Tech Earnings Disappoint and FOMO Rally Deflates

chips supply. Partisan politics roars are new in the house. I'm at Baxter with Global News a P s G Stars expecting to miss a key matchup due to an injury. Dan schwarts been I'll have that story more coming up in Bloomberg Sports. That's all straight ahead on Bloomberg Daybreak Asia on Bloomberg eleven three on New York, Bloomberg Washington, d C, Bloomberg one O six one, Boston, Bloomberg nine sixties, sent frances Go Sirius XM one nineteen and around the

world on Bloomberg Radio dot Com and via The Bloomberg Business. Apple, Good morning, I'm dead prisoner and I'm Brian Curtis. Here are the stories we're following today. We begin with Apple, the company reporting a steeper sales decline in its holiday period than Wall Street feared. The story from Bloomberg's Charlie Pellett. It shows the toll of an economic slowdown and lingering supply snags on what was long one of the tech

industry's most resilient companies. Apple said revenue in the fiscal first quarter dropped five and a half percent to one hundred seventeen point two billion dollars. Now that was well short of the average Wall Street estimate of one twenty one point one billion. The iPhone and Mac were particular weak spots for Apple during the quarter, dragged down by

a broader slump afflicting mobile devices and computers. COVID nineteen restrictions in China added to Apple's woes, making it harder to shipping off of the most popular versions of the iPhone in New York. Charlie Pellette Bloomberg Daybreak Asia. Initially is stock traded down about four percent, but when Tim Cook talked about demand coming back in China, the stock

parrotage losses. It's still down one percent. Yeah, we also heard from Amazon after the bell, though shares weaker by about one point three percent right now, Mixed results after the closing bell, and we have the story from tom Busby. Well, even though holiday sales on Amazon's e commerce site rose nine to one nine billion dollars in revenue, profits were weaker than anticipated. Last quarter sales growth slowed at Amazon Web Services, that's its cash cow cloud computing division. Another

big concern for investors. Projections for lackluster revenue in the current quarter. That's on worries that tight fisted consumers may pull back on their spending amid a lot of economic uncertainty. Shares of Amazon down sharply, and after hours trading tom Busby Bloomberg Daybreak Asia Tom Google parent Alphabet reported lackluster earnings after the closing bell, and we get that story from Bloomberg's and Kate's. Fourth quarter earnings at Alphabet came

in below forecasts and revenue missed the mark. Alphabet announced last month that it's cutting twelve thousand jobs. Now, the owner of Google says it needs less office space, Alphabet is looking for ways to save money. Alphabet also says revenue from its biggest sources. Add revenue from Google searches and YouTube views slowed last quarter amid economic uncertainty in Washington and Kate's Bloomberg day Break Asia. All right, and thank you. Well, as we know, it's been a very

busy week for central banks. We had the Fed yesterday. Today the European Central Bank lifted its key rate fifty basis points a half point. Right, so the deposit rate now at two and a half percent, the highest level we've seen since two thousand and eight. Here's Christine Laguard warning of a similar move next month. It should be fifty this time around. It should be it intended to be fifty in March. Now you will say, well, yes, but what about after March? Does that mean that you

have reached the pinnacle or the peak? No, no, no, no, we know that we have ground to cover. We know that we are not done. Yes, Madame Legarde said, the ECBs inflation outlook is improving given that drop in energy prices. Now, the ecb is Governing Council gave more details on plans to shrink that five trillion euro bond portfolio a monthly cap of fifteen billion euros and maturing debt will now

be allowed to expire between March and June. In the meantime, the Bank of England policymakers voted to raise the benchmark lending right there to four percent. That's the highest we've seen again since two thousand and eight, the majority saying that strong pay growth and an ongoing shortage of workers were driving price pressures in the economy. However, the b always latest forecast show that inflation is likely to fall sharply this year, down to around four percent, and that's

down from a level percent last October. Those findings suggested policymakers may not need to raise rates much more. Today. BOE Governor Andrew Bailey struck an optimistic yet cautious tone. We are kind of react to the information and the evidence that we see. We're not on We're not We haven't pre announced an intention because we have reached a point and as I've said for I think we have started to turn a corner that's encouraging. There's a long way to go and there are a lot of risks.

Bailey also pointed out that the bank's projections were inherently uncertain because of volatile energy and commodity markets. Still, the BOE dropped guidance that it was willing to respond forcefully to inflation if needed. That could be a sign that the Bank of England maybe near the end of its rate height cycle. And Doug I was struck by the incredible drop in the tenure UK guilt thirty basis points

lower and the tenure German bun down twenty basis point. Yeah, it seems like the market is really expecting us to move beyond this tightening regime that we've been in globally, whether it's the FED, whether it's the E c B or the b o E. And maybe it's spells optimism for risk assets, but you wouldn't know it with the earnings that we had after the bell, we talked about Apple, Amazon,

and Alphabet. We didn't touch on Qualcom. That stock got hit a little bit in the late session after a pretty lackluster quarterly sales forecast, And it kind of intersects with the Apple story, Brian, because it's suggests UH sales in terms of mobile handsets. I mean, we're going to

continue to see a drag well into the year. Well, there's those individual stories, but then there's the big macro overhang, and whether you're buying stocks or handicapping China or trying to analyze the FED, you can look beyond the next six months, but you still have to go through them, and we're going to see a lot of volatility, and I think that is is something that there's just no way to escape. Yeah, and a big question mark on the reopening story in China. It's not just Apple talking

about navigating its way through that. But look at star our Bucks. I mean weakness there that contributed to a big drop in sales. Yeah, and Kennedy Goose the story I'll tell later that stock down in New York and it spoke of weakness in China. It's time for global news. A lot of movement around the issues facing the U. S. China relationship, from chips to military bases. And Baxter has Global News in the nine sixty newsroom in San Francisco. Ed. Yeah, Brian,

it's a big basket. And let's add surveillance balloon. The Pentagon says it is tracking a suspected Chinese high altitude surveillance balloon. The Pentagon says for several days it has made its way over the northern US. The Pentagon says it has decided not to shoot it down at this point, and but it will not say where it is now, so a surveillance balloon. Meanwhile, on his trip to Beijing, Anthony Blincoln, the Secretary of State, expected to meet with

President hijimping the f TC the ft story. Says it would be making him the first U. S Secretary of State to sit down with she in the nearly six years. B Lincoln is scheduled to be there Sunday and Monday. Beijing meanwhile, as trying to blunt US moves to form new alliances regarding chip manufacture and supply. This comes just days after Japan and the Netherlands joined the US and

agreeing to restrict some high technology exports to China. The Foreign Ministry says China will continue upholding market principles and openness towards ties. There's some growing thought in the US that between what's happening in Ukraine and trying to contain China around the issue of Taiwan, that the U. S military may be spread too thin. Republican Representative Josh Holly. If China invaded Taiwan today, Taiwan would fall. So that's

just the that's the honest truth. We cannot both carry the main burden in Ukraine, which we're doing currently, and get to where we need to be to deter war with China. But US Defense Secretary Lloyd Austin, who made yesterday's announcement regarding the Philippines, says the US has to prepare for ats around the globe and the speaking of that, the US will now begin the process of building four

new military bases in the Philippines. This in the wake of granted access the US as it will allow more rapid support for humanitarian and climate related disasters in the Philippines and respond to other shared challenges. So that would be a direct reference to security in the South China Sea and threats from China. US House Republicans are systematically

removing Democrats from important committee positions. Democrats Adam Schiff and Erik Swalwell recently and today Representative Ilhan Omar ousted from the Foreign Affairs Committee. Republican leadership says she's made offensive remarks in the past. Bloomberg's Genie Schanzano she is apologized for those does that rise to the level of removal? These are conversations that have to be had, and unfortunately we don't see those moving forward. So I says Beeckman,

Democrats get the House back. At some point there will be some form of retribution. And even the former Republican National Committee Commit Communications director Linda Kamuso Miller on Balance of Power says this is all just a distraction. The difficulty in Washington is that partisanship is absolutely reached an all time high and it makes it almost impossible to

get anything done. But these kinds of UH tactics that we're using in order to vote others off of committees is absolutely a distraction and not the work that people want us to do. The fair being, it will spill over the bipartisan passage of important legislation and the FBI seeking information regarding the cyber attack on London based I on on trading in the UK. The cyber attacks snard global derivatives trading, and the FBI has reached out asking

how customers were affected. Global News twenty four more than with more than twenty seven hundred journalists and analysts and over one hundred twenty countries. In San Francisco, I'm ed Baxter, this is Bloomberg. This is Bloomberg, Gabrika Asia. Hi, everybody on Bran Curtis along with Richard Salam and our guest is Jack McIntyre, portfolio manager at Brand DeWine Global. Jack, you've made the point that central banks are not as important markets this year as they were last year. What. Yeah.

The reason being, Brian is you know last year it almost didn't matter what the data was. I mean, we were in an inflation storm. Central banks, Uh, just tighten the incredibly aggressively. Twenty three will be a year where that tightening works its way into the real economy. In part I think was that was part of the reaction you had today or yesterday in response to the FED

response to the ECB in the Bank of England. Right now, on the surface, they were still hawkish, but you know, the markets are more forward looking, and I think the central banks gonna have to be more forward looking. They're going to be more data dependent, They're gonna probably follow the markets as opposed to the markets following the Fed. Jack absolutely, Because we're getting to a point where you know, they still pools. Then the conversation really goes away from them.

Let's say they didn't think it's all about them and do so thing rash. Yeah, I think it's it's a good point in the sense that you know, we're getting you know, not surprisingly, you know, we're getting closer to that that pause, and they've got to set the narrative that pause does not automatically mean that they're going to be cutting rates, although the markets have kind of gotten ahead of them from that standpoint. But you know, I

was just thinking about it. You know, as central banks tightened today, in theory, that's not going to impact the economies until so it was all about the tightening from last year. Well, and I think that is a point that you know, being the devil's advocate, rejects what you say that central banks aren't as important this year because their actions from last year will weigh in this year and thus they will be more important. Well, and I would not push back on that because I agree it

reinforces the accents that they did last year. We're important because my my thesis is that in reasons I like treasuries in particular, is that this lag of act from all this tightening financial conditions is going to impact in this case, the US economy at a time where we already know it's slowing. We're way beyond peak inflation. Inflation

is already coming down. So it's gonna be kind of a trifecta of slowing economy, uh putting more downward pressure on inflation, and that that's gonna be good for bonds and has been good for bonds this year. Perhaps the jobs are gonna be as important has been in the month's pass, but certainly will be. Um, you'll take on that, and then you take also when you know this huge rise in productivity and what it means, so you'll strategy. Yeah, so the employment report, it's another hurdle we kind of

have to to get through. Um. You know, every cycle, employment is a lagging indicator. I feel as though this cycle is probably extra lagging, just because companies are struggled to find workers. My view is if it comes in close to expectations, and I haven't tracked anything that suggests that it shouldn't be close to expectations, but it uh as that just means that we're at a slow pace, we are seeing less job growth. I think markets will

like that. So, yeah, it was very interesting today. You know, the unit labor cost coming in week Um, again, this gets us a little bit more towards mild recession, maybe a soft landing. I think that's the big issue that markets have to figure out to really get inflation down more. Do we need the recession? Do we need a soft landing? Um?

And that unit labor cost tells us, you know, maybe we don't need quite as harder recession to get inflation lower, particularly because the central banks and the FED in particular talk about that service inflation and that's really driven by labor.

I can definitely see that line of thinking. But you wonder whether or not both the bond in the stock markets are looking beyond what the actions are too later in the year when conditions could be better, when you know, you you really still have to live through the effects of what they did last year. Um, are we reacting

too soon? Yeah, that's a tough one. That that's a you know, this is it's part of the art of money management versus the science trying to figure out when exactly is sort of the lag effect and and again it's not it shouldn't be off to the races in terms of risk assets doing well. Uh, you know again you look at Apples earnings, Amazon, Googles. I mean that there's the challenge of bottom up impacting companies versus maybe

the inflationary backdrop at the forty foot level. Uh, it is improving, but I just think the macro backdrop is improving. This is Bloomberg gay Break Asia, your morning brief on the story is 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 get

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Brian Curtis and I'm Doud Prisoner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg day Break Asia