Welcome to Network Australia.I'm Heidi Stroud. What's in Sydney?And I'm Paul Allen. The top stories, The South Asian stocksset to follow the dip on Wall Street on renewed concerns.The Fed will keep interest rates higher for longer.But Amazon shares bucked the trend as its cloud unit posts its strongest salesgrowth in a year. Binance's founder gets a four monthsprison sentence for failures at the world's largest cryptocurrency exchange,and China's ruling Communist Party vows to explore new measures to tackle thehousing crisis and hints at possible.
Rate cuts ahead.Oh, that is certainly one factor that we're watching as we get into the startof trading over the next couple of hours or so.It is a holiday in session. Of course, we'll get to that in just amoment. But this is a set up, a pretty dire onewhen it comes to Sydney. Stocks were down by about 1.2% in thefuture session. That verbally suggesting an earlydecline of over 1%. Tracking those losses that we saw in theUS overnight. Bond yields climbing to, of course,these concerns about sticky inflation.
And what we could expect from thathawkish pivot from the Fed starting to take hold when it comes to risksentiment there we are seeing futures really pointing to drops of over 1%really across the region. We stocks are down by about 4/10 of 1%.We had the labor market numbers showing that the jobless rate has risen to thatthree year high of 4.3%. So increasing some pressure there on theRBA. ANZ, Chicago Nikkei futures lookingpretty muted there as well, looking like a drop of over 1% when we get to thestart of cash trading. And as I mentioned, a number of closedmarkets in play today, no trading in.
Mainland China, Hong Kong, South Koreaand Taiwan. Across the region we're also seeingmarkets closed in Singapore, India, Indonesia, India and Malaysia as well assome of those other ones pull on the screen there.Yeah, as you mentioned there, risk off session expected in those markets thatare open today. That's definitely what we saw in the US.And if we take a look at US futures as well, also a little bit weaker at themoment. You mentioned those US labor costsrising. It's really reinforcing this higher forlonger narrative on the eve of the Fed.
Meeting and markets really seem to befront running what's likely to be a hawkish message.And we did hear from Amazon the stock flat after hours, though first quarterprofit did beat estimates. The cloud unit posted its strongestsales growth in a year. Take a look at oil prices, though, Alsoslipping below $82 a barrel for West Texas.So that was a key support level. And we are, of course, watching now fora potential Gaza ceasefire. All right.Let's get some more markets perspective now with Hebe Chen.She's market analyst at IG, joining us.
Now from Melbourne.So, Abby, as we look ahead to that Fed meeting, what's the chance that we're onhold now for the rest of 2020? For us, inflation just continues to looksticky. The one in guacamole, Heidi.Yes, I think for the upcoming meeting tomorrow, the expectation is that we'llcertainly be quite hawkish because as the market already been being quiteworried about the use of the the threat of the sea to date.But I think what the message is, the key message and key watching point for thecoming meeting is how they are going to surprise the market, but not to shop theprice to shock the market.
What the major tasks that he to do is tohelp the market navigate this. The revision of the rate cut in theprevious meeting that they fed still project for the street because by theend of this year but now the market has been downsized that you one or even thenone. So they are not going to make a decisionin this meeting, but they have to prepare for the next meeting that theywill tell the market what they are thinking about the inflation.Now, whether or not that inflation will keep pushing up and what they couldmaterial impact on their projection for the rate cuts.So at this stage, market is only being.
So ready for only one cuts, but whetherit be transport, not even the rate rise is the market being most worry orconcerned about. You have also had some sluggish GDPfigures out of the US as well as stagflation, something that you'restarting to think about and you're positioning for that.Well, I guess that based on the market's response in the past week, we know thatas the best week in the year. That seems to it's the scenario or inprobably a perfect scenario, the market's not pricing is the economystill stays okay still about the water the inflation that markets being wholecome to terms with the fact that.
Inflation will stay there higher forlonger. But as long as the economy is stilldoing alright, I think the market will feel a bit of a relief that.But if we get into a certain point, for instance, into Q2, we do.Seeing that the slowing down pace of economy, it's getting picking up speed,I think that will be a really point. As you mentioned, the Bostic questionwill be the next concern or why critical risks for the market.Taking a look at Hong Kong and China, what comes next?Because if you take a look at the outlook for earnings, things are stilllooking pretty depressed.
Well, I think Hong Kong story is a bitdifferent. If we looking back the past months inApril, it turns out that Google's hands that is the best performing index forthe global index jumping up more than 7%.And behind that is a huge push from the Chinese government, the policy makerstrying to encourage more capital investment in China to the local market.I expect that will continue to be a big push and big forces to support the localmarket in the months ahead. But of course, as you mentioned, theglobal environment is getting stronger as we seen in April as well.We do seeing the Japanese market used to.
Be best performing in the first quarterand now to be the worst performer in Asia market.So I think that the pressure will definitely accumulate and keep this guylimited for how far the Chinese market and local market could continue torally. But again, I think the supporting therewill be the one thing that maybe investors will feel still confidentabout. Yeah.And in terms of going forward, there's been a lot of talk about how you pickthe sector winners given the broader macroeconomic weakness.Right.
And this chart kind of shows theprojections that we see for the five heaviest weighted sectors across theMSCI China Index. That dispersion, when you look at it,where do you see the winners and the room where you see still room forpotential gains? Yes.I think overall that if we based on the market's response to China's GDP in theQ one, that there's no expectation that that market's not expecting a quiterapidly improvement in terms of the Chinese economy.While the is the epidemic and yesterday the manufacturing sector seems to bequite a commodity to expect a recovery.
There.I think that will be one of the potential source of a improvement or asyou've mentioned, about potential for the Chinese market.But on the other hand, I think technology wise, given that China is nowpushing so hard to its so-called the neo productive forces, and that's theone that the China from the policymakers point of view that invest so heavilyinto that. So I think this is another sector thatinvestors probably will be looking and keep their eyes on, too.Is any other support from the policy maker will help this sector to continuerecovered, covered.
Here.We just want to talk about the yen for a while.We have seen Bank of Japan accounts. That suggests what we saw on the 29th ofthis month was, in fact, intervention. But, you know, considering what we weretalking about, about the Fed higher for longer, the divergence in rates as well,do you think the Ministry of Finance and Bank of Japan are fighting a losingbattle here? I mean, we've got the yen back at one5770 right now. Yes, I think that we kicked to seeingthat the number we see on real estate in this week.It appears that out past the 165 levels.
Now, we seeing the number keep pushingup. Now the people are talking about maybe160 will be that will be the law in the Senate, that they will start to makingthat materially or tangibly into that. But I think that if you just purelypurely based on what they said in the last Friday's meeting,I still believe they will be quite cautious to making any like a big movethat because Japanese economy did not seems to be not so much what we expectedto support a higher interest rate. They also that changing the interestrate rapidly is definitely not something I think on the table for the Bank ofJapan, whether or not they were.
Intervened subtly to keep it just rightbelow 160, I think it's more likely that a plight for the months ahead.Do you think the bank is just going to keep on testing out the Ministry ofFinance appetite for intervention, though?What's your yen forecast? Yes, I think it's very likely.What happened on Monday is we due to the low liquidity and that getting into alevel that people are taking the profit away from the fold for the account.That's something that we got a bit of the volatility on Monday.But I think as long as the US dollar, as you mentioned, the US dollar continue topushing up and highly based on what the.
That's since the coming meeting and aswell as the inflation start up in the U.S., I think that pressure that up willpush us will stay stay up and yes that's true.I think the market will keep testing what is really the threat along the USwith the Bank of Japan. All right, he began.Market analysts are going to be staying with us.We'll talk a little bit about tech earnings in a moment, Heidi.But on that subject, what else are we watching?Well, we're talking about China a little bit earlier, and it's one of the topstories we're following today with top.
Officials in China committing toexploring new tools to address the country's prolonged housing crisis.The 24 member politburo led by President Xi Jinping, has agreed to make flexibleuse of measures to support the economy and research ways to deal with unsoldproperty. That's according to the official Xinhuanews agency. The meeting's readout also hinted atpossible rate cuts for the first time since April 2020, but the statement hasmentioned interest rates and the reserve requirement ratio.A Bloomberg analysis of the Bank of Japan's accounts suggests the centralbank likely intervened on Monday to.
Support the yen, the first since 2022.The BOJ reported an estimated drop of ¥7.56 trillion in its current account onTuesday. This is a much larger than the ¥2.1trillion expected by private money brokers, suggesting intervention ofabout five and a half trillion yen took place.The Ministry of Finance has refrained from confirming whether there wasintervention after rapid depreciation took the yen to beyond 160 per dollar onMonday. Israel will wait for Hamas to respond tothe latest temporary truce and hostage release proposal before considering twojoint cease fire talks on the Gaza.
Conflict.State run news said that the Israeli government is expecting an answer fromthe Iran backed militant group on Wednesday evening.Under the latest terms of the internationally mediated proposal,Israeli forces have agreed to withdraw from parts of Gaza, according to Kan.Australia is tightening scrutiny of foreign investment into mining andrefining of critical minerals as part of an overhaul of rules that also includespeeding up approvals in low risk areas to boost economic growth.China's dominance in the critical minerals supply chain has promptedAustralia to boost its industries by.
Working with allies like the US, Japanand South Korea and Bananas founder Changpeng Zhao hasbeen ordered to spend four months in prison for failures that allowed cybercriminals and terrorist groups to freely trade on the world's largestcryptocurrency exchange. While the sentence was far below thethree years prosecutors had sought, the outcome closes a long running probe forthe Justice Department, which had sought to make an example out of jail to anindustry rebounding from a slew of high profile scandals.All right. Still to come, we're going to have someanalysis on Amazon's earnings as its.
Cloud unit posts its strongest salesgrowth in a year. This is Bloomberg. It's jobs day and Bloomberg has thereport under surveillance. Oops, we did it again.We have a strong economy. Labor markets are tight.We have to question can the economy stay this resilient?This Friday, Jonathan, Lisa and Marie and Mike will bring you crucial data andexpert analysis. A term it'll be the jobs market is notdeteriorating. How long can that story keep holding forthis Federal Reserve?.
The source of this strength, we coulddebate it all day. The April jobs report Friday onBloomberg. We see considerable momentum on thefront where we've accumulated a multibillion dollar revenue run ratealready. You've heard me talk about our approachbefore and we continue to add capabilities to all three layers of thestack. Amazon president and CEO Andy Jassythere on the earnings call. Well, shares in Amazon surging inextended trading after we saw that report of a solid earnings beat.The cloud unit posting its strongest.
Sales growth in a year thanks to risingdemand. Let's bring up Bloomberg Tech reporterSpencer Soper for some analysis. And obviously it would have been arelief to see that result out of us. Does that sort of, I guess,soothe some of the disappointment when it comes to sales guidance?Yeah, there was a lot of good news from the from the cloud division and a lot ofhope going forward in the future for Amazon'sperformance through this gen IBM. That was really their talking points toinvestors was this is this is now become a multibillion dollar run rate revenuerun rate for us.
And we see that continuing to grow.We're seeing customers take on longer term agreements and bigger deals with usas they train these they train these new models.And yet that did seem to carry the day over some, you know, a little bit ofguidance for the for the current quarter, which they explained is, youknow, consumers still being pretty pretty tight with their purchases, youknow, maybe buying lower cost items and more more consumables, which tend tohave have lower prices. Spencer, what sort of spending are weanticipating from Amazon in terms of data centers?And is that going to come at the expense.
Of more cuts elsewhere?Yeah, it's a great question. They did mention that they didn't givelike absolute clarity, but they said that, you know, data center investmentsin the first quarter were about 14 billion and they expect that to be thelow mark for the year. So it's only going to increase fromthere. They didn't give a firm figure, but theydid hint that their spending will only increase on that.And then they said they're just kind of maintaining flat headcount through mostcorporate roles. Overall, employment did go up a smidgenand they said that's mostly, you know,.
Frontline workers in the transportation,transportation and logistics unit, but that the corp most of the corporateroles have been pretty been pretty flat. And they expect that to continue.No hopes for that dividend or the hopes of a snuffed out.What's the cash trajectory looking like and are they left with many optionsthere? Yes, So it did come up directly.There was a lot of anticipation even beforethe earnings release. And some of that was fueled by dividendspaid by Alphabet Inc and platforms. And so investors were curious, willAmazon do this for us?.
And asked kind of like the philosophyaround around returning money to shareholders.And the CFO was pretty blunt. You know, it just said, look, we wealways have prioritized, you know, investing in growth in the business andand paying down debt. Those are always things that will comefirst for us. And right now, we see a lot ofopportunity to invest in data centers and we still have bills to pay from debtwe took on during the pandemic to really build out our operations.So I think you threw a bucket of cold water on those hopes and dreams.All right.
Bloomberg Tech reporter Spencer Soperthere. Thanks for joining us.Let's get back now to Heebie Chen, market analyst at IG and VB.I just want to pick up on some of the points that Spencer was making there aparticularly around a was its cloud unit recovering strongly and that reallymirrors the experience of its competitors as well, Alphabet andMicrosoft. Do you think this reflects a trend morebroadly among the clients of those big tech companies that they're spendingmore on the cloud again? Yes, absolutely.I think that sort of high morale, of.
Course, mirrored the Microsoft story,that because of the IBM push their help, their cloud service to growthexceptionally. And so they have 17% of the growth inthe U.S. is actually the fastest pace in the pasttwo years for Amazon. And but on the other hand, from theinvestor point of view, I think that also reflects one of the growing trendis that the appetite for A.I. story is growing, that now this if thejust a purely vision for H1 not to satisfy the investors moving forward,they want some tangible numbers on the paper to showing their how much theybenefit from that and taking away from.
That what also been putting the morepressures for the rest of the magnificent Seven if they come deliveredthe number as robust as Microsoft and Amazon on their development and I thinkthe revenue number wise is still being pushed by the A.I.story. That will be a big pressure for them.So we've got Amazon up pretty strongly so far this year, up after ours as well.The stock sort of hovering around those highs that we saw during the the peak ofthe pandemic. Do you buy at these levels?Well, if that you taking the Amazon, not just I think that we have the trend forbeating Amazon is that it has.
Transferred successfully from just purethe e-commerce king to now we can only call it a king book from Michael.So we are not. But they do looklike solid very very solid to confirm their position as one of the marketleader in terms of crown So this is the 17% growth in this quarter has helpedthe market to ease the concern that they have previously is because their marketshare has been so high that will potentially seeing the growth be gettingquite moderate level the low, the low double digit, but they actually beat theexpectation and the expectation for next quarter is even greater.P.B.
More generally.I mean, this is obviously giving another big lift for the next seven, but do yousee the prospect of Fed higher for longer and potentially that beingreflected across some of these other economies being much of a detriment tobig tech at this point? Well, I got to say that it's we lookingfor the performance for The Magnificent Seven this year.We're already seeing this year we're already seeing the big gap in betweenmaybe just four and three. We're seeing that Microsoft Alphabet andBDA, of course, Amazon, they do having the extra boost for the A.I.for the console business.
But in terms of the Apple and Teslamatter, if they don't have the actual forces to counter the economy slowdowncounter, the interest rate will stay high.If a longer led downturn for them will be probably it's very hard to reversefor the year ahead. I wanted to talk about Baidu, obviouslyin the spotlight with these conversations around Tesla and Elon Muskvisit to China. Tell us more about this hypothesis thatwe're starting to see some of these companies become gatekeepers for Westerntech. Right?And it's such a complicated landscape,.
But does that make it a little biteasier? Well, in short, I don't think it'smaking easier. It just I think for this week's Teslaand Baidu sort of partnership, that's a new message coming from Chinesegovernment, is that they trying to convince the market or the global marketis that they still keep the door open. If you want to come into Chinese marketwith to keep the door open, don't judge me on that.But on the other hand, they also agree that we enforce the message there thatyou have to play by my rule and punish you with the Baidu or Porsche with anyother big tech in China.
Maybe the new strategy, they if youstill want to stay in China, you still want to enjoy that or the benefits thishuge market could bring to you. And in terms of Baidu, they've nowpositioned themselves as. Yet they position themselves as theyhave the capabilities of helped any like international tech players to meet withthe requirements on the Chinese side for the national security point of view onthe concerns there. And on the other hand, they also benefitfrom they could level the best tech advance for the global technologycompanies. So I think that's a winning.This is a big win for the EU as well for.
The technology companies.You have to then the new way to fight in the Chinese market now.Before we let you go. We do have one more member of theMagnificent Seven about to report tomorrow.That is, of course, Apple. A lot of focus there on falling iPhonesales. If we do get a disappointing set ofnumbers, do you buy any dip on Apple? How confident are you of a recovery infuture quarters? Well, honest, I'm not very confident.I think the expectation from Apple is they both announced per share and therevenue expected to joking about 20%, as.
You mentioned, that's largelycontributed by a decline in terms of the iPhone sales.They just reporting a huge slump in the Chinese market.But out of China, the global wise, the sales of smartphone is also declining aswell. As I mentioned, I think that this wasthe apple being beaten out to make it or break it is what the update in terms ofthat. Apple is predicted to have the airpremium in this summer. So if there's any new information theycould deliver to give the market a little bit of a positive side of thesurprise that could potentially help.
Them to see the bottom there.The Echo's share price has been dropping by 14% this year and whether or not theycould come up from the bottom. Well, how did depends pencil is anyupdates on the new technology side? Maybe it was ready to chat with you.Hippie energy market analyst there. More to come on DAYBREAK, Australia.This is Bloomberg. All right.Let's take a look at how we're shaping up for trading around the Asia Pacificthis Wednesday. We do, of course, have a lot of marketsclosed, but a lot of significant markets still open, of course, including here inAustralia.
Futures, though, suggesting we're goingto be a risk off day to day off by 1.2%. Nikkei futures also weaker by a quarterof 1%. As the old saying goes, sell in May goaway. It is the 1st of May, but data showsequities have an average gain in May of 0.93% dating back to 1983.So proof their poetry, not an investment strategy.All right, look at the silver spot index there.Pretty flat at the moment. The yen weakening again.One 5771 Never mind. Intervention doesn't seem to be workingat the moment.
More to come on DAYBREAK, Australia. Binance founder Changpeng Zhao gets afour month prison sentence for failures that allowed cyber criminals andterrorist groups to freely trade on the world's largest cryptocurrency exchange.Bloomberg legal reporter Eva Benny Morrison joins us now from Seattle.So over four months prison and he gets to remain a billionaire.What does this tell us in terms of deterrence?That was a point that he had made, saying that he's never going to committhis crime or anything like it again and that he should have probation becausehe's paid his dues.
He's suffered in punishment in the wayof being splashed all over the newspapers and in media.But the Justice Department had argued that a strong message that needs to besent here to the crypto industry and to high level executives all acrossAmerica, that this type of behavior, even though it just seems like a bankinglittle violation, is isn't acceptable. Are there meaningful implications forboth, Joe? You know, six months after when he doesget out from his prison sentence, but also for Binance more broadlysees he stepped down as the CEO of Binance as part of the terms of his pleaagreement with the Justice Department.
Late last year.He's still owner of the company. Prosecutors said today that he wouldstill profit handsomely from the company.But he has said that he is focused after his four months in prison on a careeroutside of crypto. He wants to focus on his plan therapyand some different projects in the biotech industry.So we will see how that turns out and whether he is still involved behind thescenes of finance or not. On bikes legal.Reporter everybody. Morrison there in seattle.Well, bloomberg has learned that tesla.
Is eliminating most of its entiresupercharger organization that built a vast network of public charging stationsin the US is bringing Bloomberg's global business.Asia editor Peter Vercoe. So what do we know about this and theramifications? Yeah, so it looks like tesla haseliminated, as you said, almost its entire supercharger team.It's a 500 strong team in charge of rolling out its supercharger networkacross the US, including its senior director, Rebecca Donachie.These are on top of the 10% companywide staff cuts that Musk ordered up lastmonth.
It's going to.Musk then went on to X and said that they're going to slow the growth in theSupercharger network. But this has ramifications beyond justTesla because most major US carmakers are adopting Tesla's charging connectorsin their cars. At the moment they're using adapters.But from of next year, Ford and GM are going to have Tesla's unique chargingport built into their car. And we know that access to charging,particularly fast charging is a key hurdlefor people making a transition to EVs. And to wipe out this entire division.It's just going to.
We've already had reporting from ourreporters in the US that it really is They're just sort of confused by what'sgoing on and what this means for them. It means that these automakers arelosing their main points of contact within Tesla just ahead of the summerdriving season in the US when people go on holidays and stuff like that.So it just seems to be a bit more sort of confusion and turmoil at Tesla that'sleaving some of its key customers in the dark.What are the implications for the actual supercharging network infrastructure?Well, it seems that that is going to slow down.And, you know, the Supercharger network.
Is the main charging network in the US.It's bigger than any of the other competitors.It's also a money spinner for Tesla. Piper Sandler estimated that by the endof the decade, Supercharging is going to be a $3 billion a year business forTesla. And so if that starts to slow down, youknow, again, it does leave some question marks hanging over what the plans arefor the network here, how big it's going to be, and what kind of access it'sgoing to be for for drivers, not just for, as I said, not just for Tesladrivers, but across the whole spectrum of global business.Asia editor Peter Vercoe there with the.
Latest those changes for Tesla.Let's get to banking now and HSBC CEO and O'Quinn is stepping down in what'sit's is an unexpected move as Europe's largest lender tries to navigatedeteriorating ties between China and the US.For more, let's bring in our Asia investing editor, Russell Woods.Russell, this came as really a shock to a lot of people.What do we know about Cohen's departure? Morning, Heidi.Yeah, This was a big surprise coming during an otherwise relativelyuneventful earnings season report. Now, Quinn said he's going to resign.He's going to stick around while they.
Choose a new candidate.That process is already underway, this process being led by Chairman MarkTucker. So it's going to be a smooth transition.At least that's what Noel Quinn said. They're looking at internal and externalcandidates. But now Quinn, after almost five years,is pulling the pin on his leadership at HSBC.Do we have any idea about who might be able to fill Noel Quinn's shoes and whatsort of challenges are they going to face to to continue to grow thebusiness? Hopefully, as I mentioned, they'relooking at internal and external.
Candidates.So in terms of the internal candidates, you know, people who could be in therunning, it's the CFO, George Al Haydar, who's been CFO since the start of lastyear. Other candidates as well, the wealthhead, Nuno Matus, Commercial banking head Barry O'Byrne.But they could also in a sense they have the time, they, you know, they can waitaround to look for some outside talent as well that could involve someone likeSingapore, ICBC CEO Helen Wong, Aviva CEO Amanda Blanc These are just somenames that have been touted around. And in terms of the challenges that theyface, well, you know, Quinn himself.
Faced a really turbulent, turbulent timewith that with Covid. Obviously that's that's meant that pastus. But probably the biggest challenge willbe continuing that pivot to Asia and working with China, working in China.They've really committed to that market at a time, of course, of the massivegeopolitical tension between China and the US that HSBC and Quinn have beencaught up in. And Quinn has sort of difficult deftlymanaged that. So the new CEO will have to have thatsort of that political kind of nous to be able to do that.The other thing they're going to have to.
Do is sort of look to look atdiversifying their business away from relying on net interest income.So that's like getting into more areas like wealth management and insurance.So, you know, there are some challenges ahead for HSBC.I think Quinn's legacy is that he's sort of steadied the ship and his successorwill have to build on that. And what a ship, right.This sort of turnaround, multi year turnaround for HSBC has been glacial ina lot of ways, but he is leaving on a high.He's managed to see through these record profits, fend off ping on, for example,things may not be as easy going forward.
That's right.I mean, as I mentioned, just taking an interest income as one example.You know, he's ridden the wave of the massiverate increases. That environment that has helped out thebanks lending income. But now, you know, we're looking at ratecuts, albeit, you know, delayed perhaps. But, you know, that's just one areawhere there are going to be challenges with potential that squeeze on theinterest income. And then, of course, you know, as Imentioned, that geopolitical challenges, you know, Quinn came in.You know, China was the market to be in.
To all banks were trying to get intothere. They were the China was deregulating thebanking sector. Everyone was piling in.But now, you know, of course, these banks realize they have to be in thismarket, but the market is slowing. And China has obviously, I mean,challenges. HSBC has been caught up in the profitproperty debacle. They're writing down a lot of assets inthat sector. So, you know, there are challenges goingforward for that for a successor, that's for sure.All right.
Asia investing editor Russell Wallthere. Here are some of the other big corporatestories that we're following. Starbucks shares tumbling in extendingtrading after it posted its first sales drop since 2020.The company reported a 4% decline in same store sales with its locations inChina seeing an 11% dip as half of deals and new lattes failed to enticeconsumers. Starbucks also slashed its full yearrevenue growth forecast to low single digits and signalled adjusted earningsper share may be flat. AMD shares also plunging in extendedtrading after the chip maker gave.
Disappointing forecasts for AIprocessors. The company projected that its 300lineup of AI accelerators will generate about $4 billion in revenue this year.Analysts were expecting twice that amount.CEO Lisa Su said the chipmaker is struggling to meet demand due to supplyconstraints. Huawei says profits rose nearly 600% anda sign that it's taking market share from Apple and other smartphone makers.It made $2.7 billion in the three months to March, marking the fourth consecutivequarter of profit growth. The phenomenal jump in earningsunderscores how AI Weiwei is resurgence,.
And that's in spite of U.S.sanctions. China Bank is exiting non-coreoperations and divesting assets to boost liquidity.And a memo from a shareholder meeting, the company said it's adjusting itsbusiness model to focus on property development, real estate management andrentals. It's also pledging to reduce interestbearing debt by $13.8 billion in the next two years.Take a look at our setting up ahead of the start of trading here in Australiain just about 20 minutes time. And also in Japan.Of course, a number of markets are.
Closed for holidays today, but out ofthe ones that are trading, we're looking like a downward start when it comes tothe action here in Sydney indicate a downside of about 1.1% really followingthe lag that we saw on Wall Street with that hit bit sentiment, these concernsabout higher for longer from the Fed thanks to stickier inflation, arestarting to play out when it comes to risk appetite.We also saw in addition to that sell off in US benchmarks, bond yields rising aswell, that surge in the dollar as well. Kiwi stocks were down by just about halfa percent. We did have the labor market numbersshowing that joblessness rose to a three.
Year high.Interest rates are really starting to bite.They're cooling demand and curbing hiring in that market as well.So will really be seen as kind of a welcome sign by the central bankersbattling still to return inflation to that 1 to 3% inflation target.They're taking a look at Japan. We're seeing a little bit of weakness,although mild compared to what we're seeing across the rest of the region.We did see some interesting results from a Bloomberg analysis of central bankaccounts concluding that Japan did likely conduct that first currencyintervention since 2022.
Judging by those numbers, and wecontinue to watch, of course, the yen, particularly as we see that big move,the index of the dollar jumping the most in more than two weeks in that Tuesday'ssession and how that plays out for Asian folks.More ahead here on DAYBREAK. Australia.This is Bloomberg. A Bloomberg analysis of central bankaccounts suggests that Japan has probably conducted its first currencyintervention since 2022 to prop up the yen from all.Let's bring in Garfield Reynolds who leads our markets live Asia coveragethat Garfield the evidence piling up.
That that was intervention that we sawon the 29th. But the key question is with the yennow. One 5772.Did it work? Was it worth it?Well, at the very least, it pushed the yen back from 160.It got within 0.03 of matching the lowest the low back in 1990.And if it goes past that, that would be the lowest since about 1986.And there's not a lot of ready barriers to hang on to.So from that point of view, it looks like a, you know, something of asuccess, possibly a tactical success.
And while you could argue that if theFed somehow meets or exceeds the very hawkish expectations that it's facingand also payrolls, depending on how they go, the yen could readily go back tothose sort of levels. Would the reverse argument would be whatthey hadn't intervened and you were starting from about 160 or more yen perdollar, then who knows where you could end up?170 would come into play pretty rapidly. And that's the sort of thing that youwould have a lot of impacts on Japan's economy.On the political situation, you know, and you can see, too, that we've hadthis inversion of the previous situation.
Where it used to be a weak yen waswelcomed by the Japanese stock market because that helped a lot of theexporters that are key players in the Japanese corporate sphere.A weakened is no longer being seen as, you know, unalloyed good news forcorporate Japan. The yuan, of course, obviously isanother dimension to this in terms of how long the yen stability might stay aswell. Some interesting comments we got fromthe Politburo, maybe a little bit more expressed aggression in how they plan tosupport the still struggling property sector in the broader economy.Yeah, I mean it as ever.
And see,it's always a very measured push me pull you, push me pull you setup. But they they did sound more open toeasing of various kinds which probably makes it understandable that the newsfrom this didn't come out until after we'd gone on a holiday.So there's no immediate pressure on the yuan, but it does seem as though it'sgoing to make it harder and harder for the PBOC to to significantly slow theyuan's decline in the face of a rampant US dollar.Now, if the US dollar pulls back, that's a different state of affairs.But.
On the one hand, you know, Chineseequities in particular, we saw strong gains for property stocks leading intothe meeting and that that those gains were validated to some extent becausethey they definitely increased their interest in and work on how do weresolve the property situation. So for property stocks, for stocks ingeneral, sounds like more support is coming for the yuan.You know that dancing through the snowflakes.Your task of the ABC just got a few more snowflakes to dance through.And the the the main task would seem to be to make sure that the yuan's muchlower is a smooth one rather than a.
Disorderly one.One of the potential variables you mentioned there was the possibility of afalling US dollar. It looks pretty unlikely at the moment.As we're on the eve of the Fed meeting, markets seem braced for a pretty hawkishmessage here. What are we anticipating?Well, you're very strong anticipation that,you know, the Fed will signal that it's going to further delay rate cuts andthat indeed its initial guidance coming into this year.And then that was repeated in March that expects to cut three times this year,that that looks.
Extremely unlikely to occur.You would need to have not just a by now, not just a noticeable slowdown ininflation, but an actual deterioration in thethe way the economy is traveling. For them to looktoward, you know, three rate cuts in the second half of this year, that that's apretty strong pace. And indeed if you think your pal back inthe beginning of this year was the. Base case seem to be.We cut in the middle of the year, probably June or July, on the way tothese three cuts that we've pencilled in.That looks very unrealistic now.
So those are the sort of things you'regoing to want to look to look to. And there is the potential that the bondmarket has overplayed its hand and the power will end up sounding far moremeasured than the bond market is expecting.A couple of rentals Who leads Our markets live Asia coverage there.Well, Harvard University economics professor Kenneth Rogoff says a Fed isunlikely to act on possible political pressure coming from the US government.He also told Bloomberg that he expects long term rates to remain elevated foryears to come. It's not going to work very well.I mean, it's going to be obvious that.
It's not working.If you take away Fed independence, investors are going to get jitteryinflation expectations. They're going to go up, the dollar isgoing to attack. So happily, for better or for worse,maybe. I think markets will throw a pretty coldbucket of water on the president if he tries to do that.I don't think he would go to that extreme, but it's clear, you know, hewants to be disrupter in chief. And it probably irritates him that ourgot so much attention at his press conferences.So markets there would apply the brakes.
In that scenario, which of course, stillbeing reported out. Details unclear.So we won't go too far into the hypotheticals.But let's talk a little bit more about real interest rates.If we do enter into this environment where you have these episodic spikes ofinflation. What would sustainably higher realinterest rates mean for this economy when you think about the potentialripple effects? Well, I think it really comes in thecost of borrowing for the government per individuals.So remember, you know, inflation is also.
Driving up tax revenues.It's also driving up wages and salaries. But the real interest rates, you know,they're there to stay there. They're the wedge between the two andthis world. You know, there is this period where youwere just a sucker not to borrow as much as possible, whether it was to buy alarger house, whether it was to fund new government programs, etc..And I think, you know, we live in a more normal world now.I'm not saying I'm telling you what interest rates are going to be for thenext 20 years. But what I am saying is, I think onaverage they're going to be a lot higher.
Than they were after the globalfinancial crisis. Ken, one last quick one, if I could.What does it do to growth if we have longer, long term interest rates?Well, we've had long term interest rates a lot higher for a long time and hadbetter growth than we have now. It sort of depends on what's going on.I think to the extent it's driven by huge government borrowing, privateborrowing, it's clearly a negative. You're just paying a risk premium toborrow to the extent it's driven by a high and productivity and wondrous newtechnology, then obviously higher rates just go hat in hand.Maybe there's some of both.
That's Harvard University economicsprofessor Kenneth Rogoff speaking there to Bloomberg's David Westin and KatieGreenfield. You can watch it live and you can seeour past interviews on our interactive TV function.TV go there. You can also dive into any of thesecurities or Bloomberg functions that we talk about.You can also become part of the conversation and send us instantmessages during our shows. This is for Bloomberg subscribers only.You can check it out of TV. Go.This is Bloomberg.
All right.Taking a look at the markets. And it is a holiday in session acrossAsia, but we are just a few minutes away from the start of the staggered open inAustralia, looking like starting off on the back foot there, looking likedownside of over 1% when we get to the start of trading here with some downsidecoming through from New Zealand as well, with the jobless rate rising to thatthree year high in the latest data from the first quarter, employmentunexpectedly falling as well as really the impact of higher rates starting tocurb demand. That will be welcome news in a sense forthe ANZ.
And of course so much of this has justbeen the risk aversion that we saw in the final stretch for April across theUS markets. Right now we're looking at optionssuggesting that traders are now expecting the biggest Fed day move inthe S&P since 2023. That's according to analysis from acity. And that should be quite interestingbecause what we are expecting of course from the Fed poll is they will keeprates steady for a sixth straight meeting.And more importantly, that signal of no plans for cuts in the near future afterinflation, as we know, continues not.
Just inflation, but so much of the datacontinues to hold up. Well, yeah, higher for longer definitelyseems to be the well embedded narrative at the moment from the Fed that's goingto support the greenback. You see the dollar spot index rising.A couple of interesting currencies on that board starting at the bottom.The yen, well, that's weakening again. One 5771 And we have more evidence thatthe Bank of Japan probably did conduct intervention on Monday.We've got a bad AJ report from yesterday that its current account is probablygoing to fall by 7.56 trillion. We were expecting $2.1 trillionreduction.
So that suggests an intervention ofabout five and a half trillion took place.But was it worth it? Well, the yen weakening again, also alittle bit weaker. The Aussie dollar just below $0.65 us.We did, of course, have CoreLogic house prices out of Australia coming in asexpected, 6/10 of 1% increase in April. Just a reminder, a lot of markets closedtoday. Those include mainland China, Hong Kong,India, Indonesia, Malaysia, South Korea and Singapore.Others there on your screen market opens in Sydney, though, next.
