Good morning.
I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.
The drop inequities this morning follows economic news out of Asia. The prospect of deflation is wearing its head in China. The country's consumer inflation rate ease to zero in June, while producer prices fell further into deflation territory. Bloomberg Daybreak Asia anchor Brian Curtis has more from Hong Kong.
The CPI was unchanged from last year. That was lower than a Bloomberg survey estimate of a zero point two percent gain. The inflation data adds to evidence that the economic recovery is cooling. Core inflation slowed to zero point four percent. In the meantime, Producer price is falling five point four percent. That compared with a four point six percent drop in the previous month, and it was lower than our survey estimate in All Kong. Brian Curtis, Bloomberg.
Daybreak, All right, Brian, thanks well.
Janet Yellen is fresh offer trip to China, and the Treasury Secretary is striking up positive.
Tone on relations.
She's assuring Chinese officials that the US won't hold back its economic growth.
I believe that my bilateral meetings, which total about ten hours over two days, served as a step forward in our effort to put the US China relationship on a surer footing.
Well, Yellen says the US is not seeking a full of the coupling from China. When it comes to her own economy, Yellen remains optimistic, but says she cannot rule out a US recession.
It's not completely off the table, but we would expect, with the job market as strong as it is now, to see a slower pace of ongoing job gains.
And Yellen made the comments unfaced the nation from CBS. Catch the program every Sunday on Bloomberg Radio.
Well Now, Karen, It's President Biden's turn for a trip overseas. He's on his way to a NATO meeting in Lithuania, but first the President stops in London to discuss Ukraine with UK Prime Minister Rishi Sunak. Morris has more from our Bloomberg ninety nine one newsroom in Washington.
Biden will meet with Sunek to compare notes on their support for Ukraine. After several allies questioned Biden's decision to send cluster bombs to Ukraine. They're also expected to discuss the Atlantic Declaration, a potential trade pack that could help UK lawmakers qualify for electric vehicle subsidies. Brokering a deal with Turkey could also come up. Turkey has blocked Sweden from joining NATO, and Biden may also bring up post
Brexit arrangements for Northern Ireland. Biden will also have tea with King Charles the Third at Windsor Castle, their first meeting since his coronation in Washington. I'm Amy Morris, Bloomberg.
Daybreak, Amy, thank you all.
Back here in the US, much of the country is bracing for severe heat. Near record temperatures will spread from the southwest across Texas and the Great Plains this week. Temperatures of one hundred degrees or more are expected to strain electricity networks. The blistering heat will hit the southern US and northern Mexico, challenging local records.
All right, let's turn to the equity markets now, Karen, The S and P five hundreds coming off its second losing week over the past three and some investors see more pain ahead. Let's get the details from Bloomberg's Lisa Mateo in New York.
According to Bloomberg's latest Markets Live Pole survey, profit warnings and fears of higher interest rates are threatening the key US stock indicator. Fifty five percent of respondents say the upcoming earning season will hurt stocks. Forty two percent say the biggest reason will be the impact of further tightening
of financial conditions. Many predict the Federal Reserve will raise interest rates later this month after data from last week showed moderating payrolls but stronger than expected wage growth in June. In New York, Lisa Mateo Bloomberg Daybreak.
All right, Lisa, thank you well. Earnings are front and center for many on Wall Street. The season kicks off in earnest this week, and we get a preview from Bloomberg's Charlie Pellett.
Friday, we hear from JP Morgan, Chase, Wells Fargo, and City Group. The earnings reports come amid a backdrop of inflation and the specter of rise interest rates. Liz Anne Saunders is chief investment strategist at Charles Schwab.
We know first quarter was better than expected. A lot of people are focusing on the fact that calendar your twenty twenty three estimates are lifting, but that's only because of the beat in the first quarter, second quarter, third quarter, fourth quarter and even into first quarter next year. Have a have all had down trends in their estimates, so that will come in clearer focus when we start to enter reporting season.
Thursday, it's Delta Airlines and PepsiCo with a focus on pricing Power in New York. Charlie Palett Bloomberg Daybreak.
All right, Charlie, thanks, We've got some conflicting calls this morning. On earnings. Goldman Sachs strategists expect companies to meet the low bar set by consensus. They say negative earnings or visions for this year and next appear to have bottomed and sentiment has improved. Meantime, Morgan Stanley's Mike Wilson has a more bearish view. He expects analysts to keep cutting second half profit projections. Wilson also says company forecasts will matter more than usual this year.
They have an update on Meta's new Threads app. The new social media platform has now gained one hundred million users.
That's according to tech Crunch.
Threads hit the million user mark after just five days of existence, and then makes it one of the fastest growing consumer products ever.
Time now 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. New York Governor Kathy Hokeel declared a state of emergency for Orange County last night. Heavy rain spawned extreme flooding in New York's Hudson Valley, killing at least one person and forest road closures. Orange County Executive Steve Newhouse says the woman in her thirties was trying to evacuate her home.
There's some major flash flood major washouts were all around with her houses, so I could definitely see where she was trying to get out to safety, but did not make it, got swept away and unfortunately did not make it.
Two other people escaped. Bloomberg Meteorologist Rob Carolyn has the latest on the weather, Michael.
The heavy persistent rain we saw yesterday over upstate New York caused all sorts of problems with flash flooding across portions of Orange and Putnam Counties. Some areas received over five inches of rain. Some areas received as much as eight inches closed portions of the Palisades Parkway and also Route nine. The heaviest rain, though moving out of that area, now lifting up across Vermont. That's where the heavy rain
will occur today is across western New England. But the good news is any additional rainfall shouldn't be quite as heavy as what we received yesterday north of the city.
Michael thanks Rob North Korea accused US spy planes of violating its airspace and threatened to shoot them down. A spokesman for North Korea's defense ministry said the US was engaging in hostile espionage activities. Chinese police say a man with a nine killed six people and wounded one more at a kindergarten in the southeastern province of Guangdong. Police
say it's one five year old man was arrested. Senate Majority Leader Chuck Schumer's responding to complaints about a social media influencer backed energy drink founded by some of the biggest stars on YouTube alongside pediatric health experts in New York City. Schumer is calling on the FDA to investigate the drink, called Prime, over concerns about its excessive levels of caffeine.
An eight point four ounce can of Red Bull has eighty milligrams of caffeine. A twelve ounce can of Prime, by contrast, contains two hundred milligrams of caffeine, more than one hundred percent of Red Bull and close to ten times as much as a twelve ounce can of Coca Cola.
YouTube stars Logan Paul and Ksi founded the beverage brand, launching this year Global News twenty four hours a day, powered by more than twenty seven hundred journalist and analysts in over one hundred twenty countries. I'm Michael Barr. This is bluem Nathan.
Thank you, Michael.
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. On the cusp of a trading week with no shortage of potential catalysts for investors, we get the last key readings on US inflation before the Fed's next meeting at the end of the month, the kickoff of second quarter earning season as well at the end of this week. But it's weak economic data out of China that appear to have investors closest attention this morning, and for more, we're joined by Lori Calvacina,
head of US equity strategy at RBC Capital Markets. Laurie, good morning. It's good to speak with you as always. What is the potential read through for the broader market when we see further signs of potential deflation in China with flat consumer prices and producer prices at their lowest level in about seven and a half years.
So thanks for having me as always, So the two things that jump in my mind are, first off, when things are going well in China, there's always taught the investors about stimulus, so I think we have to keep an eye on that potential as something that could reignite risk assets. But I think that the other thing, kind of more fundamental in my mind, is just what this does to a whole We have to buy non US equities. US equities are too expensive, the economy isn't doing great
in the US. That kind of talk I've been hearing a lot from investors all year, and I do think that to start the year there was very much a sense from global investors that you wanted to be in non US equities, and that seems like a very very consensus call, even as recently as the beginning of sort of middle of the second quarter, and we do feel like there was just so much complacency on China in particular,
you're just seeing that chipped away at. And ultimately, what we've noticed in the flow data is that if you look at China flows on the EPFR data, for example, they started to fade. Your Pean equity flows have started to fade, and guess what, US equity flows are starting to look a whole lot better. A lot of that's been driven driven by the growth trades that we are starting to see some improvement on the value side as well.
So to me, the really fascinating thing is is that going is this sort of idea that China's economy maybe not so strong as people that anticipated to start the year, Is that going to peel further rotation back into US equities.
Would be interesting to see that, given some of the conflicting messaging we're hearing of just this morning about the earnings picture in the US, whether we could continue to see that kind of flow continue after the rally that characterized the first half.
You know, it's a great question, and there's been a lot of trepidation about earnings this year. One of the things we do tell investors is to take comfort in the fact that most years, earnings expectations are way too high. To start the year, they're way too high the prior year. They ten to come down. It doesn't destroy the stock market. But if you look at where estimates are in years that forecasts are too high and come down, typically by the time you get to the middle part of the year,
the consensus expectation is in the right neighborhood. You don't really see too much change in the overall SMP earnings picture in the back half of the year. So that's really where we are. We have seen a certain stability
really sort of emerging sell side estimates recently. That doesn't mean they can't be turns a little bit more, but I do tell people that, you know, but if you think about earnings forecasts, there's sort of this you know, collective exercise between the cell side, the byside, and the companies themselves. And by the time you get to the middle part of the year, companies really they've got two
quarters in the bag. They've got two quarters they've got to make to kind of get to their full year numbers, and that's really where we are, and we see that management teams are very, very determined to make those contensive numbers.
What do you think we're going to see out of the inflation data this week and what could it mean for the set at the end of the month.
So look, I am still on the camps at inflation is still moderating. I don't through specific CPI forecasts, but our economics team did put out a great chart last week showing that their heat map for CPI just where they look at all the different categories is getting greener and greener, which means it's been looking better and better. So I'm not too caught up on what the FED
is going to do at any one particular meeting. I think that we are generally even if we get another hyper two closer to the end of this and I think investors on the equity side, to be honest, are really just ready to start looking ahead. They're kind of
tired of debating this FED narrative. They're looking at twenty twenty four trying to figure out if that's a recovery year not or not economically at least what I saw in the price action on Friday from the job data, we did see a willingness of investors to really kind of release their kind of very tight grip on defensive sectors, which under performed on the day on Friday on the heels of that job support.
So our last minute here just on the theme of looking ahead. Do you think that tech stocks can continue powering through? Are you looking for more breadth in this market?
So I think the answer to both of those questions is yeah. When I look at the technology sector, there's this perception, you know, when I talk to investors that the evaluations are absolutely insane, And that's true for certain stacks, that's not true for the broader text. So if you look at a multiple, say back to nineteen eighty nine on a medium basis, it's only a little bit elevated. So I think there's actually a case for broading out
leadership with in technology. I do think that it's tough to sell your tech stocks right now, just because I do think the recovery is going to be subpar. Around you A kind of one percentage a little below that is the consensus for next year. Growth and tech that tipically do very very well in a sluggish economic backdrop. But at the same time we see opportunity really building in more typlical parts of the market as well, like
small caps and energy. So we do think you want to broaden out your best a bit.
This is Bloomberg day Break Today, your morning brief on the story's making news from Wall Street to Washington and beyond.
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