WEBVTT - Investors See More Pain Ahead; Meta Threads 100 Million Users

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Nathan Hager and I'm Karen Moscow. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 3>The drop inequities this morning follows economic news out of Asia.

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<v Speaker 3>The prospect of deflation is wearing its head in China.

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<v Speaker 3>The country's consumer inflation rate ease to zero in June,

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<v Speaker 3>while producer prices fell further into deflation territory. Bloomberg Daybreak

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<v Speaker 3>Asia anchor Brian Curtis has more from Hong Kong.

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<v Speaker 4>The CPI was unchanged from last year. That was lower

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<v Speaker 4>than a Bloomberg survey estimate of a zero point two

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<v Speaker 4>percent gain. The inflation data adds to evidence that the

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<v Speaker 4>economic recovery is cooling. Core inflation slowed to zero point

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<v Speaker 4>four percent. In the meantime, Producer price is falling five

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<v Speaker 4>point four percent. That compared with a four point six

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<v Speaker 4>percent drop in the previous month, and it was lower

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<v Speaker 4>than our survey estimate in All Kong. Brian Curtis, Bloomberg.

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<v Speaker 5>Daybreak, All right, Brian, thanks well.

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<v Speaker 2>Janet Yellen is fresh offer trip to China, and the

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<v Speaker 2>Treasury Secretary is striking up positive.

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<v Speaker 5>Tone on relations.

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<v Speaker 2>She's assuring Chinese officials that the US won't hold back

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<v Speaker 2>its economic growth.

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<v Speaker 6>I believe that my bilateral meetings, which total about ten

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<v Speaker 6>hours over two days, served as a step forward in

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<v Speaker 6>our effort to put the US China relationship on a

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<v Speaker 6>surer footing.

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<v Speaker 2>Well, Yellen says the US is not seeking a full

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<v Speaker 2>of the coupling from China. When it comes to her

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<v Speaker 2>own economy, Yellen remains optimistic, but says she cannot rule

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<v Speaker 2>out a US recession.

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<v Speaker 6>It's not completely off the table, but we would expect,

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<v Speaker 6>with the job market as strong as it is now,

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<v Speaker 6>to see a slower pace of ongoing job gains.

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<v Speaker 2>And Yellen made the comments unfaced the nation from CBS.

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<v Speaker 2>Catch the program every Sunday on Bloomberg Radio.

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

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<v Speaker 3>He's on his way to a NATO meeting in Lithuania,

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<v Speaker 3>but first the President stops in London to discuss Ukraine

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<v Speaker 3>with UK Prime Minister Rishi Sunak. Morris has more from

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<v Speaker 3>our Bloomberg ninety nine one newsroom in Washington.

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<v Speaker 7>Biden will meet with Sunek to compare notes on their

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<v Speaker 7>support for Ukraine. After several allies questioned Biden's decision to

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<v Speaker 7>send cluster bombs to Ukraine. They're also expected to discuss

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<v Speaker 7>the Atlantic Declaration, a potential trade pack that could help

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<v Speaker 7>UK lawmakers qualify for electric vehicle subsidies. Brokering a deal

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<v Speaker 7>with Turkey could also come up. Turkey has blocked Sweden

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<v Speaker 7>from joining NATO, and Biden may also bring up post

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<v Speaker 7>Brexit arrangements for Northern Ireland. Biden will also have tea

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<v Speaker 7>with King Charles the Third at Windsor Castle, their first

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

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<v Speaker 5>Daybreak, Amy, thank you all.

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<v Speaker 2>Back here in the US, much of the country is

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<v Speaker 2>bracing for severe heat. Near record temperatures will spread from

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<v Speaker 2>the southwest across Texas and the Great Plains this week.

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<v Speaker 2>Temperatures of one hundred degrees or more are expected to

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<v Speaker 2>strain electricity networks. The blistering heat will hit the southern

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<v Speaker 2>US and northern Mexico, challenging local records.

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<v Speaker 3>All right, let's turn to the equity markets now, Karen,

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<v Speaker 3>The S and P five hundreds coming off its second

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<v Speaker 3>losing week over the past three and some investors see

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<v Speaker 3>more pain ahead. Let's get the details from Bloomberg's Lisa

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<v Speaker 3>Mateo in New York.

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<v Speaker 8>According to Bloomberg's latest Markets Live Pole survey, profit warnings

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<v Speaker 8>and fears of higher interest rates are threatening the key

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<v Speaker 8>US stock indicator. Fifty five percent of respondents say the

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<v Speaker 8>upcoming earning season will hurt stocks. Forty two percent say

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<v Speaker 8>the biggest reason will be the impact of further tightening

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<v Speaker 8>of financial conditions. Many predict the Federal Reserve will raise

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<v Speaker 8>interest rates later this month after data from last week

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<v Speaker 8>showed moderating payrolls but stronger than expected wage growth in June.

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<v Speaker 8>In New York, Lisa Mateo Bloomberg Daybreak.

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<v Speaker 2>All right, Lisa, thank you well. Earnings are front and

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<v Speaker 2>center for many on Wall Street. The season kicks off

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<v Speaker 2>in earnest this week, and we get a preview from

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<v Speaker 2>Bloomberg's Charlie Pellett.

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<v Speaker 9>Friday, we hear from JP Morgan, Chase, Wells Fargo, and

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<v Speaker 9>City Group. The earnings reports come amid a backdrop of

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<v Speaker 9>inflation and the specter of rise interest rates. Liz Anne

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<v Speaker 9>Saunders is chief investment strategist at Charles Schwab.

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<v Speaker 10>We know first quarter was better than expected. A lot

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<v Speaker 10>of people are focusing on the fact that calendar your

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<v Speaker 10>twenty twenty three estimates are lifting, but that's only because

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<v Speaker 10>of the beat in the first quarter, second quarter, third quarter,

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<v Speaker 10>fourth quarter and even into first quarter next year. Have

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<v Speaker 10>a have all had down trends in their estimates, so

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<v Speaker 10>that will come in clearer focus when we start to

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<v Speaker 10>enter reporting season.

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<v Speaker 9>Thursday, it's Delta Airlines and PepsiCo with a focus on

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<v Speaker 9>pricing Power in New York. Charlie Palett Bloomberg Daybreak.

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

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<v Speaker 3>On earnings. Goldman Sachs strategists expect companies to meet the

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<v Speaker 3>low bar set by consensus. They say negative earnings or

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<v Speaker 3>visions for this year and next appear to have bottomed

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<v Speaker 3>and sentiment has improved. Meantime, Morgan Stanley's Mike Wilson has

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<v Speaker 3>a more bearish view. He expects analysts to keep cutting

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<v Speaker 3>second half profit projections. Wilson also says company forecasts will

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<v Speaker 3>matter more than usual this year.

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<v Speaker 2>They have an update on Meta's new Threads app. The

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<v Speaker 2>new social media platform has now gained one hundred million users.

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<v Speaker 5>That's according to tech Crunch.

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<v Speaker 2>Threads hit the million user mark after just five days

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<v Speaker 2>of existence, and then makes it one of the fastest

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<v Speaker 2>growing consumer products ever.

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<v Speaker 3>Time now to take a look at some of the

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<v Speaker 3>other stories making news in New York and around the

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<v Speaker 3>world with Bloomberg's Michael Barr.

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<v Speaker 11>Good Morning, Michael, Good morning, Nathan. New York Governor Kathy

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<v Speaker 11>Hokeel declared a state of emergency for Orange County last night.

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<v Speaker 11>Heavy rain spawned extreme flooding in New York's Hudson Valley,

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<v Speaker 11>killing at least one person and forest road closures. Orange

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<v Speaker 11>County Executive Steve Newhouse says the woman in her thirties

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<v Speaker 11>was trying to evacuate her home.

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<v Speaker 12>There's some major flash flood major washouts were all around

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<v Speaker 12>with her houses, so I could definitely see where she

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<v Speaker 12>was trying to get out to safety, but did not

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<v Speaker 12>make it, got swept away and unfortunately did not make it.

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<v Speaker 11>Two other people escaped. Bloomberg Meteorologist Rob Carolyn has the

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<v Speaker 11>latest on the weather, Michael.

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<v Speaker 13>The heavy persistent rain we saw yesterday over upstate New

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<v Speaker 13>York caused all sorts of problems with flash flooding across

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<v Speaker 13>portions of Orange and Putnam Counties. Some areas received over

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<v Speaker 13>five inches of rain. Some areas received as much as

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<v Speaker 13>eight inches closed portions of the Palisades Parkway and also

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<v Speaker 13>Route nine. The heaviest rain, though moving out of that area,

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<v Speaker 13>now lifting up across Vermont. That's where the heavy rain

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<v Speaker 13>will occur today is across western New England. But the

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<v Speaker 13>good news is any additional rainfall shouldn't be quite as

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<v Speaker 13>heavy as what we received yesterday north of the city.

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<v Speaker 11>Michael thanks Rob North Korea accused US spy planes of

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<v Speaker 11>violating its airspace and threatened to shoot them down. A

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<v Speaker 11>spokesman for North Korea's defense ministry said the US was

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<v Speaker 11>engaging in hostile espionage activities. Chinese police say a man

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<v Speaker 11>with a nine killed six people and wounded one more

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<v Speaker 11>at a kindergarten in the southeastern province of Guangdong. Police

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<v Speaker 11>say it's one five year old man was arrested. Senate

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<v Speaker 11>Majority Leader Chuck Schumer's responding to complaints about a social

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<v Speaker 11>media influencer backed energy drink founded by some of the

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<v Speaker 11>biggest stars on YouTube alongside pediatric health experts in New

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<v Speaker 11>York City. Schumer is calling on the FDA to investigate

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<v Speaker 11>the drink, called Prime, over concerns about its excessive levels

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<v Speaker 11>of caffeine.

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<v Speaker 14>An eight point four ounce can of Red Bull has

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<v Speaker 14>eighty milligrams of caffeine. A twelve ounce can of Prime,

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<v Speaker 14>by contrast, contains two hundred milligrams of caffeine, more than

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<v Speaker 14>one hundred percent of Red Bull and close to ten

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<v Speaker 14>times as much as a twelve ounce can of Coca Cola.

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<v Speaker 11>YouTube stars Logan Paul and Ksi founded the beverage brand,

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<v Speaker 11>launching this year Global News twenty four hours a day,

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<v Speaker 11>powered by more than twenty seven hundred journalist and analysts

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<v Speaker 11>in over one hundred twenty countries. I'm Michael Barr. This

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<v Speaker 11>is bluem Nathan.

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<v Speaker 3>Thank you, Michael.

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<v Speaker 15>From coast to coast, from New York to San Francisco,

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<v Speaker 15>Boston to Washington, DC, nationwide on Syrias Exam, the Bloomberg

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<v Speaker 15>Business app and Bloomberg dot Com. This is Bloomberg Daybreak.

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<v Speaker 3>Good morning. I'm Nathan Hager. On the cusp of a

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<v Speaker 3>trading week with no shortage of potential catalysts for investors,

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<v Speaker 3>we get the last key readings on US inflation before

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<v Speaker 3>the Fed's next meeting at the end of the month,

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<v Speaker 3>the kickoff of second quarter earning season as well at

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<v Speaker 3>the end of this week. But it's weak economic data

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<v Speaker 3>out of China that appear to have investors closest attention

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<v Speaker 3>this morning, and for more, we're joined by Lori Calvacina,

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<v Speaker 3>head of US equity strategy at RBC Capital Markets. Laurie,

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<v Speaker 3>good morning. It's good to speak with you as always.

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<v Speaker 3>What is the potential read through for the broader market

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<v Speaker 3>when we see further signs of potential deflation in China

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<v Speaker 3>with flat consumer prices and producer prices at their lowest

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<v Speaker 3>level in about seven and a half years.

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<v Speaker 16>So thanks for having me as always, So the two

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<v Speaker 16>things that jump in my mind are, first off, when

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<v Speaker 16>things are going well in China, there's always taught the

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<v Speaker 16>investors about stimulus, so I think we have to keep

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<v Speaker 16>an eye on that potential as something that could reignite

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<v Speaker 16>risk assets. But I think that the other thing, kind

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<v Speaker 16>of more fundamental in my mind, is just what this

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<v Speaker 16>does to a whole We have to buy non US equities.

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<v Speaker 16>US equities are too expensive, the economy isn't doing great

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<v Speaker 16>in the US. That kind of talk I've been hearing

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<v Speaker 16>a lot from investors all year, and I do think

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<v Speaker 16>that to start the year there was very much a

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<v Speaker 16>sense from global investors that you wanted to be in

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<v Speaker 16>non US equities, and that seems like a very very

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<v Speaker 16>consensus call, even as recently as the beginning of sort

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<v Speaker 16>of middle of the second quarter, and we do feel

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<v Speaker 16>like there was just so much complacency on China in particular,

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

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<v Speaker 16>we've noticed in the flow data is that if you

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<v Speaker 16>look at China flows on the EPFR data, for example,

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<v Speaker 16>they started to fade. Your Pean equity flows have started

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<v Speaker 16>to fade, and guess what, US equity flows are starting

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<v Speaker 16>to look a whole lot better. A lot of that's

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<v Speaker 16>been driven driven by the growth trades that we are

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<v Speaker 16>starting to see some improvement on the value side as well.

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<v Speaker 16>So to me, the really fascinating thing is is that

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<v Speaker 16>going is this sort of idea that China's economy maybe

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<v Speaker 16>not so strong as people that anticipated to start the year,

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<v Speaker 16>Is that going to peel further rotation back into US equities.

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<v Speaker 3>Would be interesting to see that, given some of the

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<v Speaker 3>conflicting messaging we're hearing of just this morning about the

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<v Speaker 3>earnings picture in the US, whether we could continue to

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<v Speaker 3>see that kind of flow continue after the rally that

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<v Speaker 3>characterized the first half.

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<v Speaker 16>You know, it's a great question, and there's been a

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<v Speaker 16>lot of trepidation about earnings this year. One of the

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<v Speaker 16>things we do tell investors is to take comfort in

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<v Speaker 16>the fact that most years, earnings expectations are way too high.

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<v Speaker 16>To start the year, they're way too high the prior year.

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

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<v Speaker 16>But if you look at where estimates are in years

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<v Speaker 16>that forecasts are too high and come down, typically by

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<v Speaker 16>the time you get to the middle part of the year,

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<v Speaker 16>the consensus expectation is in the right neighborhood. You don't

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<v Speaker 16>really see too much change in the overall SMP earnings

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<v Speaker 16>picture in the back half of the year. So that's

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<v Speaker 16>really where we are. We have seen a certain stability

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<v Speaker 16>really sort of emerging sell side estimates recently. That doesn't

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<v Speaker 16>mean they can't be turns a little bit more, but

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<v Speaker 16>I do tell people that, you know, but if you

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<v Speaker 16>think about earnings forecasts, there's sort of this you know,

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<v Speaker 16>collective exercise between the cell side, the byside, and the

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<v Speaker 16>companies themselves. And by the time you get to the

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<v Speaker 16>middle part of the year, companies really they've got two

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<v Speaker 16>quarters in the bag. They've got two quarters they've got

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<v Speaker 16>to make to kind of get to their full year numbers,

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<v Speaker 16>and that's really where we are, and we see that

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<v Speaker 16>management teams are very, very determined to make those contensive numbers.

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<v Speaker 3>What do you think we're going to see out of

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<v Speaker 3>the inflation data this week and what could it mean

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<v Speaker 3>for the set at the end of the month.

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<v Speaker 16>So look, I am still on the camps at inflation

0:11:47.960 --> 0:11:51.040
<v Speaker 16>is still moderating. I don't through specific CPI forecasts, but

0:11:51.120 --> 0:11:53.480
<v Speaker 16>our economics team did put out a great chart last

0:11:53.520 --> 0:11:56.120
<v Speaker 16>week showing that their heat map for CPI just where

0:11:56.120 --> 0:11:58.520
<v Speaker 16>they look at all the different categories is getting greener

0:11:58.559 --> 0:12:00.800
<v Speaker 16>and greener, which means it's been looking better and better.

0:12:01.480 --> 0:12:03.559
<v Speaker 16>So I'm not too caught up on what the FED

0:12:03.640 --> 0:12:05.600
<v Speaker 16>is going to do at any one particular meeting. I

0:12:05.600 --> 0:12:07.480
<v Speaker 16>think that we are generally even if we get another

0:12:07.559 --> 0:12:10.000
<v Speaker 16>hyper two closer to the end of this and I

0:12:10.040 --> 0:12:12.719
<v Speaker 16>think investors on the equity side, to be honest, are

0:12:12.720 --> 0:12:15.200
<v Speaker 16>really just ready to start looking ahead. They're kind of

0:12:15.200 --> 0:12:18.000
<v Speaker 16>tired of debating this FED narrative. They're looking at twenty

0:12:18.040 --> 0:12:20.280
<v Speaker 16>twenty four trying to figure out if that's a recovery

0:12:20.320 --> 0:12:23.520
<v Speaker 16>year not or not economically at least what I saw

0:12:23.600 --> 0:12:25.800
<v Speaker 16>in the price action on Friday from the job data,

0:12:25.880 --> 0:12:28.199
<v Speaker 16>we did see a willingness of investors to really kind

0:12:28.200 --> 0:12:31.199
<v Speaker 16>of release their kind of very tight grip on defensive sectors,

0:12:31.200 --> 0:12:32.959
<v Speaker 16>which under performed on the day on Friday on the

0:12:32.960 --> 0:12:34.079
<v Speaker 16>heels of that job support.

0:12:34.679 --> 0:12:37.240
<v Speaker 3>So our last minute here just on the theme of

0:12:37.320 --> 0:12:41.200
<v Speaker 3>looking ahead. Do you think that tech stocks can continue

0:12:41.240 --> 0:12:44.320
<v Speaker 3>powering through? Are you looking for more breadth in this market?

0:12:45.840 --> 0:12:48.120
<v Speaker 16>So I think the answer to both of those questions

0:12:48.240 --> 0:12:51.520
<v Speaker 16>is yeah. When I look at the technology sector, there's

0:12:51.559 --> 0:12:54.040
<v Speaker 16>this perception, you know, when I talk to investors that

0:12:54.120 --> 0:12:58.440
<v Speaker 16>the evaluations are absolutely insane, And that's true for certain stacks,

0:12:58.480 --> 0:13:01.080
<v Speaker 16>that's not true for the broader text. So if you

0:13:01.120 --> 0:13:03.400
<v Speaker 16>look at a multiple, say back to nineteen eighty nine

0:13:03.400 --> 0:13:05.480
<v Speaker 16>on a medium basis, it's only a little bit elevated.

0:13:05.720 --> 0:13:07.600
<v Speaker 16>So I think there's actually a case for broading out

0:13:07.679 --> 0:13:11.000
<v Speaker 16>leadership with in technology. I do think that it's tough

0:13:11.040 --> 0:13:13.440
<v Speaker 16>to sell your tech stocks right now, just because I

0:13:13.440 --> 0:13:15.760
<v Speaker 16>do think the recovery is going to be subpar. Around

0:13:15.760 --> 0:13:17.680
<v Speaker 16>you A kind of one percentage a little below that

0:13:17.800 --> 0:13:19.839
<v Speaker 16>is the consensus for next year. Growth and tech that

0:13:19.960 --> 0:13:22.640
<v Speaker 16>tipically do very very well in a sluggish economic backdrop.

0:13:22.960 --> 0:13:25.800
<v Speaker 16>But at the same time we see opportunity really building

0:13:25.840 --> 0:13:27.800
<v Speaker 16>in more typlical parts of the market as well, like

0:13:27.880 --> 0:13:30.280
<v Speaker 16>small caps and energy. So we do think you want

0:13:30.280 --> 0:13:31.400
<v Speaker 16>to broaden out your best a bit.

0:13:33.160 --> 0:13:36.080
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