>> good morning and welcome to deborah kostroun that, i am paul allen in sydney. >> we are county down to asia's major market opens. good evening from bloomberg's world headquarters in new york, i am shery ahn. alphabet and microsoft shares rise in after-hours trade as the two tech giants beat estimates, both seeing strong demand in cloud services. >> u.s. stocks dropped the most in two months as first republic bank has disappointing earnings and they rekindle worries that the baking turmoil is not over yet. >> president biden -- washington sees closer alignment with its longtime ally on china and russia. u.s. futures getting a boost after a lackluster session in new york. this as we have those tech giants rallying after-hours but in the new york session, we are actually down the most in a

month. treasury yields also retreating. we have the concerns over first republic bank but we also had data showing u.s. consumer confidence dropped this month to the lowest level since july. not to mention to regional fed manufacturing reports underwhelming. take a look at after-hours trading at the moment. it is all about those tech giants including alphabet rising on revenue as sales recovering. microsoft sales are jumping in after-hours trade. profit and sales topping estimate. we are following texas instruments which is up more than 1.5% after-hours despite the fact that they gave a lackluster forecast for the current time. texas instruments may be a bit more shielded -- they're getting a little bit of a boost from their industrial market. we do have sk from south korea reporting later today. that is not going to look pretty.

we are looking forward to that. let's get a little bit more on the rally. su keenan with the latest. >> that is just what investors wanted to hear. google continues to fare better than his rivals even as many customers and advertisers have been pulling back in this economically challenging time. it was green on the screen across the board for tech after-hours. with google's parent initially helping lead the charge. there is one point where as much as 6% have seen that rally pair back just a bit during the conference call which will get to in a minute. the partner payout came to just over 58 billion. the cloud unit reached profitability for the first time. that is a very big deal. the cfo said youtube is

stabilizing and that she is pleased with the significant subscriber growth between you to music and youtube tv. she also talked about how excited leadership is about ai and deep mind although we will not get much visibility into the financial results. that will be lumped in with alphabets cost. as we saw or heard these comments, we did see the rally pull back just a bit in after-hours. she says she sees ongoing headwind and a challenging market. the outlook is quote uncertain. she does expect currency headwinds to decrease and revenue growth similar in the current quarter. ed is on the covers call. it is not really an outlook in the peer financial sense but this is what alphabet is seeing.

>> a strong crowd demand is a big thing for microsoft. give us the highlights there. >> that was another big beat because it is the resiliency story. the resiliency of that corporate customer base helping to put that cloud unit in line with expectations and certainly feeling what we saw. microsoft up in a big way after hours. fueled by the cloud services on the outdoor cloud computing software as well. sales rose 57%. it should say 7% to 59 billion. revenue for the as a unit climbed 31%. that actually matched expectations. selling commercial cloud products.

deal renewals were a big part of this. when you look at the earnings scorecard out of the box, they will tell you this is very strong. one analyst will say from microsoft it is a solid report on a lobar quarter. there is a big question as we drop into the bloomberg, can tech keep up? there are so many concerned about what this tech earnings time will bring us. a very good start. there is concern about the challenges we are hearing in some of the lowered expectations. back to you. >> that is su keenan there. let's get to annabel in hong kong with a look at how asian trading is shaping up. annabelle? >> we are expecting earnings from sk before the opening bell.

some of the expectations you can see here but broadly, what we are looking for today is the worst revenue decline on record for the second consecutive quarterly loss today. that is the state of play. it will really give us some insight into how much this chip slump is continuing to play out. a lot of perspective on issues facing the industry. you should know what sherry did earlier. texas instruments after the bell did show even though it is a more diversified chipmaker, they will be hitting unscathed areas and parts. sherry said a low bit higher in after-hours trade. that is looking across the broader asian landscape today. whether the earnings will be able to offset the slump they came through in wall street. broadly, it is a bit of caution coming in today. new zealand just fractionally

down. bitcoin saying this is more of a haven play at the moment. adding onto its more than 2% gain in the session. a lot of that coming down to these concerns around first republic bank. also, the signals around potential asset sales. >> we actually have an exclusive by bloomberg on first republic bank. that is looking at divesting up to $100 billion of assets as it tries to recover from the finance sector turmoil. >> how does this fit into the broader rescue plan? >> first republic which reported earnings yesterday, i think it really shows that while the prices for many appear to have abated somewhat for first republic, they are still very much looming incredibly large. reported earnings today show

deposits have dropped more than analysts expected and today, we reported they are trying to sell up to 100 billion in assets of mortgages and other securities. that is part of an effort to shrink the balance sheet effectively. the goal is most likely to make the bank a bit smaller and potentially more palatable for an outside investor to come in and purchase a stake. which we probably need to do along with some sort of government intervention. a lot of the measures it is taking aimed at trying to salvage itself from this turmoil by making itself smaller and a little bit more palatable for the next investor. >> in terms of selling to external investors, who could potential buyers be? >> all big banks and some regional lenders have been rolling in and ruling out

various stages of this crisis. it probably just needs that big capital injection in order for it to continue operating. even though it is trying to do this sale and it is weighing are the strategic options, that would probably be enough for the bank to continue. it definitely feels like the sentiment has really deteriorated since it reported earnings yesterday. this is a bank that has targeted the wealthy. in the earnings yesterday, it unveiled some measures that would clip it swings in that business a little bit. the bank is facing a very bleak future unless he can get some sort of risky deal. that was sally bakewell there. let's get a check of the first word headlines now. president biden has formally announced people seek reelection in 2024. leading a campaign against a republican field dominated by his predecessor.

biden is already the oldest u.s. president at age 80. he is imploring voters to finish this job. the class for second term begins with consumers battling sticky inflation and potential possession looming. the u.s. house speaker kevin mccarthy is refusing to say if he has enough support from reluctant republicans to pass his debt bill. they were scheduled to me to line up legislation of wednesday's vote. if the bill falls flat, it could delay any talks over raising the debt ceiling. fighting in sudan is testing a fourth attempt at a nationwide cease-fire. this as conflict flared over the month. smoke seen rising from the presidential palace with violence also reported in nearby cities. this is leaders after sudan's army faced this. the tokyo-based i space says it has lost contact.

the ceo say they assume the landing has failed. they lost contact with the mission one lender at some point. they launched the craft in december. it was the first commercial attempt to place a lender on the moon. those were your first word headlines. quick still have, as we count down to the boj chief's first policy meeting, former colleagues and other central bankers share what they expect. our special report later this hour. next, the partners plans why there may be a few most of continued higher volatility ahead. more on the market outlook in just a moment. this is bloomberg. ♪ ♪

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our next guest expect the u.s. stock market to recover later on this year. only after a few more months of high volatility. allen joins us now. we saw volume of today. prices down again. volatility very much the theme at the moment. what is driving all of this? >> first of all, thank you for having me.

the reason the u.s. market is experiencing so much volatility is because real rates have been rising for the last year plus and the fed has been tightening financial conditions. a lot of business models that were predicated on very low rates are being exposed for what they are but not only that, growth stocks have values mostly out in the future that have fallen as well. you add on top of that some of the banking issues we have seen over the last month or so due to the rising interest rates and everything is happening all at once. we expect volatility to continue and the reason for that is rates are going to continue to be high. i think consensus is expect and the fed to raise rates again in may. after that, who knows? maybe they will pause, maybe they will cut. we think they will probably pause for several months. as long as they stay high, there will be fallout among financials and others who depend on lower rates. >> we still do have a number of sectors performing well.

if we take a look at microsoft and alphabet reporting today, a strong set of numbers. earnings continue to surprise considering the expectations we seem to have. >> it is still early in the earnings season to assess how well the market has priced this in. they have certain events of negative surprises. as you point out, some of the big tech names have been secular winners. even before covid. microsoft and alphabet as you mentioned but also visa, very strong position. i think those companies will be ok. there are others in the market that are seeing higher costs that are unable to pass through costs fully.

>> texas instruments today with a very lackluster outlook. perhaps showing the economic slowdown is not even sparing such a diversified company. what do you like at this point? >> we like tsmc. we also like broadcom. that is another dominant semiconductor company. whether it is in pc chips or smartphone chips, the only place that does not seem to have a lot of excess inventory is auto chips. almost everywhere else, there is a supply glut. that is getting through pre-quickly. the stocks always predict that.

questions, confidence pulling to the lowest level in months now. what does that tell you about? >> there are a lot of crosscurrents in the economy. this is the soft data versus the hard data. this is a survey-based measure. it doesn't measure actual output. the thing about survey-based data is it can be -- consumer confidence is low now. that may predict a downturn in the farther out and harder economic data. it remains to be seen. you're seeing inflation come down. people are happy about that. you can see wages go up and

people are happy about that and unemployment remains very low here in the u.s.. that really helps families and i'm sure that was part of the reason why visa was so strong today when they reported their first quarter. consumers are still spending. they may say they are not confident but if you look at the recent numbers, they are still spending. >> we have the bond markets seem to predict it. >> you have nothing a lot of the imbalance you have seen in prior recessions that it took a long time to work out. in 2008, we had all that mortgage debt that needed to work through the system before we can access this in the

recession. we have the tech bubble. so many invested here. we don't see the same excesses this time. that is what we think it may be a more garden-variety procession. even the bond market has a split personality on the probability of recession. if you look at the rates part of the bond market, it has been for quiet sometime. that should clearly signal a recession. if you look at spreads, they are not too bad. the bond market does not seem to be overly concerned about of a session. they're not supertight but they're not super white either. -- super wide either. looking at the soft data versus the hard data, looking at confidence and what people say about what they spend, looking at the bond market, the credit side versus the right side. you see a lot of different opinions and perspectives and it is not consistent at all.

it is that uncertainty that needs to continue volatility in the context of higher rates. >> do you up some of those strategic haven assets like dollar, yen, gold, cash? >> we have been increasing our international exposure outside the u.s. and rethink the dollar may be at the moment. we want to be diversified. more broadly, we are staying diversified in most respects. we are overweight and some are economically sensitive areas like consumer staples and utilities. the idea is it is very difficult to say if and when the market will fully price in a recession. you want to have your foot on

this elevator and break at the same time. we are staying high quality across all these different areas but you're not making enormous bets either. >> ellen is joining us with her because on the markets. you can actually get around all of the stories we discussed in this edition of daybreak. you can customize your settings in the terminal so you only get news on the assets that you care about. this is bloomberg. ♪

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>> a quick>> check of the latest business flash headlines. texas instruments has given a

lackluster forecast indicating a slump in chip demand is spreading to previously unscathed areas. second-quarter revenue will be around 4.2 24153 million dollars. first quarter revenue fell 11% to $4.4 billion. every sector except automotive is suffering. apple is reportedly working on a health coaching service. they are planning to use apple watch data to create fitness programs tailored to specific users. it also plans to use iphone algorithms to determine users mood through their speech and apple is looking to lock in users with health and wellness features. ubs is gearing up for record-breaking profits once the credits we still closes. this was back is a specter to reagan as much as $57 billion in

second-quarter earnings stemming from an accounting term known as negative goodwill. that recognizes the bargain raisman prices. question only thing i can say is we will take our time based -- we will take our time and we will do it based on facts, not emotions. >> let's look at the day had for new zealand now. we will be breaking the latest new zealand trade shortly. the figures for march, we will have those for you shortly. we are expect and the first quarter cpi print. this will soften slightly. australia has announced local missile manufacturing and billions of dollars. we will have more long-range

strike systems. let's take a look at how our asian markets are shaping up. we have new zealand trading back from the holiday yesterday. currently weaker at about half of 1%. australia will resume trading today. also, the futures are little bit weaker. nikkei futures in negative territory. we will get those cpi numbers out of australia. the reserve bank's next move will happen next tuesday. once more to come on daybreak australia. this is bloomberg. ♪ these days, our households depend on the internet more and more. families grow, houses get smarter, and our demands on the internet increase. that's why we just boosted speeds for over 20 million xfinity customers, on us.

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>> take a look at after-hours trading at the moment.

we are getting a boost from these tech giants gaining ground. of the chairs wasn't on that revenue beat. as as recovering. microsoft, take a look at then jump of more than a percent profit and sales with resilient corporate demand. even texas is from its is gaining ground despite the fact that they gave a lackluster forecast for the current time. let's bring in the managing director and senior research analyst, daniel in new york. good to have you with us. all these countries facing the cyclical headwinds. when it comes to alphabet and microsoft, they seem to be performing well. especially when it comes to cloud computing. >> great to be with you as always. what we have seen from the data and commentary on the cause is that these companies, google and microsoft are certainly seeing some of the cyclical challenges of the broader secular drivers

around key areas like the cloud and artificial intelligence. those remain healthy. if we can turn to google first, i think research is durable. youtube should see better growth and their cloud business remains vibrant. i think it's underappreciated opportunity. with micro soft, the azure cloud platform is continuing to perform well and i think microsoft is doing a good job navigating a lot of these times. we continue to like shares of both companies here. >> are you concerned about how sustainable these gains are especially when corporations become a bit more cautious given the global economic outlook? >> i expect customers and the feedback from speaking to a lot of cloud buyers is that they are looking to optimize and reduce costs where possible. part of what we have seen if we figure out the pandemic over the

last few years is that cloud really provides a level of flexibility and agility. a lot of the key new technologies like ai are going to be consumed in the cloud. there is this balance in terms of customers wanting to save money but at the same time really embracing this idea of digitizing their own businesses. for that, they rely on partners like microsoft and google and amazon web services to help do that. >> we do have both companies putting most of the resources into ai. i don't know us in the person on earth that uses bing as their default search engine but can you see competition really starting to heat up between these giants >> at think the search market has always been competitive. they have been using artificial intelligence in the search

platform for many years. they will continue to do that. i think what microsoft doing -- is doing is using championship ed and bing. i think there is potential over time if the eggs acute to perhaps gain a little bit of share in search. i think for microsoft standpoint, the ability to infuse a lot of that intellectual property, jet -- catchy bd into their product suite into office, that can be incredibly impactful to their business and i think again help with azure. i think both companies will compete but they have strengths in different areas. you have more on search and a growing cloud business. >> any questions around these ai tools? there are some others that are being worked on. do you have questions about them? >> it is very early. we are seeing with generative ai that there is a lot of potential

to get answers, suggestions, ways to look at things creatively. it with thick about the opportunity inside enterprises. if you can have a better chat experience, if a customer is trying to get something resolved with coding, at the technology can help speed up the coding process. there are a lot of benefits but at the same time, there are a lot of challenges as with any new technology that have to get solved in terms of how it works, the answers and the output that he gives. it is a learning process for all . i am optimistic that the technology will continue to advance. i think over what it is doing and microsoft for where they are, they can infuse ai into their businesses and really unlock a lot of potential for their users which overtime could translate into revenue growth and ultimately contribute to

shareprice outperformance for these two companies. >> how much will the growth of ai help chipmakers? how much will be -- i think it will be important for chipmakers. if you look at this as one example, they have a broad portfolio of products, they are a leader in artificial intelligence and i think they are very well-positioned to help their customers including cloud companies like google, like microsoft really push ahead. if we look on the equipment side, you have a company that is a key provider for the next generation of chips. another name, advanced micro devices have -- have a role to play in the build out of this ai infrastructure.

we cai as a positive driver for some of these chip companies and all this. these businesses all remain cyclical. waistcoat to have you with us. you can also search your bloomberg for more on this. you can get commentary and analysis from our bloomberg expert. you can see the breakdown of alphabets first-quarter earnings there. let's bring in annabelle. before the opening bell in seoul, what are we expecting? >> you're discussing these long-term cyclical trends. they are expected to show this in the earnings that could come within an hour or so. drop broadly -- but broadly, this is what we are expecting right now. it would be the second

consecutive quarterly loss for the company and certainly one that is broadly also experiencing those issues of those inventory buildups. and the slump that came from texas instruments. let's take a look at what bloomberg intelligence is expecting in the numbers. they are saying we could've seen that significant drop. it is down to that market we are seeing in the industry, they are expecting an operating loss around 3.74.2 trillion. what they are also looking at is what came in from the lead-in with microsoft and samsung. those with weaker sales. we are also seeing this in the korean exports. >> we have geopolitical tensions weighing heavily on chinese stocks. what is happening? >> that is right. we have seen in terms of the losses in taiwan and korea that

are really caught between those tensions with beijing and washington. this here is looking at the nasdaq golden dragon index. we are seeing a drop around 10% in april alone. a wipeout of about 100 billion dollars. that really is -- as investors have been less focused on those economic recovery signals coming through, this is some of the macro data we have seen and they are focusing very squarely on what is happening with u.s. and chinese tensions. that is playing into the selling pressure we are seeing. morgan stanley is looking at this and they are saying it is the u.s.-based active fund managers that are leading the selling pressure here. in the last few weeks they have offloaded $5.1 billion of stock. this is looking extremely selective. there only doing this to select

stocks. alibaba. baidu as well. >> let's get to the first word headlines. the german chancellor has invited the chinese premier for talks in berlin in june. it is the latest bid to ease tensions between europe and the government in beijing. sources say that schultz will be trying to enlist china in promoting global peace and tackling climate change. he will also set up red on taiwan. the federal reserve is closing a loophole that certain funds have used to take advantage of the reverse repo facility and is raising criteria for this to exclude funds organized for the purpose of accessing operations. since last june, two chili dollars have been parked in the facility that offers a steady

rate that is often better than alternatives like treasury builds. : off a deal to buy voyager over a hostile and uncertain u.s. regulatory climate. it comes less than a week after regulators dropped that to halt the deal in court. it is the second failed deal from voyager who has been trying to repay customers. those are your first word headlines. >> still to come, you know the name but do you know the demand? we will talk to their family, former colleagues in other central bankers to find out what makes them tick. a special report up next. this is bloomberg. ♪

>> on thursday, leaving his first meeting as the new governor -- leading his first meeting as the new governor of the bank of japan. >> one in tokyo. the capital city were his family

eventually removed. his uncle says he often came back to visit, riding the train all by himself by the age of 10. >> he was a very independent kid. he listened to in was broadcast on a portable radio. he did not understand what he was listening to. his smartness and cleverness really stood out in the family. >> his career as a lifelong academic and central bank under got off to an auspicious start as he earned his phd in economics at m.i.t.. ben bernanke, mario draghi all went on to become heads of central banks along with him. he would use his skill at communicant complicated aspects of unconventional monetary policy clearly to investors in a way that will maintain market stability.

the former fed vice chair is a lifelong academic who became a top central banker. he says any policy changes made now at the boj will be gradual. >> you want to dismantle the whole thing right away. you move it out slowly and with a lot of thought about what you move at a first, second, third and then forth. i am sure he is thinking about that a lot already. >> he made his mark back in 2002 when as a member of the boj policy board, he voted against a majority decision to raise rates. saying that he needed to see more data. they are facing the real possibility that in the near future, japanese inflation will reach 2% in the sustainable matter that boj policy normalization requires.

bracing for the very large adjustments that the markets will have to make and the turbulence that could result. >> at that have to make an appropriate judgment -- i think that we have to make an appropriate judgment. >> investors in japan and around about our waiting to see if they can thread this policy normalization needle. kathleen hays, bloomberg tokyo. >> getting some breaking news. this is the trade balance for the month of march. the deficit. i can't wait to see the minor sign there.

the $1.2 billion trade deficit for the month of march. we have seen reasonable increase for exports. 6.5 billion. training 6145 against the greenback. this book to japan's former vice minister for them and asked him why investors -- what investors should expect. >> he mentioned that -- this is closing to 2% with high probability.

it seems to me that it becomes more cautious. underway. this is mainly a big company. that important. i would guess he would want to keep them -- keep the current momentum. he has taken care -- >> if we get this, watching

inflation closely, does that mean no change in this comfortable spot? think about financial market stress or as a tightening of the monetary policy outside of japan. there could be a more important factor. >> we look at why cc, yield curve control and sooner or later, maybe it will be a year and a half or longer but it changed presumably. right now, you have this yen in range. the bundle, bond market, not

pushing too hard against the upper range. these are the conditions that would be a good time. >> there is no pressure. to some extent, it is corrected. the important factor is to not send the wrong message to the market.

there is a strong forecast of inflation. >> what is the biggest risk for the bank of japan policy? >> everything they could have an impact on the economy, on inflation and therefore, an impact -- >> that is why japan inflation, could it be much longer? that was the case. the timing could come quicker

than the market boj expected. keeping good communication with the market, this is important. >> that was the former finance minister of japan speaking with kathleen hays. as we count down to the boj meeting, we will be speaking to the former deputy governor in his first interview since his term ended in march. it is coming at 9:30 a.m. sydney time. this is bloomberg. ♪

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question rate of deals will be evolving here in the u.s.. i attended a meeting where he spoke about south korean firms investing so much across the u.s.. it is quit interesting that the summit in particular is more about aligning economic interest and the interest of the companies of both countries. because it is a security guarantor the u.s..

>> this is a president that is very clear when it comes to relations with china and the u.s.. he took off last year in may and they have been trying to post more military exercises with the u.s.. he has been somewhat of a supporter of this security cooperation that involves japan with china. chen remains the biggest trading partner for korea. because of the u.s. pressure to get more companies out of china, south korea faces a choice and it is a difficult choice because a lot of the fundamental technology -- and i'm >> we are out of time. daybreak: asia in a moment. this is bloomberg. ♪

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