This is Bloomberg Daybreak Asia for this Friday, May fifth in Hong Kong, Thursday May fourth in New York and coming up today.
A selloff in regional lenders leads to mounting anxiety over stability of the US banking system.
Apple beats estimates on signs that iPhone demand may be weathering an industry wide slump.
And Ali Baba's global online commerce unit is said to be weighing a US IPO.
Taiwan warrants China regarding potential drone incursions. The US Intelligence Director says China seeks to achieve goals at US expense, China voicing displeasure regarding Switzerland upping diplomatic efforts with Taiwan. I'm at Baxter with Global 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.
Morning.
I'm Doug Prisner and I'm Brian Curtiz. Here are the stories we're following today. A route in regional banks leading to a down day for markets. Packwest shares down fifty one percent after the bank said it's in talks with potential investors and partners. Western Alliance shares stumbled as much as sixty two percent and then bounced back, if we want to call it that, to close down thirty eight percent, as after the bank said that a report that it
was exploring options, including a sale is categorically false. Meantime, First Horizon shares dropping thirty three percent. The bank said, along with Toronto Dominion Bank, that it had agreed to termine the merger packed they cited uncertainty over regulatory approvals. Now, the sell off today adds to concerns about the financial sector, as you know, it has been rattled in recent months
by the collapse of multiple banks. Bloomberg's Hermann Chan stressed that the needs that a lot more needs to be done to soothe investor nerves.
Get this point, there needs to be a more holistic solution from Washington, from regulators, because no matter what the regionals are saying, from a fundamental view, and it's not arresting the declines in the market pressure. So there needs to be a more of a government response and deposit guarantee, maybe a blanket guarantee over a short period of time to calm market fears would be helpful.
All twenty one shares in the KBW Bank index we're down for the day. Larger US lenders also declined, and Goldman Sachs shares fell about two percent as the bank's role in Silicon Valley banks attempt to raise funds is now under review in a US probe.
And the same time, we are hearing today that the FDIC is planning to release a highly anticipated proposal to replenish its deposit Insurance fund that could happen as soon as next week. And we have the story from Bloomberg's Charlie Pellett.
The fund was partly depleted by the failures of Silicon Valley Bank and Signature Bank. Sources say smaller lenders with less than ten billion dollars in assets would not have to pay. FDIC data showed there were more than four thousand institutions under that threshold at the end of last year.
A political debate who has been raging over who should be on the hook for refilling the fund after it was depleted by billions of dollars When the government took the extraordinary step of making all SVB and Signature depositors, even uninsured ones whole in New York. Charlie Pellett Bloomberg Daybreak Asia.
Apple reported second quarter sales amounting to ninety four point eight billion dollars. That was better than the ninety two point six billion analysts had predicted. The results suggest that Apple is bouncing back from a slump that plagued both the computer and smartphone industries. We got reaction from Dan Morgan at Cinovistrust.
Well, obviously the big numbers that stand out to me, and there's this huge beat in iPhone revenue because coming in this quarter I had forty eight point ninety seven that came in a fifty one point three and that forty eight point nine seven would have represented a negative growth rate of about three point two percent. This is going to put them, I think, probably flatter, even slightly up on iPhone revenue. I was looking for about fifty five million units, so that's a huge number for them.
From a supply perspective, the second quarter was an opportunity for the iPhone fourteen to rebound. The device had suffered from constraints during the prior quarter because of COVID policies in China. Separately, Apple announced plans for ninety billion dollars in stock repurchases, which was the same as last year's plan, and the company raised its quarterly dividend four percent to twenty four cents a share. Apple shares had traded up
around three percent in after hours trading. At the moment, they have advanced about two percent.
Well.
Lift is forecasting disappointing revenue for the current quarter. According to the company, top line will be between a billion to one point zero two billion dollars. That is less than what the street was looking for. Analysts were estimating one point zero eight billion. Lift also reported fewer than expected active riders on its platform. It's an indication Lift is failing to stay competitive with Uber despite lowering rider fares. Here's Bloomberg's Man Deep sing.
What Uber has done well is they've created tiered pricing for you know, really attracting all kinds of users. So if you're if you care about price, you can find that kind of right on Uber. If you want that convenience, you can find an expensive ride and shorter eta. Lift just is struggling to keep that driver's supply on the platform, and that's why the ETAs are going up. So you know, the user experience won't be as good because people don't want to wait.
That is Bloomberg's man Deep saying. By the way, today's results regarding Lift come as the company's new CEO, David Rischer, is attempting to turn Lift into a properly profitable company. He's already begun to shake things up, recently cutting twenty six percent of Lift's workforce. Risher has also said he's committed to being competitive on prices. He's planning to wrecked some of the cost savings to subsidizing lower fares and
boosting driver earnings. Lift shares right now in the late US session down by more than fifteen percent.
Ali Baba's international online shopping unit is exploring a US initial public offering. We hear more from Bloomberg's Joanne Wong in Hong Kong.
We're told the ibo might be launched as soon as next year. The company's weighing options to spur growth for the business, and that includes major e commerce brands Lazada and Ali Express. Earlier in March, Ali Baba unveiled plans to break up his empire into units such as e commerce, logistics and the cloud and Is said it'll have each business potentially explore fundraising and an IPO and an appropriate time. If the USIPO plan goes ahead, it will be competing
with rivals such as Amazon in markets outside China. Analysts valuation for Alibaba's international business units vary between twenty nine and thirty nine billion dollars in Hong Kong, Joan Wong Blueberg day Break Asia.
We had a little bounce in alib Bobba shares up one and a quarter percent in US trading with the ADRs, and we also saw an advance yesterday in Hong Kong, up four tenths of a percent, but that stock has straded down about twenty percent over the past month. Well, I'm Brian Curtis, along with Doug Kristner. Doug Apple's numbers really didn't do too much to change the sort of level of heat or coolness in the markets, and I wanted to strip out the China numbers because it didn't
appear in our story. It's because it wasn't that newsworthy sales were down a little but sort of in line with the rest of the revenues, down two point eight percent, but the next quarter could be quite interesting in that we know that the reopening is playing into this year and last year in the second quarter we had the lockdowns, particularly in the Shanghai area, so that could be could
be good for Apple. Japan was down, but not that much. Interestingly, the rest of the Asia Pacific was up fifteen percent, and that's quite surprising, and.
Cook saying on the comment, Fferends called with analysts that India is an incredibly exciting market for the company to focus on. Let's not forget that Apple did authorize an additional stock buyback program of up to ninety billion. That's pretty significant. I think analysts have already kind of adjusted expectations for this company a great deal. If you remember the stock so far this year, I think is what up twenty eight percent. It's outperformed the overall market quite significantly.
Yeah, is PE is twenty eight the forward PE twenty six, not chan, and that's high compared to where it often trades. However, it's really the same as Procter and Gamble, Coke, McDonald's and those are you know, those are considered staples. Is Apple a staple? I think many people would say yes, it sort of is, and it grows faster than those companies I just mentioned.
Yeah, I'd like to get your reaction to this idea that maybe we'll get a rate cut as soon as the July FED meeting. At the swaps market right now, pricing in odds well over fifty percent based on what we heard yesterday from the FED chairman, that doesn't seem to be a possibility. Maybe the market's not buying the Fed's story right now.
I almost think it's the Fed and Jay Powell not buying the market story because the market is calling for these three cuts towards the end of the year, and essentially they're almost talking about different things. As I mentioned in our conference call, it seems like the FED is really thinking about this in terms of inflation, and it thinks that the market's cuts mean that inflation will come down, and the Fed does not believe that's what's going to happen.
But it's actually the market thinking that there's trouble out there and it could be recessionary conditions. But you didn't hear. You didn't hear Jay Powell talking about that. What he talked about was that the job numbers are solid and there are no immediate signs that recession is in the picture, certainly by by July, so it creates an interesting battle.
Yeah, let's get to Global News next. Here on Dave Break Asia, Taiwan's defense minister is saying the country will treat china drone incursions as a first strike attempt. Let's get to ed Baxter in the Bloomberg newsroum at San Francisco.
Edty, Yeah, that's right, Doug saying the ministry does not wish for war to break out on the Taiwan Strait, but Chu Ku Cheng, repeating previous declarations made about aircraft violating the twelve mile line now applying to drones. This while China's sent increasing numbers into the broader air defense identification zoned a state out of the more narrow region
so far. Meanwhile, the US Director of National Intelligence, Abril Hagines is telling the Senate Armed Services Committee today that the CCP is increasingly convinced it can only fulfill Shesha Impeing's vision at the expense of the United States and.
Through tools of coercion, using demonstrations of strength as well as economic and political coercion to compel governments to acquiesce to the CCP's preferences, including the land, sea and air claims in the region and its assertions of sovereignty over Taiwan.
She says China sees the US as a threat that must be undercut in many ways. Haines also says China would seek to exploit a debt default, propaganda and intelligence gathering. China's embassy in Switzerland ISS voice what it called strong discontent over a move in the Swiss parliament's lower house aimed to intensify its relations with Taiwani's lawmakers. Now the embassy says it is grossly interfered with China's internal affairs.
Ukraine's President Vladimir Zelenski has visited the International Criminal Court at the Hague, acknowledging the recent arrest warrant for Vladimir Putin.
Of course, we all want to see different Vladimir here in.
The Hague, and the US State Department spokesman Vidant Patel says Russia's running more and more attacks.
Since May one, Russia has launched more than one hundred and forty five airstrikes across Ukraine. That means Russia has launched more than one missile, one drone, or bomb every hour, twenty four hours a day for four straight days.
And the State Department also saying it believes purported drone attack on the Kremlin is a Russian false flag. Says not very good one either. Former chairman of the Proud Boys, Henry Enrique Tario, has been convicted of seditious conspiracy tie to the January sixth insurrection and in the US and Europe, today is the fourth of May.
Ice drink flow from the force, off the dark side, anger, aggression, the dark side of the horse name.
May the fourth be with you.
Global News powered by more Than and Galaxy News more than twenty seven hundred journalists and analysts and over one hundred twenty countries. In San Francisco, I'm at Baxter in this is Bloomberg.
I'm Brain Curtis along with Rashad Salama. We have Doug Crisner on Markets and head Baxter there on News. And now our guest is Christina Hooper, chief Global market strategist at Invesco. Christina, we were just talking about the different positioning from the FED and the swaps market. The swaps market, the WORP function on the Bloomberg tells us it's more than fifty two percent the likelihood that we'll get a cut by July. Do you think that that's possible.
I think it's very unlikely, but there's always a possibility something like that could happen. But I don't think we would want to get to a scenario with the economy where we would see the FED cut rates.
Hey, you know, Christina, I wanted to just phrase the question differently. I'm kind of curious whether or not is that like a hedging. It's not the market predicting it or saying this is going to happen, but it's like positioning yourself as a hedge in case it does happen.
Well, I think that's part of it. But I really do believe markets are more are increasingly anticipating that the FED has committed overkill and that we could see a situation where the economy deteriorates significantly. We're also, of course, in a disinflationary environment and that will continue. I think that will accelerate. So but I think for the FED to actually cut rates in July, we'd have to see a very significant economic downturn. I hope we don't see it, and I don't think it's.
Likely because you know, I had a guest in two thousand and eight, and this is in July of that year, and that's when the European Center Bank raised interest rates, and he called it an economic war crime. I had a guest on yesterday suggesting that tightening during a banking crisis is an act of insanity. What are your thoughts.
Well, I won't use such extreme language, but I do think it's foolhardy. I think it's a mistake on the part of the Fed. It is looking in the rear view mirror at inflation. Inflation is a problem that is certainly has been a very significant problem, but it is going away, and it needs to be worried about breaking things, and it needs to be worried about just how much damage it is doing to the US economy and quite frankly the global economy with the aggressive hikes that it
has made over the past fourteen or so months. Okay, and we've got, of course, it's quite synchronized, right, We've had a lot of central banks to it. So that's adding to the kind of a very treacherous environment we're in.
Let me take the other side of the argument, is what we do and defend Jerome pal He said quite clearly yesterday that with the jobs market at this level, that he doesn't really see that many hurdles on the horizon, and that basically the reason they would cut would be if inflation were coming down rapidly, and he does not see that happening. If you look at the earnings that we just got and put that together with a strong jobs market, can you really see recession coming anytime soon?
Well, I certainly hope not. That is not my base case. But we don't know what the lagged effects are of such aggressive monetary policy tightening. Let's face it, there tends to be a twelve to eighteen month lag, which means we've only just begun to see the impact of rate hikes on the economy, and so it could be quite significant and there could be a lot of damage done. But I do think he makes certainly a coherent argument that the economy is in good shape right now, but
employment tends to be a lagging indicator. Let's hope it holds up. Let's hope we don't see much in the way of an increase in unemployment. Let's hope labor force participation continues to improve. I certainly think there is a scenario where we see I wouldn't say a soft landing, but a bumpy landing, not a hard landing.
Tell me, what does the fixed thing came?
Muck?
It's a sovereign debt anyway. Treasury is actually at the moment pricing in well.
I think their expectation is an economic slowdown, and that is certainly in the cards given the kind of aggressive tightening we've seen, but economic disaster definitely not.
Let's talk a little bit more about the banking crisis. Doug raised a point several times on the program, not really making the point, but raising the question should there be a ban on short selling, because it seems like a lot of banks are being targeted now that otherwise look like solid banks, but their stock price is plummeting, and it's an easy way for speculators in the market to take advantage of fear. Do you see that as reasonable as something that might be considered, well, I just.
Think there are other options that are less drastic.
Right.
We all want to believe in free markets. So the better course, in my opinion, would be for the Fed to come out, for the US Treasury to come out and guarantee you know, the FDIC insurance would be more broadly applied, perhaps an unlimited amount for deposits at least, you know, in the very short term, because that seems
to be the catalyst for all that we're seeing. I think there's this expectation that some of these banks are very vulnerable because they don't have that insurance covering you know, a significant portion of their deposits that could easily be remedied, and that really, I think would end the short selling frenzy.
Okay, thirty seconds. We always like to talk about the big macro conditions, but we want to know about actions too. What would you buy here? What's your single best pick of the moment.
I actually think it's technology, and my rationale is that we're actually seeing rates come down. That's likely to benefit tech more than other areas. But more importantly, the economy is clearly in a slowdown mode and that's a time to be in more defensive sectors as well as secular growth areas of the economy, and technology is front and center for that.
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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