Good morning.
I'm Brian Curtis and I'm Doug Krisner. Here are the stories we're following today.
Advanced micro Devices reporting second quarter earnings that did top analyst estimates. AMD says it's making further inroads in the race to develop artificial intelligence technology. More from Bloomberg's tom busby.
AMD earning fifty eight cents a share, beating estimates by a penny, with revenues of five point three six billion dollars just topping estimates. It's also forecasting revenue for the current quarter at upwards of six billion dollars thanks to gains in making AI accelerators, an area now dominated by rival in Vidia, which CEO Lisa Sue said in a statement increased by more than seven times in the quarter as customers initiated or expanded program supporting future deployments of
its Instinct accelerators at scale. Tom busby Bloomberg, day Break Asia.
And Doug the Stalk is firm in late trading at the moment, up two point four percent.
We go to Starbucks next after the beld. The company reported quarterly sales below analyst estimates. We have more from Bloomberg's Charlie Pellett.
It is a sign that momentum may be slowing for the coffee giant amid higher prices and tighter pocketbooks. The results contrast with those of McDonald's, which topped estimates despite warnings of slowing growth. Starbucks earnings show that American consumers may be starting to cut back on discretionary services such
as dining out. International same store sales grew twenty four percent in the quarter, in line with estimates, power by higher traffic That included higher than anticipated growth in China, which is still recovering after extended COVID nineteen restrictions in New York, Charlie Pellett Bloomberg Daybreak Asia, and.
In late trading their Starbucks down just a little more than one percent. Well investors looked beyond China sales weakness for Caterpillar to send shares up to a new high, and we'll get you details on that in just a moment. More from Bloomberg's Tracy Junkie.
Demand for Caterpillars earth moving equipment is still going strong on much of planet Earth, but China is an exception. While Caterpillar's second quarter earnings and revenue climbed well about estimates. Sales in China were softer than the company anticipated. The Caterpillar CEO called out weakness in excavators most used for Chinese construction projects. Even so, he says the company's full year earnings will be better than expected. Tracy Jonkie Bloomberg, Daybreak Asia.
US lawmakers on Capitol Hill are investigating two firms over there China investments. The story from Bloomberg's and Kates.
How Select Committee is looking into whether black Rock and MSCI allegedly helped to facilitate American investment into Chinese companies that have been blacklisted by the federal government for human rights abuses and aiding the military. Black Rock, the world's largest asset manager, has been ordered to turn over information about the inclusion of Chinese firms and its mutual and other funds. Financial services provider ms C is reviewing the
panel's request. Lawmakers say American companies should not be profiting from investments that fuel the military advancement of the US's foremost foreign adversary. In Washington and Kates Bloomberg, day Break Asia.
China's oil demand may have peaked for twenty twenty three. Bloomberg's Joan Wong has more from Hong Kong.
Crude imports reached a three year high in June after exceeding twelve million barrels a day in May. That may seem like music to the ears of the bulls, but a lot of that oil has been stockpiled as buyers took advantage of lower prices to replenish inventories. Energy Aspects says China's oil demand likely peaked at about sixteen million
barrels a day in the last quarter. The possibility of more stimulus looms and that would propel prices higher, but analysts say that might be more of a twenty twenty four story in Hong Kong and joined Wong Bloomberg day Break Asia.
So, Doug, if we take that story there that Joan just did about oil perhaps having peaked given the slower growthing China, and put that with the comments from Caterpillar, it doesn't sound too good. Caterpillar is saying that equipment sales in China were worse than expected. But then again, once again, looking at Starbucks and McDonald's, you know it's a different area. It's these are smaller purchases, you know, people going and buying a cup of coffee or or
you know, a Mickey Di's burger. It's a different kind of sales outlook in China based on what you're.
Doing most definitely, So if you're an official in Beijing, Brian, how do you begin to target stimulus based on those data points that you've just laid out there? What do you do if you want to apply a little bit more juice to get the economy going.
Well, particularly when you know one of the one of the approaches is they want to get consumer spending. But we see consumer spending on things like travel and restaurants and that sort of thing, the big purchase items. That's a little different. Confidence in investing for the future. A lot of that is tied up in the in the property market. And even though Caterpillar spoke of weakness in China, the shares rocketed today up eight point nine percent, and so you can tell that at least in the US
there is confidence about the future. We know that there's been a lot of deficit spending and on the fiscal side is a lot of juice there. And Caterpillar over the past month up sixteen point seven percent. So if you're looking for a broadening in the market in the US. You're seeing it in industrial.
Yeah, speaking of deficit spending it we want to remember that after the bell here in the US, Fitch lowered the long term debt rating of the US to double A plus from triple A. Even so, Fitch calls the outlook stable. It says the downgrade does reflect the expected fiscal deterioration over the next three years and a high and growing general government debt burden. So could be some tough times for the bond market ahead.
Yeah, all right, the big story of the hour. Now it's time for Global News. Donald Trump charged in the January six Special Council investigation at Baxter has Global News from a nine to sixty newsroom in San Francisco.
Yeah, big day in history. You're right, Brian. I. We're joined by Bloomberg Sound on Balance of Power co host Joe Matthew. Joe, thanks for staying with us. Donald Trump indicted. I want to go through the charges with you and get political stuff, but I want to play first. A quick cut from Special counsel Jack Smith.
Today, an indictment was unsealed, charging Donald J. Trump with conspiring to defraud the United States, conspiring to disenfranchise voters and conspiring and attempting to obstruct an official proceeding.
All right, Joe, that's a pretty straightforward and a punch to the jaw that Donald Trump first participated in a conspiracy to the fraud. Now, this needs to be adjudicated. But in my thinking of it, and I want to know whether it's your thinking as well, that means that Donald Trump knew that he had lost the election, but he went ahead with the attempt to overturn.
Well, that's right, and you know, we do have to remind our listeners here that this is the beginning of yet another long process. But these four charges are severe, as you just heard from the Special Council, coming right down to this conspiracy against the right to vote. That was one that really jumped off the page for us. And we can talk about that a little bit more. But you know the fact that there was also no
charge related to the actual day of January sixth. There was no insurrection charge for instance, that some thought might be part of this package. It was, you know, affectionately known as the January sixth investigation, but it's in fact the attempts to overturn the election results. You know, think about the pressure campaign against Mike Pence, the slates of so called alternate electors. That's what these charges are getting down to.
Yeah, so I do want to talk more about disenfranchised voters and disrupt a proceeding. So I mean, yeah, they were saying that basically, that he would say that people who voted their vote didn't count, and then when that didn't work, you know, going to the sending people to the Senate. So you're right, there's a thin line between whether he instigated the insurrection or whether he was separate from it, isn't there.
Well, that's absolutely right, and it's a case that they decided not to try to make here in terms of inciting an insurrection or some other similar activity. These conspiracies, and I will read directly from the indictment targeted a bedrock function. It writes of the US federal government the nation's process of collecting, counting, and certifying the results of the presidential election. That would be the federal government function,
in this case, electing the president. It is remarkable to read that on the page, even though many predicted that this would be essentially where the grand jury was headed, where this indictment was headed, but for a former president to be running for reelection while this narrative is coming from the Department of Justice.
Is historic now a recurring theme of sound on and balance of power that you talk about almost every day. Is it these things when they come down seem to help Donald Trump? You know? So does this do the same or are these more severe than the others?
Well, you better believe he's going to be fundraising off of this. But the interesting wrinkle there is that many of these folks who put in an average of thirty four dollars and twenty cents based on his quarterly report to sending money to the campaign and money spent by the Political Action Committee, is in fact going to pay
his lawyers to the tune of forty million dollars. So there are questions about what the feeling is going to be right now, while motivated potentially by what some supporters see as the weaponization of government, that's what he'll call this third indictment. And again we are at number three now with the potential for four to come. Number four to come in August.
But they might.
Wonder where their money is going. Is it going to help elect the former president or are we simply funding his legal defense mechanism.
Well, I know it's not going to stop him. He's going to want to get back out of the campaign trailig would you think absolutely?
I'd say that he probably will schedule a roule tonight as a matter of fact, and do whatever he can to seize on this moment. Incidentally, and for just something to note, by the way, Joe Biden, who's on vacation in Delaware this beach this week on the beach, is going to see Oppenheimer tonight. So two very different tracks for these gentlemen.
Yeah, that really is ironic. So just very quickly going back, does this hurt Donald Trump or no?
Well, it really depends on what timeline we asked that question in and how we decide to, you know, kind of fill in the blanks on what the reaction will be.
Here.
Look, if history is any short term history here, any guide, it's going to help him in the meantime. We could even go further to say that it might help him win the nomination at it. But what happens in a general election. We had to pull out today from the New York Times and Seeena College a second round of numbers that show him tied with Joe Biden in a presumptive rematch forty three percent each. This is not going to help him add to his base or win over
independent voters. So maybe I'll say no and yes in the same answer.
All right, and we appreciate that. Joell, thank you for staying with us and standing up. We really appreciate it. That is the host of Sound on and Balance of Power. Joe Matthew here on Bloomberg in San Francisco. I'm at Baxter and this is Bloomberg.
Dave Breay, Kasha, and our guest this hour is George Bevoris. He is executive director also the head of research at K two Asset Management. He joins from Melbourne. George, thanks for being with us. Were you surprised by that decision on the part of the RBA yesterday?
Not so much. I mean the part of the RBI, they've been quite aggressive with the right hawks and what's unique to Australia very quickly for non Australian residences mortgages, which are the key part of our economy on the housing sector. I really prossed off the cash right unlock the US example, and there's a lot of there's a lot of fixed guide to floating. That's tripling the right and so there's a lot of demand destruction underway and the trajectory of in flash and will why to you
high from a purest point of view. From our point of view, it's in the right direction and the poor through the hawkish time seem like a reasonable outcome. But the thing to reinforce I think Australians need to understand is rates are staying higher for much longer and that's a consequence of our soft landing.
Yeah, I'll have.
Issues Harby keeping rates on hold at four point one percent. That's the target for the key rate there. In terms of what happened after the bell here in the US, we had Fitch, the ratings agency, lowering the long term debt rating for the US to double A plus from triple A. The outlook has been labeled stable. Fitch says that this adjustment really reflects the expectation for some fiscal
deterioration in the US over the next three years. We're going to be dealing with a high and growing general government debt burden.
We knew that was the case.
One of the things that we're expecting tomorrow is the government's plan for quarterly financing. What is your outlook for the US bomb market right now? If the FED is near the end of its tightening cycle, and maybe some policy makers appearing to be a little confident that at least in terms of direction, inflation is coming down, we may not get much more in the way of tightening. What's your outlook for the US bond market?
Yeah, and of the good question, and the FITCH is interesting, but high level the FED. Hats off to the Fed. So far it's done quite well. There is stubborn inflation services component that's seventy two percent of that core index that is stubbornly too high, but that's been again pedantic, while we acknowledge its way too high. The core the
trajectory is in the right place. And then the resilience throat across the North American economy and the pragmatism with corporate America and winding down inventories, adjusting and pivoting to protect margins, et cetera. Reflecting in the aggurate earnings basically says that the bond market and yield inversion was way too pessimistic, and it seems like that soft landing implies high for longer rates, which is an issue for equity valuations,
but the pitch rating. The key point here is that that the nuances the stateness can be unwound a bit and reverse a little bit because of the warning shot from a rating agency and plays be a bit more
prudent on the fiscal side. And that's an important discussion to reinforce right across the developed world because it hasn't been the case from rating agencies this open for a number of years, and that's the question to ask for both sovereigns and the developed world, and also provincial and semi governments in Australia.
Speaking of being overly pessimistic, a number of analysts for the US equity market have been calling for correction. Today I noted the JP Morgans saying that the US equity market may be pulling back in the coming weeks, although JP Morgan Chase is expecting the S and P five hundred to reassert itself around September before climbing to an all time high. A lot of the earnings that we
have seen have been positive. And just to go back to the point that we were discussing a moment ago about the FED being near the end of its tightening cycle. Do you think there is a lot to argue for higher US equities.
Yeah, we're cautiously optimistic and we are overweight as not as overweight as earlier on this year, but we like the overweight and coarsely optimistic on the equities and underweight the high yield and overweight the scene un security for its worth. But going back to the equities, it's navigating itself into that soft landing. Again, it was higher cash rates for longer, so therefore that's not price into the
equity market. That could be a negative, but the positive is the resilience again that Corporate America is pivoting, protecting margins, running down inventory. We're required and obviously it's got the tech rally to has been a bit of a tall wind, and that narrow rally. Acknowledge that, you know, it's a multi decade narrow rally for the SMP five hundred or
pretty much in Nasdaq as well. It is broadening out because soft landing more predictability that the fedce engineered to date calls that why doesn't that rally go into undervalued stocks and say the Russell two thousand, where there's more economic sensitivity. So there's a number of nuances playing there, but the overweight and that measured overweight cautiously optimistic to
be maintained into next year. But that high for longer rate levels, I should say, are basically a function of success and that soft landing that's been engineered because of the silience. Again, week by week we just get more confirmations. Yes, IM is a little bit weaker, but in the aggregate of the past few months, overwhelmingly there is a resilience across there. And notwithstanding there is demand destruction happening, but
at a much much slower pace. And the Bears were looking at earlier this year.
George, in the time we have left, let's take a quick look at China. We did have numbers from Caterpillar that cited very weak sales there. On the other hand, if you look at the numbers from both Starbucks and McDonald's Brian and I were talking about this a moment ago, the consumer seems to be holding up reasonably well. What is your outlook for China going forward? And talk to me a little bit too about the extent to what you would like to see a little bit more in the way of targeted stimulus.
Yeah, very quickly, so bias here. So we're underweight China, but we did pick up some short term alibarba in the past five weeks or so, but underway structurally overweight Southeast Asia as the consequence, but very quickly targeted policy. They've been trying to do targeted policy now for two years. It's not working. And if I can paraphrase Larry Summers is always on your shows, it's all about the ultimate confidence of mainland China.
It's just not there.
It's not coming through that animal spirits. So Beijing's got to continue to pivot and be innovative and how it targets this. And obviously these sentiments linked to a labor market, then employment optimism, and obviously the housing market, which is the largest housing market correction we've seen in the world on the planet. So there's a lot of nuances there.
Beijing's just going to keep working at being innovative finding how to target it because we're all waiting for to be pretty much domestic demand to be a bigger proportion of a jdpay for the decades ahead. That's an obvious statement given where they've been coming from the export sector of the path two and a half decades, but it's got an nuance there, and it's very difficult to be overweight long duration in mainland China, but tactically in a very very short term, you can play it there.
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I'm Brian Curtis and I'm Doug Krisner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak Asia.