This is Bloomberg Daybreak Asia for this Friday, April twenty eighth in Hong Kong, Thursday April twenty seventh in New York, and coming up today.
US economic growth slows during the first quarter, while inflation accelerates.
Amazon reports strong sales in its cloud division, with quarterly profit topping analyst estimates.
And Snap reports its first ever quarterly drop in revenue after making major changes to its ad tools.
US policy to d risk not decouple, White House says major economic address. McCarthy on Bloomberg says he will not compromise to clean debt ceiling rise. Fed Share deep faked into thinking he was talking to Zelenski. I'm at Baxter with Lebel News.
That's all straight ahead on Bloomberg Daybreak Asia, The business news you need to start your day in just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App, and everywhere you get your podcasts.
Good morning, I'm Doug Chrisner.
And I'm Brian Curtiz. Here are the stories we're following today. Amazon reporting first quote, a revenue that did increase nine point four percent to one hundred and twenty seven point four billion dollars unless we're projecting one twenty four point seven, So about three billion less sales in Amazon's cloud unit rising sixteen percent to twenty one point four billion, and that beat projections. It's a sign that the retailer's business
is weathering an uncertain economy. Bloomberg's Punam Goyle tells us Amazon is seeing stable online demand.
It got leaner in term of the promotions from a four Q standpoint, so inventory in the retail landscape has rationalized a little. There's still more to go, but we don't think it's promotions driving that increase. We think it is demand and consumers are flocking to Amazon for their day to day needs.
Amazon's results also suggest the company's efforts to reduce costs just starting to bear fruit. Operating expenses increased eight point seven percent in the quarter. That was the slowest pace in at least a decade. So the stock had a big gain during the regular session of four point six percent. I mentioned the jump in after hours, but it's given all of that back, illustrating flat here.
At the moment.
The stock had gained thirty one percent so far this year, as part of a big rebound in tech firms.
We also heard from Snap after the bell. The company reported first quarter revenue fell seven percent. This is the company's first ever decline in quarterly revenue, and it comes after Snap made some major changes to its advertising tools. This includes tweaking the design of its distinct direct response ads. We heard earlier from Bloomberg's Alex Sparinka to have Snap.
Kind of playing around with those direct response ads. A lot of marketers have backed away, and it's clear that they're not sending on the platform now. The company will say they had to make these changes. This will improve their business in the long run, but it does seem like there are quite a bit of impatience for investors in terms of the story that they're telling today.
That is Bloomberg's Alex Sparenka. By the way, Snap said the continued disruption and demand for advertising is expected to continue into the current quarter. The stock right now is down seventeen percent in late US trading.
US economic growth slowed in the first quarter. The GDP was at one point one percent on an annualized rate. Bloomberg economists were projecting one point nine percent growth. Business investment and equipment posted the biggest drop since the start of the pandemic. There was also a pullback in inventories, which subtracted the most from GDP in two years. It comes despite a pickup in consumer spending, which rose three
point seven percent. We got reaction earlier from Lindsay Piggs, a chief economist at Stefel.
This sets the tone for what the expectation of the US economy was at the start of the year, and it tells us two things. One, we're losing momentum from what we saw at the end of last year, but two, the economy is still proving resilient.
On a more concerning note, for the FED core PCEE, inflation for the quarter rose four point nine percent. That was higher than the four point seven percent that analysts had estimated. And again this is the quarterly number. We'll get the March number coming up tomorrow. It may strengthen the case for another FED rate hike next week.
Well later today, the Bank of Japan is expected to leave its policy unchanged this as Governor Hueita will chair his first meeting of the Bank of Japan. We have more from Bloomberg's Bonni out.
Bloomberg Survey says the short term rates will likely be held at minus zero point one percent, and that the target yield for the ten year JGB will stay at zero percent, with a wiggle room on either side of half a percentage point. The governor's recent public comments have been dubvish, but surprises from the previous governor, Harohiko Kuroda,
mean traders will be on high alert. Some economists are flagging for a possible tweak in youth curve control, but Bloomberg Economics say Ueita may call for a policy review that could prepare the ground for a shift in course. Further out in Hong Kong, I'm Bonniel Bloomberg day Break Asia.
I'm Brian Curtis, along with Doug Krisner. Rashad's Sam will join us in a few moments, So, Doug, I have to say that among the questions that I would want to be putting to guests today is does this rally that we're having in the equity market feel shaky or on solid ground, particularly in light of that rather disappointing
GDP report. Although consumer spending was pretty solid, but that one point one percent print surely is disappointing, and it comes at a time when you've got inflation not only sticky but actually gaining.
Yeah, it's difficult to make sense of how the equity market was responding to the weak data and also inflationary pressures that remain persistent in the economy and that may keep the FED from cutting rates as soon as the market had been expecting. But I want to touch on Intel, Brian, because we also heard from Intel after the bell, and the stock right now is up by more than seven
percent in the late US session. If you look at the revenue from the data center chips and those chips that are used for AI, well above the average estimate. But the forecast for the current quarter in terms of revenue solid, yes, but not overwhelming, and I think a little more troubling though maybe gross margin forecast was a little disappointing. But here again, difficult to see why the stock is up about seven percent right now.
Well, see, here's the thing. It seems like investors are looking at earnings that they're just that good compared to what was expected that they can set aside the macro and everybody realizes that this is an extremely unusual environment. We have falling GDP at a time that jobs stay strong. So how do you actually put that into your figure out, you know what comes out the other side. It's a good question to put to Anthony Doyle, who be coming up in a few moments out of investment strategy at
Fire Trail Investments. Now it's time for Global news US National Security Advisor Jake Sullivan saying that the operative word when thinking about the relationship with China is de risking. A. Baxter has Global News from IT nine and sixty newswomen in San Francisco.
Edward, Yeah, exactly. Brian Sullivan says d risk, not decouple, and remarks today at the Brookings Institution in DC. Sullivan said the interest in protecting US security against China's use of US technology.
We'll keep investing in our own capacities, in insecure, resilient supply chains. We'll keep pushing for a level playing field for our workers and companies and defending against abuses. Our export controls will remain narrowly focused on technology that could tilt the military balance. We're simply ensuring that US and allied technology is not used against US.
Now, he says, not d couple.
We are not cutting off trade. In fact, the United States continues to have a very substantial trade and investment relationship with China. Bilateral trade between the US and China set a new record last year.
And Sullivan says all measures are tailored and measured. US House Speaker Kevin McCarthy today is saying his redline on the sand regarding the debt ceiling is he definitely will not negotiate a clean debt ceiling increased proposal exclusively on Bloomberg's balance of power. McCarthy says, both just a.
Debt ceiling vote cannot pass the floor without dealing with the budget. We're at a thirty two trillion dollar deficit. When are we ever going to take this up? The Democrats had added six trillion dollars. The President wants to spend more money than he spent during.
COVID now Bloomberg's Chot Fitzpatrick says President Biden's position is seeming to lose a bit of traction.
Realistically, they can either play an endless game of chicken and the President can refuse to talk to them, or this vote in the House that demonstrated the Republicans do have a functioning majority can actually get him to the table. It seems the most likely thing is that Biden has to talk to McCarthy.
And the White House has reiterated that it will go along with anything but a clean bill, FED Chair or will not go along with anything. I should say now FED Chair Jerown Powell held a call with a pair of Russian pranksters posing as you and President Vladimer Zelensky. A video posted on the Internet shows Powell answering questions on topics ranging from the outlook for inflation to the Russian Central Bank. It's unclear if the video was altered.
Now the FED has confirmed it has no confidential information being discussed. The two pranksters are well known. It's not their first video or rodeo. They did one with JK.
Rowling.
They did one with former President George W.
Bush.
Now Bloomberg, Kylie Lynd says this has to be getting people's attention.
This is just something we have to think about in the age of deep fakes and AI and the ability to manipulate information and how it's perceived on the Internet. Clearly, central banks and governments around the world have to be paying attention.
And Wendy Whitmore of Palo Alto Networks on Bloomberg technologist says always morphing into the deep fake.
We're going to see much more sophistication coming from them, and you've already seen that over the course of the past year, with cyber criminals really getting in the game in an effective way. So generally technology fuels the offense a bit more faster than it's going to feel the defense. But I think we also feel very well premiered on the defensive side.
And says it will always be a cat and mouse game. Global News powered by more than twenty seven hundred journalists and analyst number one hundred and twenty countries. In San Francisco, I'm Ed Baxter, and this is Bloomberg.
I'm Brian Curtis in Hong Kong, along with Rashad Salamat, and we say good morning to Anthony Doyle, head of investment strategy at Fire Trail Investments. On with this from Sydney. Anthony, we know that we need to respect the price action. We talked about how difficult it is to really get risk assessment done here, and it's not like investors are not discerning. They've traded Snap down eighteen percent here after the bill and Amazon was up twelve percent. Now it's
actually down one point two percent. So people are out there making educated guesses on what's going on. What does Anthony Doyle think is going on?
Yeah, I mean the market action that we've seen of life really reflects around the end game of monetary policy, interest rates and the extent to which inflation may not
moderate as quickly as central banks would like. So in this type of environment where for so long macro has dominated the narrative and we start to revert back to a more normal regime where central bank rates may be on hold for an extended period of time, obviously the stock specific idiosyncratic factors start to come to the fore and that's why you're seeing the price action on a
couple of names that you've just mentioned there. But also the market is highly discerning as to which companies are likely to thrive in a more difficult environment and may may be less reliant upon economic growth, and those companies that will find an operating environment much tougher, which could be a possible recession, global recession within the next felve months.
So tell me something, Anthony, Is it discernment or is it actually skittishness in terms of the investors way of looking at things?
I mean, the conversations that I have with our clients here in Australia, certainly, I think many recognize the opportunity that exists in global equity markets in terms of valuations are compelling following the price action that we've seen over the course of the last four months or so, even with the rally we've seen in twenty twenty three, particularly
in medicap growth style stops. But there is I think you're quite right, apart from being discerning and an environment for obviously trying to sort the week from the chat. It is a growing consensus that it is no longer the case that central bank liquidity will bail investors out. And so this is where investors becoming more discerning really comes to the fourth it's no longer a case of simply only market beta that you do have to be active in your approach.
Well, you have so much to actually put into the calculations. I mean, you look at Amazon's earnings, they weren't really all that great, but then the stop was down more than fifty percent last year. So you've got high valuations but a lot lower than they used to be, and then you've got earnings that coming in. You know, maybe not as bad as expected, And so how do you
figure that. I'm not asking you about Amazon in particular, but you know what I'm saying is that it's very complex now to figure out how to maneuver through the next six to nine months.
Yeah, and I think it comes down to your.
Investment time horizons. So more recently, yes, ala Qualia, we've added Alphabet, we've added Beta, we own Microsoft, and we've earned Microsoft for quite some time. So if you are willing to take that longer term perspective and potentially look through the volatility that we're going to experience within the sixth night, six to nine months, you know, these are businesses that are very well run, high quality companies. They can sustain long term growth despite that short term volatility.
Tell me something, what you know we've been seeing of late low volumes, low volatility. You know, the market has been in a kind of torpa here. You know, how much is effectively what is the case exactly? Do investors as you look at what's going on with the equity markets and go, well, should I really bother when I can just put my money into money market fund instead?
Yeah, it's a relatively high hurdle when you do have the risk free rate relatively higher, certainly over the course of the last decade, much higher than than what we've become used to in terms of ultra low interest rates. And couple with that, obviously a more uncertain outlook and even you know, some geopolitical concerns, particularly around the US debt ceiling, and obviously the issues we've seen in terms
of the war in Ukraine. It is are relatively high hurdles for investors to potentially move out of that risk reasset or money market fund, as you say, into a higher risk asset. I think that's what we're seeing, and that's reflected in the live volume.
This is Bloomberg Daybreak Asia, your morning brief on the story's making news from Hong Kong to Singapore and Wall Street.
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Mhm