Good morning.
I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.
Bank earnings resumed this morning with Morgan Stanley and Bank of America set to report. That's after mixed results from lenders last week. We get a preview from Bloomberg Intelligence senior analyst Alison Williams.
Net interest income is going to be the key variable that we're going to be looking at for Bank of America, and that's after we saw upside to both the quarterly numbers as well as guidance on that particular line items from some of the biggest banks last week. Bank of America should get some benefit from the card loans where we've saw some good growth. They do have some exposure there. However, weakness on the commercial and industrial side could be a negative.
As for Morgan Stanley, the deposit costs are a factor for them, But really the bigger picture is going to be on the trading and fee side of things, just because that tends to be a little bit more volatile. Equity trading is a week spot this quarter. Fees are studying, but they're setting at pre pandemic levels. Are there some signs of hope going into the second half or will that be pushed out till twenty twenty four.
Allison Williams with Bloomberg Intelligence says flows for June could be key for Morgan Stanley. The bank saw those steady in May after seasonal outflows in April.
Meantime, Nathan wall Street banks will face stiffer rules on mortgage capital than their global peers. Bloomberg News has learned the change is part of a sweeping overhaul due to be unveiled by regulators at the end of this month. Bloomberg's Katanga Johnson breaks down the changes.
What this measure will require is for banks to put more capital aside to how boffer against any potential defaults or losses. And while there are certain standards that globally that banks a ball flights as well be imposed to the US centers scoch just a little bit.
Beyond, and Bloomberg's Katanga Johnson says the FDI SEE, the FED and the Office of the Controller of the Currency are declining to comment on the move. Where told, the regulators are likely to unveil the changes on July twenty seventh.
Well, the economy is going to be in focus as well. This morning, Karen. When we get retail sales data for June, economists forecast a solid half percent gain. We get more from Bloomberg Economics correspondent Michael McKee.
Americans likely spent more during June as auto sales at other discretionary purchases rose, helping boost sales and increase in consumer sentiment, brought on in part by lower gasoline prices. Retail sales are calculated on a dollar basis, so gas will be a drag on the numbers, but it means there was more available to spend on other things. June is usually a good month at outdoor and gardening stores,
and home remodeling has been relatively strong. Inflation's contribution to the data is shrinking, so the headline numbers will give a little clearer picture of the consumer economy. Good numbers should lift markets as the outlook tilts more towards a soft landing. Michael McKee, Bloomberg Daybreak.
All right, Michael, thank you. While turning to geopolitics now, tensions between the US and China continue to take center stage. We're learning the US plans to limit investments in ships, AI and quantum computing in China likely by next year. At the same time, though the scope OFO'SE limits is being cut back. Bloomberg's Amy Morris has details from Washington.
The Biden administration's plans to restrict investments in China will be narrowly focused on cutting edge technology, only new investments, and likely won't take effect until next year. Treasury Secretary Janet Yellen tell's Bloomberg the restrictions are narrowly targeted.
They would focus on a few sectors, in particular semiconductor's, quantum computing, and artificial intelligence.
This is part of the administration's effort to limit China's capabilities in developing next gen tech, but the original scale of the program has been cut back to include only new investments and not the biotech and energy sectors, sources tell Bloomberg. Officials won a proposal by the end of next month. In Washington, I may me Morris Bloomy daybreak.
All right, a me thank you. While the Whitehouse looks to restrict investment in China, it's also looking for common ground with Beijing on climate change. Special Climate Envoy John Kerry met today with China's Premier League Kiang. Negotiations are aimed at a series of issues, including global climate targets, methane abatement, and the use of coal fired power.
And turning to corporate news now, Nathan, it could take a little more time for Microsoft to close its takeover off Activision. The original deadline for the sixty nine billion dollar deal was today. The companies are still waiting for final regulatory approvals, including a key one in the UK.
The meantime, big tech more broadly has been on a tear Karen. The Nasdaq one hundred has gained forty three percent this year. That has some on Wall Street worried about a pullback, including Arc Investment Management CEO Kathy Wood. She tells us notes of caution are popping up in equity markets.
You know what's interesting is to see funds having nice moves and flows not follow I think there's a wall of worry up out there. It is about further interest rate increases. What's going to break next? It's about a hard landing.
Kathy Wood says she's still focused on growth tied to artificial intelligence. She's buying shares of companies that could benefit from the technology. Stay tuned for more of our interview with the Ark Investment CEO. It's coming up shortly on Bloomberg Daybreak.
Well, despite those concerns from Kathy Wood and Nathan, investors are bullet shawn tech and they expect a soft landing for the US economy. Those are the findings of Bank of America's latest global survey and show sixty eight percent of fund managers expect an economic slow down without a recession, and being long on big tech stocks top the list of most crowded trades in the survey. And this is Bloomberg.
Time now to take a look at some of the other stories making news in New York and around the world. For that were joined by Bloomberg's Michael Barr.
Good morning, Michael, Good morning, Nathan. To Florida judge who issued accord ruling last year that critics said was unduly fait favorable to former President Donald Trump is set to preside over the first pre trial conference in his landmark criminal case concerning the willful retention of classified documents. Prosecutors and defense lawyers are scheduled to appear today before US
District Judge Ellen Kennon. They will discuss the rules and procedures that will govern how classified evidence is used in the case. Meanwhile, Donald Trump has suffered another legal defeat, Bloomberg said. Baxter reports, this one in Georgia.
Trumpet attempted to have the election probe stopped and that Georgia Supreme Court said no, the decision unanimous. An announcement from Fulton County District Attorney Fanny Willis is expected soon to announce whether a grand jury has brought indictments in the case. Trump's attorneys have argued that Georgia's special grand jury process is generally unconstitutional and that the DA has been permitted to turn the twenty twenty election probe into
quote a Jerry rigged investigative weapon. Quote in San Francisco, I'm at Baxter Bloomberg daybreak.
House, Democrats introduced a resolution to censure Republican Congressman George Santos of New York. Fellow New York Representative Richie Turres, a Democrat, says Santos quote repeatedly lied to voters in his district.
The breadth and depth of his deception is so staggering that it cries out for congressional punishment.
Congressman Tourist says, after seven months of delay by the House, Republicans doing nothing is no longer an option. Phoenix has set to break a record today with heat. Phoenix tiede a record yesterday of eighteen straight days of one hundred ten degrees or higher, and the forecast is for it to be one hundred and seventeen degrees every day through the end of the week. Hollywood's historic double strike continues
as actors have joined writers on the picket line. Entertainment attorney Jonathan Handel says the studios and unions aren't anywhere close to an agreement.
I have a fear that there may be nothing in the current dynamic that will drive the parties back to the table until the.
Oscars actors are demanding higher pay and AI protections. Global News twenty four hours a day, powered by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries. I'm Michael Bard. This is Bloomberg, Nathan.
Thank you, Michael.
Time now for the Bloomberg Sports update. Here's John Stanshout. Thanks Nathan. The losses just mounting for the Yankees. Seven in the last nine, sixteen in the last twenty seven. The Yankees are in sole possession of last place this late in the season for the first time since nineteen ninety In Anahe'm just like the day before. In Denver, Yanks had a late three to one leads seventh inning. Joe Hey Otani up as the Tine run.
Here's the pin the Swineys and drives them all deep out in their left center field.
It's south by.
The wall.
Here, Hey, get to Johnny and Earnstone and tonight on this Monday night is showtime.
Hey LAA.
Angels would then score tenth inning to win four to three. The Yanks truckout seventeen times. John Carlos Stan Anthony Rizzo combined zero for ten, striking out five times. Yanks got a good start from Luis seven Arena. Then Michael King came in, got only two outs, walk three, gave up that O'tani homer, which was his thirty fifth. He's on pace to hit sixty red Sox won seven nothing. In Oakland, Will combined one hitter with eighteen strike ads, and that
drops the Yanks to sole possession of the seller. As expected, the deadline passed, no new long term deal for the Giant Saquon Barkley. The same thing happened to a couple of other top running backs. The Raiders Josh Jacobs, the Cowboys Tony Pollard all figured to play on the franchise tag. Although Barkley may not be in a hurry to sign it, he can then skip training camp and not be fined.
The sale to Washington Commanders from Dan Snyder to Josh Harris King namsly approved by the NFL Finance Committee, heads to a vote of all the owners. The Jets reluctantly agreed to be on HB Those Hard Knocks Training Camp reality show. They demanded that scenes where they cut players not to be shown. N Dashaward Bloomberg Sports.
From coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on Syrias Exam, the Bloomberg Business app in Bloomberg dot Com.
This is Bloomberg Daybreak.
Good morning.
I'm Nathan Hager.
Kathy Wood.
She is a big name on Wall Street, known for her bets on tech companies like Tesla, Twitter, and in Nvidia. She did miss out on the latest Games Foreign video though, selling shares before the aikraze sent the chip maker soaring.
Well.
Now we're getting Kathy Wood's view on the broader tech industry and what's next for equities in the space. The Arc Investment Management CEO sat down for an interview with our colleagues Carol Master and Matt Miller late yesterday. Let's listen into that conversation now with Kathy Wood.
Kathy, nice to have you back. Matt and I were just talking before we got going. Nasdaq one more than forty percent best first half for the index. Investors are definitely chasing risk this year, anything that feels euphoric, irrationally in your view, that maybe we need a little bit of a correction here.
You know, what's interesting is to see funds having nice moves and flows not follow I don't think. I think there's a wall of worry up out there. It is about further interest rate increases. What's going to break next, It's about a hard landing. It's about a hard landing in the context of now China and Europe really seeing struggling and how will that reverberate. So we actually think that and we've been saying this for some time, that deflation is the bigger risk out here, and I think
we're going to see an unwinding of auto prices. That the Ford F one fifty lightnings price decline is going to be the first of many, many auto cuts that we'll see. And if you remember, during the early stage of COVID and the supply shocks, at one point the combination of used cars and new cars accounted for a
third of the increase in inflation. I think you'll see that on the downside here, and we're going to get to two percent inflation, I think, much faster than many people think, with perhaps a harder landing, more for corporate margins than anything else, because if you see these discounting and you see consumers respond to discounts, maybe real growth kind of. I still think we'll have a harder landing, but maybe with price declines we'll stave that off.
That hard landing.
For a while, well, we were hearing investors say that inflation is no longer concern number one. Growth is really what the market is concerned about now. And so you think we're going to have a recession, Kathy.
Yeah, If you look at real corporate revenue growth, it's down one point one percent year over year as of that was as of the first quarter. That is consistent with gross domestic income down one point one percent. This is real gross domestic income down one point one percent year over year. Gross domestic income and gross domestic product over time equal one another. It's an identity, but the information flows are different. And income you get a lot from the IRS, a lot.
Of income data.
The product data, product and service data is a little bit more sampled and erratic, but over time, so we could already be in that downturn. And the GDP numbers we'll just catch up later on.
What about the inflation numbers. I mean, we come down over the last year from nine point one percent CPI to three that's pretty quick. And you know, I've talked to you a couple of times in the last couple of years and you've mentioned a concern about deflation rather than inflation. Do you think we're going to start to see that coming as we see it in other major economies, most notably China.
Yes, it's very interesting to Chinese Deflation is so their price prices are down according to the PPI five point four percent year over year, and I do believe they are going to export it over time. So yes, we do think we're going to see price deflation but there are two flavors of deflation. There's good and there's bad.
The good deflation has to do with innovation, and we have centered our research around five major platforms, all of which are technologically enabled and deflationary, and they're becoming a bigger part of the pie electric vehicle sales. For example, Tesla's making sure that it's passing along the cost declines from its drive electric drive trains to consumers so that it can sustain demand. Anything having to do with innovation, the best companies are going to pass those costs along
to the consumers. And so I think you're going to see much broader based deflation in not only the transportation sector, but perhaps everywhere because artificial intelligence training costs AI training costs are dropping. Get this, seventy percent per year. Seventy percent per year. Now that's the good deflation is causing booms in activity.
But we do know that.
Disruptive innovation will disturb or disintermediate the traditional world order. Think electric vehicles and gas powered vehicles. You know, these auto companies ninety to ninety five percent of their revenues are still tied to the internal combustion engine.
So, Kathy, when people talk about AI. Do you think it's going to upend the labor market substantially.
The history of technology over time is that it's a net job creator. In the short term, you'll see some displacement, You'll need some retraining. But I like to remind people about the Internet. In the early days of the Internet, when we're trying to figure out what it was and how it was going to work, we had no idea about Uber or Airbnb businesses that could not exist without the Internet. And I think the same is going to be true in the AI world as well. I think
it's going to be a tremendous boon to productivity. It is the equivalent for knowledge workers of the assembly line in the industrial age.
This is the new assembly line. And you know what happened.
Because of the original assembly line, Well, a lot of people left the farms.
There are a lot of farmers then and.
Moved into businesses and activities that they didn't dream were possible before that.
And I think the same will prove true. Now.
Hey, it love it little Henry Ford history there.
I like it, love love, love no, but it's like this big picture. One thing I want to ask you, kind of whittling it down a little bit.
You know.
One of the things in the headlines today has to do about Dad j Oones. You did an interview and you talked about Twitter and writing down your stake in Twitter by I think about forty seven percent since Elon took it over. You're still bullish long term, So help me understand that right down against a long term bullish view.
Sure that we have no choice in this. This is we have a pricing committee. We calculate our net asset value for the ARC Venture Fund every day and we get a lot of markers. There's trading on the secondary market less. So with Twitter, we are trying to find some Twitter. We love to buy some at this level.
But while a Fidelity has marked it down and some of the other large managers have marked their positions down dramatically based on yes, we are still getting information about advertising sales not picking up dramatically yet, but they're in very early stage. With Linda joining the team, we'd love to buy it. We think longer term. We think that Elon understands what a super app is. After all, he did get started in the payment space and sold his
company to PayPal. In the last week, Twitter has gotten money transmitter licenses from three or four states, and they're going to cover the land and we chat pay taught us a lot about what a super app is in terms of not only information flow, but financial activities and commerce. So we think Elon has grand plans, and you know, it's also been interesting. I think some of these markdowns may be a result of Threads.
I don't know.
I don't get involved in that decision making, but if you look at Threads already, the engagement activity is plummeting. I think people know that Threads is no Twitter.
This is Bloomberg day Break Today, your morning brief on the stories making news from Wall Street to Washington and beyond.
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