Transcripts For BLOOMBERG Bloomberg 20240704

Australia, counting down asias major market opens. Shery the top stories this hour. The u. S. Stock rally hitting a wall following hot jobs data. The s p 500 has its worst day since april, the vix of the most in five months. Haidi u. S. Companies added more jobs in july than expected. Inc. Of america reversing its outlook for a recession. Shery Brazil Central Bank cut its key rate by 50 basis points. U. S. Futures coming online in the asian session, Downside Pressure in the new york session, asher on u. S. Stocks and bonds. This on investors having to digest high job numbers and treasury debt issuance. The day after the Credit Rating downgrade of the u. S. This coming at a time when we continue to see the treasury selloff. We are talking about yields reaching new highs, the 10 year yield at the highest level since november. An upsurge in the yields earnings. It led to more momentum. It is still earnings season, 169 s p 500 Companies Reporting earnings. Qualcomm being the latest. The Downside Pressure of 7 because they gave a week forecast. A smartphone device, mobile market not recovering china demand. Take a look at oil prices in the asian session, a little bit of upside. The risk off sentiment being felt despite the fact we saw u. S. Stockpiles plunging. We were watching the Brazil Central Bank rate decision. Plenty for markets to digest. Emerging economies are embarking on an easing cycle. The Brazil Central Bank has kept the rate at 2. 75 for nearly a year. It has now cut the rate not by the expected d5 basis points, but by 50 basis points. Only 11 economists expected a big rate cut. Lets get details from our economics and government editor travis who joins us from brazil. Rate to have you with us. The surprise was not just the 50 basis points height, which was greater than most economists had expected, but they are seeing another 50 basis and cut in the future. Travis the expectation was they would cut, it was a coin flip whether it would be 25 or 50. People were brought were looking for signals. To say they expect the pace to be 50 basis points Going Forward was interesting. The other major aspect has been resilient being the First Central Bank start hiking rates, and now is the first bank to start cutting. Chile cut last week and latin america is leading the cycle while the fed and European Central bank are moving in the other direction. Haidi this was the first meeting to include a eula appointee. How does that play into the political environment the central bank is operating in . Travis we will see because lula said he expected a rate cut but renewed his there are questions given his appointees joining the board about how the bank will operate Going Forward because it is its formal autonomy was entrenched two years ago. It will be interesting to watch his reaction now. This is a bigger cut than people expected and signals there are bigger cub cuts coming in the future. Shery will they be able to do that . The divergence in paths from Central Banks and emerging economies eyes with what happens with the path of inflation. Brazil has lowered below its annual inflation target, but for how long and what could be the variables . Travis that is still the big open question, how far they go. They said in their statement they are going to monitor inflation expectations, and want to take on monitor and have moderation Going Forward. There is a question about how far they will go. The big news is that they went this far and this fast. Shery our brazil and latin economics editor travis, as we await other emergingmarket central inc. Decisions that could lead an easing cycle. Here in the u. S. The 6. 5 trillion stock rally is hitting a wall following labor market data that ramp up in treasury issuance and aqs credit downgrade. A u. S. Credit downgrade. A lot for investors to digest. How big was the Market Impact given that this is historic, a second Credit Rating downgrading . Traders were concerned about turbulence in the treasury market and the hot jobs data that renewed concerns that the Federal Reserve will have to tighten further. Many macro folks i was speaking to say this is not a concern. What spooked investors today was the u. S. Treasury sting its quarterly bond sales and spiking yields further pressured tech shares and weighed on the broader market. We saw the s p 500 drop more than 1 . When you look big picture, today is not a concern. It is the next few days that will be make or break about whether this will become a bigger risk off event. Investors took this as an event to do profit taking after the they are waiting to see what we see from the rest of Earnings Results with amazon and apple, the bar has been set high for tech companies. As well as the jobs report, that will give them a clue as to whether the fed is done. Haidi the iranian is we are seeing a turn in market sentiment, a lot of wall street banks are feeling optimistic about the economy. Alexandra just a couple of days after we saw biggest verbs on l street change their outlook on the s p 500. He saw city increase its target, oppenheimer increase its target. Because a lot of the strategists are in a bad place as we get into the second half of the year after missing out on a rally. A lot of them have been cornered into revising their outlooks. However sometimes it is a concern when you see strategists increase equity allocation. Bank of america has an indicator that serves as an indicator. It is sometimes a sign of selloff ahead. They still say it is neutral territory and the signal is closer to buy them so. I spoke to my sources who are saying the a lot of people who set out the rally could see this pullback an opportunity to get in on the stock market. Shery bloombergs equities reporter. Another wall street economist reversing the u. S. Recession forecast is a shift supported by job market strength. Kathleen hayes is here with us. We are talking about bank of americans change of mind coming after a week coming a week after the fed sees no recession ahead. Kathleen more and more saying, the labor market that keeps going, jobless claims that keep following falling. This is what is making people change their mind and throw in the towel. That is the case of the team at bank of america who have been forecasting a recession. Here is what they said in their report today. Growth in the economy for the past three quarters has averaged 2. 3 . The Unemployment Rate is near time lows. Wage and price pressures are moving in the right direction gradually. We think of a recession as being defined as to quarters of negative gdp growth. The actual definition in the u. S. Has four factors. One of them is jobs. That is one of the main things you are looking at. Lets look at this adp jobs report. This is the gauge of private job. It came at 324,000. This adp number has a terrible correlation with the size of payroll changes. It is a good indicator of direction. It underscores that we will get a positive job number on friday jobs are expected to rise by 200,000. If there is not going to be a recession, is the fed going to be able to pause . That is what people are asking. Bank of america is saying have moved their forecast for when it cuts might start until the middle of 20. The rate hikes the middle of 2024. The rate hikes will still show up in the economy. The fed may have more to do. Bank of america is saying we will get this soft landing. Shery we are in a hiking path for the bank of england. We are expecting that decision. 25 or 50 basis points . Kathleen echoes of brazil but in the other direction. In june the bank of england surprised with a 50 basis point. People are saying they will hike again. This time they will sit back and do 25. The inflation rate has gone from 8. 7 to 7 . The core has only gone from 7. 1 to 6. 9 . There is sticky inflation, may be they will do the 50 basis point move. And this is something that what make it markets are expecting 75 basis points more of hikes from the bank of england in total. I am thinking, they could do three 25s, or 50 and then a 25. Inflation is too high, they have to do more, we are waiting to see the size of the move. Shery kathleen hays, we have live coverage coming up of the big inc. Of england decision followed by governor baileys news conference. Lets take a look at how all of this is feeding into the thursday start of trading in asia. Aussie futures are charting off on the back foot. Downside indicating early losses. We saw u. S. Bond yields hitting 2023 highs. Stocks tanking. The spookiness from the flooding of Government Debt and strong labor data, a mixed bag of factors going into the asia open. The aussie dollar seeing strength at 65. 40. The dollar seeing a four high. Kiwi stocks are off by. 6 . When it comes to broadly, we are expecting another difficult day for asian stocks after we saw the Asian Pacific clocking its worst day since march. Losses of over 2 due to the selloff in highflying tech stocks with the move in bond yields. Still ahead, constructs tell us why qualcomm remains wellpositioned despite revenue forecasts. That is coming up, this is bloomberg. I need it cool at night. You trying to ice me out of the bed . Baby, only on game nights. You know you are retired right . Am i . Ya save up to 500 on the new sleep number® smart bed. Plus, free Home Delivery when you add an adjustable base. Shop now only at sleep number®. Affixed rating downgrade came as a surprise. A bit of a head scratch. The likelihood of any impact small. This does not move the needle. The bigger impact will be politics and reputation. There is a governance problem. Markets will brush off. The u. S. Treasury market is the key. There is no viable alternative. In the long run, very little impact. Haidi some of our guest reacting to the downgrade of the u. S. Debt rating. Our next guest says recession rating is still high. The opportunities with theresa spath, founder at zuma wealth. From what the fed and a number of wall street banks, why argue more pessimistic . Terri i would not say we are pessimistic. What we are concerned about is this increasing complacency when it comes to what is going on in the economic backdrop of the u. S. We are hearing an increasing chorus of people saying that the risk of recession is low, the fed is going to thread the needle. We think there is way too many risks still out there that suggest that is not the highest probability outcome this stage of the game. Haidi International Developed equities is where you are seeing opportunities. Terri when we look at the u. S. , we talked touched more on that. Think there has been an increase of breadth in the stock market in the u. S. , not just the tech stocks leading the way, the are seeing a broader spread. We think that is positive. However we also have been pointing out that many investors have been missing the boat when it comes to International Developed stocks. You are missing what is going on in europe, where we are seeing strength. On a relative cases in terms of valuation, it has never been as cheap relative to the u. S. In 20 years. When we see that, that makes us sit up straight. It means you better have a lot of exposure to International Developed, because those are going to avert. Shery these are still markets where the Central Banks are continuing to hike rates. We are expecting the bank of england to hike. They are perhaps cheaper than the u. S. , but would you not find value in of secure corners, even in delving markets . Terri yeah, another area that we have been positive on is india, we are seeing strong infrastructure spending, great population growth, a smart population, democratic society. It will surpass china in terms of its size, it will surpass other countries in europe. We are constructive on india, that will be very interesting. We are pointing out on the International Side is that do not own just a few tech stocks, to borrow a quote from the barbie movie, that is so popular now. It can be fun until it is not. Make sure you have exposure to international development. Make sure you have exposure to emerging markets, select diffley. We are constructive on india. Shery do you go into the treasury space and we are expecting more debt . We are expecting the tweak in the boj policy. Terri if you are talking about u. S. Treasury bonds, have been positive on that. Lock in your 5 , do not think its will be higher than that. You saw a little today because of the news coming out, lowering the rating for the u. S. It pushes yields up. But most of those rate increases are in the rearview mirror. We do not think the fed needs to raise rates in july or in september. Their tools are looking at backward data for forwardlooking is also. They have done enough. You have seen the highest rates in the u. S. , and lock those in. Because we do not think they will go higher from here. Haidi you called what happened today a blip, is the fitch downgraded a blip in the longer implications it could have for marcus . Terri it was a great piece you put together before this segment that showed the various commentary. Most of it was dismissive. I do not think we are quite as dismissive. We questioned the timing, there was nothing in particular that seemed to drive the decision. The rationale was valid. We think there are concerns for the creditworthy credit worthiness of the u. S. , it is high. I do think what they pointed out, when we look at the fiscal stimulus that is lifting all ships, it is gone. You have an inverted yield curve, higher interest yields for corporations, there is a lot more risk in the global outlook. That is being reflected in their view on what is going on in the u. S. Haidi when you take a look at the longterm structural impact on potential inflation, and it comes to Energy Markets and agricultural and grains, is there more upside to inflation risk then what we are looking at in the shortterm . Terri that is in an interesting question. The market seems to say yes, there is a risk of inflation to the upside. That would go along with a thesis of both being stronger than expected Going Forward. Is that possible . Absolutely. However we are in the camp that growth will slow down. When you see Interest Rates going up globally as rapidly as they have, never before seen, there will be an impact. It is like slamming on the brakes in a car. There is going to be implications for that. We do think that will slow down the economy faster than the fed or bank of england belief. The risk to that point of view is that we are wrong, and growth will be every strong, and which case you will see inflation in commodities. That is not our base case scenario. Shery good to have you back, founder and cio at zuma wealth. You can get a roundup of these stories in todays edition of daybreak, terminal subscribers go today two daybgo. Terminal subscribers can find it by entering daybgo. This is bloomberg. The first time your sales reached 100k with godaddy was also the first time your profits left you speechless. At the counter or on the go, save 20 with the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com 76 of 23andme Health Customers surveyed reported taking healthier actions. And keep more of what you make. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Shery here are some of the top corporate stories. Carlyle group has posted a 26 drop in it secondquarter earnings. The ceo says the firm is in negotiation for an effort to minute cost and profit margins. It follows the report of the most then but three months. Record quarterly profit thanks to a surge in travel and collapse of is smaller rival. Indigos net income reached 300 374 million, double analyst forecast. Flew more than 23 billion passengers during the order, up 12 from last year. Indian billionaire is said to be buying a majority stake in saudi in sanghi industries. It will propel a donnie adanis potential. Back in the day, sneaker drops meant getting online to wait in line. Now with xfinity mobile. We get the Fastest Mobile Service and can get the freshest kicks asap. I got this. Save hundreds a year over tmobile, at t and verizon with the best price for two lines of unlimited. Nice job, little sis they grow up so fast. Im a fan. From xfinity. Sleepovers just arent what they used to be. A house full of screens . Basically no hiccups . You guys have no idea how good youve got it. How old are you . Like, 80 . Back in my day, it was scary stories and flashlights. We dont get scared. Oh, really . Mom can see your search history. Thats what i thought. Introducing the next generation 10g network. Only from xfinity. Shery qualcomm falling and afterhours trading, reporting softer than expected third order revenue and fourthquarter guidance was week. Was weak. Lets bring in our next guest who says qualcomm is very well positioned in an industry that has lots of room to grow. With us now is david traier, ceo at new constructs. Give us your reaction to the latest numbers. David this is not much of a surprise. This is about Revenue Growth in this business. It is a hard margin, high return on invested capital business. The question is, what kind of growth can they sustain and what is a supercompetitive this next . A great company, not a great stock because the expectations baked into a current price are pretty high. Shery are you concerned about the broader industry and how that demand is not picking up, especially in china . David yeah, it is becoming a more mature and crowded market. March are that the penetration is high, there is not a lot of Additional Market share out there for free. Or competitive because you have more people competing for a diminishing amount of market. Growth is going to be harder to come by. What our modeling shows is that the key number is 5 . If they can do better than 5 Revenue Growth, the stock looks attractive and she. If they are not going to do better than that, it looks expensive. That is the breakeven point. Assuming margins and profitability stay the same, assumed degradation in the margins. But 5 longterm, they have to be that if you want to believe the stock is cheap. If they cannot beat 5 , this might be a good time to exit. Haidi how formidable armies a Free Cash Flow situation . David i believe it is strong, we are showing Free Cash Flow at 1. 5 billion. And on average over the last five years, around five lien 5 billion per year. I like that, great margins, great return on capital, strong Free Cash Flow. Russian is can they continue to generate that level and row the business. I think that is the tough part. It is not often a stock can come to something that simple. For qualcomm, to have the wherewithal to continue to innovate in a way that can allow the business to grow at than 5 for a sustained. Sustained period of time. The answer for that question is for people a lot smarter than i am. [laughter]haidi we might be in trouble when you construct it like that. This has been an interesting conundrum ross tech earnings. Conundrum across tech earnings. More investment is required for ai, at the same time the monetization has not materialized. And they are losing access to keep capital. How do you separate where the good opportunities are . David that is a great question. It has been a long time since we have had to eat discerning about capital and expect companies to be discerning about how they allocate it. The answer to that question is it is going to be hard, and i think investors should be careful about where they allocate. The best way to get a sense of whether or not companies will be able to continue to cash flow is to see whether or not they have done it the past. Alas think you want to do is find a company that has never been profitable and has done nothing but burn cash flow. On the other hand, with qualcomm, great cash flow, a much better chance at gang able to the 5 growth rate than other companies. They can internally sustain and on a lot of this r d to be successful in ai that companies with less cash flow cannot. The stock is pretty expensive, the market has given it credit, the question is whether they can do better than what the market has given them credit for . My models show the orchids give them credit for show the markets give them credit for 5 . I am i do not track those numbers. It will not be much more than it has been in the past. The iphone launches have been increasingly less impressive. The iphone is a business that is really successfully penetrated it target market, not a lot of room for both left. The new features are increasingly less impressive, a lot of competition. Apple is a more similar business to qualcomm. Our model show it is a good business. But it is more expensive as well. I do not think you will find many stocks these days in the tech space that are not close to, at or above, fairly valued. We have had to look in basic to aerials, energy, financials, we see a lot of opportunities there. Everybody knows the sexy names, nvidia and others are really expensive and he. And risky. Haidi great to have you with us, david traier, ceo at new constructs. Taking a look at u. S. Futures, a tumultuous session, when it comes to the u. S. Stock rally. S p futures looking muted at the moment, a flat nasdaq 100. The doubt up by. 1 . After we saw the rally hitting a wall, the hot labor market data, a day after the u. S. A downgrade from fitch. We saw the s p 500 suffering its worst day since april after the big rally and going into the asian session, we do not see recovery from what was the worst day all year from for a number of these markets. Janet yellen has tapped into this drink of the u. S. Economy as she criticized fitchs downgrading of its Credit Rating. There decision is puzzling in light of the economic strength we see. I disagree with their decision and i believe it is entirely unwarranted. Shery the cohead of american sovereign ratings explained the decision to downgrade. We did right after the resolution of the debt ceiling, mind you, two or three days from the x date. We indicated we would resolve rating watch in the third quarter. We want to take our time. We wanted to opine upon the impact of the fiscal responsibility act, the debt level. He wanted to update her own numbers and look at where we think the fiscal trajectory is going. And we want to take stock of the actual debt ceiling debate and its resolution. We want to take our time and give a thoughtful analysis to the fiscal picture and the governance issues. It is worth talking about the criteria you set out a year ago, about what it would take to get to a downgrade. Some things have changed in terms of the picture. The rise in debt to gdp ratio. Why is that not factored in here in terms of the decision made . The debt bubble has been rising for currently. If you look at before the great Financial System in 2000 some 2007, gdp was below 16 . Now it is 113 . It is almost three times higher than a aaa edn. Median. Yes, that ep peaked after the pandemic and has come down. That is because inflation and high gdp growth, and also the withdrawal. But now we are seeing the level starting to rise again we do not see them stabilizing but continuing to rise in the next three years and more. That 113 is 13 Percentage Points higher than where it was before the pandemic. Shery speaking with bloomberg. We have or to come on daybreak australia, this is bloomberg. The chase ink business premier card is made for people like sam, who make everyday products, designed smarter. Like a smart coffee grinder, that orders fresh beans for you. Oh, genius for more breakthroughs like that i need a breakthrough card. Like ours with 2. 5 cash back on purchases of 5,000 or more. Plus unlimited 2 cash back on all other purchases. And with greater spending potential, sam can keep making smart ideas a brilliant reality the ink business premier card from chase for business. Make more of whats yours. Shery breaking news, the net income coming in at 2. 69 billion for the lender rid this is beating expectations of 2. 4 billion. They are entering Dividend Per Share at . 48, higher than xpeng patients. Second quarter nonperforming loans ratio, 1. 1 . Second order net income including onetime items that cost 2. 6 3 billion. Dbs is saying their macroeconomic Business Outlook was slower, they see upside bias to net interest margins. They will continue momentum. They are seeing further upside from cards, higher spending as well. This coming from dbs, beating expectations. The expectation was we would see a sequential slowdown in the Second Quarter given that we have sluggish loan growth and margin construction. It seems there they are optimistic. Haidi we are getting numbers when it comes to occidental, it missed the average analyst estimate. The justice eps is 63 . 63. A little bit higher than expectations. We are kind of seeing the oil price per errol at 73. A little bit higher than expectations. The oil and gas pretax income was 1. 1 billion softer when it comes to expectations. They had been expecting that increase in that quarter. That was not a huge surprise. That willingness to repay or rent profit, even as we see prices to look volatile. Shery take a look at crude prices, you can see a rebound on wti f. This is after we did not see much of a price rally, despite that we got the measures of the u. S. Stock pile, falling by 17 Million Barrels last week. Su keenan joins us. The new york session, we are actually down. You have to ask, if you take the data at its face value, a drawdown which might indicate tightening of the market, or it might indicate this is a wild swing in the data that may be subject to revision. You are seeing red on the screen in asian trading, but you had oil lower in the u. S. Session. Stockpiles sell by a record 17 million. The drawdown was in the oklahoma hub that impacts price. We have oil sitting at the lowest since january. The massive number failed to induce a price rally which has to do with the fact traders focused on the monthly figures for july they say will aligned with expectations. Traders talk about the adjustment factor or margin of error. The drawdowns are undeniably huge, but generally we lose seasonal momentum. The macro risk rate is rearing its ugly head, the market is not buying a lot of. A lot of crude. You have a lot of currency issues, the strong dollar putting pressure on brent crude and other commodities. Crude exports jumped to the third highest level since the u. S. Lifted the ban on overseas shipments. Shery u. S. Oil exports to asia appear to hit a record. Su that has to do with the fact the saudis have taken oil off the market, that leaves the asian region looking for replacements. Birgit data shows there were 27 and 29 supertankers booked this month. Industry consultants forecasting that u. S. Exporters will send a record 2. 2 Million Barrels of aid to asia this month. Demand from china, south korea, taiwan and india, and expected to take less oil in august amid refinery outages. Bloomberg reported that while asia has seen robust demand, much of this is going to storage. Concerns remain about economic recovery in asia. There are questions about a soft landing in the u. S. These are the crosswinds we are seeing in terms of economic outlook, in terms of oil trading. That was a lot of pressure on those in the oil trading business. Despite the bullish data out of the u. S. , caution was the word of the day. Haidi be sure to tune into Bloomberg Radio to hear from the days newsmakers and get analysis from the daybreak team. Broadcasting live from hong kong, more ahead, this is bloomberg. upbeat music woah. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. Shery some of the top political stories, singapores Prime Minister has vowed to protect the integrity of governance following a series of scandals that have tested his partys reputation. The Top Parliament will do what needs to be done in accordance with the law, even if they may be politically amberson. He was fighting back questions against his parties transparency. I have been asked, why did i take so long to act . It is a fair question. In retrospect, and now knowing how things eventually turned out, i agree. I should have forced the issue sooner. Haidi a party linked to the former Prime Minister says it is creating a new coalition with a potential support of conservative parties. It will seek to form a government. It will also nominate a new Prime Minister. Conservative parties had rejected the coalition that included move forward. Shery fans of korean pop sensations ets are turning bts are turning their love into environmental activism. Reporting from south korea. This is south koreas beach, the butter beach where keep up superstar bts set up concept art in 2021. But just six miles from here, a coal burning power plant is being built, set to open in a few months. Fans and climate activists are leveraging k pops global reach to draw intention to the Environmental Impact of the growing use of coal and protecting its photo hotspot. A member of Advocacy Group k pop for planet protesting means more than just reserving a place of k pop pilgrimage. Most capable fans are in their 20s who will lead in the future. The climate issue and climate change. According to activists, it is expected to release more than 13 million tons of Greenhouse Gas emissions every here once they start operating. The planned plant developer did not respond to request for comment. Adding fuel to the fire, construction of a port for the plant, which has cost caused coast erosion. This area was known for its long stretch of sand, that extends for 5. 1 kilometers. But now it is turning into a grim place for tourists. It is experiencing erosion and sedimentation simultaneously. The province where the beach is located will have 10 coal units. But a combined capacity of 7. 7 gigawatts will cover 20 of koreas total coal power generation. While south koreas Energy Ministry declined to comment, eGovernment Data showed the Government Data showed a 7. 3 gigawatts capacity will be added , but only 3. 6 gigawatts will be removed in the country. Haidi lets take a look at fx, think u. S. Dollar i yank the fourweek high the irony of the safe haven demand flows into treasuries and the u. S. Dollar in the wake of the downgrade for the u. S. Rating. We are seeing aussie dollar sitting comfortably. We are watching the kiwi dollar which lost following jobs numbers. When it comes to dollar yen, 148 3, 145 is set to hold. We did see demand for the yen after the u. S. Downgrade. This is bloomberg. Every business deserves a great deal. Thats why comcast business is launching the mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 39 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Hi, im jason and ive lost 202 pounds on golo. So the first time i ever seen a golo advertisement, i said, yeah, whatever. Theres no way this works like this. And threw it to the side. A couple weeks later, i seen it again after getting not so pleasant news from my physician. I was 424 pounds, and my doctor was recommending weight loss surgery. To avoid the surgery, i had to make a change. So i decided to go with golo and its changed my life. When i first started golo and taking release, my cravings, they went away. And i was so surprised. You feel that your body is working and functioning the way it should be and you feel energized. Golo has improved my life in so many ways. Im able to stand and actually make dinner. Im able to clean my house. Im able to do just simple tasks that a lot of people call simple, but when youre extremely heavy theyre not so simple. Golo is real and when you take release and follow the plan, it works. Shery qualcomm counting down