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Good morning, I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.
Karen, we begin with the latest on US China relations after President Trump's long awaited meeting with Chinese leader shi Jinping. The two came face to face on the sidelines of the APEX summit in Busan, South Korea, and walked away with an agreement to cut fentanyl related tariffs in half to ten percent. President Trump says China has also agreed to buy US soybeans again. On a scale of one to ten, he says he'd rate the meeting at twelve.
I thought it was an amazing meeting. He's a great leader, great leader of a very powerful, very strong country China.
President Trump spoke aboard Air Force one following the meeting. China's response was a bit more muted. As we hear from Bloomberg Steven Engel in Busan.
He did say that China will cooperate with the United States on trade again after that hour and forty minute meeting with Donald Trump, but he also went on to say, with a little bit of a cautionary tone, he said the US and China should not fall into a vicious cycle of retaliation, and says the US should continuously reduce the list of problems. China and the US should continuously reduce the list of problems, and that the two nations should i long term benefit from cooperation.
Bloomberg Steven Engel reports China's agreed to suspend rare earth export restrictions for one year, and it says the US will also pause some of it so called reciprocal tariffs for a year. China also says it will resolve issues related to TikTok with the US side, but it did not give specifics.
Well.
One issue that apparently did not come up Nathan and President Trump's meeting with Shijinping was in Vidia's black Well ship. The President had indicated he might discuss it giving China access to the AI chip giant's most advanced semiconductor. Trump says he and she talked about vida is access to China in general, and those conversations would continue speculation that the US my green lights sales and more advanced chips drove in Vidia to become the first ever five trillion dollar company.
Well, let's turn now care into the latest market reaction to earnings from three high tech heavyweights shares of Microsoft. They are down nearly three percent in early trading the world's largest software maker reported a steeper climb and spending than Wall Street expected. The profit and revenue did top analyst estimates, and the Azure cloud computing unit posted a thirty nine percent revenue gain in the quarter that was
also a beat. An aag Rana is a senior tech analyst at Bloomberg Intelligence.
You look at Azure growth of thirty nine percent, I mean given that size, that's pretty good. The margins actually stood out, you know, way higher than what we were anticipating. We thought there was going to be pressure on margins because of all the spending. And then the lastly when you look at the capex number substantially higher than the thirty billion that they talked about now in you know,
to some people maybe that's what this ointment. But for us, that's a good thing because I think they have so much demand coming in.
That sound a rag Rana with Bloomberg Intelligence, and on the company conference call, Chief financial officer Amy Hood said Microsoft cannot meet current demand for AI and other services well.
Shares of Meta Nathan they're also pulling back this morning, they are down more than seven percent. The Facebook owner is projecting increasing expenses and it's taking a one time tax charge. And we get more with Bloomberg's Sturlelypellett.
Meta said the tax charge of fifteen point nine billion dollars was due to the implementation of the tax bill signed into law in July. I haven't find Sethos, a senior partner with Tigris Financial Partners.
So the Big Beautiful Bill caused the recognition of a deferred tax asset. It's actually a non cast charge. And there while it caused a spike in their tax rates eighty seven percent for the quarter, it actually goes down significantly going forward. I think this is really a non event. It's an accounting issue, and I think any weakness is a buying opportunity. In the stop.
Meta says it will continue to invest aggressively in artificial intelligence in New York. Charlie Bloomberg Radio, All right, Charlie, thank you.
On the flip side, shares of Alphabet are surging pre market there now at eight percent. Sales topped quarterly Wall Street estimates, fueled by a surgeon demand for its cloud and artificial intelligence services.
Brook May is a managing partner at evans May Wealth.
Alphabet is the horse that I would put my money on right now. You know, they've blown their earnings out of the water. You know, not only did they have good earnings growth, but you know the cloud growth was very strong. You know, search is strong.
That's brook May of evans May Wealth.
Alphabet says its capital expenditures for the year will be ninety one to ninety three billion dollars.
That's up from an earlier estimate of eighty five billion.
Well, Nathan, The high tech earnings continue today with Apple and Amazon reporting after the close of trading, and we get a preview with Bloomberg's Tom Busby.
Just days after Apple became the third stock in history to top four trillion dollars in value, Investors want to know about its investment in AI, how many new iPhone seventeen's it's sold, and whether sales in China have started to rebound. It's projected to report record revenue, topping one hundred billion dollars for the first time ever. At Amazon, investors will want to know about growth and its AWS cloud computing unit, the one that suffered a serious outage
just last week. And they also want to know whether all the money it's investing in AI is bringing in revenue. Tom Busby, Bloomberg Radio.
All right, Tom, thanks.
Artificial intelligence startup open ai is reportedly preparing to file for an initial public offering as soon as next year. Reuter's is reporting that IPO could give the company a market capitalization of one trillion dollars. Earlier this week, open ai said it completed a restructuring into a more traditional corporate organization, which could make an IPO possible. Open Ai was most recently valued at five hundred billion dollars in an employee share sale.
Well, Nathan Elon Musk's one trillion dollar pay package is being opposed by the biggest pension plan in the US, California Public Employees Retirement System is planning to vote against Musk's compensation agreement. A spokesperson for CalPERS the CEO pay package proposed by Tesla is larger than pay packages for CEOs and comparable companies by many orders of magnitude. CalPERS owns about five million shares in Tesla.
All right, let's turn to the economy, now, Karen in the latest decision from the Federal Reserve for the second meeting in a row. The Fed has cut interest rates, but Chair J. Powell is cautioning investors against assuming another interrastrate cut is coming in December.
In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December. A further reduction in the policy rate at the December meeting is not a foregone conclusion.
Far from it.
Policy is not on a preset course.
Japal's comments came after the Fed voted ten to two to lower rates by a quarter of a point for the first time in six years. There were to sense in both directions. One official advocated a larger reduction, another preferred to stay on hold.
In Asia, Nathan the Bankage Japan Policy Board left at spendmark interest rate change in a vote that offered no new hints on what it might hike, and the BOJ held its policy rate at zero point five percent.
And we get another rate decision later this morning.
Karen from the European Central Bank economists predict the ECB will keep its interest rate unchanged for a third straight meeting.
Time.
Now for look at some of the other stories making news in New York and around the world. And for that we're joined by Bloomberg's Michael Barr.
Michael, good morning, Good morning, Karen.
The devastation from Hurricane Melissa has resulted in at least thirty three depths across the Caribbean, with powerful winds tearing the bird homes and buildings and knocking out electricity. Andrew Wholeness is Jamaica's Prime Minister.
I would say about eighty to ninety percent of roofs were destroyed, Hospitals destroyed, libraries, police station, fourthouses are about infrastructure destroyed.
Economic losses in Jamaica are estimated to be seven point seven billion dollars. Melissa is moving away from the Bahamas more with Bloomberg meterologist Craig Allen.
Fortunately, the forward speed has picked up, now moving north northeast at about twenty to twenty five miles per hour and increasing. Next up Unfortunately Bermuda, the storm will probably pass just to the west of the island rather than a direct hit, but now less than eight hundred miles away, and it will pass with hurricane conditions for Bermuda during Thursday night into early Friday.
Thank you Craig. The government shutdown is now in its thirtieth day. More than forty million Americans are expected to lose food benefits this Saturday. This Pennsylvania widow says losing snap will force her to choose either.
We eat, or we don't have electricity, or we don't have gas.
Republicans are blaming Democrats for the shutdown. Democrats say Republicans that refuse to address health insurance premiums. A Paris prosecutor says five more people have been arrested in the investigation into the theft of Crown jewels from the Louver Museum, but the treasures remain missing. The prosecutors says two suspects and the jewel heist have admitted their involvement in the theft. They were handed preliminary charges for a theft committed by
an organized gang and criminal conspiracy. It took the thieves less than eight minutes to steal the jewels, valued at one hundred and two million dollars. Global News twenty four hours a day and whenever you want it with the Bloomberg News. Now, I'm Michael Barr, and this is Bloomberg.
Karen all Right, Michael Barr thank you. Time Now for the Bloomberg Sports Update, here's John stash Hour.
John, Good morning, you, Morning Careen.
Dodger fans are known for being stuck in traffic, arriving in the games late, and that happened last night. Those fans missed it. Unprecedented start to a World Series game.
Game five is underway with a fly ball to t left, come first to the volume and David Schneider, let's get it out on Sportsnight Gatto leave off home run has happened before, even on the first pitch. Derek Jeter did that in the two thousand Subway Series. But when Vladimir Guerrero Junior homer two pitches later, that made for World Series history and a two nothing lead that Toronto never gave up.
A night after the Blue.
Jays beat the Dodgers six to two, they won six to one and now head home up three to two in the series. Another pitching jem by their twenty two year old rookie Treya Savage. The Yankees and the Alds couldn't get a hit off him. The Dodgers only got three, a Savage struckout twelve. His manager is John Snyder.
It's one thing to be in the zone, and it's another thing to be in his zone and get some swinging mess. So slider and split were electric. You know, I said it before the game, it's it's a different pitcher when he has his stuff.
You know.
Game one didn't have a feel for a split, so kind of blown away at what he did.
The good news for the Dodgers the Ashinova Yamamoto will start Game six tomorrow. He's had complete game victories in his last two starts in the LA. He's alive at game seven Saturday, and the Nets are on and five and Brooklyn lost to Atlanta won seventeen one twelve. Michael Porter led the NEETs with thirty two points. In Boston, Jalen Brown scored thirty. Celtics beat the Cavs by twenty Indiana. I went to Game seven of the finals last year.
They're rowing four this season, a two point loss in Dallas. Lakers are playing without both Lebron James and Luka Donson's but Austin Reeves just had a fifty one point game in last night, scored at the buzzer for Laker winn at Minnesota. The Bulls beat Sacramento to go to four and oh John Stashawa, Bloomberg Sports Karen.
Nathan stay with us. More from Bloomberg day Break coming up after.
This Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg dot Com and the Bloomberg Business opp This is Bloomberg Daybreak.
Good morning.
I'm Nathan Hager. On a scale of one to ten, he rated a twelve. That was what President Trump said after his long awaited meeting on trade with China Knese President she Jenpang.
It is an outstanding group of decisions.
I think that was made.
A lot of decisions were made too. It wasn't too much left out there.
That was President Trump on Air Force One after his nearly two hour face to face with the Chinese leader in South Korea. Joining us for some more details on what came out of it is Bloomberg News Global Trades are Brendan Murray and Brendan. It seems like we're getting kind of a drip drip of headlines on some of the details coming out of this encounter. Walk us through what we've learned of what we know so far. Good morning.
Yeah, Basically it means we're not headed into a big trade war with China over the next year. They've agreed to what they're calling a one year truce. From the US side, the US gave up the following concessions. They agreed to lower the fentanyl tariffs on Chinese imports from twenty percent to ten. They're suspending an expansion of its US Entity list. That's a list of Chinese companies that
are barred from doing some commerce with US companies. They're suspending that expansion, and they're also suspending the threat of Trump's one hundred percent tariffs on Chinese goods is also off the table. On the Chinese side, they agreed to suspend the tougher rare Earth's controls that they had threatened a couple of weeks ago that was going to disrupt the global supply chain for everything from defense systems to
just every day electronics. And China also agreed to buy more US soybeans, something they haven't done over the past several months in protests of Trump's tariffs on the world's second largest economy. They also agreed to suspend ship fees on each other. The US was putting fees on Chinese ships that would dock at US ports and China reciprocated doing the same to American flagships, so they're suspending those for a year. And lastly, they agreed to work together
to resolve the TikTok ownership situation. So there were quite a few things on the table. None of these would be considered to be game changers in the overall relationship between the US and China, but these were sticking points that we're leading to tensions that could have escalated into something a lot worse. But they seem to have. President she and President Trump seemed to have settled things down for at.
Least a year, So it sounds like it opens the door at least to getting some kind of resolution around some of those issues you mentioned, like the TikTok situation. But it was interesting, Brendan, because you know, going into this meeting, President Trump kind of surprised Wall Street with this idea that he might talk about China's blackwell chip.
Apparently that did not come up.
Yeah, that's that's the reporting that we that were getting. We'll still get some readouts from US officials as President Trump flies back to the States today, but as far as we know, the initial reporting that we have is that that wasn't an issue of any substantive discussion, but of course it will be on the table in the talks going forward. We're going to work. This isn't the end of the US China trade tensions. This is going
to play out, you know it could. At the moment, things are things have stabilized, but you know, as we've seen recently, things can things can escalate pretty quickly. And you know, we're right back where we were with you know, threats on both sides.
And I guess there's a possibility that we could see even more headlines coming because we just had a social media post from the President talking about China purchasing more US energy, not just soybeans.
What more do we know about that?
Yeah?
This, you know, this is this The details are still fuzzy. If it probably involves some uh some projects in Alaska. But the you know, the the the the the ability of President Trump to get China to buy these kinds of things is a is a big part of what he's promised. And of course, his his his first trade deal with with China five and a half years ago during his first term, had a lot of these kinds
of things. These purchases, two hundred billion dollars worth of purchases were agreed to back then, So delivering those kinds of pledges are definitely high on President and Trump's goal list of goals to accomplish with with China.
So we have about a minute left here, Brendan, Where does this leave the US China relationship? Is it progress? Is it back to uh where we were with trade war one point zero?
Where would you put it on that scale?
It feels like we're in for a long, a longer period where it's going to take a lot of management to keep this relationship on an even keel. That that they both sides agreed that this is this is that that talking is the best way to to maintain that
sort of stability. And so it feels like they're not going to walk away from this at PISA and the document that they've signed with you know, with things fixed and resolved and we you know, we move into a new era of of you know, US China relations It's gonna it's going to take some micro managing, it feels like,
to keep it from escalating. And you know, of course, you know, we've got you know, countries in Southeast Asia now have new tariffs on them, and the Europeans are also looking at this carefully and trying to weigh up how they're going to respond to China.
So it.
All it sets the table for more drama in the future for the trade relationship.
Thanks Brendan.
As always, that's Bloomberg Global Trades are Brendan Murray Karen.
Nathan Less repeat some of our top stories this morning. The Fed cut interest race at quarter point for a second straight meeting, but one voter dissented in favor of a half point cut, well another.
Voted for a pause.
Chair j Powell says a December cut is not a foregone conclusion.
Hurricane Melissa has moved past Jamaica, Haiti and Cuba, believing at least thirty three dead and almost eight billion dollars in damage.
And a prominent Senate Democrat says there have been no formal discussions on ending the government shutdown. New Hampshire's Jean Shaheen tells Bloomberg News it's not clear how the standoff will end, and we have more on those stories come up on Bloomberry Day Bag, but right now we continue to watch shares of a trio of tech heavyweights after they reported earnings after the closing bill and right now, shares of Meta they are down more than seven and
a half percent. Microsoft shares they're lower by almost three percent. In Alphabet, those shares are higher, up seven and a half percent. We want to take a closer look now with Bloomberry's Karati Gupta Creaty. Good morning, and let's just start with your takeaway because we're getting real different investor reaction here.
Good morning, We absolutely are. I mean, we'll start with a positivity. It's always good to start with some sunshine. Alphabet is having a really great day. Goog is your take of the shares? Just on a tear this morning. There's a couple of things to know about the cloud space, and this is perhaps where Microsoft is feeling a little
bit of the pinch. There are a couple of major players when it comes to cloud and ultimately the technology used to get to AI and Microsoft and Amazon Web Services have just dominated the space for such a long time. They have the majority of market share, but Alphabet, where Google comes in third, and they've trying to bit alongside Oracle, trying to kind of build up that market share.
And that's what investors are rewarding them for this time around.
Their sales are beating on that cloud unit growth, and that is a very important piece for Alphabet because this is a company that traditionally has gotten a good chunk of its revenue from AdSpend. Think YouTube, thinks social media, think the Google search engine as well. That's kind of
where it's gotten the majority of its games from. And so the fact that you are now going to see it kind of actively be viewed in cahoots or in competition with the likes of Microsoft and Alphabet Amazon excuse me, is a very big sea change in terms of how this share price is going to be looking. And that's kind of what is getting this kind of Wall Street equivalent of a round of applause for the Alphabet shares.
That being said, it's those exact same concerns around the buildout and the execution for the cloud unit that is weighing on Microsoft, because look, Microsoft has this incredible reputation of just beating their expectations quarter after quarter after quarter. They're the A plus plus student, So how do you beat how do you get a better grade when you're already an A plus plus student? And that's what Microsoft
has kind of struggled with today. It looks like they came out with earnings that didn't meet those enormous expectations that they've kind of attuned the market to, and you're starting to see those results, which were still fairly good, just not as good as expected, and that's really what
is getting punished for. But again, a three percent drop for Microsoft is nothing compared to the seven percent drop you're seeing in Meta platforms, which again comes to a question of this massive AI spend that's starting to worry a lot of investors that have maybe seen this picture before, given that Meta did this big push for the metaverse and they kind of had to reel it back. So there are some questions about the execution when it comes to Meta.
Okay, but let's talk about that AI spend in general, because, like all of these companies together, they racked up what's seventy eight billion dollars in capex last quarter. That that's a big number. That's according to US, it's eighty nine eighty nine percent higher from a year ago. So let's talk about that number. Why, why such a push and why so much money?
Well, it's really interesting because when you think about technology stocks or growth stocks broadly, you don't think about capex. In fact, they're rewarded for not being value intensive. Think of up here like an Exxon Mobile or Chevron, where they need to buy physical equipment to do oil drilling. That is kind of what you associate the likes of
CAPEX spending for. So you are now seeing these tech companies trade at these massive valuations on the assumption that some of the growth and AI is going to be coming down the pike. But to get to that growth, you need to build out the infrastructure. The problem is that there's so much money going into the infrastructure.
It won't all be a success.
And that's really where a lot of the concerns lie because to your point, they're leveraging a lot of the cash on their balance sheets that they haven't been spending for years in terms of bolt on acquisitions. And that's actually, again something the market has rewarded them for that in the worst of situations in a recession, they can rely on that cash. They can kind of tap into that
extra cushion, those extra pennies under the mattress. Except if you have these pennies again, trillions being spent in the AI space. How quickly you will you get that return on investment. And that's kind of what's worrying the market, because again, when you think about tech, you don't associate it with capex spend.
This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond.
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