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Speaker 1: This is Bloomberg Daybreak Asia for this Wednesday January in

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Speaker 1: Hong Kong, Tuesday January in New York and coming up

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Speaker 1: this hour. US stocks inch lower as the market analyzes

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Speaker 1: the latest patch of corporate earnings. Microsoft's profit top sandalists

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Speaker 1: estimates with help from its cloud services business and the

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Speaker 1: U S shoes, Google over an alleged monopoly on ads.

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Speaker 1: Germany and the US break deadlock to bring heavy tanks

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Speaker 1: to Ukraine. Classified documents found at Mike Penn's home. W

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Speaker 1: A show head says he's concerned about COVID and China.

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Speaker 1: I'm at Baxter with Global News. The highest men seed

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Speaker 1: remaining advances to the semis of the Australian Open. Dan Schwartzman,

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Speaker 1: I'll have that story more coming up in Bloomberg Sports.

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Speaker 1: That's all straight Ahead on Bloomberg Daybreak Asia on Bloomberg

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Speaker 1: eleven and three on New York, Bloomberg Washington, d C,

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Speaker 1: Bloomberg one O six one, Boston, Bloomberg nine sixties Sentrances

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Speaker 1: Go Serious Exam one nineteen and around the world on

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Speaker 1: Bloomberg Radio dot Com and via the Bloomberg Business app.

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Speaker 1: Good Morning, I'm de prisoner and I'm Brian Curtis. Here

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Speaker 1: are the stories we're following today. All right, Doug, let's

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Speaker 1: take a closer look at Microsoft. Those earnings out second

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Speaker 1: quarter profit, topping analysts estimates. We get the details for

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Speaker 1: Bloomberg's Charlie Pellet, the software giant was helped by strengthen

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Speaker 1: its Azure cloud services business even as demands slump for

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Speaker 1: personal computer and corporate software. In Microsoft's closely watched cloud

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Speaker 1: computing business, sales gained thirty eight percent, compared with predictions

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Speaker 1: for a thirty seven percent increase excluding the impact of

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Speaker 1: currency fluctuations. Last week, Microsoft said it was firing ten

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Speaker 1: thousand workers in the past quarter. The software giants growth

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Speaker 1: engines have faltered as corporate customers became warier of spending

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Speaker 1: in an uneven economic environment. In New York, Charlie Pelt

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Speaker 1: Bloomberg Daybreak Asia, Thank you, Charlie. Well Equity Strategies, saying

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Speaker 1: the next few weeks could tell us whether corporate America

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Speaker 1: remains strong or is beginning to slump. The chief investment

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Speaker 1: strategist over at City is Stephen Whiting. He's expecting to

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Speaker 1: see earnings take a significant hit despite some rosy estimates

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Speaker 1: it looks so much in the analyst earnings estimates, like

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Speaker 1: the fourth quarter was the recession and here we are

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Speaker 1: sitting in the recovery, and it actually looks a little

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Speaker 1: bit like that in financial markets. And it would be

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Speaker 1: wonderful if that were really the truth, if we weren't

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Speaker 1: just on the leading edge of the hit that we're

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Speaker 1: going to have in profits um and of course how

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Speaker 1: markets traded last year are not anticipating this to be,

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Speaker 1: you know, some kind of profit Nravana. We don't have declines, uh,

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Speaker 1: you know about something that is Cities Investment strategist Chief

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Speaker 1: Investments Strategists Stephen Whiting. Now when it comes to US equities,

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Speaker 1: Whiting is overweight farmer suticals. And at the same time,

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Speaker 1: if you look at the Asia Pacific region, City's head

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Speaker 1: of Asia strategy is overweight Chinese equities and very bullish

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Speaker 1: on the Yuan Brian. And we're seeing signs of strength

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Speaker 1: dug in some developed markets. Data out of Europe, for instance,

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Speaker 1: showing the private sector unexpectedly returning to growth. SMP Globals

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Speaker 1: Flash Manufacturing Index arose to fifty point two in January.

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Speaker 1: That's the first time the gauge has pointed to growth.

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Speaker 1: Since June. Eric Robertson, his chief strategist at Standard Chartered,

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Speaker 1: we're seeing upside surprises in the data. This feared recession,

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Speaker 1: that food and energy crisis which was so talked about

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Speaker 1: last year, is just turning out to be less threatening

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Speaker 1: than expected, and so I think there's a very good

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Speaker 1: case for Europe to at least outperform from those really

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Speaker 1: downbeat expectations. Robertson says the situation in Europe does look

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Speaker 1: better than he initially feared. At the same time, SMP

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Speaker 1: Global says the region is quote not out of the

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Speaker 1: woods yet well. Emerging market equities could be gearing up

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Speaker 1: for a very strong run. That is the call from

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Speaker 1: Morgan Stanley. We have more from Bloomberg's Tom Busby. Stocks

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Speaker 1: and emerging markets are set to be this decade's winners.

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Speaker 1: That's according to Morgan Stanley Investment Management's Deputy Chief investment

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Speaker 1: Officer Gentandra Kendari. She says developing equities are trading at

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Speaker 1: attractive valuations and economies like India are set for better

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Speaker 1: growth than the US. In fact, Kendari calls India one

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Speaker 1: of the top trades at Morgan Stanley. So far this year,

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Speaker 1: the m s c I Emerging Markets Index is up

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Speaker 1: more than eight percent. Coodpared with a four and a

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Speaker 1: half percent advance for the SMP five hundred In New York.

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Speaker 1: I'm Tom Busby Bloomberg Daybreak Asia and now back to

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Speaker 1: a story out of the United States. Who've been telling

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Speaker 1: you about this for the past twenty four hours or so,

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Speaker 1: but now it's official. The US government is suing Google.

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Speaker 1: We get the details from Bloomberg's and Kate's in Washington.

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Speaker 1: The Justice Department in eight US states are suing alphabets Google.

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Speaker 1: They say the company has an illegal monopoly on digital

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Speaker 1: advertising and they want break up the business. It's the

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Speaker 1: Biden administration's first major case challenging one of the largest

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Speaker 1: US tech companies. It's also one of the few times

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Speaker 1: the Justice Department has called for the breakup of a

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Speaker 1: major firm. The last time it dismantled the company was

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Speaker 1: the Bell Telecom System In in Washington. I'm in Kate's

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Speaker 1: Bloomberg Daybreak Asia. All right, and thank you, And we're

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Speaker 1: seeing Google respond to those allegations from the US government.

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Speaker 1: The company is saying the Justice Department is quote doubling

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Speaker 1: down on a flawed argument. Google is comparing these charges

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Speaker 1: to a similar lawsuit brought by the state of Texas,

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Speaker 1: which it calls unfounded and Brian, staying with a theme

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Speaker 1: of Texas, can I pivot to Texas instruments. I mentioned

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Speaker 1: earlier that the company reported of first it's first drop

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Speaker 1: in sales since about and kind of with a tepid

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Speaker 1: forecast for the current quarter week demand in all ends

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Speaker 1: of the market for semiconductors. I thought this was curious

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Speaker 1: except automotive. Yeah, that has been an industry that has

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Speaker 1: been on fire. Uh, and apparently it's still very good

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Speaker 1: for for t I um that the I wanted to

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Speaker 1: go back to Google just briefly. The stock did trade

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Speaker 1: down two point one percent today, Doug, and that's because

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Speaker 1: of the waitiness I suppose of this action. But all

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Speaker 1: when you think about it, this could play out over many, many,

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Speaker 1: many years, and yet investors still reacted. And I'm looking

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Speaker 1: at the Microsoft share price now really fluctuating. You know,

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Speaker 1: from most of the period after the earnings came out,

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Speaker 1: the stock was up about four percenters, so now it

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Speaker 1: has moved down to just with a gain of about

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Speaker 1: two I think some analysts take from this Doug is

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Speaker 1: that this was more resilience by Microsoft than any new

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Speaker 1: news that some thought it could be a lot worse. Yeah,

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Speaker 1: particularly where the cloud service business is concerned. That of course,

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Speaker 1: asure we saw a weak demand for personal computer software

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Speaker 1: and corporate software as well. And then, Brian, if you

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Speaker 1: look at some of the cloud computing companies, UH names

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Speaker 1: like Mango, dB, Data Dog, they are rally here in

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Speaker 1: the late session. Yeah, and I wanted to mention Swatch.

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Speaker 1: It came out with its earnings. The stocks traded up

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Speaker 1: about five percenters so in Europe, and Swatch had some

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Speaker 1: positive comments about China, and that's very much in focus

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Speaker 1: now as China is reopening. We'll be getting comments from

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Speaker 1: CEOs of many, many companies over the coming days. It's

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Speaker 1: time for global news. The U S and Germany are

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Speaker 1: poised to break their negotiating deadlock over sending heavy tanks

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Speaker 1: to Ukraine. Ed Baxter has Global News in the ND

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Speaker 1: sixty newsroom in San Francisco. Ed. Yeah, that's right, Brian.

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Speaker 1: Both will offer tanks, sending Kieva powerful new weapon to

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Speaker 1: counter Russian offensives. This is something the NATO Secretary General

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Speaker 1: Yan Stoltenberg says is essential to the defense of Europe

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Speaker 1: as a whole. We have no indication that Preston Putin

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Speaker 1: has changed his goals. He wants to control Ukraine and

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Speaker 1: is planning new offensives. Biden administration expected to announce as

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Speaker 1: soon as tomorrow it will offer Ukrainian forces the M

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Speaker 1: one Abrams tank, dropping the criticism that it is too

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Speaker 1: hard to operate. Germany then will send its powerful Leopard tanks.

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Speaker 1: The move will give Ukrainian President Vladimer Zelenski's forces significant

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Speaker 1: new capabilities as the war will shift to the east.

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Speaker 1: New Zealand has a new Prime Minister. Just within the

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Speaker 1: past half hour. Chris Hipkins has been sworn in, completing

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Speaker 1: the handover from Jacinda Ardern. He's expected to hold a

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Speaker 1: news conference this morning. World Health Organization Panel will meet

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Speaker 1: this week to discuss whether COVID nineteen still represents a

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Speaker 1: global health emergency. Director General Tetris gabrius As says he's

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Speaker 1: very concerned by the situation in many countries and the

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Speaker 1: rising number of deaths. He says China's particular concern after

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Speaker 1: its abandoning of COVID zero. The FDA is rolling out

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Speaker 1: procedures for annual COVID vaccines. The hope in some circles

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Speaker 1: is to have one annual shot that would cover with

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Speaker 1: COVID and influenza. Well, now, Dr She's Shaw earlier today

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Speaker 1: on Balance of Power on Bloomberg. She is with Stanford

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Speaker 1: Health Director of Infectious Diseases. She says, maybe not too fast.

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Speaker 1: I think the first step is that we need to

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Speaker 1: get to one shot that takes care of COVID for

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Speaker 1: the whole year um, and that's the hope for the

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Speaker 1: coming season. Dr Shaw says that this is the best

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Speaker 1: science at this point to protect against both diseases. Classified

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Speaker 1: documents have been found in former US Vice President Mike

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Speaker 1: Penns home in Indiana. Bloomberg Examrie Horndern reports she ordered

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Speaker 1: he ordered lawyers to do a search and they found

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Speaker 1: about a dozen classified documents. We were then put in

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Speaker 1: boxes and driven to the National Archives. Right now we

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Speaker 1: have the Department of Justice and the FBI looking into this.

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Speaker 1: Per this report. One thing is notable though, that the

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Speaker 1: former Vice president Mike Pence has said that he did

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Speaker 1: not have classified documents previously, and now they are showing up. Yeah,

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Speaker 1: and the FBI and Justice apart but are investigating Meanwhile,

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Speaker 1: law makers on both sides of the aisle would like

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Speaker 1: to know more about the Biden classified documents. Republican Senator

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Speaker 1: Lindsey Graham says, the whole system needs looking at. I think,

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Speaker 1: uh clearly the way we handle classified information needs to

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Speaker 1: be uh improved upon. So I'm not going to pre

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Speaker 1: judge what happened with Trump or Biden. I'm glad people

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Speaker 1: outside of politics or looking at it. I have confidence

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Speaker 1: in UH Attorney General Garland to do it fairly and

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Speaker 1: approves of the Special Council in San Francisco. I'm at

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Speaker 1: Baxter and this is Bloomberg. This is Bloomberg Debrik Asia,

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Speaker 1: Brian Curtis here in Hong Kong, along with Rushad Salamat

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Speaker 1: in Singapore, and our guest is Anna Han, equity strategist

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Speaker 1: at Wells Fargo Securities. And a plenty of time to

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Speaker 1: talk about the really big picture, the big macro story

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Speaker 1: and the FED in recession, all that, But let's get

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Speaker 1: your take on the earnings so far from the banks

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Speaker 1: at the outset to the tech results we saw today.

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Speaker 1: Your thoughts. Yeah, coming to earning season, you saw that banks,

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Speaker 1: which tend to be the first group that report and

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Speaker 1: kind of a bell weather banks for training up generally,

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Speaker 1: which is usually not a great sign if you look historically,

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Speaker 1: when banks outperformed coming into earnings, they tend to get

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Speaker 1: faded pretty quickly. We're not seeing that too much, uh

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Speaker 1: this season. So it's been encouraging to see that those games, um,

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Speaker 1: that these banks who were able to be earnings or

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Speaker 1: even miss earnings are still able to get some rewards.

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Speaker 1: And in fact, the most peculiar thing this earning season

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Speaker 1: is to see how light the penalty has been for

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Speaker 1: earnings misses. We'll see how that trends as we get

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Speaker 1: further into the season. So ultimately, and well, why I

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Speaker 1: guess investors being that I suppose forgiving in a way,

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Speaker 1: and also you know when you look at banks, what's

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Speaker 1: actually then being priced into them? Right right? You have

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Speaker 1: the exact word on my mind, which was forgiving. Uh.

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Speaker 1: To be honest, it could be possibly that people had

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Speaker 1: such negative sentiment coming into this season, and that's not

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Speaker 1: really the most bright sunny picture I'm painting here, but

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Speaker 1: it's true that a lot of people are expecting lower

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Speaker 1: EPs for visions and with that at UM some really

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Speaker 1: bad news this earning season. We also know that that

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Speaker 1: inflation has been you know, gnawing away at those margins.

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Speaker 1: I think that the action that you're seeing here is

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Speaker 1: a little bit of a relief. And in particular, you

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Speaker 1: saw some big names report some positive news in there

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Speaker 1: despite some of the bigger layoffs that we're hearing about.

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Speaker 1: I think that's helping lighten the penalty for now um.

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Speaker 1: And again it's that sentiment, that expectation coming into earning season,

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Speaker 1: that low bar makes it a lot easier to hop

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Speaker 1: over net interest margins. So pretty good for the banks,

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Speaker 1: but then fears about recession. If you get a recession,

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Speaker 1: that wouldn't be good for the banks either. So let's

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Speaker 1: talk about that. Do you see a recession coming? We've

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Speaker 1: card back our view on the recession on how deep

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Speaker 1: the recession is. I think we can, you know, sit

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Speaker 1: here and go to it for tat on how exactly

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Speaker 1: we're going to measure this recession. But the idea that

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Speaker 1: we have here it's going to be mild. We do

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Speaker 1: think that consumer spending is going to contract, just looking

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Speaker 1: at how people have been using their debt and credit lines,

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Speaker 1: looking at that draw down of excess savings versus income.

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Speaker 1: I do think that we're going to see consumers pull back.

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Speaker 1: We will see earnings slow down, probably about a five

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Speaker 1: percent decline in large cap EPs growth. But we don't

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Speaker 1: think it'll be so dire enough where we'll see something

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Speaker 1: like the financial crisis, or we'll see anything, if anything,

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Speaker 1: nothing close to what we saw when the pandemic first hit. Okay,

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Speaker 1: well that's that's the case at the moment. But we

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Speaker 1: look at what happened, you know, the deletion of depletion

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Speaker 1: of those COVID, theators savings that's gone. We still have

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Speaker 1: inventory overhangs. We also have, of course, the jobs market,

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Speaker 1: which remains resilient. Um. I mean, where would a really

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Speaker 1: really deep recession, a recession come from, ultimately, because all

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Speaker 1: the fundamental will seem apart from of course, even inflation

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Speaker 1: is coming down. It seemed that perhaps the feed's job

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Speaker 1: may well, and I'm saying this controversiy is done, bring

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Speaker 1: up a good point. If the FED is done, I

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Speaker 1: think what could happen here is if a sentiment really

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Speaker 1: grabs hold. Right now, a lot of people are eyes

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Speaker 1: sharp on labor data, on watching wages, and that's been

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Speaker 1: somewhat of the lynch pin here. If we see some

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Speaker 1: sort of fear um that investors are so excuse me,

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Speaker 1: that consumers are suddenly feeling that weight I don't have

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Speaker 1: as much income coming in the door, or things could

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Speaker 1: get really rough and they contract their spending suddenly. I

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Speaker 1: think that's going to snowball effect into corporates who already

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Speaker 1: you're seeing some corporate belt tightening. If that really starts

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Speaker 1: to squeeze, that cycle can feed upon itself and there

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Speaker 1: you can see an aggressive contraction. But what we've seen

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Speaker 1: is really peanuts compared to what would be needed to

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Speaker 1: get the unemployment rate up to four and a half percent.

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Speaker 1: And it seems that company still want to keep their

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Speaker 1: employees because they don't think they can get them back

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Speaker 1: once you start to see growth coming back. So my

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Speaker 1: question is, if the job market doesn't crack, could we

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Speaker 1: see the Fed stay in hiking mode for much of

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Speaker 1: this year and then stay there for much longer. You know,

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Speaker 1: we would agree with that. Really, to get unemployment at

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Speaker 1: a high level or what we expect to be a

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Speaker 1: low four percent this year, we have to see, um,

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Speaker 1: some weakening somewhere. Something has to crack, like you said,

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Speaker 1: But what's particular about this, what's going on right now

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Speaker 1: is you're not seeing that as much. Um So, if

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Speaker 1: the FED stays on its path unlike which consensus expects

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Speaker 1: cut starting in the summer, I think that's going to

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Speaker 1: get pushed back and that could be a little rough

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Speaker 1: for equities as well. That's something to watch out for.

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Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on the

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