WEBVTT - Daybreak Asia: January 25, 2023

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Wednesday January in

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<v Speaker 1>Hong Kong, Tuesday January in New York and coming up

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<v Speaker 1>this hour. US stocks inch lower as the market analyzes

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<v Speaker 1>the latest patch of corporate earnings. Microsoft's profit top sandalists

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<v Speaker 1>estimates with help from its cloud services business and the

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<v Speaker 1>U S shoes, Google over an alleged monopoly on ads.

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<v Speaker 1>Germany and the US break deadlock to bring heavy tanks

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<v Speaker 1>to Ukraine. Classified documents found at Mike Penn's home. W

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<v Speaker 1>A show head says he's concerned about COVID and China.

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<v Speaker 1>I'm at Baxter with Global News. The highest men seed

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<v Speaker 1>remaining advances to the semis of the Australian Open. Dan Schwartzman,

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<v Speaker 1>I'll have that story more coming up in Bloomberg Sports.

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<v Speaker 1>That's all straight Ahead on Bloomberg Daybreak Asia on Bloomberg

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<v Speaker 1>eleven and three on New York, Bloomberg Washington, d C,

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<v Speaker 1>Bloomberg one O six one, Boston, Bloomberg nine sixties Sentrances

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<v Speaker 1>Go Serious Exam one nineteen and around the world on

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<v Speaker 1>Bloomberg Radio dot Com and via the Bloomberg Business app.

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<v Speaker 1>Good Morning, I'm de prisoner and I'm Brian Curtis. Here

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

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<v Speaker 1>take a closer look at Microsoft. Those earnings out second

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<v Speaker 1>quarter profit, topping analysts estimates. We get the details for

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<v Speaker 1>Bloomberg's Charlie Pellet, the software giant was helped by strengthen

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<v Speaker 1>its Azure cloud services business even as demands slump for

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<v Speaker 1>personal computer and corporate software. In Microsoft's closely watched cloud

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<v Speaker 1>computing business, sales gained thirty eight percent, compared with predictions

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<v Speaker 1>for a thirty seven percent increase excluding the impact of

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<v Speaker 1>currency fluctuations. Last week, Microsoft said it was firing ten

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<v Speaker 1>thousand workers in the past quarter. The software giants growth

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<v Speaker 1>engines have faltered as corporate customers became warier of spending

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<v Speaker 1>in an uneven economic environment. In New York, Charlie Pelt

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<v Speaker 1>Bloomberg Daybreak Asia, Thank you, Charlie. Well Equity Strategies, saying

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<v Speaker 1>the next few weeks could tell us whether corporate America

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<v Speaker 1>remains strong or is beginning to slump. The chief investment

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<v Speaker 1>strategist over at City is Stephen Whiting. He's expecting to

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<v Speaker 1>see earnings take a significant hit despite some rosy estimates

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<v Speaker 1>it looks so much in the analyst earnings estimates, like

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<v Speaker 1>the fourth quarter was the recession and here we are

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<v Speaker 1>sitting in the recovery, and it actually looks a little

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<v Speaker 1>bit like that in financial markets. And it would be

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<v Speaker 1>wonderful if that were really the truth, if we weren't

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<v Speaker 1>just on the leading edge of the hit that we're

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<v Speaker 1>going to have in profits um and of course how

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<v Speaker 1>markets traded last year are not anticipating this to be,

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

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<v Speaker 1>you know about something that is Cities Investment strategist Chief

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<v Speaker 1>Investments Strategists Stephen Whiting. Now when it comes to US equities,

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<v Speaker 1>Whiting is overweight farmer suticals. And at the same time,

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<v Speaker 1>if you look at the Asia Pacific region, City's head

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<v Speaker 1>of Asia strategy is overweight Chinese equities and very bullish

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<v Speaker 1>on the Yuan Brian. And we're seeing signs of strength

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<v Speaker 1>dug in some developed markets. Data out of Europe, for instance,

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<v Speaker 1>showing the private sector unexpectedly returning to growth. SMP Globals

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<v Speaker 1>Flash Manufacturing Index arose to fifty point two in January.

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<v Speaker 1>That's the first time the gauge has pointed to growth.

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<v Speaker 1>Since June. Eric Robertson, his chief strategist at Standard Chartered,

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

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<v Speaker 1>that food and energy crisis which was so talked about

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<v Speaker 1>last year, is just turning out to be less threatening

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<v Speaker 1>than expected, and so I think there's a very good

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<v Speaker 1>case for Europe to at least outperform from those really

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<v Speaker 1>downbeat expectations. Robertson says the situation in Europe does look

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<v Speaker 1>better than he initially feared. At the same time, SMP

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<v Speaker 1>Global says the region is quote not out of the

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<v Speaker 1>woods yet well. Emerging market equities could be gearing up

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<v Speaker 1>for a very strong run. That is the call from

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<v Speaker 1>Morgan Stanley. We have more from Bloomberg's Tom Busby. Stocks

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<v Speaker 1>and emerging markets are set to be this decade's winners.

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<v Speaker 1>That's according to Morgan Stanley Investment Management's Deputy Chief investment

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<v Speaker 1>Officer Gentandra Kendari. She says developing equities are trading at

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<v Speaker 1>attractive valuations and economies like India are set for better

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<v Speaker 1>growth than the US. In fact, Kendari calls India one

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<v Speaker 1>of the top trades at Morgan Stanley. So far this year,

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<v Speaker 1>the m s c I Emerging Markets Index is up

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<v Speaker 1>more than eight percent. Coodpared with a four and a

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<v Speaker 1>half percent advance for the SMP five hundred In New York.

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<v Speaker 1>I'm Tom Busby Bloomberg Daybreak Asia and now back to

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<v Speaker 1>a story out of the United States. Who've been telling

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<v Speaker 1>you about this for the past twenty four hours or so,

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<v Speaker 1>but now it's official. The US government is suing Google.

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<v Speaker 1>We get the details from Bloomberg's and Kate's in Washington.

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<v Speaker 1>The Justice Department in eight US states are suing alphabets Google.

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<v Speaker 1>They say the company has an illegal monopoly on digital

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<v Speaker 1>advertising and they want break up the business. It's the

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<v Speaker 1>Biden administration's first major case challenging one of the largest

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<v Speaker 1>US tech companies. It's also one of the few times

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<v Speaker 1>the Justice Department has called for the breakup of a

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<v Speaker 1>major firm. The last time it dismantled the company was

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<v Speaker 1>the Bell Telecom System In in Washington. I'm in Kate's

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

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<v Speaker 1>seeing Google respond to those allegations from the US government.

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<v Speaker 1>The company is saying the Justice Department is quote doubling

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<v Speaker 1>down on a flawed argument. Google is comparing these charges

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<v Speaker 1>to a similar lawsuit brought by the state of Texas,

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<v Speaker 1>which it calls unfounded and Brian, staying with a theme

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<v Speaker 1>of Texas, can I pivot to Texas instruments. I mentioned

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<v Speaker 1>earlier that the company reported of first it's first drop

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<v Speaker 1>in sales since about and kind of with a tepid

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<v Speaker 1>forecast for the current quarter week demand in all ends

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<v Speaker 1>of the market for semiconductors. I thought this was curious

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<v Speaker 1>except automotive. Yeah, that has been an industry that has

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

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<v Speaker 1>for for t I um that the I wanted to

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<v Speaker 1>go back to Google just briefly. The stock did trade

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<v Speaker 1>down two point one percent today, Doug, and that's because

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<v Speaker 1>of the waitiness I suppose of this action. But all

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<v Speaker 1>when you think about it, this could play out over many, many,

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

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<v Speaker 1>at the Microsoft share price now really fluctuating. You know,

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<v Speaker 1>from most of the period after the earnings came out,

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<v Speaker 1>the stock was up about four percenters, so now it

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<v Speaker 1>has moved down to just with a gain of about

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<v Speaker 1>two I think some analysts take from this Doug is

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<v Speaker 1>that this was more resilience by Microsoft than any new

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<v Speaker 1>news that some thought it could be a lot worse. Yeah,

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<v Speaker 1>particularly where the cloud service business is concerned. That of course,

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<v Speaker 1>asure we saw a weak demand for personal computer software

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<v Speaker 1>and corporate software as well. And then, Brian, if you

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<v Speaker 1>look at some of the cloud computing companies, UH names

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<v Speaker 1>like Mango, dB, Data Dog, they are rally here in

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<v Speaker 1>the late session. Yeah, and I wanted to mention Swatch.

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<v Speaker 1>It came out with its earnings. The stocks traded up

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<v Speaker 1>about five percenters so in Europe, and Swatch had some

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<v Speaker 1>positive comments about China, and that's very much in focus

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<v Speaker 1>now as China is reopening. We'll be getting comments from

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<v Speaker 1>CEOs of many, many companies over the coming days. It's

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<v Speaker 1>time for global news. The U S and Germany are

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<v Speaker 1>poised to break their negotiating deadlock over sending heavy tanks

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<v Speaker 1>to Ukraine. Ed Baxter has Global News in the ND

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

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<v Speaker 1>Both will offer tanks, sending Kieva powerful new weapon to

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<v Speaker 1>counter Russian offensives. This is something the NATO Secretary General

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<v Speaker 1>Yan Stoltenberg says is essential to the defense of Europe

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<v Speaker 1>as a whole. We have no indication that Preston Putin

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<v Speaker 1>has changed his goals. He wants to control Ukraine and

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<v Speaker 1>is planning new offensives. Biden administration expected to announce as

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<v Speaker 1>soon as tomorrow it will offer Ukrainian forces the M

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<v Speaker 1>one Abrams tank, dropping the criticism that it is too

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<v Speaker 1>hard to operate. Germany then will send its powerful Leopard tanks.

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<v Speaker 1>The move will give Ukrainian President Vladimer Zelenski's forces significant

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<v Speaker 1>new capabilities as the war will shift to the east.

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<v Speaker 1>New Zealand has a new Prime Minister. Just within the

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<v Speaker 1>past half hour. Chris Hipkins has been sworn in, completing

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<v Speaker 1>the handover from Jacinda Ardern. He's expected to hold a

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<v Speaker 1>news conference this morning. World Health Organization Panel will meet

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<v Speaker 1>this week to discuss whether COVID nineteen still represents a

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<v Speaker 1>global health emergency. Director General Tetris gabrius As says he's

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<v Speaker 1>very concerned by the situation in many countries and the

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<v Speaker 1>rising number of deaths. He says China's particular concern after

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<v Speaker 1>its abandoning of COVID zero. The FDA is rolling out

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<v Speaker 1>procedures for annual COVID vaccines. The hope in some circles

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<v Speaker 1>is to have one annual shot that would cover with

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

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<v Speaker 1>on Balance of Power on Bloomberg. She is with Stanford

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<v Speaker 1>Health Director of Infectious Diseases. She says, maybe not too fast.

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<v Speaker 1>I think the first step is that we need to

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<v Speaker 1>get to one shot that takes care of COVID for

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<v Speaker 1>the whole year um, and that's the hope for the

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<v Speaker 1>coming season. Dr Shaw says that this is the best

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<v Speaker 1>science at this point to protect against both diseases. Classified

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<v Speaker 1>documents have been found in former US Vice President Mike

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<v Speaker 1>Penns home in Indiana. Bloomberg Examrie Horndern reports she ordered

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<v Speaker 1>he ordered lawyers to do a search and they found

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<v Speaker 1>about a dozen classified documents. We were then put in

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<v Speaker 1>boxes and driven to the National Archives. Right now we

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<v Speaker 1>have the Department of Justice and the FBI looking into this.

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<v Speaker 1>Per this report. One thing is notable though, that the

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<v Speaker 1>former Vice president Mike Pence has said that he did

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

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<v Speaker 1>and the FBI and Justice apart but are investigating Meanwhile,

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<v Speaker 1>law makers on both sides of the aisle would like

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<v Speaker 1>to know more about the Biden classified documents. Republican Senator

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<v Speaker 1>Lindsey Graham says, the whole system needs looking at. I think,

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<v Speaker 1>uh clearly the way we handle classified information needs to

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<v Speaker 1>be uh improved upon. So I'm not going to pre

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<v Speaker 1>judge what happened with Trump or Biden. I'm glad people

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<v Speaker 1>outside of politics or looking at it. I have confidence

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<v Speaker 1>in UH Attorney General Garland to do it fairly and

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<v Speaker 1>approves of the Special Council in San Francisco. I'm at

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<v Speaker 1>Baxter and this is Bloomberg. This is Bloomberg Debrik Asia,

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<v Speaker 1>Brian Curtis here in Hong Kong, along with Rushad Salamat

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<v Speaker 1>in Singapore, and our guest is Anna Han, equity strategist

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<v Speaker 1>at Wells Fargo Securities. And a plenty of time to

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<v Speaker 1>talk about the really big picture, the big macro story

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<v Speaker 1>and the FED in recession, all that, But let's get

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<v Speaker 1>your take on the earnings so far from the banks

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<v Speaker 1>at the outset to the tech results we saw today.

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<v Speaker 1>Your thoughts. Yeah, coming to earning season, you saw that banks,

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<v Speaker 1>which tend to be the first group that report and

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<v Speaker 1>kind of a bell weather banks for training up generally,

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<v Speaker 1>which is usually not a great sign if you look historically,

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<v Speaker 1>when banks outperformed coming into earnings, they tend to get

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

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

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<v Speaker 1>that these banks who were able to be earnings or

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<v Speaker 1>even miss earnings are still able to get some rewards.

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<v Speaker 1>And in fact, the most peculiar thing this earning season

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<v Speaker 1>is to see how light the penalty has been for

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<v Speaker 1>earnings misses. We'll see how that trends as we get

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<v Speaker 1>further into the season. So ultimately, and well, why I

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<v Speaker 1>guess investors being that I suppose forgiving in a way,

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<v Speaker 1>and also you know when you look at banks, what's

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<v Speaker 1>actually then being priced into them? Right right? You have

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<v Speaker 1>the exact word on my mind, which was forgiving. Uh.

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<v Speaker 1>To be honest, it could be possibly that people had

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<v Speaker 1>such negative sentiment coming into this season, and that's not

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<v Speaker 1>really the most bright sunny picture I'm painting here, but

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<v Speaker 1>it's true that a lot of people are expecting lower

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<v Speaker 1>EPs for visions and with that at UM some really

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<v Speaker 1>bad news this earning season. We also know that that

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<v Speaker 1>inflation has been you know, gnawing away at those margins.

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<v Speaker 1>I think that the action that you're seeing here is

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<v Speaker 1>a little bit of a relief. And in particular, you

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<v Speaker 1>saw some big names report some positive news in there

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<v Speaker 1>despite some of the bigger layoffs that we're hearing about.

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<v Speaker 1>I think that's helping lighten the penalty for now um.

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<v Speaker 1>And again it's that sentiment, that expectation coming into earning season,

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<v Speaker 1>that low bar makes it a lot easier to hop

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<v Speaker 1>over net interest margins. So pretty good for the banks,

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<v Speaker 1>but then fears about recession. If you get a recession,

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

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

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<v Speaker 1>card back our view on the recession on how deep

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<v Speaker 1>the recession is. I think we can, you know, sit

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<v Speaker 1>here and go to it for tat on how exactly

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<v Speaker 1>we're going to measure this recession. But the idea that

0:13:04.440 --> 0:13:07.679
<v Speaker 1>we have here it's going to be mild. We do

0:13:07.920 --> 0:13:11.600
<v Speaker 1>think that consumer spending is going to contract, just looking

0:13:11.640 --> 0:13:14.240
<v Speaker 1>at how people have been using their debt and credit lines,

0:13:14.320 --> 0:13:17.600
<v Speaker 1>looking at that draw down of excess savings versus income.

0:13:17.760 --> 0:13:20.000
<v Speaker 1>I do think that we're going to see consumers pull back.

0:13:20.040 --> 0:13:23.800
<v Speaker 1>We will see earnings slow down, probably about a five

0:13:23.840 --> 0:13:27.600
<v Speaker 1>percent decline in large cap EPs growth. But we don't

0:13:27.640 --> 0:13:31.439
<v Speaker 1>think it'll be so dire enough where we'll see something

0:13:31.440 --> 0:13:34.680
<v Speaker 1>like the financial crisis, or we'll see anything, if anything,

0:13:34.760 --> 0:13:38.520
<v Speaker 1>nothing close to what we saw when the pandemic first hit. Okay,

0:13:38.600 --> 0:13:41.280
<v Speaker 1>well that's that's the case at the moment. But we

0:13:41.360 --> 0:13:44.320
<v Speaker 1>look at what happened, you know, the deletion of depletion

0:13:44.320 --> 0:13:47.480
<v Speaker 1>of those COVID, theators savings that's gone. We still have

0:13:47.520 --> 0:13:50.760
<v Speaker 1>inventory overhangs. We also have, of course, the jobs market,

0:13:50.760 --> 0:13:55.480
<v Speaker 1>which remains resilient. Um. I mean, where would a really

0:13:55.559 --> 0:13:59.319
<v Speaker 1>really deep recession, a recession come from, ultimately, because all

0:13:59.400 --> 0:14:02.160
<v Speaker 1>the fundamental will seem apart from of course, even inflation

0:14:02.240 --> 0:14:04.959
<v Speaker 1>is coming down. It seemed that perhaps the feed's job

0:14:05.000 --> 0:14:09.400
<v Speaker 1>may well, and I'm saying this controversiy is done, bring

0:14:09.480 --> 0:14:11.560
<v Speaker 1>up a good point. If the FED is done, I

0:14:11.600 --> 0:14:14.840
<v Speaker 1>think what could happen here is if a sentiment really

0:14:14.880 --> 0:14:17.840
<v Speaker 1>grabs hold. Right now, a lot of people are eyes

0:14:17.960 --> 0:14:22.000
<v Speaker 1>sharp on labor data, on watching wages, and that's been

0:14:22.080 --> 0:14:24.720
<v Speaker 1>somewhat of the lynch pin here. If we see some

0:14:24.760 --> 0:14:28.400
<v Speaker 1>sort of fear um that investors are so excuse me,

0:14:28.480 --> 0:14:32.280
<v Speaker 1>that consumers are suddenly feeling that weight I don't have

0:14:32.360 --> 0:14:34.440
<v Speaker 1>as much income coming in the door, or things could

0:14:34.520 --> 0:14:37.880
<v Speaker 1>get really rough and they contract their spending suddenly. I

0:14:37.920 --> 0:14:41.720
<v Speaker 1>think that's going to snowball effect into corporates who already

0:14:41.720 --> 0:14:44.800
<v Speaker 1>you're seeing some corporate belt tightening. If that really starts

0:14:44.840 --> 0:14:48.160
<v Speaker 1>to squeeze, that cycle can feed upon itself and there

0:14:48.240 --> 0:14:51.400
<v Speaker 1>you can see an aggressive contraction. But what we've seen

0:14:51.600 --> 0:14:54.440
<v Speaker 1>is really peanuts compared to what would be needed to

0:14:54.440 --> 0:14:57.320
<v Speaker 1>get the unemployment rate up to four and a half percent.

0:14:57.880 --> 0:15:01.160
<v Speaker 1>And it seems that company still want to keep their

0:15:01.160 --> 0:15:04.160
<v Speaker 1>employees because they don't think they can get them back

0:15:04.800 --> 0:15:07.480
<v Speaker 1>once you start to see growth coming back. So my

0:15:07.640 --> 0:15:11.360
<v Speaker 1>question is, if the job market doesn't crack, could we

0:15:11.440 --> 0:15:15.240
<v Speaker 1>see the Fed stay in hiking mode for much of

0:15:15.280 --> 0:15:18.880
<v Speaker 1>this year and then stay there for much longer. You know,

0:15:19.080 --> 0:15:22.160
<v Speaker 1>we would agree with that. Really, to get unemployment at

0:15:22.160 --> 0:15:24.280
<v Speaker 1>a high level or what we expect to be a

0:15:24.320 --> 0:15:27.320
<v Speaker 1>low four percent this year, we have to see, um,

0:15:27.400 --> 0:15:30.880
<v Speaker 1>some weakening somewhere. Something has to crack, like you said,

0:15:31.360 --> 0:15:34.880
<v Speaker 1>But what's particular about this, what's going on right now

0:15:35.120 --> 0:15:37.720
<v Speaker 1>is you're not seeing that as much. Um So, if

0:15:37.720 --> 0:15:41.640
<v Speaker 1>the FED stays on its path unlike which consensus expects

0:15:41.680 --> 0:15:43.520
<v Speaker 1>cut starting in the summer, I think that's going to

0:15:43.560 --> 0:15:45.720
<v Speaker 1>get pushed back and that could be a little rough

0:15:45.760 --> 0:15:48.280
<v Speaker 1>for equities as well. That's something to watch out for.

0:15:49.840 --> 0:15:52.680
<v Speaker 1>This is Bloomberg Daybreak Asia, your morning brief on the

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