Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg DAYBAC podcast, available every morning on Apples, Spotify or wherever you listen. It's Friday, the twenty second of March in London. I'm Caroline Hepke and I'm Lizzie Verdon.
Coming up today.
Apple's value dropped by more than one hundred and ten billion dollars as the tech giants legal challenges.
Mount, the Bank of England inches closer to rate cuts as the Hawks retreat.
Plus Reddit pops Shares in the social media firm rise by forty eight percent as investors embrace their AI pitch.
Let's start with a raundup of our top stories.
Apple's value has dropped by one hundred and thirteen billion dollars as regulators in the US and EU accused the tech giant of abusing its market dominance. Once the world's most valuable firm, with a market cup of more than three trillion dollars, Apple has under formed both the Nasdaq
and the SMP five hundred this year. The latest slide in the tech firms share price comes after US Attorney General Merrick Garland sued the company, accusing it of blocking rivals from accessing hardware and software features on the iPhone.
We allege that Apple has employed a strategy that relies on exclusionary anti competitive conduct that hurts both consumers and developers. For consumers, that has meant fewer choices, higher prices and fees, lower quality smartphones, apps and accessories, and less innovation from Apple and its competitors.
Merrick Garland's US Justice Department's lawsuit has been strongly refuted by Apple, who called it wrong on the facts and the law. The iPhone maker also faces a competition probe by the EU, which could lovey penalties of up to ten percent of global annual revenue. Earlier this month, Apple was hit by a one point eight billion euro penalty from the Block of releegations that it shoulds out music street rivals on its platforms now.
The Bank of England took a big step towards cutting interest rates at its March meeting. Although the central Bank kept interest rates on hold yesterday, none of its policymakers are now voting full rate rises, and the Central Bank governor Agie Bailey says that the Bank of England can cut rates before reaching its two percent inflation target.
Yeah, we don't have to actually get inflation all the way back to target sustainably to cut rates, for instance, what we have to do is be convinced that it is going to go there.
We should act ahead.
Of time in that sense, because we have to be forward looking.
Reacting to those words from the Governor Ajie Bailey, markets moved up their expected first rate cut to June Bailey's comments bring the Bank Viglin more in line with the Fed and the ECB.
And staying in the UK, we brought you the retail sales numbers. UK consumers are the most confident they've been about their personal finances in years. This is according to the GfK measure, which tracks the way people feel about their finances. It rose to plus two in the latest survey, as the first positive reading since December twenty twenty one. The figures indicate personal budgets remained strong even as the Bank of England chose to hold interest rates at that sixteen year high.
Chinese authorities are examining the role of PwC in Evergrand's accounting practices after the developer was accused of a seventy eight billion dollar fraud. The move ramps up pressure on the global accounting giant that order to a slew of Chinese property firms before the sector's melt down. Evergrand's alleged forward dwarfs that of Enron and has added fuel to concern about how widespread such accounting issues are in China.
Shares in the social media company Reddit have soared by forty eight percent after its USIPO. Investors appear to have embraced the company's vision of profiting from the growth of artificial intelligence. The COO, Gen Wong, says the AI revolution is at the center of reddits value proposition.
Large language models need data to train on, and when you look at riddit's corpus nineteen years of human experience organized by topic with well in moderation and relevance. That's incredibly important to building both a chat capability and the freshness of information. So that's an area where you know, we see opportunity.
Read it's Gen Wong, they're speaking to Bloomberg.
The firm also says it's in the early stages of allowing third parties to license access to data on the platform.
After six and a half years in exile, the man who tried to break up Spain is making a comeback. Carls Pouche demon led the Catalan independence movement and caused Spain's worst political crisis since it became a democracy. He is now planning to run for his old job as President of Catalan in the May elections.
I'm not looking for what is most comfortable and less risky on a personal level. Not explain to myself after having spent six and a half years its defending the presidency in exile, now that we have an opportunity to restore the presidency, I think that was unjustly illicitly an illegally destitute by Article one five to.
Five Prisdom while speaking there via a translator and referring to Article one fifty five that is the controversial law that the Spanish government used in twenty seventeen to force the regional Catalan administration to obey national law after an illegal independence referendum.
Finally, there are signs of progress towards a possible Guards of Peace agreement at the same time as Israel is threatening to invade Raffa. This is as the US Secretary of State Anthony Blincn is in the Middle East attempting to help breaker a deal between Humas and Israel.
Blomberg's Ed Baxter explains.
Delegations from Israel, the US, Cutter, and Egypt will meet today to try to draw up a plan so that the invasion doesn't have to happen. But Israel's Minister for a Strategic Affairs, Ron Dermer, on a US podcast says, Hamasha infrastructure remains in Rava.
Which you saw in October seventh, was a genocidal force that wants to wipe out all the Jews. And it's the first program that we've had since the birth of the State of Israel. We have the ability to defend ourselves.
He says. If there is not a piece deal, the assault will happen. Ed Baxter, Bloomberg Radio.
We're going to delve into the story around Apple and the share price drop in just a moment. But there's a very interesting piece on the Rumberg terminal from Dave Lee. Now Dave I've known for many, many years, and he writes on all things technology, and he's always just got such a great turn of phrases, one of our opinion columnists, and he's saying, look, you can't back Apple into a corner that is not what the US should be doing this after the case from the DOJS of looking into
anti competitive behavior. He's saying that actually Apple's authoritarianism is what makes an iPhone iPhone and not an Android. He talks about you know, fans of Android, you know, saying that their phones can do everything that iPhone can do, but they ignore that Actually the experience on an Android phone, as Dave puts it, is a hot mess.
Yeah.
I'm of the Holy Trinity of Apple myself. I'm just going to put it out there. I guess what you're saying is that androids are clunky. That's what Apple loyalists would say. And yeah, Dave puts it really well. He says that you don't want the US to force Apple to make a worse iPhone.
Through all this regulation.
If you level the playing field, it means adding complication and friction and insecurity to a device, he says, whose success is based on getting rid of those things. So this is completely against the very best of the iPhone.
Well that's one perspective. Should we get the other perspective, which is around the regulation. Shares in Apple Yesterday's slid by more than four percent, so wiping out that Hunter thirteen billion dollars off of Apple's market cap. Investors do seem to be spooked by another US lawsuit, also a European probe after a big EU fine. Let's bring in Bloomberg's Oliver Crook, who's been following all of this for US. I'm sure that's not the perspective of the Europeans who
want to regulate Apple a bit more thoroughly. But firstly, what about this Justice Department lawsuit the Biden administration getting a bit tougher on tech.
Yeah, this is very interesting because and there's a meaningful set because it's coming out of the United States itself. It's perhaps less of a shock to have regulation coming out of Europe and having that happen to hit in your US firms, as we've seen a lot of that in the past, but now it's coming directly from the
heart of the United States and the DOJ. So this is all looking at how you can access hardware and software for their iPhone, distributing apps for developers, but also harder for people who use the phone to switch it. Of course, Apple is firing back, has a very different view of thing that they're wrong on the fact, and the laws has standardous precedent. They don't want the government
to get involved in, you know, designing of tech. But again, you know, I think the Europeans would argue in a number of people in tech is that our very concept of how this technology work, our very concept of its experience, what we think in our minds of its limits, are actually governed by these companies and we, you know, we need to be a little bit more expansive in the way that we think about these things. The App Store
is a great example. This is at the heart of the European probe and this for Margarete a Vesta here is going to be front and center in her attack of both yes, Apple, but also potentially Google.
Yeah, you say, it's less surprising that the EU would crack down on big tech. But it's not just Apple that's for bearing the brunt to this, it's also Google. What exactly is the EU trying to pin them down on to find them?
Yeah, so this is very interesting. So in burnas separate this into kind of two different categories. So you remember the fine we got about three weeks ago for Apple, which is one point eight billion euros, right, and that was about the App Store and Spotify and a complaint that they had leveled. Since then, you have the Digital Markets Act, which is a new regime of regulation coming out of that has come into power. That came into power in fact that week, the week that we spoke
to Margaret's investor, who is the architect of it. And this gives all kinds of new rules in terms of how to govern big tech to deal with exactly some of these issues, the anti competitive behavior. And what's interesting on this is it also gives us very clear consequences if you violate this. They're talking about potentially ten percent of international sales on the first violations, up to twenty percent if you're a repeat violator. And they're also talking
about potentially breaking up these companies. So now we understand that under the digital market sector, which again we've had no legal action for yet from the EU, we understand that both Google and Apple are in the crosshairs and a lot of this is going to focus on the apps and again their dominant position in the market.
Yeah. Absolutely, And so this is I suppose what investors are most concerned about. I mean, how significant is the share price drop and the worry about Apple's performance? Yeah?
Well, I mean, well, Listen, we still can't take away from the fact that context of Apple and its absolute size and its performance over the last you know, many many years, and that is you know, so it's coming up from a high base. But it's saying because if you do take a step back and you look at Apple, what's going on. More broadly, Europe and the US are increasingly important markets for Apple because a there's sort of much more concern about tech supremacy and China wanting to
develop its own tech, pushing its own iPhones. And we saw that report out earlier this month or last month about Apple sales the iPhone down twenty five percent in China in just the first few months of the year.
That is absolutely huge. So that puts the focus on Europe and the United States and if they're going to be coming under intense regulatory scrutiny in both of those markets, which are increasingly important, investors are going to pay attention to that and clearly to the tune of over one hundred billion dollars worth of market gap yesterday.
Yeah, absolutely, Oliver, thank you so much for being with us this morning and take us through then the Apple story, the European perspective, in more blue bags Oliver Crook there, so that's one key story. But then also want to think a bit about the Bank of England what happened yesterday sort of moving closer to interest rate cuts?
Is there not in London?
I know you in Dubai, but it doesn't mean that you haven't kept to be on Governor Andrew Bailey.
So he gave a.
Short sort of clip interview to TV stations yesterday, there wasn't a full press conference and he's also there's a piece in the Ft this morning from him too. He did talk about and told broadcasts in the UK that Rake huts and the UK's on the way to winning its fight against inflation, so Rake cuts maybe on the way. What did you make of the Bank of England decision yesterday? I thought that it wasn't as devish as he did.
We did lose two Hawks in the form of Catherine Mann and Jonathan Haskell, but it was still a hold and the majority of the committee voted to hold. What I thought was interesting in terms of the signaling that you ask about, was that you had Andrew Bailey saying the bank could cut rates and still be restrictive. So you might say maybe that's not so surprising rates are high, but actually I think that suggests that rates are coming soon.
You mentioned the ft interview with the Governor saying that rate cuts are in play at future meetings, reiterating the point that inflation doesn't need to be at target to cut. For me, that acknowledges the point that's been made by Swatty Dinger at the Dove on the Committee time and time again that there's this lag in monetary transmission. You've got to wait for people to refinance their cars, re mortgage on their houses, for interest rates to transmit to
the real economy. That suggests you've got a lag. You need to get ahead and you need to cut rates sooner rather than later.
Yeah.
Absolutely, And I remember speaking to the M and S chairman who was saying, look, you know, if a company, I mean, if you think about that read across, if a company doesn't have big debts, it's not going to be you know, rate hikes or rate cuts that then get passed through to the price of pasta, you know, in his view straight away. So it does, you know,
it does take time. On the other hand, the Bank of England looks to be versus yesterday pre the decision actually closer to the FED now, doesn't it?
Yeah, more so now, But by comparison, both of them pretty boring compared to all the other central banks out there that surprised US overnight. So you had that quarter point cut from the SNB, the Bank of Mexico with its first quarter point cut this cycle, Turkey and Taiwan with a five hundred basis point and a twelve and a half basis point height, respectively. So all of those This is why I think that the BOE is a bit of a nothing burger.
Caroline.
Look, speaking to strategists, they flag the risk that the FED lags European central banks in easing this year, and HSBC was already warning that the pounds increasingly vulnerable even though it's been the strongest in the G seven this year, because it could be that the BOE seems dubbish by comparison.
Our economists conclusion here at Bloomberg Economics and the r wise Head is that yes, the data justify a may cut from the BOE, but the Military Policy Committee is going to be very cautious and it's not going to want to cut first of its major central banking pick.
They didn't get the credit going first.
On the way in, so they're not going to rush to be the first on the way out. This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond.
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