Good morning. I'm Brian Curtiz. Here are the stories we're following today. The FTC is poised to pause its Microsoft Activision Blizzard merger trial and that will open the door to settlement talks. More from Bloomberg's Denise Pellegreeney.
This is seen as a huge win for Microsoft in Activision as they seek to close the largest ever gaming deal in the US, and sources also tell us the FTC really had to back down and withdraw its internal case because under its own rules, it's expected to do so after losing a last ditch fight in federal court to keep the sixty nine billion dollar merger from taking place.
At what's next for the two companies, Watch for Microsoft and Activision to try to persuade FTC's commissioners to accept a settlement or drop their antitrust opposition to the deal altogether. Denise Pellegriney, Blueberg Day Breakay Show.
In terms of the stocks, Activision Blizzard was flat today. Microsoft was caught up in the selling in big tech. It traded down two point three percent. Well Blackstone has become the first private equity firm to manage one trillion dollars. However, the accomplishment is tempered somewhat by a deal making slump that weighed on second quarter results. Distributable earnings tumbled thirty nine percent to one point two billion dollars, the lowest
in two years. Blackstone slowed the pace of new deals as more buyers and sellers struggled to agree on valuations for private assets. Here's Blackstone COO Jonathan Gray.
This year, you had a lot of concern about where inflation was going, a lot of concern about how far the Fed would go. You had the banking crisis in March, and naturally you see a slow down in deal activity. I think the good news is the.
Tone has improved as we've worked through this quarter. The deal market feels like it's unfreezing a bit, so I think as people feel better about the overall picture a little more certainty, I think we'll see deal volume pickup as we move forward.
Blackstone's Jonathan Gray. Private equity firms that grew rapidly during the deal feelmaking boom now face more scrutiny from investors on how they will weather higher interest rates. Still, Gray says that markets are beginning to recognize that inflation is under control. As the fed works to cool the economy and bring down inflation. Some leading artificial intelligence companies are now expecting to commit to implementing safeguards for the technology.
We get that story from Bloomberg's Tom Busby.
Open Ai, the maker of Chat, GPT, Microsoft, and Alphabet's Google Unit all expected to voluntarily commit to White House demands on Friday, pledging to responsibly develop and deploy artificial intelligence capabilities after the Biden administration warn those companies that they have to ensure the technology does not lead to any harm. But the company's commitments will expire when Congress has expected passes legislation addressing those safety issues over AI.
According to a draft of the White House document tom Busby Bloomberg Daybreak Asia, the.
US Senate has adopted in an end mean that blocks China from purchasing oil from American emergency stockpiles. The measure was added to the must pass National Defense Authorization Act. It's sponsored by Senators Joe Manchin and Ted Cruz. The legislation is similar to a bill that passed in the
House back in January. It would prohibit the sale of US oil from the SPR to any company under the control of the Chinese Communist Party Senator Manchin said this Senate version also borrows the sale of oil to Russia, to North Korea and Iran. The US Senate is hoping to finish the bill before the August recess. Taiwan's Semiconductor has cut its annual revenue outlook and has delayed the start of its Arizona plant until twenty twenty five. That story from Bloomberg's Joan Wong, the.
Surprise cut and revenue for this year sends a warning to investors suggests that despite the boom and ai the global electronic slum may persist for some time. Add to that the delay of the plant Arizona project that will be worrisome for Washington as it tries to establish a more robust chip industry at home. TSMC chairman Mark leeus that the company faces several challenges at the US facility that includes a shortage of skilled workers and higher expenses
than in Taiwan. This still comes on the heels of TSMC's financial results. The chipmaker now projects a ten percent fall in sales this year, versus previous guidance for a single digit decline In Hong Kong, join Wong Loomberg, DA Bragasia, a.
Few other stories to keep in mind. Will get the Japan CPI numbers out this morning. That will be of interest for sure. The headline at three point two percent, that's the estimate for core. If you strip out energy and also food, that's expected to be as hot as four point two percent. And we'll be taking a closer look at Taiwan Semi as well. Now it's time for
global news. Russia has intensified its attacks on Ukrainian ports and has threatened ships headed there with attack at Baxter has Global News from the nine to sixty newsroom in San Francisco.
Ed, Yeah, this a slowly building escalation for sure. Brian third straight day Moscow exit of the grain deal you know three days ago, began reimposing a blockade. UN Secretary General Antonio Gutera says the attacks have implications that go far beyond Ukraine.
Hundreds of millions of people face hunger and consumers are confronting a global cost of living crises, and they will pay the price.
As well as food supplied diplomatic relations. Russian bombing has also damaged the Chinese consulate in Odessa. Russia's also warned ships headed to Ukrainian ports that they would be considered to be carrying munitions and in danger, and in response, Ukraine has said that it would consider ships headed to Russian ports to be carrying munitions and be in danger. Meanwhile, the US says Ukraine has has begun deploying US supplied
cluster bombs. White House Deputy spokes from When Sabrina Singh says that Ukraine is.
Committed to use it responsibly, to keep track and record where they are using it so when this war is over, they can begin those demining efforts definite escalation.
Though within the past few days, US President Joe Biden has ordered a working group on how to avoid the last minute game of chicken over the national debt. Bloombergs Jonathan Tamara says pressure from the left.
This is something that a lot of more progressive Democrats had really urged him to do, in something that he rejected ahead of the most recent that limits standoff, where they said, listen, we should just get rid of this thing. Republicans keep holding democratic president's hostage over it, and it's threatening the credit of the United States. Whenever we get run into these logjams.
Whether or not it could withstand legal challenges is another question. China has ordered its largest cities to step up preparations for future medical emergencies by building leisure and recreational facilities that can be used for quarantine during a pandemic. It wants to handle things a bit differently than during COVID.
After praising former US Secretary of State Henry Kissinger the day before, Chinese President Chi Chimping has held a meet with him, now the first known in the Chinese capital in more than three years. Kristin Hahn Democratic strategists on Balance of Power.
That there are different ways that we communicate with foreign governments, particularly one that's as difficult, as complicated as our relationship is with China, and you know that could be something that's happening right now.
She told Kissinger that China is ready to discuss the correct way for nations to talk. And let's play jeopardy. The answer is one point zero eight billion dollars. The question what is the lottery ticket sold in southern California? You're going to pay out that.
Lucky player unknown to us to date, one point zero eight billion dollars.
Carolyn Becker the lottery says the cash value is over five hundred and sixteen million before taxes. She says the lucky winner will have a lot of new friends. He she they have not come forward. Global News powered by more than twenty seven hundred journalists and analysts over one hundred and twenty countries in San Francisco. I'm Ed Baxter in.
This is Bloomberg him, Brian Curtis. Let's get to our guest, Matt Lloyd, chief investment strategist at Advisors Asset Management. Matt, the dial up nine days in a row and the laggards kind of having their day. I know you're a value guys, so this must be music to your ears. Does it continue?
Yeah? I thanks Brian, It's great to be with you. We think so. I think that the shift has been in place. But when anytime you have a regime change, a shift from growth to value, or any international move, it doesn't go easy into that good night either. It doesn't go softly. It fights and it battles back and it usually these patterns take times and years to really materialize.
So we still think it's great. I mean, with a lot of the risk that's out there, the pricing of the equities in the growth sector really almost perfection to next year's earnings. We see a little bit better risk reward in value, and value doesn't just necessarily mean here in the US matching up with certain you know, basic historical price book, price sales, cash blok, but also international, because international is a very big value play.
It's funny that you say that, because I had in my notes of something to put to guests this notion that the US has all these big companies, important companies in AI, cybersecurity, cloud software, you know, mega tech, more so than other countries. And if these companies now have to take a pause because they've run pretty hard, pretty fast, that there might be good opportunities in Europe and in other areas like Japan to sort of play ketchup as
those laggers rally laggers rally. So you mentioned that you're looking at some of these other markets. What would be chief among them?
Well, I think if you look at even with the big run up in Japan, you look at Japan as you know, really about sixteen percent from its all time highs cording the MSCI Japan Index. You know again that was set in nineteen eighty nine. For those of US that can remember trials and tribulations of Japan to now. This is a long time coming, which is why you can see the Bank of Japan is really trying to keep that yield curve control because they like a little
bit of the inflation. Maybe not to the degree they're talking with the three to four percent on the core rate, three percent on the regular, but they still feel very vibrant right now. But you look at every metric in their index, it's really a price. It's a value, price to book, price to sales, cashblow generation, steadiness and earnings. And even in Europe you're seeing the same thing, some earnings revisions, but it's broad based because the MSCI World
Index is really done fairly well here recently. So we continue to see when we see pressures on the dollar up and down and so forth, some of the steadiness in earnings projections look a little bit better international and we continue to see a break in the dollar, which should bode well for many emerging markets. China is probably the only one right now with the GDP to play a coming out that's pretty problematic for them because the consumption level hasn't really taken off for them in general.
When we look at a very balanced portfolio. The values really in the international play in select sectors in national, and then the growth sectors really are dominated here in the US outside of certain individual companies. So just by that mere fact of having diversification between growth and value, you're going to probably be steering more international. Yeah.
Well, the diversification is key because we don't know actually if growth is going to correct here. I mean, you can have a couple of bad days for sure, but you still have the S and P five hundred well above the fifty day moving average. I think five to six percent above it's fifty day moving average, which is a little hot, but there's some room to slide back, which would be completely normal and could mean that you know, you continue to see the same type of behavior that
we saw in the first half. Are you thinking about that.
Yeah, we are. We look a little bit more a longer term and strategic We look at the risk reward and since we cover a lot of different asset classes and debt classes, we are always looking at that risk reward scenario. And the only problem is the AI is reminds me of the Internet back in the late nineties. You know, it's a great promise, great hope, but it's going to take some time to materialize and incorporate, to
regulate and so forth. So I think it's a lot of fever on that, but it also probably has to do with the run up in the technology. And two things everyone's anticipated the pause by the Federal Reserve, which we think is a little bit premature because inflation is probably going to be a little bit higher in the second half than the low print that we just got.
And then secondly, there's been so much cash on the sidelines that the FOMO investors have kind of come back into it, you know, and we get that sense where people are like, I'm not going to miss the boat. But if you go back in time in history, every time the Fed is paused, you've seen a market rally until they actually cut, and if they cut, it's usually for one reason, and that's usually a recession or demand destruction. And that is why you start to look at these
little blurbs. And this is a much more exaggerated if we'd say, bear market rally. But you know, Serge, however, you're just pricing too much perfection. So again when we look at it, we're not against growth, and so forth, we just have dialed it down a little bit and been more selective, and I think the values it gives you a little bit more predictability.
I know you want to buy quality companies, so I need to. I mean, I think all investors want to buy quality companies, but I want to hear from you how you actually define quality.
Number one is cash flow when you're looking at times like it is now, when you look at higher interest rates, and the best thing the corporations did was like prolong some of their maturity profiles in anticipation of higher rates. I know they didn't expect these kind of rates, but in twenty six, late twenty five, twenty six, you're going to start getting some refinancing costs a bit higher, and that's going to really hurt a lot of the money
that we go investment into capex and so forth. So when we look at that thing that that measure and so forth, cash flow right now is what we're looking at, whether that's high yield on the short run looking two years and in or in general with companies because they have a little bit of pricing power, we're looking at steady margins and earning. But positive cash flow is crucial right now for both debt and we think equity investors.
Yeah, I think costs. You know, if you look at the strikes that we're seeing and some of the requests from from workers, you know, the labor cost is continuing to go up. Is not going to hit you know, earnings in the stock prices, and is it already happening.
It already is happening. If you look at retail sales, real retail sales are pretty much flat if you take the inflation, the real cost of it, and really interest seeing it on some of the consumer sentiment numbers, the access to credit to you know, basically pay up for certain things. Now it's very biprocated. You see forty fifty percent really struggling, and then you're seeing discretionary income still high for people that have you know, had good jobs.
But even going to your point, the job market, even the last month, you had a large chunk of the new jobs where people getting second jobs. And so when we look at those kinds of second jobs that's not in the narrow equity markets, those aren't really great harbingers for what's coming.
This is Bloomberg Daybreak 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 get your podcasts. You can also listen live each day on Bloomberg eleven three to zero in New York, Bloomberg ninety nine to one in Washington, Bloomberg one oh six to one in Boston, and Bloomberg nine sixty in San Francisco. Our flagship New York station
is also available on your Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty plus listen coast to coast on the Bloomberg Business app, Sirius XM Channel one nineteen, the iHeartRadio app, and on Bloomberg dot Com. I'm Brian Curtis. Join us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak Asia