Good morning.
I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.
Karen, we begin with a selloff in chip stocks. In Vidia is leading the declines, down more than four and a half percent in early trading. It all comes after a Wall Street Journal report saying Washington could soon close loopholes in the sale of powerful chips to China.
We get details from Bloomberg's Doug Prisner.
The chips are those used to train AI models, and the restrictions are aimed at containing China's technological rise, but the move would clearly dent sales, and Vidia gets nearly twenty percent of its revenue from China. Its chips are vital to the development of generative AI models such as chat GPT. This year and Vidia produced less capable chips below thresholds requiring a license from the Commerce Department to
export to China or other countries of concern. But Washington is now weighing action as soon as next month to expand the curbs to include those lower powered semiconductors. In New York, I'm Doug Krisnerberg Daybreak.
Okay, Doug, thanks, and checking some other chip stocks this morning, Advanced micro Devices is down three and a half percent, Applied Materials is down one and a half percent. Intel also down more than one percent.
Well, another major story we're following this morning, Nathan takes us overseas. Bloomberg News has learned that UBS plans to get more than half of the workforce and inherited from credit suits. Bloombergsh and Aali Bosik says the job losses will start next month.
The way that this will be done, according to people familiar, is three rounds of job cuts this year, with the first round expected by the end of July and two more rounds tentatively planned for September and October. So certainly through the end of the year there will be kind of a lot of communication with staff, plus probably a lot of conversations across Wall Street and global finance.
And Bloomberg and Aali Bosik says UBS intends to reduce the total combined headcount by about thirty five thousand.
Staying in Europe, Karen, we're watching for news on the economy and global monetary policy on this final day of the European Central Bank four in Central Portugal. Speakers on the agenda today include Fed Chair j Powell, ECB President Christine Legard, Bank of England Governor Andrew Bailey, and Bank of Japan Governor Caswell Ueida.
Well back here in the US, Nathan, the economy is also in focus. President Biden says he thinks the US economy can avoid a recession in the coming months. Bloomberg's Amy Morris has details from our ninety nine one newsroom in Washington.
President Biden told donors that after economists have predicted a recession for the past eleven months, he doesn't think it's going to come, citing a strong labor market and his efforts to tamp down inflation. National Economic Council Director and former Vice Chair of the Federal Reserve Lyle Brainerd agrees, we are.
Going to continue to see resilience against a backdrop of what we have referred to as more stable economic growth.
Economic Council Chair Brainard made the comments as President Biden is set to head to Chicago today, where he'll deliver what the White House is calling a cornerstone address on his ex economic policy, Bidenomics.
In Washington.
I Mamy Morris, Bloomberg Daybreak.
Thanks Amy.
Now let's get to the latest on Russia following last week's failed Wagner Group mutiny. The brief rebellion against the Russian government could boost the Biden administration's efforts to rally more military support for Ukraine. White House Deputy Press Secretary Olivia Dalton announced another half billion dollar draw down from the Pentagon stockpiles yesterday.
This package includes key capabilities that will support Ukraine's counter offensive operations, such as mind clearing equipment, armored vehicles, and artillery rounds. It will also strengthen air defenses to help Ukraine protect its people from rocket attacks.
Deputy Press Secretary Dalton says there has been strong bipartisan support for Ukraine in the past. Sources tell Bloomberg News the White House is expecting stronger commitments as well from NATO allies when they meet next month in Lithuania.
Well, Nathan, another story we're following this morning brings us to the skies of New York. That's smog which blanketed skies in the Northeast earlier this month. Maybe coming back, could we get the latest of the Bloomberg's John Tucker in New York, John.
And Karen Air quality should reach unhealthy levels in Western and Central New York today, and New York City will be enveloped tomorrow. The city in the northeast tenth some of the worst air quality in the world. Earlier this month, when the smoke from Quebec forest fires swirled south, Governor Conthy Hoko says, make no mistake about it. This is the result of climate change.
We are truly the first generation to feel the real effects of climate change, and.
We're also the last generation to do anything meaningful about it.
Large parts of Canada from coast to coast have been burning for weeks, currently two hundred and fifty seven fires of burning out of control. Now, if you think it's an excuse to work from home, keep in mind that modern office building filtration systems to a pretty good job cleaning out harmful particulates. New York Out and John Tucker Bloomberg.
Daybreak, John. Thanks.
While unhealthy air may stress you out, investors are also waiting for bank stress tests this afternoon from the Federal Reserve.
We get more from Bloomberg's Charlie Pellett.
It comes as regulators explore more stringent requirements on in the aftermath of several lender collapses. Analysts largely expect banks to sail through the tests, which examine how lenders would hold up in a hypothetical severe global recession in which US unemployment peaks at ten percent, commercial real estate prices plunge forty percent, and the dollar surges against most major currencies. In New York, Charlie Palett Bloomberg Radio.
This is Bloomberg.
Now.
Time to take a look at some of the other stories making news in New York and around the world with Bloomberg's Michael Barr.
Good morning, Michael, Good morning Nathan.
The travel night mayre drags on from severe weather. After days of flight cancelations. More than one hundred flights already are scrapped in the New York area today. It is left travelers at Newark Airport frustrated.
Come on, this is like the Disney World Line from hell.
Here.
I feel gross.
I feel like I want to cry, but I have nothing left.
Some passings we're told they won't be able to reach their destinations until next week. Daniel Penny, the man accused in the May subway chocold death of Jordan Neely, will be arranged day in New York. Penny's grand jury indictment will be unsealed. Tuesday was primary day in New York City. In a closely watched race, use of Salaam, the exonerated Central Park five criminal justice reform activists, has won a
seat for the City Council in the ninth district. Salam got close to fifty one percent of the vote, compared to his closest competitor, State Assembly Member A Nis Dickens, with just over twenty five percent. Salam replaces Kirsten Richardson Jordan, who announced in May she would not seek reelection. In Council District thirteen, incumbent Democrat Marjorie Velasquez easily won her
primary against three other challengers. However, the Republican primary challenger's race is still too close to call, with Christy Mamorto showing a slight lead over George Havnrik four percent. Brooklyn's three was created through redistricting to reflect the area's majority Asian population. Susan Shong won her Democratic primary with fifty
nine percent. However, the Republican primary too close to call, with Ying Tan ahead of Vito Labella fifty two to forty eight percent for Bronx District Attorney, Democratic incumbent Darcel Clark easily won with more than seventy three percent of the vote. For Queen's District Attorney, Democrat incumbent Melinda Katz grab more than seventy one percent of the vote.
I believe a good government is good campaigning. I believe you take the guns off the streets, the gangs off the streets. You think of innovative ways to take care of those are the stealing things from drug stores and retail stores. I believe you do good government.
It's good campaigning.
Audio courtesy of q Ands. She'll run against Republican Michael Mosa in November. Some mayor wal races were also watching. In Yonker's Democratic incumbent My Expano easily won. In Mount Vernon, Democratic incumbent Sean Patterson Howard beat Andre Waller seventy one percent to twenty nine percent. Global News twenty four hours a day, powered by more than twenty seven hundred journalist and analysts in over one hundred and twenty countries. I'm Michael Barrd. This is Bloomberg, Nathan.
Thanks Michael, time out for the Bloomberg Sports Update. Good morning, John stash Out.
Good morning Nathan.
The Yankees were coming off two wins over one of baseball's better teams. First play Texas, they went to Oakland and then lost to a team that's on pace perhaps have the worst season in baseball history. The A's were twenty and sixty, but they topped the Yanks two to one, with the only Yankee ue being a home run by Josh Donaldson, former All Star with the A's. That's his seventh homer. He only has two other hits at City Field. Metts used the long ball.
One that's lined in the air at the left center and deep Gleamer going back at the track at the Wallie can't get it.
It's gone.
The home run.
Head to the party deck in front of a great wall of pushing Brandon Nippo.
With an opposite field hall run his second Hall brun of the game on WCBS.
Daniel Vogelback also homer, so did Francisco Lindor two hundredth of his career. Mets over the Brewers seven to two. It's just their sixth win in the last twenty two games. And we'll see what Mets owner Steve Cohen has to say this afternoon. He's holding a rare press conference in Anaheim. The legend of showe Otani continues in an Angels win web with the White Sox on the mound, O'tani gave up just one run four heads, struck out ten at the play two long home runs.
He leads the majors with twenty eight.
The Devils have acquired Tyler Tofole in a trade with Calgary. He was their leading scorer. NBA free agency begains Saturday. A lot of attentions being paid to Damian Lillard, not a free agent, but will Portland trade the seven time All Star. They met with Lillard yesterday said they are committed to building a winning team around him, and that
Lillard has not asked for a trade. Ryan Mallett, star quarterback at Arkansas then played for three NFL teams, has died at thirty five, apparently drowned in the Gulf of Mexico.
We're Bloomberg Sports.
From coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on Syrias Exam, the Bloomberg Business app, and Bloomberg dot Com.
This is Bloomberg Daybreak. Good morning.
I'm Nathan Hager, and it is a tough morning for chip stocks this morning, led by Nvidia following a report that the Biden administration is looking to close the loopholes that allow China to buy the chips that power artificial intelligence.
Let's bring in Alex Web for more on this.
Alex covers all things tech for US at Bloomberg News. We should note, Alex that this is reporting from the Wall Street Journal. But what are the loopholes that the White House reportedly has its eye on here?
Yeah, so there was an initial round of rules that tried to prevent bleeding edge chips that can be used for AI applications from being sold into China. And in terms of Nvidia, those are known as the A one hundred range. So when in Vidia did quite agile league quite quickly, they range called the eight hundred, which is slightly lower power, and if you looked at the specifications that were laid out by the government, they were then
allowed to be sold into China. So what, according to the journals you state, is now being reported is that these restrictions are going to be extended, so they will cover those new A eight hundred chips and more than that,
even they will also be covering cloud operators. There is a world where you can imagine that if you're a Chinese company and you can't get the right technology inside China, well then you might buy cloud capacity which is shored elsewhere, perhaps you know, in the region, but operated by Google or at Microsoft Azure or AWS to get around some of those restrictions. And it seems as though they're going to be closing that loophole as well.
And we're seeing the impact on the stock this morning, investors thinking this could be a pretty tough for in Vidia, given how sizable the Chinese market is for that chip maker. What is the potential impact for chip makes and when it comes to their bottom line here, I mean.
I think we've got to be careful not to overstated. You must remember the of course, that in Vidia has a very full valuation at the moment. It is the most expensive chip stock in the Philadelphia Semiconductor Index, training it close to fifty times its forward earnings. That means that any indication that there might be restrictions to its growth potential are obviously going to be taken with a
certain amount of skittishness by investors. When it comes to in Vidia's total revenue, you know, China is it's actually its third biggest market, representing about twenty one percent of sales, behind Taiwan and of course the US. Some of the end customers might actually, you know, so it's made in Taiwan, it might ultimately be shipped to Taiwan in a different package, sorry, to China, in a different package. It's really about limiting
the growth here. But as if you read the fantastic artle by our colleagues and the most recent edition of BusinessWeek profiling in video and the CEO Jensen one, there's currently an eight month wait to be able to get the bleeding Edge chips. So at least in the near term, it doesn't look as though this would have any meaningful effect on demand. The question then starts to be if it affects it in the medium term, as you know, US and European cloud capacity gets filled up.
Now, I guess that raises the question as well of whether in Vidia could continue to shore up that sizeable market it has in China even with these kinds of restrictions. Is there a scenario that you could see that in Vidia could try to hold on to that Chinese market.
I mean, they've clearly managed to find a way with the previous rules to skirt the letter of the regulations. You know, of course they did something that was entirely legal, but they ultimately served up a chip that wasn't as good, right, And then the question is, well, perhaps they can innovate
further and do something similar on those lines. Even so would mean that China is not getting stuff that is as good as what you know US cloud operators are able to do at the moment, at any rate in video are the only game in town and the only others who are close the likes of AMD, they are also covered by these restrictions. So the only solution from a Chinese perspective is what can they come up with some sort of domestic competitor. The answer might be yes,
but it's not going to be anytime soon. You're looking at, you know, years and years out, because not only can they not buy these chips, they can't buy the equipment that's needed to make these chips, usually made by asmls. So it's a tough challenge for China for in VideA. It you know, might affect them around the edges, It isn't the lion's share of their business.
About thirty seconds left here, Alex. But you mentioned the restrictions on cloud leases that are reported in this Biden administration strategy. I mean, that's the kind of thing that could hit some of the biggest tech companies in the world.
Yes, but they aren't as big inside China as they might be. And of course this is all new. This is like green space for them, right. The AI processing stuff is what they're adding. That's the way of bringing new business in. It's not something they already have. So again, it's a that's in their growth, not necessarily affecting the businesses they already have, and that's the key issue at the moment.
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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I'm Nathan Hager and I'm Karen Moscow.
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