberg survey estimate of a zero point two

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Speaker 4: percent gain. The inflation data adds to evidence that the

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Speaker 4: economic recovery is cooling. Core inflation slowed to zero point

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Speaker 4: four percent. In the meantime, Producer price is falling five

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Speaker 4: point four percent. That compared with a four point six

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Speaker 4: percent drop in the previous month, and it was lower

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Speaker 4: than our survey estimate in All Kong. Brian Curtis, Bloomberg.

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Speaker 5: Daybreak, All right, Brian, thanks well.

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Speaker 2: Janet Yellen is fresh offer trip to China, and the

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Speaker 2: Treasury Secretary is striking up positive.

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Speaker 5: Tone on relations.

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Speaker 2: She's assuring Chinese officials that the US won't hold back

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Speaker 2: its economic growth.

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Speaker 6: I believe that my bilateral meetings, which total about ten

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Speaker 6: hours over two days, served as a step forward in

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Speaker 6: our effort to put the US China relationship on a

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Speaker 6: surer footing.

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Speaker 2: Well, Yellen says the US is not seeking a full

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Speaker 2: of the coupling from China. When it comes to her

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Speaker 2: own economy, Yellen remains optimistic, but says she cannot rule

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Speaker 2: out a US recession.

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Speaker 6: It's not completely off the table, but we would expect,

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Speaker 6: with the job market as strong as it is now,

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Speaker 6: to see a slower pace of ongoing job gains.

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Speaker 2: And Yellen made the comments unfaced the nation from CBS.

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Speaker 2: Catch the program every Sunday on Bloomberg Radio.

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Speaker 3: Well Now, Karen, It's President Biden's turn for a trip overseas.

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Speaker 3: He's on his way to a NATO meeting in Lithuania,

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Speaker 3: but first the President stops in London to discuss Ukraine

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Speaker 3: with UK Prime Minister Rishi Sunak. Morris has more from

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Speaker 3: our Bloomberg ninety nine one newsroom in Washington.

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Speaker 7: Biden will meet with Sunek to compare notes on their

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Speaker 7: support for Ukraine. After several allies questioned Biden's decision to

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Speaker 7: send cluster bombs to Ukraine. They're also expected to discuss

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Speaker 7: the Atlantic Declaration, a potential trade pack that could help

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Speaker 7: UK lawmakers qualify for electric vehicle subsidies. Brokering a deal

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Speaker 7: with Turkey could also come up. Turkey has blocked Sweden

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Speaker 7: from joining NATO, and Biden may also bring up post

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Speaker 7: Brexit arrangements for Northern Ireland. Biden will also have tea

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Speaker 7: with King Charles the Third at Windsor Castle, their first

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Speaker 7: meeting since his coronation in Washington. I'm Amy Morris, Bloomberg.

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Speaker 5: Daybreak, Amy, thank you all.

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Speaker 2: Back here in the US, much of the country is

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Speaker 2: bracing for severe heat. Near record temperatures will spread from

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Speaker 2: the southwest across Texas and the Great Plains this week.

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Speaker 2: Temperatures of one hundred degrees or more are expected to

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Speaker 2: strain electricity networks. The blistering heat will hit the southern

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Speaker 2: US and northern Mexico, challenging local records.

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Speaker 3: All right, let's turn to the equity markets now, Karen,

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Speaker 3: The S and P five hundreds coming off its second

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Speaker 3: losing week over the past three and some investors see

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Speaker 3: more pain ahead. Let's get the details from Bloomberg's Lisa

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Speaker 3: Mateo in New York.

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Speaker 8: According to Bloomberg's latest Markets Live Pole survey, profit warnings

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Speaker 8: and fears of higher interest rates are threatening the key

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Speaker 8: US stock indicator. Fifty five percent of respondents say the

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Speaker 8: upcoming earning season will hurt stocks. Forty two percent say

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Speaker 8: the biggest reason will be the impact of further tightening

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Speaker 8: of financial conditions. Many predict the Federal Reserve will raise

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Speaker 8: interest rates later this month after data from last week

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Speaker 8: showed moderating payrolls but stronger than expected wage growth in June.

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Speaker 8: In New York, Lisa Mateo Bloomberg Daybreak.

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Speaker 2: All right, Lisa, thank you well. Earnings are front and

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Speaker 2: center for many on Wall Street. The season kicks off

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Speaker 2: in earnest this week, and we get a preview from

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Speaker 2: Bloomberg's Charlie Pellett.

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Speaker 9: Friday, we hear from JP Morgan, Chase, Wells Fargo, and

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Speaker 9: City Group. The earnings reports come amid a backdrop of

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Speaker 9: inflation and the specter of rise interest rates. Liz Anne

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Speaker 9: Saunders is chief investment strategist at Charles Schwab.

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Speaker 10: We know first quarter was better than expected. A lot

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Speaker 10: of people are focusing on the fact that calendar your

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Speaker 10: twenty twenty three estimates are lifting, but that's only because

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Speaker 10: of the beat in the first quarter, second quarter, third quarter,

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Speaker 10: fourth quarter and even into first quarter next year. Have

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Speaker 10: a have all had down trends in their estimates, so

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Speaker 10: that will come in clearer focus when we start to

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Speaker 10: enter reporting season.

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Speaker 9: Thursday, it's Delta Airlines and PepsiCo with a focus on

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Speaker 9: pricing Power in New York. Charlie Palett Bloomberg Daybreak.

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Speaker 3: All right, Charlie, thanks, We've got some conflicting calls this morning.

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Speaker 3: On earnings. Goldman Sachs strategists expect companies to meet the

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Speaker 3: low bar set by consensus. They say negative earnings or

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Speaker 3: visions for this year and next appear to have bottomed

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Speaker 3: and sentiment has improved. Meantime, Morgan Stanley's Mike Wilson has

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Speaker 3: a more bearish view. He expects analysts to keep cutting

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Speaker 3: second half profit projections. Wilson also says company forecasts will

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Speaker 3: matter more than usual this year.

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Speaker 2: They have an update on Meta's new Threads app. The

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Speaker 2: new social media platform has now gained one hundred million users.

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Speaker 5: That's according to tech Crunch.

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Speaker 2: Threads hit the million user mark after just five days

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Speaker 2: of existence, and then makes it one of the fastest

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Speaker 2: growing consumer products ever.

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Speaker 3: Time now to take a look at some of the

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Speaker 3: other stories making news in New York and around the

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Speaker 3: world with Bloomberg's Michael Barr.

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Speaker 11: Good Morning, Michael, Good morning, Nathan. New York Governor Kathy

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Speaker 11: Hokeel declared a state of emergency for Orange County last night.

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Speaker 11: Heavy rain spawned extreme flooding in New York's Hudson Valley,

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Speaker 11: killing at least one person and forest road closures. Orange

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Speaker 11: County Executive Steve Newhouse says the woman in her thirties

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Speaker 11: was trying to evacuate her home.

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Speaker 12: There's some major flash flood major washouts were all around

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Speaker 12: with her houses, so I could definitely see where she

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Speaker 12: was trying to get out to safety, but did not

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Speaker 12: make it, got swept away and unfortunately did not make it.

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Speaker 11: Two other people escaped. Bloomberg Meteorologist Rob Carolyn has the

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Speaker 11: latest on the weather, Michael.

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Speaker 13: The heavy persistent rain we saw yesterday over upstate New

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Speaker 13: York caused all sorts of problems with flash flooding across

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Speaker 13: portions of Orange and Putnam Counties. Some areas received over

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Speaker 13: five inches of rain. Some areas received as much as

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Speaker 13: eight inches closed portions of the Palisades Parkway and also

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Speaker 13: Route nine. The heaviest rain, though moving out of that area,

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Speaker 13: now lifting up across Vermont. That's where the heavy rain

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Speaker 13: will occur today is across western New England. But the

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Speaker 13: good news is any additional rainfall shouldn't be quite as

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Speaker 13: heavy as what we received yesterday north of the city.

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Speaker 11: Michael thanks Rob North Korea accused US spy planes of

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Speaker 11: violating its airspace and threatened to shoot them down. A

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Speaker 11: spokesman for North Korea's defense ministry said the US was

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Speaker 11: engaging in hostile espionage activities. Chinese police say a man

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Speaker 11: with a nine killed six people and wounded one more

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Speaker 11: at a kindergarten in the southeastern province of Guangdong. Police

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Speaker 11: say it's one five year old man was arrested. Senate

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Speaker 11: Majority Leader Chuck Schumer's responding to complaints about a social

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Speaker 11: media influencer backed energy drink founded by some of the

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Speaker 11: biggest stars on YouTube alongside pediatric health experts in New

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Speaker 11: York City. Schumer is calling on the FDA to investigate

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Speaker 11: the drink, called Prime, over concerns about its excessive levels

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Speaker 11: of caffeine.

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Speaker 14: An eight point four ounce can of Red Bull has

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Speaker 14: eighty milligrams of caffeine. A twelve ounce can of Prime,

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Speaker 14: by contrast, contains two hundred milligrams of caffeine, more than

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Speaker 14: one hundred percent of Red Bull and close to ten

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Speaker 14: times as much as a twelve ounce can of Coca Cola.

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Speaker 11: YouTube stars Logan Paul and Ksi founded the beverage brand,

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Speaker 11: launching this year Global News twenty four hours a day,

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Speaker 11: powered by more than twenty seven hundred journalist and analysts

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Speaker 11: in over one hundred twenty countries. I'm Michael Barr. This

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Speaker 11: is bluem Nathan.

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Speaker 3: Thank you, Michael.

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Speaker 15: From coast to coast, from New York to San Francisco,

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Speaker 15: Boston to Washington, DC, nationwide on Syrias Exam, the Bloomberg

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Speaker 15: Business app and Bloomberg dot Com. This is Bloomberg Daybreak.

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Speaker 3: Good morning. I'm Nathan Hager. On the cusp of a

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Speaker 3: trading week with no shortage of potential catalysts for investors,

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Speaker 3: we get the last key readings on US inflation before

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Speaker 3: the Fed's next meeting at the end of the month,

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Speaker 3: the kickoff of second quarter earning season as well at

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Speaker 3: the end of this week. But it's weak economic data

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Speaker 3: out of China that appear to have investors closest attention

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Speaker 3: this morning, and for more, we're joined by Lori Calvacina,

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Speaker 3: head of US equity strategy at RBC Capital Markets. Laurie,

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Speaker 3: good morning. It's good to speak with you as always.

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Speaker 3: What is the potential read through for the broader market

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Speaker 3: when we see further signs of potential deflation in China

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Speaker 3: with flat consumer prices and producer prices at their lowest

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Speaker 3: level in about seven and a half years.

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Speaker 16: So thanks for having me as always, So the two

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Speaker 16: things that jump in my mind are, first off, when

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Speaker 16: things are going well in China, there's always taught the

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Speaker 16: investors about stimulus, so I think we have to keep

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Speaker 16: an eye on that potential as something that could reignite

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Speaker 16: risk assets. But I think that the other thing, kind

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Speaker 16: of more fundamental in my mind, is just what this

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Speaker 16: does to a whole We have to buy non US equities.

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Speaker 16: US equities are too expensive, the economy isn't doing great

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Speaker 16: in the US. That kind of talk I've been hearing

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Speaker 16: a lot from investors all year, and I do think

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Speaker 16: that to start the year there was very much a

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Speaker 16: sense from global investors that you wanted to be in

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Speaker 16: non US equities, and that seems like a very very

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Speaker 16: consensus call, even as recently as the beginning of sort

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Speaker 16: of middle of the second quarter, and we do feel

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Speaker 16: like there was just so much complacency on China in particular,

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Speaker 16: you're just seeing that chipped away at. And ultimately, what

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Speaker 16: we've noticed in the flow data is that if you

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Speaker 16: look at China flows on the EPFR data, for example,

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Speaker 16: they started to fade. Your Pean equity flows have started

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Speaker 16: to fade, and guess what, US equity flows are starting

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Speaker 16: to look a whole lot better. A lot of that's

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Speaker 16: been driven driven by the growth trades that we are

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Speaker 16: starting to see some improvement on the value side as well.

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Speaker 16: So to me, the really fascinating thing is is that

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Speaker 16: going is this sort of idea that China's economy maybe

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Speaker 16: not so strong as people that anticipated to start the year,

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Speaker 16: Is that going to peel further rotation back into US equities.

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Speaker 3: Would be interesting to see that, given some of the

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Speaker 3: conflicting messaging we're hearing of just this morning about the

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Speaker 3: earnings picture in the US, whether we could continue to

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Speaker 3: see that kind of flow continue after the rally that

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Speaker 3: characterized the first half.

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Speaker 16: You know, it's a great question, and there's been a

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Speaker 16: lot of trepidation about earnings this year. One of the

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Speaker 16: things we do tell investors is to take comfort in

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Speaker 16: the fact that most years, earnings expectations are way too high.

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Speaker 16: To start the year, they're way too high the prior year.

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Speaker 16: They ten to come down. It doesn't destroy the stock market.

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Speaker 16: But if you look at where estimates are in years

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Speaker 16: that forecasts are too high and come down, typically by

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Speaker 16: the time you get to the middle part of the year,

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Speaker 16: the consensus expectation is in the right neighborhood. You don't

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Speaker 16: really see too much change in the overall SMP earnings

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Speaker 16: picture in the back half of the year. So that's

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Speaker 16: really where we are. We have seen a certain stability

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Speaker 16: really sort of emerging sell side estimates recently. That doesn't

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Speaker 16: mean they can't be turns a little bit more, but

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Speaker 16: I do tell people that, you know, but if you

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Speaker 16: think about earnings forecasts, there's sort of this you know,

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Speaker 16: collective exercise between the cell side, the byside, and the

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Speaker 16: companies themselves. And by the time you get to the

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Speaker 16: middle part of the year, companies really they've got two

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Speaker 16: quarters in the bag. They've got two quarters they've got

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Speaker 16: to make to kind of get to their full year numbers,

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Speaker 16: and that's really where we are, and we see that

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Speaker 16: management teams are very, very determined to make those contensive numbers.

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Speaker 3: What do you think we're going to see out of

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Speaker 3: the inflation data this week and what could it mean

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Speaker 3: for the set at the end of the month.

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Speaker 16: So look, I am still on the camps at inflation

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Speaker 16: is still moderating. I don't through specific CPI forecasts, but

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Speaker 16: our economics team did put out a great chart last

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Speaker 16: week showing that their heat map for CPI just where

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Speaker 16: they look at all the different categories is getting greener

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Speaker 16: and greener, which means it's been looking better and better.

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Speaker 16: So I'm not too caught up on what the FED

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Speaker 16: is going to do at any one particular meeting. I

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Speaker 16: think that we are generally even if we get another

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Speaker 16: hyper two closer to the end of this and I

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Speaker 16: think investors on the equity side, to be honest, are

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Speaker 16: really just ready to start looking ahead. They're kind of

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Speaker 16: tired of debating this FED narrative. They're looking at twenty

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Speaker 16: twenty four trying to figure out if that's a recovery

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Speaker 16: year not or not economically at least what I saw

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Speaker 16: in the price action on Friday from the job data,

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Speaker 16: we did see a willingness of investors to really kind

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Speaker 16: of release their kind of very tight grip on defensive sectors,

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Speaker 16: which under performed on the day on Friday on the

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Speaker 16: heels of that job support.

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Speaker 3: So our last minute here just on the theme of

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Speaker 3: looking ahead. Do you think that tech stocks can continue

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Speaker 3: powering through? Are you looking for more breadth in this market?

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Speaker 16: So I think the answer to both of those questions

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Speaker 16: is yeah. When I look at the technology sector, there's

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Speaker 16: this perception, you know, when I talk to investors that

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Speaker 16: the evaluations are absolutely insane, And that's true for certain stacks,

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Speaker 16: that's not true for the broader text. So if you

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Speaker 16: look at a multiple, say back to nineteen eighty nine

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Speaker 16: on a medium basis, it's only a little bit elevated.

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Speaker 16: So I think there's actually a case for broading out

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Speaker 16: leadership with in technology. I do think that it's tough

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Speaker 16: to sell your tech stocks right now, just because I

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Speaker 16: do think the recovery is going to be subpar. Around

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Speaker 16: you A kind of one percentage a little below that

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Speaker 16: is the consensus for next year. Growth and tech that

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Speaker 16: tipically do very very well in a sluggish economic backdrop.

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Speaker 16: But at the same time we see opportunity really building

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Speaker 16: in more typlical parts of the market as well, like

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Speaker 16: small caps and energy. So we do think you want

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Speaker 16: to broaden out your best a bit.

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