Bloomberg Ruin of day: Australia 02/02/2024

Welcome to DAYBREAK, Australia.I'm Heidi Strode was in Sydney where markets have just come online.I'm at about $8 in Hong Kong, where counting down to Asia has made a major,major trading opens. And the top stories this hour.Apple shares lower despite its first revenue gain in a year.China sales slumping the most since 2020, with CFO Luca maestri telling usthey're not happy but continue to see long term opportunity matter soaring,though. And a strong forecast, a share buybackand its first dividend. Amazon's outlook also pleasinginvestors.

Also coming up, we'll hear exclusivelyfrom Nvidia CEO Jensen Huang on the AI frenzy that's driving demand for theirchips. We do have South Korea CPI just crossingthe Bloomberg here and we are seeing that slowing even more than expected.Expectations for inflation in South Korea to slow to 2.9% on year for theJanuary reading actually has come in at a 2.8%.So really a significant pullback from the 3.2% that we saw in the priorperiod, month on month, that is 0.4% matching expectations.And if you strip out the more volatile and food and energy elements, we'reseeing an inflation rate of two and a.

Half percent, again, a slower than that2.7%, and pulling back from 2.8% in the December period, CPI gains have reallybeen still seen as as too high for the Bank of Korea is lacking.But it does appear that food prices in particular are rising a lot more slowly.The cost of gas at the pump is continuing to fall as well.And that expectation, particularly when it comes to core CPI coming down morethan expected. We did hear from BOC governor sayingthat inflation remains really the most important task for the central bank.They'll be watching that very, very closely.Let's get you to how we're setting up.

When it comes to Asian markets.And Australia is just coming online at the moment and we are watching inparticular for the downside when it comes to materials and miners.As we see that fall in base metals are concerns over price volatility as Chinaenters that off peak season ahead of lunar New Year, we're seeing reallyquite a flat start. A little bit of downside there when itcomes to some of those miners there. But broadly speaking, Aussie markets upby just about a 10th of 1% as we get into the start of staggered trading.They're also watching the Aussie dollar holding pretty steady at 6570 for the USdollar.

They're on pace for the biggest dailydrop this year. We saw Treasury yields slipping reallythese renewed concerns about the health of US banks.We also had, of course, fed expectations in the mix as well as the book leavingpolicy rates unchanged as well. Switching out the board to take a lookat how we're setting up when we get into the start of trading across other majorAsian markets. Now this is a set up when it comes toJapan, as we are really expecting this to bepotentially a little bit of a quieter end to this week as we have, of course,Bill.

But focus when it comes to the big techearnings driving the narrative today. Yes, certainly not a quiet end to theweek on Wall Street here because there's a lot of different moves we're trackingin after hours, but just kicking off what we're seeing with those two oneshere in green. Amazon met at both of those givingpretty bullish numbers to the markets across a different variety of metrics.We'll get more on all of this in just a moment.So I don't want to get into too many details, but just to say as well, we'reseeing that drop there for Apple. Again, it actually did have some prettygood numbers overall, but investors and.

Traders, it just focusing on the theChina figures and we did see a bit of weakness coming through there.So concerns around the health of the iPhone, demand coming from mainlandChina. Intel one to note, likewise, we'reactually seeing it shares dropping here, but that is not an earnings story.It's the reporting that's coming through from The Wall Street Journal saying thatthey're delaying their $20 billion chip plant in Ohio, now saying completion forthat in 2026. Intel, one of the companies that didkick off the reporting period earlier this week and again, we did see that bigdrop for the share price, down more than.

10% in reaction.Let's switch it out. Take a look at how broader futures arecoming online today, because we are seeing the Nasdaq again pointing tofurther gains in the session and futures so far up nearly 1% at this point intime. US futures as well.So we're still trading above that key 4900 mark.A lot of investors pretty optimistic given what we've seen as well over thecourse of this reporting season. Oil fairly choppy trading sessionyesterday, But again, we are just seeing it a little bit higher.One stock to note intraday on Wall.

Street as well, was Amazon board, thatcompany closing 3% above its US IPO price.It was a first time share sale for the company that was down below a marketedrange, but still the biggest one we've seen since Birkenstock's $1.5 billionlisting last year. But again, it is that focus.On the earnings story and Apple's one in particular.Let's bring in our Bloomberg Originals host Emily Chang who's joining us today.So, Emily, we know that you spoke with the CFO, Luca.Luca maestri. And let's just start with what they saidabout China, the revenue decline.

What did you hear from them exactly?Yeah, we're seeing a meaningful decline on sales in China, and this was somewhatto be expected, but I think perhaps a little bigger than some expected.He said the iPhone in general did better than the overall products that isdeclined less than some of the other product categories in China.They did have a record install base. They did have a strong, strong growth inupgraders. And what he said was, we're not happywith the decline, but we know China is the most competitive market in the worldand we continue to see significant opportunity in China over the long term.Obviously, this is an incredibly.

Important market, but I was justlistening in on the call and they were really highlighting some of the growththey're seeing in other markets around the world, other emerging markets likeIndia, for example. Tim Cook, the CEO, specifically calledout India. So definitely not good news what they'reseeing in China. But certainly there is the potential forother markets to pick up some of the slack.Emily, what was the messaging around the health of the iPhone overall?There's a lot of concern, some of which you've really alluded to in terms of howbroader demand is going to hold up.

Totally longer replacement cycles, youknow, in China specifically. We've heard that they're cutting theprice of the iPhone there. There's a ban on on foreign workers, onworkers using foreign technology at work.In general, the iPhone still a beat record number of installs globally,record number of upgraders, globally, strong double digit growth in manyemerging markets. So the iPhone isn't necessarily theproblem here. When you look at some of the otherproduct categories we saw. You know, we saw a big decline in salesnot only in China, but also in the iPad,.

In wearables, home and accessories.The comps are a little tough here because the quarter was one week shorterthan the quarter a year ago. They also talked about some currencyissues they missed on Mac and services. Also, though, they did hit an all timerecord on services. So I think that's why you're seeing theweakness in the stock after hours. So that view,what is pretty cool is that these numbers coming on the eve of the launchof its new headset and you actually got to try it out, Emily.The vision process, what did you think about it?Yeah, you know, I thought it was pretty.

Cool.And I you know, I know I'm a journalist and I'm supposed to be skeptical, butthere are so many technological innovations packed into this device, Andand some of the things that are the most amazing are the most basic.The fact that you can just look at a virtual button and tap your fingers andit opens and suddenly you're in a room with dinosaurs or you're driving a racecar, or you're standing on first base watching a baseball game.It is so vivid and so real. And, you know, I personally loved thefamily photos and family videos. If they're shot in spatial mode, theythey show up in 3D.

I mean, it's really moving.That said, this is a 30 $500 device. It is incredibly expensive.It can be kind of an isolating experience.It's not easy. It's not an easy device to share becauseyou've got to change, you know, the band that goes around the headset itself.The real question is, are developers going to show up to the party?What is the killer app going to be? Netflix isn't developing a Vision proapp yet. YouTube isn't developing a Vision proapp yet. You know, we don't necessarily know whatexactly the main use case is going to.

Be.Certainly it could be gaming and entertainment.Luca maestri, in our discussion, really called out the Enterprise and talkedabout how a lot of companies are already developing for the Vision Pro and arereally excited about that. That's something Tim Cook echoed lateron the call. So we're really going to have to seewhat happens tomorrow when they start selling in the United States.They do have a lot of pre-orders. It's already on back order, but youknow, this is going to be a niche product for the foreseeable future andit's going to be a very long time before.

It could be something bigger than that.And certainly the price would have to come down.Yeah, I think you have it walking with dinosaurs, Emily.But yes, I do think it was pretty cool. I mean, you think about the faces of thedinosaurs. They're breathing in your mouth.I mean, it, it, it was intense. It was intense and really like, youknow, they show you rock climbing and you get that fear of heights because youlook down and it feels like you are standing on the edge of a precipice.So I don't want it you know, I don't want to underestimate just how powerfulthe technology can be.

It's just, will this be a blockbusterdevice? That's what we don't know yet.I think. Emily Chang a bloomberg originals hostthe well, aside from apple, we also saw amazon and better reporting earningsboth giving upbeat. Let's get the details from a Bloombergintelligence senior e-commerce analyst, Punam goyal.Also Bloomberg Technology reporter Kurt Wagner joins us as well.So let me start off with you on Amazon. Bloomberg intelligence sales profitrising further. What are the drivers for you?Know, I think, you know, Amazon today.

Just proved that it can continue to growon all fronts. But what stood out to me was threethings. One, the online business, the 9% salesgain that they reported on their first party business was very impressive andit was an acceleration over previous quarters.Also, the 20% third party sales that they showed, the increase was sizable.We expected mid-teens gains. But the fact that they were able todeliver 20% shows that sellers continue to flock to Amazon to get the eyeballsand the spend of shoppers. That combined is ammunition for them tocontinue to grow sales into 2024.

But that's at a par with that onlinebusiness. Growing.What it brings with it that's very lucrative is the advertising business,the digital advertising business for 27% on a reported basis.That's a sharp acceleration from the low twenties that we've been seeing.And it is one of the largest contributors to profit.In fact, if you looked at the profits that they've reported, they were thebest ever, especially in North America. And that is in part due to the strengththat we saw in advertising and also the gaining momentum that we saw in thecloud business.

Yeah, I want to pick up on the cloudbusiness because we did see it rebounding after several prettydisappointing quarters. But do you think, Poonam, that there'sany doubts that they're going to be able to hold their own against rivals in themarket? I think the cloud business is onlypoised for upside as we continue into 2024.We expect these gains to accelerate into the high teens.And for the longer term, if you look a few years out or even five years out,the cloud business is very lucrative for them.Right now, the margins are near 30%, but.

We think that margin profile can go upto 40% and the cloud business could be much, much bigger than it is today.Amazon is clearly making the right strides to lure businesses into itscloud platform, and we think it will remain a dominant share there.All right. And then, of course, there's theearnings as well. And I think what really stood out fromthis was this first ever quarterly dividend.Was this something that was it all expected by the market?And just also, tell us what's the significance of it?Yeah, I think there's no was not.

Expected.And I think it's a big deal because obviously 2023 for Meta was sort of thisyear of efficiency. They were cutting jobs, they werecutting back on some of their investments.And so this sort of signaled that they're at a place business wise wherethey feel that they're able to give back to investors here.They're also announced another $50 billion approval to do a share buyback.So I think there's this clear effort here to convince investors that, hey,even though we've cut down and slimmed down, there's still a lot of return foryou to buy into this thing as we move.

Forward to the AI in the metaverse andsort of these ambitious bets that Mark Zuckerberg has.And there's going to be some differences in terms of how Metta reports itsnumbers going forward. For the longest time, obviously, we'vebeen focused on user numbers, but that's no longer the highlight.No, it's not. They're going to stop reporting thedaily and monthly active users for Facebook, the core social network.They're also going to stop reporting the monthly active users for their family ofapps. You know, instead, they're going tofocus on things like, you know, how much.

Revenue are they making per user.They're going to focus on other kind of efficiency elements of the business.And, you know, this is something they've sort of been warning about for a coupleof years now. I think we all expected that when thishappens, it's sort of a sign that Facebook, the core social network, hassort of plateaued. Right.They don't want to continue to roll these numbers out if they're not goingto get bigger. So I imagine maybe they're starting toreach that point. But, you know, again, as they start toexpand into these other technologies and.

Other business lines, it sort of makes alittle bit more sense that they wouldn't just focus on the one core socialnetwork that we're all used to. All right.Pretty big numbers out after the bell. And of course, as we know, Amazon andmirror both of those rising in after hours.But that was our Bloomberg Intelligence senior e-commerce analyst Punam Goyaland also Bloomberg Tech reporter Kurt Wagner there.Coming up, we'll take a look at the wider markets with Miramar Capital andwhy they expect choppy trading in the first half of the year.We'll get more on that outlook next.

This is Bloomberg. We don't think the trade is to then goto the lower quality bucket, okay. To go for the low quality cyclicals andlike that's a recession trade. We're not in a recession.Do you need a clearing event? That was our call in 2020 then Thatworked really, really well. Don't overthink it, right?You need to buy the high quality growth stocks.And it's not all bad, except for Morgan Stanley, chief US equitystrategist and CIO Mike Wilson there. Speaking of the Magnificent Seven, ournext guest has Microsoft as one of their.

Largest holdings.Maxwell Simon is a founder and senior portfolio manager at Miramar Capital andhe joins us now. Max, great to have you with us.So we've got earnings under our belt now.What did you learn and how does it kind of inform how you feel about, again,this return to a narrow kind of focus in this market now?Well, I think some of the earnings have been great.I mean, if you look at what happened with Microsoft, basically a 16% increasein revenue, 28% increase in per share. Azure grew 28% at 6%.Six points of that was basically AI.

So you're hearing good numbers from likethe media, you're hearing decent numbers from Amazon.The one caveat is you're not hearing great numbers from Apple.So Apple looks if you're among all the companies and we have an investment inApple is looking like the slower technology of all of them.Max, how does the Fed's timing kind of feed into this?I know that you're in the camp that markets have kind of run away withexpectations a bit. Well, I think the market pulled forwarda lot of earnings in technology and basically the market was anticipating 3to 4 cuts, I think, by mid-June.

We don't think the Fed is going to becut into the second half of the year. And at best, maybe we'll see like 50 to75 basis points. We think the Fed may cut towards the endof second half. But we think the market's overlyoptimistic on it. And given the fact that technology hadsuch a big run since October, we think it's just ahead of itself right now.So then how does that sort of set you up for trading, do you think, over thecourse of the first half, if some of those returns have sort of been pulledforward in these numbers? Well, we think, again, the market ingeneral we think is fairly valued, is.

Just skewed in the indices because ofthe large cap tech. But we think there's a lot of greatopportunity in the market. We like the consumer cyclicals, we likefinancials. Some of the financials selectively.We like the industrials. We're dividend growth investors.So we think outside of tech, the market's fairly valued and there's moreopportunity there. Yeah, a lot of the time we do talk aboutthat so-called S&P 593, rather not these magnificent seven in the mix.Do you think that investors need to be positioning for any sort of downturn?Do you need to be moving more into.

Cyclicals or defensive?Hey, it's a great question. What we look and we people we thinkpeople investors should look to shorter duration assets, meaning dividend stocksand shorter term bonds, like 1 to 3 year treasuries actually look appetizing tous, but we think the risk is going to come because the valuations are so highin anticipation of interest rate cuts we don't believe is going to materialize.And we also think that inflation's going to be a little bit stickier on the waydown versus the way up. So we think there's opportunities, butnot just a focus on the top seven technology stocks.There's a whole area of the market,.

Consumer industrials, discipline, goals.If you look at the financials, there's some opportunity there because nobody'sreally been looking at that area. They've been all been focusing on thetechnology area, which is an interesting statistic wheel of technology over thepast three years. The Nasdaq composite is pretty much onlygiving you a 6% annual return versus the S&P, which has given you almost a 9%.So technology, while it's very catchy, we like it.We have investments in a lot of technology companies.We just think it's ahead of itself and there's better areas to be looking at.Amazon clearly is still doing very well,.

But broadly, you're a little bit moreconcerned about a lack of predictability when it comes to the consumer.Right. I think when you look at like be the bemore consistency, when you look to consumer, it's still the issue ofinflation. It's the consumer's tapped out a littlebit, but they're still spending it happily.Consumer credit is very high. So we think it's going to take them alittle bit and they'll benefit in the second half when you start seeinginterest rates come down. But right now, we think it's going to bea little bit much more of a stock.

Selection area while the consumer triesto find their footing. They're really spending on experiencesless on capital goods, but we think that it creates an opportunity in the longterm. There is an extraordinarily heightenedlevel of geopolitical risk at the moment going into the end of last year and2024. Does it surprise you how sanguineinvestors have been about this? And is is this a risk that perhaps weshould be assigning a little bit more attention to?I think political instability is always there, but it's at a heightened listright now with the Middle East, Asia and.

Eastern Europe.Absolutely. But clearly, what really moves themarket on a long term or even an intermediate basis is really Fed policy.Yes, you can have a shock to the systems, but there tend to be shocks.It's really what the Federal Reserve is doing.It's what credit availability is. It's really monetary policy that affectsthe market the most. So, yes, you can always be aware, yeah,you could have a spike in oil because a problem in the Red Sea.But we think all those things will be short lived.Right now, the market's not anticipating.

It.So you might have a bigger move if you have a geopolitical issue.But again, we would think that would be short lived,something that's not so much a geopolitical issue, but certainlysomething that could have the potential to move markets would be the U.S.election. So given the significance of Fed policy,if we do see any sort of uptick in fiscal spending ahead of that vote, doyou see that having an impact at all? I think if you started seeing morefiscal spending, right, you're going to have more debt.And more debt is going to cause interest.

Rates to go up.And I think that would not be good. Again, the economy's growing right now,but if you put too much more debt on it, then you going to have a lot of theexpenditures of the government servicing that debt and that could slow theeconomy down, which in turn we believe would cause the Fed to try to cutinterest rates to lower their service cost.And that would stimulate. But you could see you could see someproblems ahead with the US debt, and that's a problem.But right now, the market doesn't seem to care.And by the way, we're we know the Fed's.

Going to cut.It's not if it's just when and when we know they start the market, weanticipate that. And we think that again towards thelatter half of this year. So you could get some rocking this forthe first quarter or two. All right.That was Max Wasserman, a founder and senior portfolio manager at MiramarCapital there. And you can get a roundup of the storiesyou need to know to get your day going in today's edition of DAYBREAK.Terminal subscribers go to day be go. It's also available on mobile in theBloomberg Anywhere app.

You can customize your settings so youonly get news on the industries and assets that you care about.This is Bloomberg. I think we've now changed the questionreally from how restrictive. We need to be tougher.How long do we need to be restrict? So that's important.We've also taken the upside bias off.We haven't seen a risk, by the way, any risk actually, which is reallyreflective of a set of tragic events at least, and the impact that can havefurther the Red Sea effects. So I think now the question is for usis, well, as for how long do we need to.

Maintain the stones going forwards?I was you know, I've said a number of times, we're not going that we're notmaking predictions at this point. As the Bowie governor, Andrew Bailey,speaking with Bloomberg TV after the central bank's decision to keep its keyrate unchanged. But of course opening the door to ratecuts and that was really the focus of that meeting.It was importantly the widest division on the direction of policy we've seenfor the bank in a number of years. And out of the nine member votingcommittee, two thirds did want to keep the key rate steady, but two voted tohike and importantly, one of those.

Wanted to cut.But we are seeing that pound moving a little bit in the session and currenciesgenerally a bit stronger against the greenback.But the Chinese yuan is also in focus. The PBOC says it provided $20.9 billionworth of low cost funds for lending to housing and infrastructure projects lastmonth. The pledged supplemental lending programis a tool for Beijing to manage the impact of its worst property downturn onrecord. Authorities have been stepping up policysupport for the sector recently. Coming up, analysis on the latest techearnings with third Bridge.

We discussed Apple's China woes as wellas Amazon and Mattel's rosy outlooks next. You're watching DAYBREAK Australia andtaking a look at some of these big tech names in after hours here because we hadApple Mirror, Amazon, all of these reporting after the bell today.And you can see here some pretty divergent directions.You've got apple there in the red. It's sales to China.That was the key weakness for the company.So sales dropping 13% in the three months ending December.So really quite short of what analysts.

Had been expecting of 23.5 billion.So around a $3 billion difference as the weakest December quarter we've seen inthe Asian period. Asian nation, rather, going back to2022. The flip side, you've got Amazon andMirror, both of those companies delivering very bullish numbers and menare really standing out with that 15 or near 15% gain here.So let's get more on it now with Scott Kessler.He's global sector lead for technology, media and telecommunications at ThirdBridge. Now, Scott, we were just talking therein the break about made up being the.

Company that's really standing out toyou at this point. Why?Why is that exactly? Sure.Well, I mean, look, earnings season is relatively young at this point.I could argue it's really been less than a week where we've seen major companiesreporting their December quarter results and providing related guidance.I think prior to the results we're talking about, Microsoft was probablyheld out as the company that delivered most significantly across a number ofdifferent dimensions. Whether you're looking at revenues,you're looking at revenues across.

Multiple kind of segments within thebusiness margins, etc.. But if you look at meta, as you alludedto, Metcash's revenues were up 25%, drivenby strength in advertising. It seems like the company is really notjust back on track but really executing strongly.And I think it's really a testament to two things.One is the company's ability to kind of focus and pivot on what's mostimportant. And then, of course, wrapping up theirso-called year of efficiency and 2023 of that really helped them from a marginperspective.

Yeah, it's interesting because if youwere to go back to October last year, we heard from our executives and they weresaying that the global economic uncertainties could be something thatwould weigh on revenue but actually made it did a lot better than, say, Alphabet,which also gets a lot of revenue from digital advertising and is alsoinvesting heavily in AI. Yeah, I mean, it's hard really tounderstand at this point the distinctions in terms of why they betterperform so well. But yet Alphabet was really more mixed.I think it's fair to say if you looked, for example, at Alphabet's search andadvertising revenue performance, I think.

It was good, but it was not as good assome people might have hoped and some actually expected.In the case of Metta, it seems like the resultswere not just good, they were very good at in excess of, I think, just abouteveryone to expectations that, you know, are looking at and following thiscompany. I think there are a couple ofconclusions that one could draw. I think one obvious one is that Mettahas been more focused on monetizing some of its more emerging assets, mostnotably reels, which is obviously a short form video product.They seem to be doing really well there.

We've heard from experts time and timeagain that not only were they performing well, but that the future looks brightwhen it came to reels, even though, of course there has been an uphill battleas the product competes with Tik Tok. It seems like that particular offeringis performing really well. On the other hand, I think there aresome questions around YouTube and YouTube shorts, which is obviouslyAlphabet's kind of entrant into that short form video race.And I think that's one way to distinguish among the two companies andhow they performed over the quarter. And Matt is obviously taking, I guess,more of a longer term view as to how it.

Strategise is on on.Do you think the availability of these large language models for free is goingto at some point irk investors who want more of a monetization strategy when itcomes to artificial intelligence? Right.So if you're talking about Metamorph specifically, I think it's fair to saythat they're taking a more pragmatic approach.A couple of indications of that. I think first things first, right?If you think back to two plus years ago where the company renamed itself, made aplatform that reoriented around the metaverse, they created two segments,family of apps and reality labs.

It seems pretty obvious that they'vebeen pulling back investment from that reality lab segment and nothing could bea stronger indication of that, at least in my opinion, than the fact that MarkZuckerberg, I guess it was now, you know, a week or two weeks ago publiclyannounced essentially that the AI group that consists of roughly 1000 people wasgoing to be realigned under the family of apps, which tells me that really whata it's going to be at Metta is kind of supporting and helping those existingproducts and offerings with enhanced kind of functionality when it comes toA.I.. It seems to me like the goal here is toreally kind of prop up and squeeze as.

Much opportunity out of what Metta isalready doing when it comes to existing businesses and solutions.And I think that's pretty noteworthy as people wonder about whether this is acapital well allocated, so to speak. Scott from MIT is Apple, which Iobviously was a lot less in terms of the good news.Is this just a China demand story or is there kind of more existential issuesnow with China's product, with Apple's product demands and the product cyclemore broadly? Sure.I mean, I think it's fair to say that for years and years people could pointto the law of large numbers being kind.

Of an impediment to Apple deliveringoutsized growth. But the good news is obviously, that thecompany, in fact, did deliver revenue growth.But I think the first time in over a year in the December quarter.However, I think it's fair to say that there is a fair amount of, let's call itconservatism and skepticism when it comes to not just the results, but thego forward kind of opportunities for the company.Even a standout segment like services only generated 11% growth.I think that was less than expectations. And I think Apple overall has sounded atone suggesting that growth is going to.

Be more elusive over the near term.And so this is a company that, you know, not all that long ago was reallygenerating substantial growth. And now I think there are some questionsabout whether, in fact that growth is going to come from when you see a mobilephone market that many would suggest is saturated with already very premiumpricing. Scott, really great to have you with us.Scott Kessler, Global Sector lead for Technology, Media and Telecommunicationsat Third Bridge. You can, of course, turn to yourBloomberg for much more on really the all of the big tech earnings.Tesla V go is where it's up for.

Commentary and analysis from Bloomberg'sexpert editors. Taking a look at some of the othercorporate headlines that we're following this hour.And Universal Music has begun pulling music from Tick tock.After months of contract negotiations with the owner, Bytedance's failed.The label was home to artists including Taylor Swift and Drake.Universal says the rights offer was below market value, but Tick Tock callsthat, quote, a false narrative. The label also says Tiktok's adoption oftools to generate content is a major threat to artists.The Wall Street Journal says Intel is.

Delaying the construction timetable forits $20 billion Chipmaking project in Ohio.The report cites sources saying construction isn't expected to finishuntil late 2026. Intel had initially targeted chipproduction in 2025, with the plan also dependent on US government to grantmoney. I mean, sports shares gained more than3% on debut in New York. That's after the maker of Wilson TennisRackets and Solomon Ski Boots raised almost $1.4 billion with an IPO marketedbelow range. CEO James Chung told us the pricing wasfrustrating but believes it only.

Reflects a short term view.We built up the very solid foundation in the past four years and basically helpus to really can have a good moment in the future.So I think internally our company, it's still got the very high confidence tocontinue to grow the company, to grow our business at the right level.And that the price point, I'd say it's a bit frustrated at a starting point, butI think it's a it's a just a short term view on this.I know I still have my management team and I still got a very high level ofconfidence to drive the value for the company and create that the best valuefor our investor in the future.

So there's no worry about that.What made the IPO an attractive option here to reduce your debt load and fundfuture operations rather than doing that privately?Yeah, I mean, it's, you know, I mean, we grow the business more than 20% duringthe past four years. We built a very strong foundation.And look, I mean, today from now, we still of also build have a veryaggressive vision for our future ghost IPO.We're really unleash the potential for us byleveraging our overall debt situation and the give us just a more cash flow tofuel our pop up our three brands account.

Solomon and Wilson go at the pace wewant so so it's a it's a kind of a engine okay for us to really speed upthe whole progress growth in the future. When companies go public, it is verywell known they now have equity, they have stock here to potentially pursuemore acquisitions. Are you aren't still eyeing moreacquisition opportunities after building such namesake brands and what are thecriteria, if so? No, I mean, basically, I mean, we've gota good level of portfolio brands in our company or these three hero brands, theyjust exceed 1 billion. US dollars.They are still medium small players in.

The market, so we see tremendouspotential to be explored in the future for these three major brands.So for coming three years, we will really focus on where we are at thismoment. And after three years we may see someopportunity outside. I would say I'm a sports CEO.James Jiang, speaking to Bloomberg Sonali Basak in New York.And we'll have more ahead on DAYBREAK Australia.This is Bloomberg. You're watching DAYBREAK, Australia.Time for morning calls ahead of the Asia trading day.And economists are taking Fed Chair Jay.

Powell words to heart and erasing thelast of their forecasts for a rate cut in March.Goldman Sachs, Bank of America and Barclays now say the first easing inMay. Powell acknowledged the dramaticprogress in inflation, but has repeatedly emphasized the need to seemore data to confirm that downward trend.Meanwhile, Nobel Prize winning economist Paul Krugman is playing down the damagethat Donald Trump's tariff plan would do to the US economy.Speaking to Bloomberg, Krugman said Trump's idea of a 10% tariff on allimports wouldn't hurt the growth that.

Much.A dirty little secret of international trade economics is that moderate tariffrates do not, at least according to our models, and as far as we can tell inpractice, don't have huge growth effects there.They distort consumption and production choices.They they do some damage. But to get really big numbers, you haveto get well beyond 10%. So, you know, of course, if if the goalis to eliminate the trade deficit, Lighthizer was going to have a surprisebecause tariffs don't eliminate trade deficits unless they get so high as tobasically make trade impossible.

I'm Morgan Stanley's chief.US equity strategist and CIO Mike Wilson says investors should be on the lookoutfor new themes after the tech rally. He also spoke to us about the growingimpact of. Isay it started with the Treasury squeeze when they said they're going issue lesscoupon. And so it was really a duration rallythat then fed into a stock rally. And so now our valuations are stretchedagain and people are looking around going, okay, what's next?What's the next catalyst? I think there's going to be a couple ofthings that will determine the.

Direction.Number one, what is the how much deceleration do we get?Okay. What is the you know, we'll come back tothis banking question. I think that's to me, that issue is it'snot a systemic issue. What it is, is a weight on growth andcredit growth. Okay.The regional banking system is just not lending at the same rate that they werebecause they're constrained. And that's been our view all along,which means quality stocks will continue to do better.Right.

The companies that are reliant on thatkind of funding are going to continue to see that's a paperweight for them.And I think that's the main takeaway from the banking situation.And then, of course, new themes will evolve.Last year was about two main themes, right?It was about GPUs and A.I.. So can those two themes continue todrive the stock market? Yeah, to some degree, but it's probablygoing to morph a bit. And then there'll be new themes and Ithink that's what that's what investors are looking for now, looking for newthemes to kind of latch onto in a world.

That's going to remain macro.Uncertain is where we see it. Can you identify any themes right now?Well, I mean, I think the theme is the one.Instead of enablers, we're going to adopters, right?So that's that's probably the biggest thing we have as a firm.The GOP one is sort of positive and negative, as we've seen.And that's so that's a great thing for a long, short investors.And then I'm wondering if we're going to get some growth out of the internationalmarkets finally. You know, international you know,economies have not really recovered from.

The pandemic yet for the most part.And I think that's a wildcard. So if that were to happen, that could bethat could be a great thing for em. It could be a theme for things that arelevered more to global growth as opposed to just the US, which has really beenthe only engine of growth. So as you say that you fly around andyou talk with clients, I was just noticing some of your recent travels.You were recently in Miami. Yes, I'm actually getting a lot ofpoints. By the way, you talked about the stocksaying I think it's the Magnificent Four now and it's related to earnings.Who are the Magnificent Four who gets.

Dropped?Yeah, well, I mean, I think it's where I talk about specific names, but I thinkit's obvious people have been talking about this, too.I'm not the only one we're seeing. You can you can identify which stockshave fallen off. But when we look at is earnings and Iwould say there's never seen one, quite frankly, that has real top lineacceleration, growth of rate knows where it is.And then the other ones are been more cost cutting stories.Yeah. And my sense is my sense is that whatwe're going to see here is a broadening.

Out in quality growth.That was Morgan Stanley, chief U.S. equity strategist and CIO Mike Wilson.And you can watch us live and see our past interviews on our interactive TVfunction. TV go there.You can also dive into any of the securities or Bloomberg functions wetalk about, plus become part of the conversation by sending us instantmessages during our shows. This is for Bloomberg subscribers only.Check it out at TV. Go. Take a look at some of the corporateheadlines that we're following.

And the seven time Formula One champion,Lewis Hamilton, is joining Ferrari next year, leaving his longtime team,Mercedes. Ferrari says Hamilton will join on amulti-year deal. Meanwhile, the carmaker's shares rose onWall Street after it said a better than expected guidance for 2024, thanks to astrong order book. Revenue for the fourth quarter also beatexpectations. Wall Street banks, including J.P.Morgan and Bank of America, are said to be in talks to provide as much as $8billion in financing for a buyout of DocuSign.Sources say Jefferies and Deutsche Bank.

Are also among the lenders considering arole. Bain Capital and Hellman Friedman arejockeying to buy the platform in what could be the largest leveraged buyout ofthe year so far. Shares in Deutsche Bank rose after itannounced plans for a $733 million share buyback and detailed cuts to 3500 jobs.The reductions will affect mostly back office roles and are part of costcutting measures the company had previously announced.We have focused our efforts on on what we call non client facing staff wherewhere there's been a significant change over the last several years aroundinternalization of activities, the.

Control investments that we've made, theinvestments in technology. And so having reached a level ofmaturity in some some of these areas, I think the goal now is to driveefficiency without losing effectiveness. So, yes, that's where where the staffcuts are targeted. Well, sticking with financials andanalysts will be watching Mizuho as domestic bond portfolio and lendingspreads when it reports earnings later Friday.For more, let's bring in Bloomberg's Asia investing editor, Russell Ward inTokyo. So, Russell, a very, very busy week forthe Japan lenders and financials in.

General.What are you expecting out of this one? Good morning, Bill.Yes, I think with a measles case, we're expecting quarterly profit to actuallydrop, mainly due to weakness in trading. But that's really just going to notgoing to derail their up their full year outlook, which is actually for profit torise to the highest in eight years. So, you know, putting that quarteraside, I think the bigger picture for the mega-banks, at least in Japan, is asa as a bright picture. It's one where they're riding on thecoattails of Japan's market recovery, which has been boosting the brokeragebusiness here in Japan.

And of course, there's also greatanticipation here that the Bank of Japan will finally in India, negative interestrate policy, which is going to boost lending profitability.And we've seen Japanese bank shares rise over the past year to reflect thoseexpectations. Sumitomo.Mitsui reported high profit yesterday as well.Talk us through those results. Is it kind of closer to meeting its goalwhen it comes to annual earnings? Yeah, that's right.Sumitomo Mitsui had solid results yesterday, buoyed by strong lending.They're also benefiting from the.

Weekend.Remember, the biggest Japanese banks are actually generate a lot of theirearnings overseas these days. So those repatriated earnings and yenterms are growing as well. And also it benefited from a rebound inits brokerage unit as is NBC Nikko. And so really, it's still on track forrecord profits this year, which is a boost for the new CEO.I told you, Nakashima. And we're going to talk, of course,about Azamara, because that was a huge plunge yesterday for the stock, downmore than 20% warnings about losses potentially on US commercial realestate.

Just talk us through exactly whathappened and as well as we're going to see similar moves from other Japanesebanks. Yeah, that's right.I mean, also certainly spiced up the Japanese bank earnings season.I mean, you know, the the main banks, the big banks are sort of chuggingalong. But here came out of the blue, thismid-tier Japanese bank also booking the surprise forecast that reversing itsforecast for full year net profit to now forecasting a loss.And this is based, as you mentioned, on expectedreserves.

They're booking unexpected losses ontheir US commercial real estate portfolio.And so Zora is just become the latest victim and of banks worldwide.We saw a New York community bank Corp this week alsobooked losses on US real estate reflecting the downturn there,reflecting high interest rates, people working from home.You know, is this a canary in the coal mine for Japanese banks?Probably not. Analysts are saying that, you know, themegabanks in particular, you know, they're very large banks, verydiversified.

They've got huge balance sheets.And also Japan's regional banks are very, very conservative.They've got a strong customer base at home.I also always sort of caught in between the two of them, and they are Citibank,but they're a mid-tier bank and they really pursued the strategy of buyingor, you know, making loans overseas to sort of juice their profits and it'sfalling back on them. But, you know, it's certainly raised alot more attention to Japanese bank earnings season, you know, and we'll belooking for any more surprises to come, but probably unlikely on this front.Now, Japan Financials and in Focus,.

Bloomberg's Asia investing editorRussell Ward there in Tokyo for us. Take a look at some of the stocks amongthose Japanese banks. Of course, trade opens in Korea, Japan,shortly, just about 5 minutes. In fact, We're seeing these markets comeonline and watching Apple suppliers. Of course, a 13% quarterly sales slumpin China, even as total iPhone revenue came in stronger than expected.There's also difficult questions there over the product cycle and whether thatsustained demand when it comes to these big numbers that we're used to seeingfrom Apple can really continues on the right or on the likes of SamsungHaneke's LG in a and shop as well.

Coming up we'll be hearing exclusivelyfrom the former Nvidia CEO Jensen Huang on the frenzy that's driving demand forchips. The market opens in Seoul and Tokyo andnext. This is Bloomberg.

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