This is DAYBREAK.Asia. We are counting down to Asia's majormarket opens and plenty of things to keep an eye on this morning.We did just hear from SK Hynix, which is South Korea's second most valuablecompany. Blowout results for the first quarterthere. So that will be keenly watched able, butalso looking to be keeping a close eye on the yen.We have a Bank of Japan meeting, of course, about to start today and thatyen punching through levels we haven't seen for more than three decades ago.Absolutely.
And that's bringing those interventionjitters back to the fore. But as you say, it's also aboutearnings. And just remember how Tesla reallyhelped to reinvigorate the markets with its plans just a day ago measure reallypotentially spoiling the party here. But we do have the open in Korea.And as you mentioned there, those earnings from SK Hynix seem to beworking their way through into the markets.It's not just about how the company seems to be doing well with thatadvantage because it is a leader or seen as one in the high end memory chipmarket compared to Samsung, but also how.
It points to this bottoming out in thechip market and potentially that recovery for semiconductor demand we areactually seeing. SK Hynix starting the day on the backfoot, actually sliding about 3% now as investors digest that scorecard.And potentially what we got from metal is bringing that downdraft into theAsian session. We did see the Korean one yesterday.The outperformer among the Asian currencies looks to be reversing some ofthat today. Less for the board because, of course,we also got the open in Japan. And one of the things that we arewatching out for, as you say, Paul, has.
Been the Japanese currency.It's breached that 155 level. And this has got to do with that gap.As we saw the way US treasuries were coming under pressure overnight.But now that we're watching the yen at the weakest level versus the greenbackin about 30 years, consider how back in June 1990 when it breached 155, it was amatter of a couple of days before it reached the 160 level, though there issome skepticism as to whether we will actually see intervention by the FinanceMinistry simply because of the timing. We do have a big decision that is duetomorrow and Tokyo CPI number. So this does complicate the picture.Now, Japan's stocks also under pressure.
After that recovery yesterday, again, asI say, and that was thanks in large part to Tesla's plans helping to reinvigoratethe markets in Asia. So the board again, I want to take youto what we saw in US treasuries. As I say, it was under pressure duringthe session, that idea coming through from Australia's high inflation prison,that inflation is stickier than central banks might like that really putpressure on global bonds. So the further out into the curve yougo, the less demand you see the traders seem to be reluctant to put on duration.We did see an okay five year auction after a successful two year one.We have a seven year one to get through.
So this is what we're seeing across thecurve. But as I say, really focusing on theearnings from South Korea here, Paul. All right, Thanks very much.Let's get a bit more detail on the SK Hynix earnings from our Asia stocksreport. You can only in Seoul, you come just inthe early going here. We're seeing a bit of a sell off, a.k.a.next week by about 3%. That's despite very impressive firstquarter numbers and more appears to be a pretty decent outlook.So what's going on here? Are we seeing a bit of profit taking?Sure.
So Hind is reporting a much better thanexpected earnings, higher than analyst consensus.And yet we are seeing a big drop in sky high share price today.That's probably because the macro external factors, macroeconomic factorssuch as such as the geopolitics, which are political risks and effects rates,things like that are are getting a bigger attention from investors nowadayswho have been buying a sky high new share so far this year based on itsoutlook on the rally boom. It looks like earnings are reallyimportant. Earnings are really good, but investorsare now seeing the macro factors a lot a.
Lot as a bigger factor affecting thecompanies like SK, Hynix and other stocks in South Korea, other chip stocksin South Korea. So we'll have to see how the foreigninvestors flow from now on. And that may the answer to where theforeign investor flow goes on may hinge on the macro economic factors and thegeopolitical risks, not just to earnings.And another news that happened that may have shaken investor confidence in thiscase is that the company announced this big CapEx plan for CHIP for a new CHIPplant that is up that is $15 billion worth.And some investors may be worried about.
The possible new investment, increasingthe supply chip supply going forward. That could also pressure our memory chipprices. Yes, that $14.6 billion expansion planfor a new fab plant in South Korea that was announced.But also we've got this guy Hynek saying that plans to modestly increase orsomewhat increase CapEx this year. So is there potentially even morespending in the coming quarters? Yeah.So this gave a lot of OMS announcedannounce now some positive news when it wasn't releasing its earnings.Such suggests that it's now the business.
Has made a meaningful turnaround duringthe first quarter and that is seeing of memory demand being steady especially itsees a pretty good demand coming from the conventional memory such as to yourroom. And and so so its investmentannouncement may be showing the confidence from the company that ispretty bullish on the demand from coming from the air investment from around theworld. However, today's sell off in the stockmay be showing that investors are still are still pretty worried about theroute, about the increase in the supply of the chips by the by the latestannouncement from the US.
Get high nice.I'm pretty sure the investor are still waiting to hear more details about theChinese view on the on the sector and also on the companies earnings goingforward during the earnings conference call under way at this moment.So we'll have to see how the share price go after the earnings conference call isover, when there will be more details about how the company views the thesector and the air demand and on its own its own earnings for next quarters.All right, Asia stocks reporter Youth Zhong Li there in Seoul.Let's take a look at how some of those chipmakers are performing at the moment.SK Hynix off those earlier session lows,.
Still weaker, though, by about 2.2%.Key competitor Samsung in this place and South Korea's largest company, alsoweaker by 1.6%. Let's get over to our next guest, fan,Chuck Wang. She is Asia CIO at HSBC Global PrivateWealth and Banking Fan. Thank you so much for joining us.I just want to start, if I can, with your calls on some of those Asia Technames. And when you see a pullback like we'reseeing now in SK Hynix, you're tempted to buy that dip.Our previous guest from Counterpoint says this is going to be SK Hynix isbased over years.
Is this a good entry point?We remain constructive on the Asian technology sector.We think the API investment boom will continue to drive pretty strong demandfor high end memory and semiconductor products, and the Asian technologyleaders are well positioned to ride on this global AI investment in AIexpansion, and this is going to bode well for earnings outlook.Currently, we are overweight on Korean equity market as consensus earningscontinue to project around 64% EPS growth.We think the latest announcement from companies to to spend substantial CapExto expand the production capacity on the.
High end memory chips.And this is reflecting the very strong underlying demand observed by corporatemanagement. So we think the fundamental outlook forAsian tech stock remain positive and we will take this as a pilot opportunity.All right. Outside of tech, what other sectors doyou like for diversification in Asia? Within the Asian equity market, we adoptan active diversification strategy. Given the divergence of fundamental andgrowth profile also currently we have overweight position in Japan, SouthKorea, India and Indonesia. Within the China and Hong Kong equitiesmarket, as we ho are a neutral tactical.
Allocation position.So we mainly focus on surface consumption and high end manufacturingand and that telecom sector in China. So we look for companies that willdeliver resilient earnings and we also focus on the beneficiary of corporategovernance reforms across the region as we actually see a quite positivemomentum in corporate reforms in Japan, China and now South Korea also and viewmore details about the corporate governance reform that encourage listedcompanies to enhance shareholder value through dividend payout increase andshare buyback. And these are actually quite attractiveinvestment opportunities with strong.
Fundamentals upon.You're also overweight US markets and you're really not alone in that call.To what degree do you feel that the earnings story has taken over from Fedeasing as the major catalyst for markets now?Yeah, we actually see them. The main driver for the global equitymarket, including U.S. equity market, has been shifted tocorporate earnings expectation rather than a rate given that's in the firstfour months. We see heightened rate volatility drivenby uncertainty surrounding the timing of the Fed rate cuts.But we see continuous strength in the.
U.S.equity market, mainly driven by improving macroeconomic outlook as thesoft landing scenario continues to play out and corporate guidance continue topoint to pretty solid earnings recovery in 2024.And this is the key driver behind the US equity rally.That tech company continue to deliver very solid earnings growth.We think the recent weakness in the tech stock reflect a technical pullbackrather than a trend reversal. So we continue to see opportunities inthe technology sector. But importantly, we expect the US equityrally to broaden beyond just big tech,.
As we expect the economic growth willcontinue to gather momentum. And this is going to benefit all thesector, including industrials, consumer discretionary and financial stocks inthe U.S. So we expect the U.S.outperformance will continue to sustain. We can't let you go without getting yourview on the yen, which we see weakening to levels that we haven't seen since wayback in 1990. We do, of course, have a Bank of Japanmeeting starting today. Do you expect any sort of bold policy,maybe even a rate increase from the BOJ to defend the yen?We expect the bill to stay on hold in.
This meeting.However, we do expect APAC will likely addressthe market concerned about the the currency volatility.However, we think the UK will remain pretty prudent in normalising monetarypolicy. But given the strong US dollar and thisis mainly driven by the aggressive market repricing for slower and laterFed rate cuts. So this actually create room for the DOJto raise interest rate earlier. So currently we expect the UK willlikely deliver another rate hike in the third quarter of this year.We anticipate a potential 15 PIP rate.
Hike in Q3given the continuous strength in the US dollar and this drive the yen to hitmore than 30 year low. So with this goal for the EU to furtheradjust interest rate, we also project to more interest rate hike in Japan goinginto 2025. We expect one hike in Q1 next year andanother hike in Q3 next year. So taking into account our projectedrate hike in Q3, we anticipate the upper bottom of the target range for theJapanese policy rate will go up to 0.75% by the end of next year.So this would reflect a policy normalization in Japan and this shouldsupport some stabilization of the yen.
Going into the second half of the year.All right. Some aggressive moves coming from thebig event juggling Asia CEO and HSBC Global private banking and wealth.Thanks so much for joining us. And that is, in fact, our BloombergQuestion of the Day as well. Will the DOJ or the Fed move rates morein 2024? And that is becoming a very livequestion indeed. Still to come, the clock is ticking fortick tock in terms of its fight for the against the US divest or ban bill.Eurasia Group is going to be joining us to tell us what this means for digitaldiplomacy.
That conversation coming up later thishour. First, though, we're going to have moreon the investor backlash to Metters earnings as it doubles down on itsambitions. This is Bloomberg. Tick Tock says it is ready to challengea law that would ban the app in the US unless its Chinese owner, Bytedance,sells its stake in the company. President Biden signed that legislationon Wednesday as part of a larger foreign aid package.Rest assured, we aren't going anywhere. We are confident and we will keepfighting for your rights in the courts.
The facts and the Constitution are onour side and we expect to prevail again. All right.Let's bring in our tech reporter, Alex Bernier for more now.Alex, we just heard from the tick tock CEO there saying he's going to fight forAmericans constitutional rights. Give us a bit of a preview of what thislegal battle is going to be about. It certainly does.That's the message he has for users and also for employees internally that thisfight is not yet over. Tick Tock and its parent company,Bytedance, both expect to take this to the courts with the hopes of eitherdelaying this, the enforcement of this.
Bill, or getting it killed altogether.That First Amendment argument is one that we very well could see with themclaiming that the government is infringing on its users rights.We also could look to some of their past legal battles for other clues on on thearguments they might have. The state of Montana, in fact, had abill that aimed to ban Tik Tok in that state.And Tik Tok sued, as did a group of users whose lawsuit Tik Tok actuallyfunded. So we could see folks on the docket whoare not just Tik Tok or Bytedance, but perhaps some of the users contentcreators or some of the merchants that.
Are now selling on Tik Tok shop.So where do we place the odds of this legal challenge being successful, andhow long could it potentially go for? And I mentioned that in the context of apresidential election coming up in November.Of course, our Bloomberg intelligence litigation analysts expects that if thisif a appeal gets filed to the D.C. Second Circuit, which is a very likelychoice for this, the legal battle could be expedited and be wrapped up as soonas the end of the year in the fourth quarter.And he puts the chances of bytedance and tick tock succeeding in overturning thislaw at a mere 30%.
So certainly less than the confidencethat it sounded like Tick tock CEO show Chew is bringing to his message tousers. And that context there with the electionis incredibly important. The US will vote on the nextpresidential election in November and this deadline for Bytedance to sell ordivest. At stake in tick tock actually comes duethe day before the presidential inauguration in January.So depending on who wins, that presidential ticket next year, couldhave a big impact on this. Obviously, President Joe Biden signedthis bill into law on Wednesday morning.
In the United States.And if he ends up still being the president in that seat, he's leading theDemocratic Party right now, then he might very well see this out as a ban ifdance is not able to offload its stake. But the Republican frontrunner is DonaldTrump, who in recent weeks has changed his tune on Tick Tock.He thinks that it should actually stay in America.If Donald Trump wins the election come November, then tick tock and Bytedancemight actually be in front of a friendlier, friendlier audience as theymake their argument to stay. All right, Tech reporter Alex Brink ofthere on the ban.
All the best, Tick-Tock Bill.We're going to delve into how that legislation could impact ties betweenWashington and Beijing. Eurasia Group.SHARMA Lou is going to be joining us later on this hour.Plenty more to come on DAYBREAK Asia. This is Bloomberg. All right.Let's take a look at how we're tracking in commodities at the moment.Iron ore continuing to put in a spirited recovery.We're a bit about another three quarters of 1% right now.I can't tell you how iron ore miners are.
Doing in Australia because we're closedfor a public holiday today in Australia and New Zealand.Now copper is an interesting one that's pulling back from those levels that wesaw a little bit earlier. It was getting very, very close to$10,000. But there has been some reluctance fromsome of copper's major consumers in terms of paying that much.We've got BlackRock, however, saying that copper needs to rise to 12,000 toincentivise large scale mine investment. So the demand for copper is certainlythere. But the willingness to pay these eyewatering prices seems to be absent.
Right.Let's talk a little bit more about the commodities space we're hearing fromBHP, the world's biggest miner, that said to have approached Anglo Americanabout buying the 107 year old company. And this could be the biggest shake upof the global mining industry in more than a decade.So for more on this Bloomberg scoop, we are joined by commodities reporterMachin Ritchie. Martin, what more do we know about this?So far we've had confirmation from Anglo-American, which is BHP target,that they have received a proposal from BHP.And as you said, Paul, this would be a.
Really big mining deal and perhaps oneof the biggest many deals this year. Now BHP is the world's biggest miner.It produces everything from iron ore to copper and nickel.Anglo has a similar profile, a lot of different commodities.But what's really the key here I think is is copper.Anglo has a substantial production in copper and as anyone who watches thecommodities space know knows there's a lot of interest in buying copper aroundthe world because people think there's going to be, you know, a decade plus ofvery rapid demand growth. And we don't have any confirmation fromBHP yet.
As you said, it is a holiday inAustralia. We'll see what happens.But this is this is a deal that will shake up the mining space and couldcould dominate the agenda this year. You have spent some time since we'veseen such a large scale deal making from BHP.To what extent is this becoming a bit of a trademark of CEO Mike Henry'sleadership? And have we had any response from Angloabout this report? A bit.Yeah, that's right. I think.I think everyone understands that.
Can we see you probably want to make abig stamp on his leadership. The the BHP has already made a big dealin copper about over Oz Minerals last year that was a $6.4 billion deal.So they expanded their portfolio there. They've already said that in takingover. Anglo or Anglo has said that BHP, BHPproposal will see BHP Anglo first spin off its iron ore and its platinumbusiness in South Africa. And that really emphasizes that thisthis this focus on on copper. Rio Tinto BHP is rival in the number twoiron ore miner has also been looking to build up its its copper business and wesaw Glencore, the international trader.
And miner, try to take over Canada'sTeck resources as well, principally for copper and zinc.So you can see how this is shaping up into a big battle for control of theworld's copper resources. All right, Commodities reporter MartinRitchie there. Let's take a look at how we're doing inthe space at the moment. And of course, we are very closelywatching the yen. Well, we're always watching the yenclosely these days, but especially so now we're at levels that we haven't seensince June 1990. The yen now weaker than 155 against thegreenback.
So against that backdrop, we have a Bankof Japan meeting starting today. The DOJ has pledged that it's going todo something about the level of the currency.We'll have to wait and see what that is. Still to come, US Secretary of StateAntony Blinken touches down in China, the US, of course, moving to force thesale or ban of tech talk. So we're going to discuss theimplications of that with Eurasia Group next.This is Bloomberg. Well, with just over 30 minutes into thetrading day this Thursday in the Asia Pacific for South Korea and Japan, notrading in Australia and New Zealand.
Today, but everyone is keeping an eye onthings in Singapore studio, an over plenty to watch today in terms ofcurrencies and tech stocks. Absolutely.I think for tech stocks, what we got from earnings and their plans, the likesof Tesla earlier in the week and then now from Meta is really throwing aspanner in the works of these Asian equities.That negative sentiment coming through. We're seeing the Japanese benchmark aswell as the cost be both about 1% lower in the first 30 minutes of trade becausethe small cap gauge not doing as badly. But what we got from MIT I think raisesthe concern about whether tech can help.
To continue propping up this bull run inthe broader markets, especially as it talks about how it's going to have tospend billions of dollars more for AI investment and its outlook.Really disappointing here. And traders might also be reluctant toput risk on at a time where we are waiting out today for data coming outfrom the US, including on GDP consumption.And all this could go along and shape the way that the Federal Reserve isgoing to guide monetary policy. We've of course been seeing this higherfor longer narrative coming through and all this is coming against a backdrop ofa day where we've gotten a high Nick's.
Earnings.The stock is still about 3% down today despite that big beat on operatingprofit. I think the investor assessment is howthe macroeconomic environment is actually shaping the broader markets.That's change on now because of course, as you say, is really about the Japanesecurrency as well as we've seen it weaken to that three decade low, not just inthe spot read, but also the real effective exchange rate.And the question about whether we're going to see intervention, someskepticism as to whether we will see actual intervention simply because ofthe timing.
We are waiting for the BOJ tomorrow.That decision is do not expect it to change on rates.There are some corners of the market that think that given how inflation istrending, we might see some signals of quantitative tightening coming throughboth of the board. Again, let's take a look at how Chinafutures last traded the pointing to negative open.And this is after we got earlier in the week.The Hong Kong stocks, for example, really shining and coming back,outperforming global markets as Chinese sentiment turns, sentiment towardsChinese equities, tons, I should say.
But we are watching out for the storyabout how sources telling Bloomberg that these Chinese officials have beentelling brokerages to curb their exposure to the highly risky products,noble derivatives among the things we are watching in the markets today, Paul.All right, Thanks very much. Let's turn now to geopolitics.The US secretary of state has arrived in China.He's on a mission to press Beijing on issues including its support for Russiaand industrial overcapacity. Anthony Blinken will meet seniorCommunist Party officials in Shanghai on Thursday, and then he heads to Beijingfor a possible face to face meeting with.
President Xi Jinping.A hawkish US election campaign could be a test for a stabilisation in ties thatwas brokered last year by Xi and President Biden.All right, let's bring in our next guest now.Chemung Liu is director of GEO technology at Eurasia Group.Chemung, thanks for joining us. As I mentioned there, Anthony Blinkenheading to China with a message about overcapacity, support for Russia.But following the passage of the Tik Tok ban or Divest build, do you thinkChina's going to have a message for Anthony Blinken?I would expect this issue to be on.
Anthony Blinken's meeting agenda withChinese officials because I think a lot of the decision makers in Beijing hereare very frustrated about the way US treated tick Tock.And we expect Beijing's initial response to this ban to be symbolic and muted.But I think there's definitely a chance for them to talk about it over at thenegotiation table this week in Beijing. Is this the sort of thing that can benegotiated out, though, particularly in the context of US election season?I'm not sure either side will be in the position to negotiate at this pointbecause President Biden just signed the bill into law yesterday.I think the next step is for tick tock,.
As they promised in public domainmultiple times to challenge this law in court.And through this communication, I think China will gauge us potential reactionand also how things will play out in the future, order to put their plan togetherand think about how to response when that eventual tick tock exit from the USmarket happens. It's shaping up to be a very interestingcourtroom battle now, because tick tock already signaling it's going to fightthis on constitutional grounds, a breach of the First Amendment potentially aswell. How long do you see this dragging outfor and where do you place?.
Tick tock, chances of success.I think they will fight the legal battle as long as they can.I have no doubt they mobilized a lot of resource on the legal front.But in the meantime, they have up to a year to deal with this divestitureorder. If they couldn't wrap up their processand are forced out of the U.S. market.I think at this moment, Baker Downs doesn't have a very shameful that theywill be able to win the battle in court for.So let's explore some of the potential outcomes here.If they lose their battle and Tik-tok is.
Divested.What then happens to the data, the algorithm, both of which the company isvery protective about? And is there anything Beijing can do tointervene? There's a lot Beijing can do tointervene. They will have to issue approval forthis deal if Tick tock war to sell its core algorithm to US buyers, which isthe most valuable technology asset of the platform.But Beijing is unlikely to give that permission.So in that case, Tick Tock can basically sell the platform, the brand to USbuyers.
If there there's a deal interestingenough to us stakeholders, or it will have to leave the US market altogether.Or there's another potential option here as well, and that would be potentiallyto suck up a ban, leave the US market and try to return later.How appealing would that option be? I'm not sure they have much legalrecourse at this point. They can they can choose to withdrawfrom the U.S. market altogether, just like Google andother U.S. social media network did in China 20years ago. I thinkif that's the scenario, which I think is.
A likely possibility at this point, theywill leave the U.S. market, but they can still compete inother global markets, even I think U.S. is their biggest overseas user base andmost lucrative one as well. I think that's a big sacrifice forTikTok to make, but maybe that's the eventual allergy the platform has toface. No doubt other Western countries, alliesof the United States, are going to be watching this court case very carefully,regardless of the outcome. What are the implications for tick tockin other countries? I think in the EU, which is another verybig market for Ticktalk, the company is.
Already being investigated for DigitalService Act violations and identified as a gatekeeper subject to additionalscrutiny. I would expect the European regulatorsto look at these matters independently because they believe their legal andregulatory framework deal with all these potential privacy, data security,antitrust concerns on its own ground. I think they will they will see that theUS episode of Tick Tock Saga, a reflection of the geopolitical contactsbetween US and China. And I think for the global South, a lotof the emerging market, they are likely trying to stay away from the spat.And I think in that case Tik Tok can.
Have a longer lifespan in EUpotentially, and they probably will put more investment in the emerging marketwhere they face less headwinds in the future.All right. Chemung Liu, director of GEO technologyat Eurasia Group, thank you so much for joining us with your analysis.Still to come, Boeing gets a credit rating downgrade from Moody's, andthat's despite reporting strong first quarter earnings.We'll discuss what led to that downgrade next.This is Bloomberg. The auto China show in Beijing iskicking off today.
The fair returning for the first timesince 2019, bringing an array of unveilings from domestic and globalautomobile manufacturers. Chief North Asia correspondent StephenEngels right there. He joins us now from the event.Steve, what are the key themes going to be?Well, there are many key themes because you look, we haven't really been here inearnest in five years. And the landscape for sure has changeddramatically since 2019. So many more Chinese brands thatdominate this local market. So that's probably theme number one, howthe Chinese EV makers over the last five.
Years have created a a I wouldn't say amonopoly, but they dominate in the first quarter, the top ten brands, models thatwere sold in China, nine of them were domestically made Chinese brands, onlyTesla cracked the top ten. And also, again, these Chinese makersare improving their quality and also lowering their costs.So what do the legacy carmakers from Europe, Japan and the United States whoused to dominate here, how do they compete in this domestic space when thelocals are engaged in a price war as well to bring the costs down?Volkswagen, for one, they're bringing their Investor Day here.They're bringing all their top.
Executives.They have 20% of the internal combustion market here in China, but only about 2%of the EV market have they lost the space in the because of the EV switchhere in China, BMW and Mini, they're bringing 15 models here.They're testing the waters, as is Mercedes.Can they regain ground when they had dominance here with the internalcombustion engine in the EV space? That leads to really theme number two inthe price war. Some of these top models from BhiwadiBYD now has 33% of the EV market here in China.Some of their models are priced at.
11,000 USD or below.How do the Europeans and the Americans and the Japanese compete in that space?Third theme exports. All of these brands have big exportambitions, including the stalwart here, Great Wall Motor.They have been exporting a number of their cars and their SUVs abroad.But again, we're against the backdrop of rising protectionism around the worldwith Europeans and the Americans talking about overcapacity and potentialanti-dumping subsidies. It's a big theme.It's a very, very sensitive issue here. Getting people to talk about it inearnest is going to be a challenge,.
Obviously, because it's the biggestexport challenge for these Chinese makers.And finally, the big theme on technology is smart EVs.We've already seen Ciao Me in March launched its new S7, so we have thephone makers and technology companies here in China moving into the EV space.The smart EV space Far Way also has about four or so different partnerships.So there's Huawei backed EVs as well that are making some noise.So a lot of themes to talk about over these next couple of days here at thepress days as the Beijing auto show kicks off in earnest today.Yeah.
And as you say, back for the first timein five years, plenty of big names joining it down there as well.Who are you going to be talking to? Well, we're here, as I said, a greatwall motor GWM and we're going to be talking to Park Ascher who's the head oftheir international strategies coming up in the next hour on the China show atabout 910 Hong Kong Beijing time. So you got to listen for that.Also, Bill Russo, he is a long time China analyst.He'll be with us in the 11:00 hour. Later, we'll be hopefully talking to thebody of the German head of their design team.And that will be very interesting.
Wolfgang Egger can probably tune intothat tomorrow. A number of things differently.Just juggling the different events today is going to be the biggest challenge andgetting as much coverage as possible. All right.Our chief chief North Asia correspondent, Stephen Engle, he's downthere at the auto China show in Beijing. Well, sticking with cars, Ford hasposted its first quarter results. They beat expectations on strong salesof work trucks. The automaker has dialed back anaggressive electrification push. Its EV division posted another quarterlyloss.
Still, CFO John Lawler told us thecompany is on track for a strong year. Well, we had a really solid quarter and,you know, we didn't expand our guidance range of adjusted EBIT between ten and12 billion. But we have indicated that we're ourtrajectory is towards the high end of that guidance.So, you know, it looks like we're on track for a really solid year this year.I'd be remiss in not asking you about a lot of the concerns right now going onin the EV space. The Model E business at Ford was atleast the worst performing of the major businesses.We got earnings out of a couple of your.
Competitors, including GM and Tesla, andat least on the eve side, things weren't much better.Do you see any hope of improvement in that business this year?Well, you know, we're segmented, so we're different than the our many of ourcompetitors, at least the traditional. OMC You have the transparency aboutwhere we're at with our electric vehicle business relative to our commercialbusiness and our internal combustion engine business.So you have the transparency. Look, we know that we need to have theelectric business stand on its own. It needs to be profitable and needs toprovide a return on invested capital.
And we're working diligently to getthere. And, you know, we have a lot of hopesand we know that our second generation of vehicles that will be coming out in acouple of years are going to be a big step forward and bring us to the pointwhere we will be profitable so we won't launch them if we're not profitable.So, you know, we've got to make the best of it through this period here up untilwe get to the second generation vehicles.And we'll continue to manage and optimize across the company.That's the Ford CFO, John Lawler, speaking to Bloomberg's Romaine Bostick.A moody's ratings has downgraded.
Boeing's credit score one notch or twoone notch from junk. This is even after the US aircraft makerbeat estimates for its first quarter earnings.That downgrade coming after Boeing said it burned through close to $4 billion incash as quality issues plague output. For more, Bloomberg Intelligence, senioraerospace analyst George Ferguson joins us.So, George, is that cash been showing any signs of slowing down?And what else did Moody's have to say? Well.So on the earnings call today, what we heard from Boeing was that they expectcash flow to be negative again in the.
Second quarter.Not as bad as the first quarter, not that $4 billion free cash flow burn, butstill, they expected it to be sizable. I think that that's a concern forinvestors. The the plan at Boeing is all about aturnaround in the second half as they increased production rate.Right now, production is pretty slow to the factories as they're trying tostabilize it, improve quality, and they're working on a plan for the FAAfor how they're going to maintain that higher quality through the factory.And so, again, they're going to turn it on in the second half, and that should,they hope, generate a lot of cash.
But right now they're down to about $7billion cash and equivalents, which is a pretty low point for this company.But we're going to hear from Boeing's major competitor, Airbus, pretty soonwith its first quarter results. Demand for aircraft still pretty strong,but costs seem to be a focus for Airbus. What are we expecting to hear?Yeah. So demand is strong for both Boeing andAirbus aircraft with airlines around the world really want the latest technology.It's got better fuel burn. But, you know, the industry coming outof the pandemic has just had challenges with supply chains.Boeing's especially bad.
Airbus has done a better job of keepingtheir healthier. But there's still that that inflationand those challenges in the supply chain where they have to take over a supplierto help them fix a problem has really led to, you know, a profit landscapethat's just harder to achieve pre-pandemic profitability, you know,then I guess we all would have expected. Plus, they aren't up at those levels ofbills yet. They're in the sort of a mid-forties fortheir A320, the big moneymaking airplane for Airbus as they step up into thefifties, a month or so, that ought to get better.But again, that just that pain inside.
The planes, inside the supply chain justisn't allowing that profitability and those profit levels to be reached in.All right. Bloomberg Intelligence senior aerospaceanalyst George Ferguson there. And you can watch this live and see ourpast interviews on our interactive TV function, TV go there.You can also dive into any of the securities or Bloomberg functions thatwe talk about. And you can also become part of theconversation and send us instant messages during our shows.This is for Bloomberg subscribers only. You can check it out of TV.Go.
This is Bloomberg. Matta shares plunged in extended tradingafter it announced a disappointing revenue forecast and plans to spendbillions of dollars more than it had previously anticipated when it comes toAI development. Bloomberg's Ed Ludlow has more from SanFrancisco. Mark Zuckerberg outlined that met hasput itself in a position to be the leading AI company in the world, andthere is a commitment to spend on the infrastructure needed to support that,to build future generations of models on the back of the success of Lama three.The problem is investors just aren't.
Buying it.And you know, the message that really hit them in the cool was that it's goingto take time for it to show up meaningfully on the top and bottom line.What we're talking about is matter AI, the current generation of the assistant.They're trying to scale that. Smart investors, quote, would be able tosee that even if revenue's not immediately obvious from AI, you can seethat A.I. products like metal, A.I.assistant scaling and you can see the monetizable opportunity.But Metters business is still mostly advertising.You know, they're seeing impressions.
Growth.They're seeing the average ad price will ad price growth go up as well.And in some cases you could argue that Square is showing its value.Matt is kind of damned if they do and damned if they don't.There have been segments of the market calling for some time, Hey, spend moreon infrastructure, get going on this. And then there are those that want tosee the prudence. So that's the message from Zuckerberg.Be patient. Trust us.It's going to cost us billions of dollars to get there, but we will getthere.
When does this large the advertisingbase business see serious top line growth from AI?And apparently it's coming whether investors believe it?Well, we'll find out in the markets. This is Ed Ludlow from Bloomberg News inSan Francisco. All right.Let's take a look at some of the Asian tech movers in the Asia session at themoment. We've got a little, you know, somereasonable declines going on here off the back of thatearnings disappointment there. If we take a look at Rakuten, it's offby almost 2% at the moment.
The big name, the move today, though,however, was SK Hynix, South Korea's second most valuable company, reallyreporting blowout first quarter numbers. Net profits coming in at 2 trillionKorean won. That turns around a big net loss for thesame quarter of the previous year. The company saying those strongquarterly results due to that high bandwidth memory other advanced chipsfor AI data servers as well. Let's take a look at Boeing suppliers aswell. Of course, Boeing, as we were justdiscussing, seeing its credit rating downgraded to one notch above junk byMoody's.
Cash burn really the issue there,although Boeing suggesting that that burn is going to slow down in the nextquarter. Boeing suppliers having a bit of a roughride in the early going here in Asia. That is it from DAYBREAK.Asia markets coverage continues as we look ahead to the start of trade in HongKong, Shanghai and Shenzhen.
