Apple Suffers Downgrade, Tencent Buybacks Hit Record High

Good morning. I'm Doug Chrisner. Here are the stories we're following today, and we begin with Apple. Those shares suffered a downgrade today for the second time this week, Piper Sandler cutting Apple to neutral. The bank cited a weak macro environment in China, saying that that will damp and demand for iPhones. It was only on Tuesday that Barclays lowered its rating on Apple shares. We spoke with Jay Woods earlier. He is the chief Global strategist at Freedom

Two downgrades to kick off the years, not how you want to start things. We'll see how it cycles through the earning season. Over the long term, yeah, I don't worry about Apple, but the day to day for the day traders. Yeah, he could pull back a little bit. Watch it two inner day moving averages support, but over the long term it will find another like high.

He is Jay Woods from Freedom Capital Markets. Now Bloomberg Data show. Coming into this year twenty twenty four, Apple was the big tech stock with a least number of bullish recommendations. Apple is also the only tech giant to see revenue contract for the past four quarters. Apple shares today down about one point two percent.

Here in New York, Paul Qualcom has announced the new chip designed for virtual reality headsets. The goal is to compete with Apple's Vision Pro mixed reality headset, and Qualcom's chip will be used by Samsung and Alphabet on products under development. Bloombergsy and King says this will help Qualcom expand their offerings.

They've promised investors that they will be more than just a mobile phone chip company, and they're trying desperately for you know, in a number of areas. None of them are really taken off so far. Perhaps this is the one. We're up to version two point five right now. Usually for chip makers, version three is the one that is going to win.

That is Bloomberg se and King there, Qualcomb shares closing down about one percent in New York.

We go next to Ammer Sports. This company makes the Wilson Tennant racket line. Along with Solomon Ski Boots. Amor has now filed for an inch initial public offering here in the US. That story from Bloomberg's Charlie Pellett.

According to a press release confirming in an earlier Bloomberg News report, amer has picked Goldman Sachs, Bank of America, JP, Morgan Chase and Morgan Stanley as book running lead managers of the share sale. Sources have said that amer is targeting an IPO of more than one billion dollars and a listing could value the firm as much as ten

The Federal Reserve Bank of Saint Lewis has named its new president. We've got all from Bloomberg's Michael.

McKee Alberto Mussalam. He is a PhD economist and has worked on Wall Street for a significant amount of his career, also at the IMF and also at the New York Fed. He was most recently the executive chair at the Man Group and a member of the board at Freddie Mack. He says he'll resign those two positions. He was the CEO of Evin's Asset Management, and he was a managing director and partner at Tutor Investments. Broad Wall Street background

That's Bloomberg's and Michael McKee, Muslim will take over at the Saint Louis fed on April the second, and he, of course succeeds Jim Bullott. He's now the dane of Purty University's Business School.

Ten Cents spybacks have now hit a record high. That story from Bloomberg's Joanne Wong.

In Hong Kong, ten Cent boughtbacker record one point three billion dollars of shares in December. The pace of the buybacks accelerated further this month after Beajing surprised investors with a raft of new regulations and triggered a broad tech sell off. Daily repurchases more than doubled since the new roles were announced on December twenty second. The controversial regulations include caps on in game spending and a ban on

Let's move to Global news next, and we begin with the Islamic state taking responsibility for those deadly bombings in Iran. Dan Schwartzman's here, Denny.

Thanks Doug, You're right. Islamic State claiming responsibility for Wednesday's bombing in Iran that killed at least eighty four and wounded two hundred and twenty others. The blast occurring near the grave of Iranian Revolutionary Guard commander Cassam Solimani, who was killed in a US drone strike in Iraq back in twenty twenty. According to the state run Islamic Republic News agency, one bomb was planted in a suitcase, the other in a car, with the two detonating fifteen minutes apart.

Students had to barricade in offices, many fled in panic. The suspect is a student at the school in Perry. Authority say he died of what investigators believe was a self inflicted gunshot wound. At least one of the victims was a school administrator. Perry has about eight thousand residents and is about forty miles northwest of Des Moines, on the edge of the state capitals metropolitan area. Charlie Pellett, Bloomberg Radio.

Thanks Charlie. New York City Mayor Eric Adams announcing the city is suing seventeen bus companies for a total of seven hundred and eight million dollars. Adams says the companies have violated state law by not helping to pay the cost to care for the migrants after bussing them from Techis. So far, almost thirty four thousand migrants have been bussed

Bloomberg Daybreak Asia. We're about ten minutes past the hour now as we bring in our guest Edward Harrison. He is Bloomberg team leader for FX and Rates for the Americas. He joins us from here in New York, ed thanks for being with us. I think we have to begin with the employment report that we're going to get tomorrow

Yeah?

I think that what we've seen is a weakening in the labor market, but ever so slightly, it hasn't been broad based enough to know on an individual print level what these specific reports are going to say, meaning that you know this it could go either way in terms

Yeah, the job is myket holding up quite well? What are the implications here for FED policy going forward.

I think that what we're seeing with regard to growth two point five percent is the GDP now figure for Q four is an excess of where they would feel they would want to cut. And so you know, if this job's report isn't it isn't very negative, then I think it means for the FED that they're going to be on hold for a longer period of time. The

Undershoot expectations.

So yesterday we were looking at the minutes of the last FED meeting, and I think one of the takeaways higher for longer, maybe the market to kind of lost track of that, at least temporarily, when you look at the fact that perhaps some of these higher rates have the total impact has yet to be fully felt. What does that mean for momentum as we move into twenty twenty four.

I think that you know, the Fed, it means for the FED in particular that we're going to be on hold, and therefore they're looking for the momentum of the economy to slow.

Two point five percent.

Which is what we see for the data that we have currently through Q four, that's too fast. They think that it's going to slow from there. We had about five percent in Q three. We're at about two to two and a half percent.

For Q four.

They think it's going to slow if it goes below say one point eight percent, which is the level that the FED thinks is, you know, the the the economic potential for the economy, then as long as inflation comes down, we could actually get some rate cuts. But until we get to those levels, it's gonna be very They're gonna be on hold. And so the economic momentum is waning, but it may not wane enough for the Fed to act very aggressively.

Yeah, what are the signals around inflation at the moment and hitting that target.

Pend Yeah, the signals are that we have goods inflation going down. We have the overall the normal overall level of inflation going down as a result of that, as well as energy and food, but core services is not coming down to the same level. We're in a three ish almost four percent level for the super core services number, and that's way too high for the Fed. We need to see that number come down by a lot for the FED to feel comfortable that inflation is coming back to trend very quickly.

So there were many calls last year that we were going to see a recession manifest in Q four. Obviously that didn't happen. The narrative that the market has been operating under right now has to do with the soft landing. Have we completely dodged the possibility of a recession? Do you think ed?

No?

I think that actually what we need to see is is we need to see the market say that actually, no recession is coming for the recession to actually come to fruition, because you know, this has been the recession that has been watched and anticipated like no other, and only now are people saying, Okay, we've given up, the recession is not going to come. That's actually the sign that you know, we could get a recession, because you need to have that surprise for these kinds of things to happen.

We've got the US dollar continuing to strengthen five days in a row now doesn't really seem to be buying into this narrative coming from other parts of the market that we're going to get a whole heap of rite cuts in twenty twenty four.

No, I think that really what's happened is is we went to access on rates up to five percent. Then we backed away from that very aggressively at the end of last year, too aggressively in fact, and now the market is in a quandary as to what does it really mean. This particular jobs number is going to be very important in terms of.

That because we've seen the rates market.

Sell off somewhat and the dollar has followed that path higher. And when we see this number, if the number is actually better than expected, we could see a very nasty backup and yields in the treasury market tomorrow. So this

So we're talking about an economy that's losing a bit of a moment momentum, and that recession is possibly still in the cards. I'm wondering what that means about the equity market. I mean, at the end of last year we saw some very very powerful gains. Toward the last week of twenty three and the first trading week of the new year, things have been a little rocky, But I think you would have to say that the equity

Well, you know, it is interesting that were you were just talking about Apple right before I came on. I was looking at the PE ratio for Apple, which is about twelve point four percent at the end of twenty eighteen. It rocketed up to over thirty percent in twenty twenty, and it stands now at about thirty thirty times. So we're looking at thirty times earnings for Apple, which is not growing tremendously well, versus twelve times at the end of twenty eighteen.

Which was five years ago.

So in the last five years, even though interest rates have gone up somehow, Apple, the same company, which is valued much more highly, has a PE ratio much higher. That tells you that the Magnificent seven, those stocks like Apple, they're richly valued, and unless the economy continues to chug along, you could see some air pockets in the equity market.

Yeah, and as we've been reporting, we had to pop a sandllite cutting it's writing to neutral on Apple. Well, we got about thirty seconds remaining. What can we expect in terms of earnings in twenty twenty for do you think I.

Think that the market is pricing in a very high level of earnings going up, and likely we're not going to meet that. Unless the economy powers forward, You're not going to be able to see the FED cutting and getting the number of cuts that we have in there and the earnings at the same time.

One of those two has to give.

We'll leave it there with Ed Harrison, and it's always a pleasure. Thank you so much for being with us in Happy New year. Ed Harrison Bloomberg team leader for FX and Rates for the Americas, joining us here on day Breakasia. This is Bloomberg day Break Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street. Look for us on your podcast feed every day on Apple, Spotify, and anywhere else you