Good morning.
I'm Brian Curtiz and I'm Doug Prisner. Here are the stories we're following today.
US bank stocks fell after Moodies downgraded ten small and medium sized American lenders, and it said that it might do the same with a handful of major firms. But he said that higher funding costs, potential regulatory capital weaknesses, and rising risks tied to commercial real estate are all strains that are prompting the review. Now we heard from Richard Beauvet at odeon Capital. He said the move came late for Moodies.
I think that when the second quarter earnings came out, it was evident that the banking industry was suffering. And the reason why it was suffering is because basically, as interest rates go up, and this sounds stupid to say, the value of financial assets go down. And if he took a look at the balance sheet of each one of these banks, the value of their financial assets were going down very, very sharply. That meant that the industry was in trouble.
Declined for firms that had their ratings cut, including M and T Bank closing down one point four percent, and also the KBW Regional Bank Index was down one point four percent.
We got a surprise earnings report after the bell today from the nation's number two ride hailing service. That story from Bloomberg's tom Busby.
Everything seemed to align for Lift last quarter, which had been struggling to bounce back from the pandemic lockdowns and a shortage of drivers. But recent costcuding measure seemed to have worked and lower fare prices drew back more writers to the service that helped Lift beat Wall Street estimates and even raise its outlook for the current quarter. Revenue for the second quarter just over one billion dollars, where earnings coming in at sixteen cents a share. Analysts were
expecting a loss of one cent per share. Shares of Lyft soaring in after hours trading tom Busby Bloomberg day Break Asia.
Actually there was a quick change in after hours and Lift shares and now down five point eight percent. Rivia nudged up on its production guide guidance for the year and narrowed its loss expectation. This comes after the company narrowly missed its production target last year it grappled with supply constraints and rising competition. Rivian cited an improved supply chain outlook for its revised expectations, we get the story from Bloomberg's Ed Ludlow.
They raised guidance modestly for the year by two thousand units fifty two thousand evs across their two consumer vehicles and the van that they build for Amazon. I reported earlier in the year that Rivian executive had told staff that actually their plan is to build sixty two thousand. But what's interesting about this print is that they are showing the benefits of scaling up.
And that's Ed Ludlow. Separately, Rivian reported second quarter earnings that beat analyst expectations, and the shares currently are up one point three percent.
In late trading, we Work said there is substantial doubt about its ability to continue operating. The company cited sustained losses along with canceled memberships for its office spaces. Now, we Work is going to focus over the next year on reducing rental cost, negotiating more favorable leases, and increasing revenue. The company also wants to raise a little bit of
capital now. This warning comes just months after we Work struck a deal with some of its biggest creditors and soft Bank to reduce its debt load by around one point five billion dollars. We Work shares are down in late trading.
Brian Well, Chinese developer Country Gardens stock and bonds plunged as noteholders said that they had not yet received coupon payments. Bloomberg's Bonnieau has more from Hong Kong.
The noteholders said they had not received payments as of yesterday afternoon. Data showed the company owned ten point five million dollars of interest on a dollar bond that matures in twenty twenty six, and that are twelve million dollars is due on a note maturing in twenty thirty. In a statement, Country Garden set a deterioration in seals and a refinancing environment has hurt us cash flow. Country Garden is one of the few major Chinese developers yet to default,
and a failure to pay were pummel market confidence. The builder is facing more than two billion dollars of bond payments over the rest of this year in Hong Kong. I'm Bonnie Al Bloomberg Daybreak Asia, A.
Couple of other stories will be looking at China says it's Europe's own fault for the soaring trade deficit.
With Beijing.
China says that it wants to buy more high tech goods but cannot. And also we had the weak China export and import numbers yesterday, Doug. And it turns out that the US is now buying more goods from Mexico and Canada than from China. The US buying twenty five percent less in the first half of this year than last year in terms of the value of goods. And added to that, Taiwan's trade surplus surging to a record high. So a lot's happening on the trade front.
Yeah, we knew, Brian that the US was planning at some point to restrict investment in China. Well, now we're being told that the restrictions will likely apply only to Chinese companies that get at least half of their revenue from cutting A areas like quantum computing and artificial intelligence.
One source is a part of the story, which you can find on the Bloomberg terminal incidentally said that this order, expected to be announced in the coming days by the Biden administration, is going to prohibit investment in AI for military end users. Notification will be required for investments in other AI activities.
Yeah, there's so much tension between the two. It's a little more than this pull back on it, and the headline in all the paper is today in Hong Kong and likely in China as well, will be things like de risking and re shoring, shipping away at China's trade picture, chipping away at China's exports. So we'll be covering that in greater detail all throughout the program. Now it's time for Global News. Well, let's get right over to Ed Baxter. We are looking at China no longer the US's largest
importer of goods, which I just headlined there. Ed Baxter has more from San Franceancisco a ed.
Yeah, let's detail it out, Brian, China now sells fewer goods of the US and Mexico or Canada. Bloomberg Emerging Markets correspondent Sherry On says the US imported about twenty five percent year to year less from China the first six months of the year.
According to analysts, perhaps a supply chain diversification is working against China. I had an emergen markets analyst from Delta saying, you know what, Mexico is a more interesting story because the realignment of supply chains is already happening that way, especially with those trade tensions, geopolitics being an issue and the economic recovery slumping.
Now goods from Mexico in the same period we're up five point four percent, so for the US trade partners now Mexico, Canada, China, Germany and Japan. The former co CEO of FDx, Ryan Salem, as the negotiations with prosecutors, reportedly to plead guilty to criminal charges. Sources are saying that the Republican mega donor may enter a plea as soon as next month that may include campaign finance law violations. Bloomberg's Ava Barry Morrison says this has been a long time in coming.
Ryan Salem had a bit of an insight into the political fun sorry political donation side of STX, so I think it took them a long time to get information about what he was involved in, cross checked out with other people as well.
Aft Exit made donations to both Republicans and Democrats. At this point, it is unclear whether he will enter into cooperation deal to testify against co founder Sam Bankman freed. July now officially the Earth's hottest month on record, taking that record away from a year earlier July, the average temperatures hit Paris cap of one point five celsius during that was covered in the Accord. Now, the Arctic sea ice dropped fifteen percent below average. It is the lowest
level since satellite observations began. The EU of Copernicus Climate Change Service is warning of dire consequences if the trend is not reversed. Ron Decantas has brought in a new campaign manager in Bloomberg's Wendy Benjaminson says, James Uthmeyer has served as chief of staff and dessentis Governor's office.
But has never run a presidential campaign before. And there are lots of people in this town who have run presidential campaigns. But he so keeps so closely to the people he knows and trusts that he's putting inexperienced people in charge.
Detractors say, insulating himself with cronies from Florida. This follows a string of layoffs and strategy ships, same to the addressing declining polling numbers. State leaders in Maryland are surveying the damage from yesterday's major storm activity. A stretch of highway had a row of utility poles lining it and forty seven people trapped inside their cars because of it. Governor Wes Moore says they were all rescued, but sections of the state are thrashing.
This is going to take some time to fix.
The damage from last night is significant.
The authorities say most of the remaining customer with our power will be restored by tomorrow night. Global newspower by more than twenty seven hundred journalist and analysts in over one hundred twenty countries in San Francisco. I'm Ed Baxter, and this is Bloomberg.
This is Bloomberg Daybreak Asia. I'm Brian Curtis here in Hong Kong along with Rashad so I'm not in London. A flash here across the Bloomberg terminal. Amazon is in talks to be an anchor investor in the arm IPO, So that is the unit of SoftBank that's coming to market we think quite soon. And that, of course, or this story here from Reuters, So we'll get you details on that as much as we can. Going forward. Let's get to our guest, Sarah Ponzak, Vice President UBS Private
Wealth Management. Well, I mentioned that we did see we did see some losses on Wall Street today but they were not as bad so as to take away the games we saw yesterday. And we also had the dip buyers kind of entering the frame today. So I'm not sure how to frame the action today, but it seems a little more negative then perhaps the way I've just put it, Sarah, your thoughts on the action today.
I think we have to put it in context of the pretty unbelievable year that we've seen for stocks so far. You know, through July, the for seven months of the year, the S and P five hundred was up about twenty percent. That was the best start to a year in the first seven months since nineteen ninety seven, so pretty phenomenal.
And when you think about the shift that we saw from last year through the beginning of the year through the middle of twenty twenty three, it's really been this change in perception of the assumption and the expectation that we're going to fall into a recession to you know, everyone kind of now believing and the consensus being that
we're going to have a soft landing. So when we think about these past couple of months, you think about that shift to you know, investors, economists throwing away that recession call now believing in a soft landing. They're really not being much negative news over the course of the summer, to all of a sudden, a weekly last week in which we get the Fitch downgrade of US sovereign debt and then a day like today in which you have
the Moody's downgrade of regional banks. It's just negative news in this stock market world in which there really hasn't much been much negative news. So it's healthy to see, you know, some volatility on the negative news. And if anything, it seems complacency is more so a risk at this point in.
Time, complacency in being the watchword, Sarah, given that we saw the S and B banking index after those downgrades from moody is sending the banking index absolutely to the floor and then a recovery, a massive recovery to just be just off the the gain line, as it were. Should people be worried. It does portend for of course, more liquidity tightening and loans which would not be given out, which are all going to do the Fed's job in some ways or amplify what the Fed's doing.
Right, So it's interesting to see that whereas heading into the year Originally, you know, the impetus for investment was more so to fade gains, believing that they wouldn't be sustained.
And how quickly that has changed, you know, in the face of fomo fear of missing out, to dip buying whenever we do see some type of downdraft in the market, because you know, some people now believe that we are going to see you know, further gains and if they sold and went to cast at the beginning of the year, it's a difficult position to be and you feel as that you need to get in at some point in time. So we do see this impetus of dip buying now.
But when we think about, you know, the larger ramifications of the downgrades that we did see from Moodies on some of those regional banks, this is not entirely new news. You know, we have been listening to and thinking about what is going on in the banking system for months now after what we saw with you know, a couple regional bank failures, and again this sheds more light and it does bring focus back to the fact that you know, the fallout that we saw with a few regional banks.
It's very possible. It's not over. There could be more dominoes to fall, and we need to take you know, we need to take stock of that when we think about the overall US banking system. But really, all in all, this isn't necessarily new news.
Yeah, in terms of well, I imagine you know you have some contact with high net worth individuals. I'm curious whether or not they're talking more about diversification now rather than riding the gains that we saw in the first part. And if so, what are they diversifying into they.
Are I actually had a conversation with a high networth client individual today who was asking, Okay, you know, should we be diversifying out of some of these high flying, big tech names that have really driven the gains this year? And our response was yes, especially if you have more exposure to some of these names that have just led the way this year been even the index, then yes it could. It could take sense to take some chips
off the table and diversify those gains a bit. So what we've been saying, ubs' chief investment office has really been pounding the table on two key themes, one of them being you know, if you missed out on the gains this year, or if you are not diversified, if you have a significant amount of capital tied up in just a few big tech names, maybe it does make sense to now look to the laggards, look to value,
look to more defensive areas of the market. Maybe look to an equal weight version of the S and P five hundred and we have seen this broadening out over the past month or so. You know, you look at value stocks, you look at small caps. It has happened.
It definitely has happened, Sharon. We have noted it on this program quite a lot. To RSP is one ETF that one can look at for the equal weight. We enjoyed the conversation, Sharah. Thank you. Sarah Ponzak, Vice President UBS Private Wealth Management. This is Bloomberg Daybreak Asia 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 sixty 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.
And I'm Doug Prisner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg day Break Asia