WEBVTT - Amazon Beats and Intel, Snap Disappoint

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Friday, April twenty

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<v Speaker 1>eighth in Hong Kong, Thursday April twenty seventh in New York,

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<v Speaker 1>and coming up today.

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<v Speaker 2>US economic growth slows during the first quarter, while inflation accelerates.

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<v Speaker 1>Amazon reports strong sales in its cloud division, with quarterly

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<v Speaker 1>profit topping analyst estimates.

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<v Speaker 2>And Snap reports its first ever quarterly drop in revenue

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<v Speaker 2>after making major changes to its ad tools.

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<v Speaker 3>US policy to d risk not decouple, White House says

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<v Speaker 3>major economic address. McCarthy on Bloomberg says he will not

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<v Speaker 3>compromise to clean debt ceiling rise. Fed Share deep faked

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<v Speaker 3>into thinking he was talking to Zelenski. I'm at Baxter

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<v Speaker 3>with Lebel News.

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<v Speaker 4>That's all straight ahead on Bloomberg Daybreak Asia, The business

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<v Speaker 4>news you need to start your day in just one

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<v Speaker 4>fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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<v Speaker 4>and everywhere you get your podcasts.

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<v Speaker 2>Good morning, I'm Doug Chrisner.

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<v Speaker 1>And I'm Brian Curtiz. Here are the stories we're following today.

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<v Speaker 1>Amazon reporting first quote, a revenue that did increase nine

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<v Speaker 1>point four percent to one hundred and twenty seven point

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<v Speaker 1>four billion dollars unless we're projecting one twenty four point seven,

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<v Speaker 1>So about three billion less sales in Amazon's cloud unit

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<v Speaker 1>rising sixteen percent to twenty one point four billion, and

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<v Speaker 1>that beat projections. It's a sign that the retailer's business

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<v Speaker 1>is weathering an uncertain economy. Bloomberg's Punam Goyle tells us

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<v Speaker 1>Amazon is seeing stable online demand.

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<v Speaker 5>It got leaner in term of the promotions from a

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<v Speaker 5>four Q standpoint, so inventory in the retail landscape has

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<v Speaker 5>rationalized a little. There's still more to go, but we

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<v Speaker 5>don't think it's promotions driving that increase. We think it

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<v Speaker 5>is demand and consumers are flocking to Amazon for their

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<v Speaker 5>day to day needs.

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<v Speaker 1>Amazon's results also suggest the company's efforts to reduce costs

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<v Speaker 1>just starting to bear fruit. Operating expenses increased eight point

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<v Speaker 1>seven percent in the quarter. That was the slowest pace

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<v Speaker 1>in at least a decade. So the stock had a

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<v Speaker 1>big gain during the regular session of four point six percent.

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<v Speaker 1>I mentioned the jump in after hours, but it's given

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<v Speaker 1>all of that back, illustrating flat here.

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<v Speaker 4>At the moment.

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<v Speaker 1>The stock had gained thirty one percent so far this year,

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<v Speaker 1>as part of a big rebound in tech firms.

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<v Speaker 2>We also heard from Snap after the bell. The company

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<v Speaker 2>reported first quarter revenue fell seven percent. This is the

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<v Speaker 2>company's first ever decline in quarterly revenue, and it comes

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<v Speaker 2>after Snap made some major changes to its advertising tools.

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<v Speaker 2>This includes tweaking the design of its distinct direct response ads.

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<v Speaker 2>We heard earlier from Bloomberg's Alex Sparinka to have Snap.

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<v Speaker 6>Kind of playing around with those direct response ads. A

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<v Speaker 6>lot of marketers have backed away, and it's clear that

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<v Speaker 6>they're not sending on the platform now. The company will

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<v Speaker 6>say they had to make these changes. This will improve

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<v Speaker 6>their business in the long run, but it does seem

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<v Speaker 6>like there are quite a bit of impatience for investors

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<v Speaker 6>in terms of the story that they're telling today.

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<v Speaker 2>That is Bloomberg's Alex Sparenka. By the way, Snap said

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<v Speaker 2>the continued disruption and demand for advertising is expected to

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<v Speaker 2>continue into the current quarter. The stock right now is

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<v Speaker 2>down seventeen percent in late US trading.

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<v Speaker 1>US economic growth slowed in the first quarter. The GDP

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<v Speaker 1>was at one point one percent on an annualized rate.

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<v Speaker 1>Bloomberg economists were projecting one point nine percent growth. Business

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<v Speaker 1>investment and equipment posted the biggest drop since the start

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<v Speaker 1>of the pandemic. There was also a pullback in inventories,

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<v Speaker 1>which subtracted the most from GDP in two years. It

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<v Speaker 1>comes despite a pickup in consumer spending, which rose three

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<v Speaker 1>point seven percent. We got reaction earlier from Lindsay Piggs,

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<v Speaker 1>a chief economist at Stefel.

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<v Speaker 7>This sets the tone for what the expectation of the

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<v Speaker 7>US economy was at the start of the year, and

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<v Speaker 7>it tells us two things. One, we're losing momentum from

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<v Speaker 7>what we saw at the end of last year, but two,

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<v Speaker 7>the economy is still proving resilient.

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<v Speaker 1>On a more concerning note, for the FED core PCEE,

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<v Speaker 1>inflation for the quarter rose four point nine percent. That

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<v Speaker 1>was higher than the four point seven percent that analysts

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<v Speaker 1>had estimated. And again this is the quarterly number. We'll

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<v Speaker 1>get the March number coming up tomorrow. It may strengthen

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<v Speaker 1>the case for another FED rate hike next week.

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<v Speaker 2>Well later today, the Bank of Japan is expected to

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<v Speaker 2>leave its policy unchanged this as Governor Hueita will chair

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<v Speaker 2>his first meeting of the Bank of Japan. We have

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<v Speaker 2>more from Bloomberg's Bonni out.

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<v Speaker 8>Bloomberg Survey says the short term rates will likely be

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<v Speaker 8>held at minus zero point one percent, and that the

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<v Speaker 8>target yield for the ten year JGB will stay at

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<v Speaker 8>zero percent, with a wiggle room on either side of

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<v Speaker 8>half a percentage point. The governor's recent public comments have

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<v Speaker 8>been dubvish, but surprises from the previous governor, Harohiko Kuroda,

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<v Speaker 8>mean traders will be on high alert. Some economists are

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<v Speaker 8>flagging for a possible tweak in youth curve control, but

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<v Speaker 8>Bloomberg Economics say Ueita may call for a policy review

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<v Speaker 8>that could prepare the ground for a shift in course.

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<v Speaker 8>Further out in Hong Kong, I'm Bonniel Bloomberg day Break Asia.

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<v Speaker 1>I'm Brian Curtis, along with Doug Krisner. Rashad's Sam will

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<v Speaker 1>join us in a few moments, So, Doug, I have

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<v Speaker 1>to say that among the questions that I would want

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<v Speaker 1>to be putting to guests today is does this rally

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<v Speaker 1>that we're having in the equity market feel shaky or

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<v Speaker 1>on solid ground, particularly in light of that rather disappointing

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<v Speaker 1>GDP report. Although consumer spending was pretty solid, but that

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<v Speaker 1>one point one percent print surely is disappointing, and it

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<v Speaker 1>comes at a time when you've got inflation not only

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<v Speaker 1>sticky but actually gaining.

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<v Speaker 2>Yeah, it's difficult to make sense of how the equity

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<v Speaker 2>market was responding to the weak data and also inflationary

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<v Speaker 2>pressures that remain persistent in the economy and that may

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<v Speaker 2>keep the FED from cutting rates as soon as the

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<v Speaker 2>market had been expecting. But I want to touch on Intel, Brian,

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<v Speaker 2>because we also heard from Intel after the bell, and

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<v Speaker 2>the stock right now is up by more than seven

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<v Speaker 2>percent in the late US session. If you look at

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<v Speaker 2>the revenue from the data center chips and those chips

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<v Speaker 2>that are used for AI, well above the average estimate.

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<v Speaker 2>But the forecast for the current quarter in terms of

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<v Speaker 2>revenue solid, yes, but not overwhelming, and I think a

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<v Speaker 2>little more troubling though maybe gross margin forecast was a

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<v Speaker 2>little disappointing. But here again, difficult to see why the

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<v Speaker 2>stock is up about seven percent right now.

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<v Speaker 1>Well, see, here's the thing. It seems like investors are

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<v Speaker 1>looking at earnings that they're just that good compared to

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<v Speaker 1>what was expected that they can set aside the macro

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<v Speaker 1>and everybody realizes that this is an extremely unusual environment.

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<v Speaker 1>We have falling GDP at a time that jobs stay strong.

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<v Speaker 1>So how do you actually put that into your figure out,

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<v Speaker 1>you know what comes out the other side. It's a

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<v Speaker 1>good question to put to Anthony Doyle, who be coming

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<v Speaker 1>up in a few moments out of investment strategy at

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<v Speaker 1>Fire Trail Investments. Now it's time for Global news US

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<v Speaker 1>National Security Advisor Jake Sullivan saying that the operative word

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<v Speaker 1>when thinking about the relationship with China is de risking. A.

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<v Speaker 1>Baxter has Global News from IT nine and sixty newswomen

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<v Speaker 1>in San Francisco.

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<v Speaker 3>Edward, Yeah, exactly. Brian Sullivan says d risk, not decouple,

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<v Speaker 3>and remarks today at the Brookings Institution in DC. Sullivan

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<v Speaker 3>said the interest in protecting US security against China's use

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<v Speaker 3>of US technology.

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<v Speaker 9>We'll keep investing in our own capacities, in insecure, resilient

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<v Speaker 9>supply chains. We'll keep pushing for a level playing field

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<v Speaker 9>for our workers and companies and defending against abuses. Our

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<v Speaker 9>export controls will remain narrowly focused on technology that could

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<v Speaker 9>tilt the military balance. We're simply ensuring that US and

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<v Speaker 9>allied technology is not used against US.

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<v Speaker 3>Now, he says, not d couple.

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<v Speaker 9>We are not cutting off trade. In fact, the United

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<v Speaker 9>States continues to have a very substantial trade and investment

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<v Speaker 9>relationship with China. Bilateral trade between the US and China

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<v Speaker 9>set a new record last year.

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<v Speaker 3>And Sullivan says all measures are tailored and measured. US

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<v Speaker 3>House Speaker Kevin McCarthy today is saying his redline on

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<v Speaker 3>the sand regarding the debt ceiling is he definitely will

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<v Speaker 3>not negotiate a clean debt ceiling increased proposal exclusively on

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<v Speaker 3>Bloomberg's balance of power. McCarthy says, both just a.

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<v Speaker 10>Debt ceiling vote cannot pass the floor without dealing with

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<v Speaker 10>the budget. We're at a thirty two trillion dollar deficit.

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<v Speaker 10>When are we ever going to take this up? The

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<v Speaker 10>Democrats had added six trillion dollars. The President wants to

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<v Speaker 10>spend more money than he spent during.

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<v Speaker 3>COVID now Bloomberg's Chot Fitzpatrick says President Biden's position is

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<v Speaker 3>seeming to lose a bit of traction.

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<v Speaker 11>Realistically, they can either play an endless game of chicken

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<v Speaker 11>and the President can refuse to talk to them, or

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<v Speaker 11>this vote in the House that demonstrated the Republicans do

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<v Speaker 11>have a functioning majority can actually get him to the table.

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<v Speaker 11>It seems the most likely thing is that Biden has

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<v Speaker 11>to talk to McCarthy.

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<v Speaker 3>And the White House has reiterated that it will go

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<v Speaker 3>along with anything but a clean bill, FED Chair or

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<v Speaker 3>will not go along with anything. I should say now

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<v Speaker 3>FED Chair Jerown Powell held a call with a pair

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<v Speaker 3>of Russian pranksters posing as you and President Vladimer Zelensky.

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<v Speaker 3>A video posted on the Internet shows Powell answering questions

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<v Speaker 3>on topics ranging from the outlook for inflation to the

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<v Speaker 3>Russian Central Bank. It's unclear if the video was altered.

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<v Speaker 3>Now the FED has confirmed it has no confidential information

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<v Speaker 3>being discussed. The two pranksters are well known. It's not

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<v Speaker 3>their first video or rodeo. They did one with JK.

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<v Speaker 4>Rowling.

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<v Speaker 3>They did one with former President George W.

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<v Speaker 4>Bush.

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<v Speaker 3>Now Bloomberg, Kylie Lynd says this has to be getting

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<v Speaker 3>people's attention.

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<v Speaker 12>This is just something we have to think about in

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<v Speaker 12>the age of deep fakes and AI and the ability

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<v Speaker 12>to manipulate information and how it's perceived on the Internet. Clearly,

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<v Speaker 12>central banks and governments around the world have to be

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<v Speaker 12>paying attention.

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<v Speaker 3>And Wendy Whitmore of Palo Alto Networks on Bloomberg technologist

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<v Speaker 3>says always morphing into the deep fake.

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<v Speaker 13>We're going to see much more sophistication coming from them,

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<v Speaker 13>and you've already seen that over the course of the

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<v Speaker 13>past year, with cyber criminals really getting in the game

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<v Speaker 13>in an effective way. So generally technology fuels the offense

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<v Speaker 13>a bit more faster than it's going to feel the defense.

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<v Speaker 13>But I think we also feel very well premiered on

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<v Speaker 13>the defensive side.

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<v Speaker 3>And says it will always be a cat and mouse game.

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<v Speaker 3>Global News powered by more than twenty seven hundred journalists

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<v Speaker 3>and analyst number one hundred and twenty countries. In San Francisco,

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<v Speaker 3>I'm Ed Baxter, and this is Bloomberg.

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<v Speaker 1>I'm Brian Curtis in Hong Kong, along with Rashad Salamat,

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<v Speaker 1>and we say good morning to Anthony Doyle, head of

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<v Speaker 1>investment strategy at Fire Trail Investments. On with this from Sydney. Anthony,

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<v Speaker 1>we know that we need to respect the price action.

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<v Speaker 1>We talked about how difficult it is to really get

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<v Speaker 1>risk assessment done here, and it's not like investors are

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<v Speaker 1>not discerning. They've traded Snap down eighteen percent here after

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<v Speaker 1>the bill and Amazon was up twelve percent. Now it's

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<v Speaker 1>actually down one point two percent. So people are out

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<v Speaker 1>there making educated guesses on what's going on. What does

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<v Speaker 1>Anthony Doyle think is going on?

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<v Speaker 14>Yeah, I mean the market action that we've seen of

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<v Speaker 14>life really reflects around the end game of monetary policy,

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<v Speaker 14>interest rates and the extent to which inflation may not

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<v Speaker 14>moderate as quickly as central banks would like. So in

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<v Speaker 14>this type of environment where for so long macro has

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<v Speaker 14>dominated the narrative and we start to revert back to

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<v Speaker 14>a more normal regime where central bank rates may be

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<v Speaker 14>on hold for an extended period of time, obviously the

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<v Speaker 14>stock specific idiosyncratic factors start to come to the fore

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<v Speaker 14>and that's why you're seeing the price action on a

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<v Speaker 14>couple of names that you've just mentioned there. But also

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<v Speaker 14>the market is highly discerning as to which companies are

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<v Speaker 14>likely to thrive in a more difficult environment and may

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<v Speaker 14>may be less reliant upon economic growth, and those companies

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<v Speaker 14>that will find an operating environment much tougher, which could

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<v Speaker 14>be a possible recession, global recession within the next felve months.

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<v Speaker 15>So tell me something, Anthony, Is it discernment or is

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<v Speaker 15>it actually skittishness in terms of the investors way of

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<v Speaker 15>looking at things?

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<v Speaker 14>I mean, the conversations that I have with our clients

0:12:13.200 --> 0:12:19.000
<v Speaker 14>here in Australia, certainly, I think many recognize the opportunity

0:12:19.080 --> 0:12:22.880
<v Speaker 14>that exists in global equity markets in terms of valuations

0:12:22.960 --> 0:12:26.079
<v Speaker 14>are compelling following the price action that we've seen over

0:12:26.120 --> 0:12:28.079
<v Speaker 14>the course of the last four months or so, even

0:12:28.120 --> 0:12:32.720
<v Speaker 14>with the rally we've seen in twenty twenty three, particularly

0:12:32.880 --> 0:12:36.959
<v Speaker 14>in medicap growth style stops. But there is I think

0:12:37.120 --> 0:12:40.680
<v Speaker 14>you're quite right, apart from being discerning and an environment

0:12:40.760 --> 0:12:43.680
<v Speaker 14>for obviously trying to sort the week from the chat.

0:12:45.000 --> 0:12:48.720
<v Speaker 14>It is a growing consensus that it is no longer

0:12:49.080 --> 0:12:53.240
<v Speaker 14>the case that central bank liquidity will bail investors out.

0:12:54.160 --> 0:12:57.160
<v Speaker 14>And so this is where investors becoming more discerning really

0:12:57.160 --> 0:12:59.760
<v Speaker 14>comes to the fourth it's no longer a case of

0:13:00.240 --> 0:13:04.120
<v Speaker 14>simply only market beta that you do have to be

0:13:04.240 --> 0:13:05.360
<v Speaker 14>active in your approach.

0:13:06.320 --> 0:13:10.320
<v Speaker 1>Well, you have so much to actually put into the calculations.

0:13:10.360 --> 0:13:12.840
<v Speaker 1>I mean, you look at Amazon's earnings, they weren't really

0:13:12.880 --> 0:13:14.720
<v Speaker 1>all that great, but then the stop was down more

0:13:14.760 --> 0:13:18.880
<v Speaker 1>than fifty percent last year. So you've got high valuations

0:13:18.920 --> 0:13:21.400
<v Speaker 1>but a lot lower than they used to be, and

0:13:21.440 --> 0:13:24.240
<v Speaker 1>then you've got earnings that coming in. You know, maybe

0:13:24.720 --> 0:13:27.160
<v Speaker 1>not as bad as expected, And so how do you

0:13:27.200 --> 0:13:29.960
<v Speaker 1>figure that. I'm not asking you about Amazon in particular,

0:13:30.040 --> 0:13:32.080
<v Speaker 1>but you know what I'm saying is that it's very

0:13:32.200 --> 0:13:35.559
<v Speaker 1>complex now to figure out how to maneuver through the

0:13:35.600 --> 0:13:37.160
<v Speaker 1>next six to nine months.

0:13:37.400 --> 0:13:39.800
<v Speaker 2>Yeah, and I think it comes down to your.

0:13:39.760 --> 0:13:44.400
<v Speaker 14>Investment time horizons. So more recently, yes, ala Qualia, we've

0:13:44.440 --> 0:13:49.520
<v Speaker 14>added Alphabet, we've added Beta, we own Microsoft, and we've

0:13:49.520 --> 0:13:52.839
<v Speaker 14>earned Microsoft for quite some time. So if you are

0:13:52.880 --> 0:13:56.440
<v Speaker 14>willing to take that longer term perspective and potentially look

0:13:56.520 --> 0:13:59.320
<v Speaker 14>through the volatility that we're going to experience within the

0:13:59.400 --> 0:14:01.679
<v Speaker 14>sixth night, six to nine months, you know, these are

0:14:02.160 --> 0:14:05.960
<v Speaker 14>businesses that are very well run, high quality companies. They

0:14:06.000 --> 0:14:10.080
<v Speaker 14>can sustain long term growth despite that short term volatility.

0:14:10.240 --> 0:14:13.320
<v Speaker 15>Tell me something, what you know we've been seeing of

0:14:13.440 --> 0:14:17.840
<v Speaker 15>late low volumes, low volatility. You know, the market has

0:14:17.840 --> 0:14:20.120
<v Speaker 15>been in a kind of torpa here. You know, how

0:14:20.200 --> 0:14:23.840
<v Speaker 15>much is effectively what is the case exactly? Do investors

0:14:23.840 --> 0:14:25.680
<v Speaker 15>as you look at what's going on with the equity

0:14:25.720 --> 0:14:28.280
<v Speaker 15>markets and go, well, should I really bother when I

0:14:28.280 --> 0:14:31.000
<v Speaker 15>can just put my money into money market fund instead?

0:14:31.360 --> 0:14:33.720
<v Speaker 14>Yeah, it's a relatively high hurdle when you do have

0:14:34.520 --> 0:14:38.800
<v Speaker 14>the risk free rate relatively higher, certainly over the course

0:14:38.840 --> 0:14:40.920
<v Speaker 14>of the last decade, much higher than than what we've

0:14:40.960 --> 0:14:44.200
<v Speaker 14>become used to in terms of ultra low interest rates.

0:14:44.480 --> 0:14:51.000
<v Speaker 14>And couple with that, obviously a more uncertain outlook and

0:14:51.080 --> 0:14:54.080
<v Speaker 14>even you know, some geopolitical concerns, particularly around the US

0:14:54.080 --> 0:14:57.040
<v Speaker 14>debt ceiling, and obviously the issues we've seen in terms

0:14:57.080 --> 0:15:00.960
<v Speaker 14>of the war in Ukraine. It is are relatively high

0:15:01.040 --> 0:15:04.000
<v Speaker 14>hurdles for investors to potentially move out of that risk

0:15:04.120 --> 0:15:07.280
<v Speaker 14>reasset or money market fund, as you say, into a

0:15:07.360 --> 0:15:10.880
<v Speaker 14>higher risk asset. I think that's what we're seeing, and

0:15:10.960 --> 0:15:12.720
<v Speaker 14>that's reflected in the live volume.

0:15:14.000 --> 0:15:16.840
<v Speaker 1>This is Bloomberg Daybreak Asia, your morning brief on the

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<v Speaker 1>Mhm