haidi: good morning.

welcome to daybreak australia. annabelle: we are counting down to asia's major market open. shery: the top stories this hour. u.s. technology stocks fell after hours on disappointing earnings from some of the industry's biggest names including alphabet and microsoft. haidi: australia warns of growing debt and deficits as the latest government holds down spending in the first budget, we are live. shery: the twitter takeover saga going to the end, final steps to sum up the cash. the asian trading session, we have the misses coming from the disappointing technology earnings, that is pressuring the market, in the new york session we had a third day of rallies.

we had the likes of gm and coca-cola coming up with positive results and that supported markets. we how the 10-year yield falling for .1%, bonds continue to rally. we have seen oil under pressure in the asian session, we are slightly higher in the new york trading session. look at the after hours of trades because microsoft for example talked about the surge in dollar. -- the surge in the dollar hitting their revenue. we saw the gain in the new york session. elon musk may be finishing at a wrapping up the deal by friday. -- and wrapping up the deal by friday. a lot of this was taken into the market with eco-data as well. 20 large u.s. cities followin -- falling since 2009.

a mortgage rates are near 7%. annabelle: we did see the dollar point back in the u.s. session and the moves in treasury yields. you can see all the futures, new zealand is online and in the grain. the question is around conviction. how confident are traders putting their bets when you do have earnings coming through that you mentioned, the ms. for alphabet, the strong dollar weigh on microsoft and gmc with the weaker forecast. we have the technology heavy index,. also reporting later today. -- index also reporting later today. you see the slight bounce and move higher for the u.s. stocks listed rather, the china stocks listed in the u.s.. a subdued trading day. it does seem that risk appetite today is not going to be that strong.

shery: let us bring in ed ludlow and cross asset reporter emily griffey and. let us start with alphabet. we see the pressure in after hours trading. what went wrong? >> it was the comprehensive mist on the top and bottom line. a long list of issues. the ceo said the first issue is you are comparing against a quarter in the same period a year ago when alphabet had incredible strength. take that into account in the -- into the assessment. you see a pullback in brand and direct ads, currency headwinds are clearly a factor as we thought they may be in this quarter. despite optimism, the cloud is an area for growth. we discussed how actually some of the cloud customers are putting off their spending given

the uncertain macroenvironment or they are committing to shorter-term, less lucrative deals from alphabet. it is a mix of all of the fact is we thought would be in play going into this. the street is spooked and that fell down 7% in after-hours. haidi: when it comes to microsoft we saw them getting throttled by the strong u.s. dollar. we are hearing now that the company's second quarter sales growth dropped 5% from the first. ed expects quo the ship expects cloud expect -- it expects cloud expectations to be higher in the second quarter. what is the take away? is this a sign of the trend we are saying in the pc market in particular? >> this is raising questions around how i expectations were for microsoft.

you find me a company anywhere else in the world that has done that and yet we accelerate after hours to 8%. we should mention the going into the current period, currency continues to be headwind to the tune of 5%. if you need weakness in the consumer side of the business. they did beat on the top and bottom line. when you think about the cloud unit and you take into account the impacts of currency and strip those out, growth in the cloud unit was pretty significantly below some expectations. they are facing the same factor that alphabet faced, perhaps expectations were high despite the beat on the top and bottom line. these headwinds will continue to be present into the end of the year. we are not seeing a huge, positive picture about what is to come in 2023. shery: extending around 2%, despite the fact we are seeing

this negative reaction when it comes to the technology sector, we have seen some positivity from the earnings season. not to mention the share buybacks do have an annual year. broadly speaking, what is the sentiment right now? >> we had three days in a row of s&p 500 gains. it seems like the narrative was about the fact the earnings came in better-than-expected. we know that the bar had been lowered but when you look at the companies who have reported so far, we have over one quarter of s&p 500 companies reporting and of that, 70% beating estimates. although yields came down on tuesday, we still had the market pretty much pricing in a terminal rate of 4.9% on the fed funds rate. we were able to see stocks rally on this earnings optimism. these big megacap tech companies make up such a large portion of the index.

investors are watching those for any indication of how these indexes are going to perform with a lot of traders thinking we will get the seasonal rally at the end of the year. if these big cap companies, these megacap technology stocks cannot sustain gains, that may threaten the rally. haidi: do we see value funds having a bounce going into the year? they have seen six executive weeks of money being put into u.s. equities. a lot of the money is flowing into single stock names. >> i have a number of strategists saying this may be a good time to buy into value. if these megacap technology stocks, these growth names cannot sustain the rally, maybe it would be a good time to pivot into value. it is a wait and see how the rest of the week does. we have apple, amazon, we have meta to report earnings for the

rest of the week. haidi: in terms of the set up we have had, what does that tell us about the rest of the week? >> we went into this thinking about the fab five, microsoft, alphabet, meta, amazon, apple, they would drop 22%. the biggest drop in three years. if you extrapolate that out further there is an expectation we would see a recovery going into 23. how much of that is in doubt given the commentary about the near-term headwinds going into next year? i wonder how the market freaks out. it is pretty ugly out there. shery: we are seeing markets on extending the drop, sales forecast or falling short of what we have talked about. that is ed ludlow and emily. thank you. haidi: let us get back to

australia, it is the day after the budget was delivered and the australian treasurer is seeking to ensure that his budget does not add too much to demand and drive rates even higher. the country faces mounting debt and deficits in the years ahead. paul allen joins us live. what are the -- we know so much about this before it was released. what is the biggest take away for you? >> inflation was a theme that got return to again and again. -- returned to again and again. context in terms of debt, i will give you this in u.s. dollars. the debt is expected to surpass $180 billion in 2023 -- $580 billion in 2023.

that is a big round number. by the time we get to that point inflation will mean that the interest bill on that debt alone is going to be 1.2% of gdp. inflation is underpinning many of the decisions that were taken in this budget. the treasurer said the worst thing that the government could do at the moment is contribute to that inflation. how to ease cost-of-living pressures caused by inflation while not adding to it. we have had an extra spent on childcare, $4.7 billion available there. half a billion dollars on extending paid parental leave. another cloud hanging over the economy is rising energy prices, gas prices are seen rising 56% over the coming year. tough conversations need to be had around how to alleviate pressures. the gas prices and perhaps a conversation around tax reform as well. the government really not touching the subject in a

serious way at the moment. we will get a lot more in a little while. i will be joined by the shadow treasurer angus taylor and the next hour by the finest minister katie gallagher -- by the finance minister katy gallagher. >> rishi sunak has reappointed jeremy hunt as>> the second as e tackles what he calls of the profound economic crisis facing the u.k.. he has to strike a balance between rewarding lori list and ensuring party unity. he has -- this is days after he had resigned from a security breach. sources say that a lender is providing $13 billion of debt financing for the final credit agreement and in the process of

siding documentation, and marts one of the last steps before sending it cash to elon musk for the twitter deal. i foreign-exchange regulator has vowed to maintain the healthy development of the stock and bond markets. the u.n. would be stable. the comments were made at meetings held after the communist party congress. a russian court has upheld the nine year prison sentence handed to american basketball star brittney griner. they said that the sources in the about him his original to as change her and another american held in russia for the russians jailed in the united states. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. shery: discussing the australian

budget with the shadow treasurer. also ahead, we talk with the pmo family office -- bmo's family office carol. this is bloomberg. ♪

>> the global economy teeters on the edge with a war that is not ending, global energy crisis that is escalating, inflationary pressures persisting, and economies are slowing, some already in reverse. we intend to avoid the wars from overseas, we cannot -- the worst from overseas, we cannot avoid it completely. haidi: the shadow treasurer, paul?

>> thank you. i am joined inside of the parliament house by the shadow treasurer angus taylor who is here to discuss what the opposition it may have done differently in this case. we heard a moment ago from a treasurer, outlining the difficult global set of circumstances. a war in ukraine, rising inflation, is it physically responsible to fees -- fiscally responsible to have a boost from commodities? what would you have done differently if you were still in power? angus: economy is in and a strong position. the budget position has improved dramatically, $50 billion improvement in the last financial year. in the budget we see 142 billion dollars compared with the last budget.

extraordinary position. it is not to say that our challenges are not there, there are challenges. they are global and domestic and we are seeing challenges for many years, for most governments. the truth is australia is in an enviable position. it did not build on the strength, the budget described, the vast majority of that is being spent by the government. what we see is a deterioration of the deficit despite the strength. significant deterioration from the second billion dollar deficit was financially going down in the next couple of years. there is an opportunity given australia's strength to build on that and deliver a great outcome. we are seeing is a deteriorating position and over the medium-term a very significant increase in the growth and net

debt. given we are seeing around the world, capital markets will be far less forgiving of those sorts of outcomes rather than they were in the past. the euro time is at an end and we need to see responsible budgeting. otherwise, your population pays the price. >> returned to the debt issue in a moment. focus on the deficit situation. -- let us return to the debt issue in the moment. focus on the deficit situation. >> they are running increasing deficit over an extended period of time. it is a simple formula. we delivered it in the lead up to the pandemic. that is what australia had such a strong position relative to most countries in the world. make sure they economy grows faster than you spend it. -- that your economy grows faster than you spend it. i have a business background, it

is like what you do in business. you are making sure that every dollar is being well spent. you have faster growing areas and slow-growing areas and you have to get the balance right. that is hard work, that is not what we are seeing in the new government. governments have been expended governments. this is a big tax and budget. >> much of that debt was accrued under the morrison administration. it is hard to imagine any government doing anything differently during a pandemic. they were extraordinary times, yet here we are in a situation where the debt is likely to surpass $1 trillion by 2026. the interest will be 1.2% of gdp. what risks are facing the australian economy? i am thinking around the aaa rating? >> the net debt is half of what you describe governments like having an offset account.

account your offset account when you are considering what you have. it is half. that is the right way to think about it and it is half. two thirds of the total debt was of the momentum inherited back in 2013 on the back of the last labor government. it was a spend during the pandemic. there was a spend during the pandemic. from here, the answer is clear, australia is in a better position than any other country in the world. it is hard to find a better set of circumstances than ours. what is disappointing about this budget is a does not consolidate and build from that position. when the simple formula, has strong economic growth and strong spending growth. that is what we did, we got a back to balance by 2019, that

put us into a position when we went into the pandemic what was stronger than many other countries around the world, we benefited from that. the job of this government is actually to strengthen the position, and a week and it. this is a budget that weakens it and does not have a clear plan for dealing with those challenges. it is a budget about forecasting and commentary rather than it is about a plan. i am wondering why it was done now. you have your budget in mind, they insisted on having it now. it seems to be a pointless exercise because there is nothing in here that resembles a plan that will deliver the short-term issues and the longer-term issues. >> how about a plan around energy prices? how about how gas prices are likely to rise by 56% in the coming months? something serious needs to be done here. is it time for intervention and the free market be dammed?

-- damned? angus: gas is an important part of the equation. what they have said is that they are walking away from that, it will be 50% increase in electricity prices over the next three years. the economics 101, you get prices down and put more supply in and of the key with gas is to get more supply into the domestic network. we are a big exporter, the americans do it very successfully and we can do the same. we saw a sharp reduction in gas prices and a separation of the domestic price from the international price by getting more gas into the domestic network. it is a straightforward formula and it works and it is working in countries other than australia and it has worked for us in the past and on the electricity side, and more supply and expectable generation . we have seen record levels of

investment in renewables in this country. the highest level of household stay on the rise. labor is not focused on the supply side. they are obsessed with other things. this is important to get right and important for the transition too. it would have a -- you will not have a successful transition without getting that right. >> thank you for joining us and braving the rain. that is angus taylor, the shadow treasurer. we are joined by the finance minister for australia to talk a little bit more about the contents of this budget. shery: we are looking forward to that. he will be back with the australian finance minister about economic challenges that lie ahead. there will be 10:10 a.m. sydney time -- that will be 10:10 a.m. sydney time. this is bloomberg. ♪

shery: here is a quick check of the headlines. general motors beat estimates on record revenue. surpassing analyst projections of $1.89 a share. gm also maintained is profit target up to $7.50 a share. sales of his cadillac suvs and the trucks. texas instruments tumbled in trade and earnings forecasted flag a chip industry slump spreading beyond personal computers and phones. orders worsened and cancellations increased this quarter. it does the automobile industry demand remaining strong. texas instruments is the largest maker of analog and embedded processing chips. adidas is dropping yeezy after

dropping ties with the artist ye , formally known as kanye west. they expect a earnings hit after terminating relationship with the star over his comments. haidi: hot on the heels of the budget, australia's budget drops on cpi data. third-quarter inflation is 1.6%. the budget includes a four and eight boost of almost $894 million.

haidi: the is facing what is

called a confluence of my death stagflation and geopolitical confrontation. while these issues have been faced before, they are made worse by high levels of debt. >> in addition to the economic and monetary and financial risks and the new wants, we are going toward stagflation we have never seen since the 1970's. there is also the geopolitical risk like the confrontation with some revisionist powers like china, russia, iran, and korea. that will lead potentially to conflict. there are environmental risks that are severe, there are risks coming from pandemics and from global climate change dynamics. there are technological risks coming from robotic automation of jobs.

there is a political risk with polarization and the extreme right and extreme left coming to power in advanced economies and emerging markets. we have explicit debt. >> that is where i want to go. lipsky was heated about the debt buildup. on the back of your book, you have a quote from many experts, the quote of the season from the gravity has returned to the physics. we have a higher realty old -- real yield. what are the ramifications in our system that the gravity has returned to our physics? >> there were many agents in the economy are in the private and public data. it has gone from 200% to 250%.

advanced economies is more like 420% and rising. the u.s. is higher after the great depression and world war ii go and we are not out of a major war. even now, even if you had some beet households, corporate, bank, -- even if you had some empty households, corporate banks, during the covid crisis, many of them were not fragile. they would build up again. this time around instead it is different. we have so much debt and central banks like the fed have increased interest rates to fight inflation. the zombie institutions go bankrupt. we have inflation and stagflation. stagflation that rises -- debt crisis. shery: he is also saying the risk of a severe recession in the u.s. will force the fed to

blink on rates. others are saying start a contraction is not a done deal. what are we hearing from the likes of him? >> he has been one of the most vocal critics of the fed out there. he says the risk of the recession is still uncomfortably high, he is saying it is not a 100% certainty because he sees strength in the u.s. labor and credit markets. he says at the skill of the issues facing the fed actually are grater today than -- greater than the paul volcker era. he hike the rights to around 20% -- he hiked rates due to around 20%. >> chair powell has on top of this financial stability. if they pivot, it will be

because of financial stability and will not be because they are deciding to not look at inflation anymore. annabelle: it is pretty clear that the risk of recession is weighing on energy markets? it has been a major contributor to the wild swings. it has made it difficult for investors to know when and what to buy in the energy space. sam from equity group investment is not immune to this challenge, he spoke to us about how his asset picks up distressed oil assets back in 2019. take a listen. >> has a volatility in the energy space has been so extreme that the volatility -- the volatility in the energy space has been so extreme. that shifted between that and

128. that is an incredible level of volatility. it makes making investments extraordinarily difficult and challenging. haidi: our next guest says this is not a area to be on careful -- not careful in. we see gas prices falling into negative territory. we are seeing housing prices easing and inflation expectations slightly better than this. does this mean we expect a turn from the fed and we come to support markets now? carol: the markets are trying to look for every idea that they can hang their hats on. i think there will be listening really closely next week to the fed's commentary. we think the 75 basis point hike is in the pudding by listening to what they say commentary wise is when you look at the charts and the various indicators,

there are pretty sharp as a already, much quicker than anybody thought in housing and the supply chain issues that are starting to ease in pockets. listening to the commentary from the fed, we do not think they will take the foot off of the gas pedal anytime soon. markets have all year been trying to fight the fed and looking for any opening that they can to adopt a more positive tone. shery: what are you seeing in the start of this earnings season? we hear about share buybacks amounting to $1 trillion this year so far. is this a vote of confidence in their balance sheets? carol: it is a combination of potentially a vote of confidence and a lack of other things they are willing to step out and round up and buy right now. intentionality around trying to support their earnings. the earnings season has been pretty mixed so far.

you have some unexpected places, pressures in unexpected places. investors have a lot of information to clean because we are hearing about supply chain and the proactive stance accompanies -- companies are taking to reduce costs. they are fighting differently how they are passing price increases along. what they are bearing at the corporate level. haidi: we are seeing some of microsoft's numbers, the throttling effect of the strong u.s. dollar. is that a dominant theme and will be problematic for corporate's going forward? carol: i multinationals are -- our multinationals are going to struggle against the strong dollar. we have the periods of the stronger dollar, those large caps suffer from that because it took of the s&p earnings among those large caps are generated

over season and translating those back into stronger dollars is tough. that is why we stepped up some exposure to small-cap value names within our asset allocation. to gain the smaller cap and mid-cap names, they tend to be more u.s. centric. the u.s. relative to a lot of places on the globe is in pretty reasonable shape from a corporate standpoint. haidi: there has been more positioning that we see value in a come back into the last little bit of the year. what opportunities are you seeing there? carol: the first dance is careful how you define value. buying something because it is beaten up is not value. where there is potential for growth among names that were traditionally viewed among industrials and financials. some of these other areas where

you have higher dividends and basically fiscal incentives edit into the system in the form of -- incentives brought into the system. those companies that participate in that buildout and the rebuild and the infrastructure build can often reside in the value sector. the value sector may end up being growth companies. haidi: you talk about this time when it comes to a bear market, the economic circumstances are different. sort of an inflection would you need to see when it comes to the labor market for a significant change? carol: the labor market is staying strong and over all the adaptability of corporate america has been very solid. it is one of those things that

does not get trumpeted enough. how nimble our companies have been and adapting to the pandemic slowdown and the rebound happen faster than anybody thought the rearrangement of supply chains has happened really actively. for the labor market, we have to see those labor statistics really picked up. -- tick up. if you see 4.5%, prior to 2000 was considered five point -- 5.5% as full employment, we have gotten used to much lower. watching the health of the consumer will be vital. it is bifurcated, the high end consumer spending middle and low income consumers are really facing a lot of uphill battles from increased expenses. make sure that they have to opportunities will be vital -- making sure that they have job opportunities will be vital.

haidi: thank you, that is carol schleif, cio of bmo family office. >> australia is warning of mounting debt and deficits as the treasurer held out spending in his first budget to avoid fueling inflation. treasury figures say that the debt will widen to 2% in 2025. that increase will largely be driven by higher spending on the nation's disability insurance program and rising borrowing costs. >> the global economy teeters on the edge with a war that is not ending, a global energy crisis that is escalating, inflationary pressures persisting, and economies slowing. some of them already in reverse. we intend to avoid the worst of the turbulence from overseas, we cannot escape it completely. >> the former pakistan prime minister plans to point a protest marked demanding early

elections. he was ousted by a no-confidence vote in april but is making a major push to return to power. the current prime minister says the election will not happen until late next year. jim eli has been found -- jimmy lai has been charged in his role for antigovernment protests and is under the national security law, he will be sentenced in november. a study has found new bivalent booster shots from moderna and pfizer do not do any better than current vaccines in raising antibody levels against the dominant covid strains. the research by columbia university and the university of michigan contrasts sharply with pfizer and beyond tech's -- biontech's claims about the data. it needs to be confirmed in larger studies. global news 24 hours a day, on-air and on bloomberg

quicktake, powered by more than 2700 journalists and analysts in over 120 countries. shery: elon musk is set to close his $44 billion twitter bio by friday. the latest on the takeover saga, next. this is bloomberg. ♪

shery: bloomberg has learned that elon musk is pledging to close his twitter deal by friday. let us bring in sarah, is this going to happen? what are we hearing? >> this is what he is telling the bankers. he says he needs the money and that this is the first step to closing this in time for the deadline which is friday at 5:00 p.m. eastern. it looks like everything is on track. i would not put it past any of the parties in this deal to let something get in the way. it is still possible things could all apart but we are the closest we have ever been to seeing this $44 billion transaction complete which would really be an incredible end to the saga for twitter. this company that has been in a state of limbo with all of this back and forth in court between

elon musk and their company. we are curious to see where the next -- what the next few days hold. haidi: nothing insurgent when it comes to elon musk. this would be the end of one saga about the -- but the beginning of another. what is twitter under elon musk look like? >> the bankers have debt that they have to know what to do with in a terrible time for the market unlike what it was in april when they agreed to take this on. twitter, the change that you will see will be incredible. we are expecting massive cuts. elana may put up to 75% of the -- elon musk may cut up to 75% of the workforce. twitter employees is expecting to get less value under

engineering and product. they will rule the roost. they plan to make big changes. this is a company that has focused on introducing ways to have healthier conversations and a abuse and bullying on the -- and reduce abuse and bullying. one of elon's ideas letting anybody say whatever they want. that is at odds with the vision that twitter employees have had for the service. we are going to see a dramatic change in leadership. we do not know who is going to leave twitter or if elon musk will take on another company to lead. it will be a big, fast change for everyone involved. haidi: uncertainty there.

that was the latest on twitter. mary sees a strong demand for her company's vehicle despite inflation and higher rates. she spoke with matt miller. >> we are seeing very strong demand for our products, we are seeing strong average transaction pricing that we continue to be able to build on and we are starting to see inventory build a little bit. while below levels that were in the past. we are seeing a strong consumer for our products. we are watching carefully all of the different signs. right now it is still very strong. >> what about the pressure on margins? does the stronger dollar balance that out? are you seeing a big inflation rise in the costs they need to pay out for parts and is that squeezing your margins? >> yes.

we have seen commodities, logistics, we work with our suppliers to make sure that we have a healthy supplier base. all of those factors we tend to work to offset. we predicted this year would be a 5000 or $5 billion impact. we are seeing that. we have worked to find offsets and that is part of our overall equation for this year which is allowing us to still maintain guidance. >> one big boost to the inflation reduction act. ubs sees the ira as generous. it has the potential to make the u.s. a global battery hub. how you see the inflation reduction act? >> general motors was already investing in north america or in the united states. we have a battery plant in ohio that is ramping right now. two others, one in michigan and one in tennessee. we were making the investments

because he wanted to make sure we had a resilient supply chain -- wheat wanted to make sure that we had a resilient supply chain. we are looking for treasury to set the rules. we are very well positioned. we believe that the benefits of the ira will drive stronger adoption with the american consumer. it will do what it intended to do and we are well-positioned to benefit and work with our consumers to make sure that they have an eb that is affordable that they cannot really enjoy the benefits of an ev -- can really enjoy the benefits of an ev. we absolutely are, look at the lineup that we have with the hummer to the lyric, the chevy silverado. we launched the gmc sierra ev along with the chevrolet blazer ev and the equinox ev. we will be well-positioned

covering the important segments of the portfolio to rate the million unit level by 2025. haidi: that was gm's ceo. shery: tune in to hear more from the newsmakers, get in-depth analysis from the daybreak team broadcasting live from our studio in hong kong. listen through the app or bloombergradio.com. plenty more ahead, this is bloomberg. ♪

haidi: a quick check of the business flash headlines, microsoft shares slumped after the weakest quarterly revenue growth in five years. cells were throttled by the surging dollar and a drop in sales of windows software to pc makers. cells for its cloud services were 42%, below expectations. alphabet's revenue and earnings fell short of expectations as he search business showed signs of weakness. about $57 billion, third quarter sales, missing projections. the net income was less than the estimate of one dollar $.25 a share. shery: a deep dive into the

crypto story, where it came from , let it all means, and why it matters. the depth when it comes to digital cash and how this behaves with trust and distrust in who keeps your money. we have seen bitcoin trading higher around $20,000 level given that will risk on sentiment we have been having barley in the markets with a three-day rally for the west -- having a rally with the markets with a three-day rally for the west. haidi: we know that there is so much mystery and uncertainty and perhaps even an accuracy when it comes to the world of crypto and how best to navigate it for both opportunity and hedging risk. easy bitcoin off by .7%. it has been such a wild ride throughout the course of the pandemic and the post-pandemic selloff.

particularly when it comes to the correlation with relation to traditional assets. this is part of a businessweek special issue and check it out for everything that you need to know on crypto. these are the stocks we are watching as we get into the start of trading in five minutes or so in australia. mining related stocks tumbling to the lowest since november over pessimism about the demand outlook in china. we are watching the likes of bhp and mineral resources as a place. delayed spending in china's budget from suspended or canceled infrastructure projects. we are watching the likes of bluescope steel. this is bloomberg. ♪

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