♪ shery: counting down to asia's major market open haidi: top stories, alphabet revenue beat

as his flagship search business. asian markets are set for a countdown to the federated. traders watching sk earnings today as well as quarterly aussie inflation data. plus, china reinstates their foreign minister but gives no explanation for the disappearance of their former diplomat. shery: we are seeing a little bit of downside pressure after we saw u.s. stocks gain ground. we are talking about that reaction to earnings results. gen 3m beating expectations. 80% of companies that have reported earning so far have beat lowered expectations. that is a caveat. s&p 500 finishing around the april 2022 high. we are watching treasuries on the eve of the federated decision. it was mixed with the two year

yield down and the 10 year yield up. consumer confidence data came out today strong near the two year high. oil prices on the downside. wti closed above their 200 day moving average, perhaps signaling a more bullish outlook as it continues to trade throughout the week. microsoft under pressure as we saw tepid sales growth. their cloud business slowing and we are waiting for any boost to come from their new ai tools. you have to put it into context, we had seen microsoft at a record high last week. 18% gain of showing the past three months. that is because of the expectation around ai. although for alphabet, ai chat bots did not hurt their google search business. you are seeing that resilience

after hours and you can see the nasdaq 100 etf under broad pressure right now in late trading. texas instruments came out with a weak forecast. the reason we care, sk hynix reporting later today. haidi: one to watch out for. potentially later on this hour. but sick a look at big tech earnings. jackie devall los and julia love join us. let me start with julia. robust numbers from alphabet. what jumps out to you? >> it was a very strong quarter for alphabet. almost across the board. one of the biggest signs the search business continues to be doing quite well for alphabet. almost from the moment chatgpt launched last year, there was a lot of fear that product would siphon away users from google search but so far, the project seems to be holding up well.

google cloud was another breakout hit. the unit was profitable for the first time last quarter and they managed to remain profitable this quarter. which i think will be really reassuring news for lots of folks on wall street. finally, youtube. they had been a drag on alphabet for the past few quarters, but they are showing growth once more this quarter. they find demand for youtube ads is stabilizing. hopefully things will be on the upswing. haidi: you mentioned the cloud unit again profitable but how much will ai investments really pressure the company long-term? >> that is what remains to be seen. google stresses that ai is an opportunity. they say they have been an ai first company for seven years. they say ai is something that

will only strengthen their business model. however, i think it is still early and ai has certainly created opportunities for others like microsoft to make inroads. shery: still, those gains, that boost from ai is not necessarily being felt. investors do not seem to like that. >> it has not trickled down into the numbers yet. at the end of the day, microsoft is a cloud computing business. when you look at its customer base, it is less vulnerable to consumer swings and is more dependent on how businesses spend their money. predominately on cloud infrastructure and software products. you have seen a pullback in spend, especially from the height of the pandemic. of course, being a major

beneficiary of artificial intelligence, it is confusing to see the reaction. but the reason for that is we have not seen those tools really hit the mainstream just yet. they are still testing some of those tools in its office products and that has not been rolled out broadly. the hope is that once they start really marketing that to customers broadly, you can see more of that ai boom trickle through into their business. haidi: in the meantime, how much of a burden is the heavy spending they are making into ai capacity? >> that is part of the fine line they have the balance. they have been investing more into making more cloud infrastructure available, specifically for ai product. at the end of the day, they are

balancing that with cutting costs in other parts of the business. perhaps not investing so much in other products that were not bearing fruit the way they thought they would. at the height of the pandemic when there was plenty of capital to go around, these were products they could freely spend on. but now, a lot of that focus that ai is taking is going to bear the question, is this paying off? until we start to see those monetization efforts really be offered broadly to a wider set of customers, not just businesses, into its search business and chip away some of the dominance google has, investors are going to be asking that question, how much money is too much money in ai? shery: now, we are of course expecting sk hynix commit you to report second-quarter earnings this hour. it is expected to report a

fourth straight contraction, pointing to signs that a chip recovery remains elusive. we saw those early trade numbers come out of south korea and to chip exports didn't necessarily look good. is sk hynix simply going to confirm the trend? >> good morning. that is likely. a lot of analysts we have spoken to say they are delaying their traditional -- when the recovery will happen. it was predicted that the third quarter may be the time but now a lot of them are going back to the fourth quarter because the demand for smartphones and pcs remains weak. when we see the sk hynix earnings later today, probably within the hour, we are likely to see the third quarterly loss from the company. sk hynix, the second largest

chipmaker and its results often reflect the demand for consumer products. that might not be the main focus of investors today. what they are focused on is sk hynix, their views on the ai related chip demand. there company is one of the dominant suppliers of the ai chips related to nvidia and other companies. the company produces what is called high bandwidth memory chips. hbm has been a key focus of the market lately. haidi: when it comes to the broader pace of recovery, does that tell us it is going to be slower than expected even as we see the pace of price declines? >> probably. the pace of the recovery may have been slower than expected,

but it is interesting that is what investors are concerned about. what investors are concerned about is more ai. sk hynix share price has been rising more than 50%. even though gain has been stalled in july, the company is still outpaced to -- it's rival samsung and that is because sk hynix has such a huge presence. investors saw the major ai play within the asian market was sk hynix and that has been bringing a lot of demand for shares. we are likely to see inflows of investor money continue to come in because of this continued ai boom. haidi: of course as we get into the start of trading, chipmakers and sk hynix, we will be getting those numbers hopefully within the hour.

one of the leads, potentially more than the big earnings from the u.s.. also getting numbers out of see atl. taking a look at how we are setting up. it is looking muted. we are looking at equities trading in the future session in sydney. the aussie dollar was the outperformer when it comes to the g10 space overnight. we had the dollar slapping five sessions of losses. those with exposure to china excel earning gains. also looking at the start of trading in japan. ek futures looking flat at the moment. the key is going to be how we set up for trading in greater china and hong kong. tech stocks in hong kong may see a pullback even though we had a 6% gain in the previous session. also watching luxury names as well, given we did see the downside from lvmh u.s. sales upsetting the strength it had in asia.

but of course, it is also geopolitical uncertainty at play. beijing's announcement that it has removed its foreign minister, doing little to answer the phone a mental questions over the downfall of one of xi jinping's handpicked investors. this is i guess a conclusion to what has been a month of mystery and uncertainty. it really poses more questions the -- than we have answers for. >> that is certainly true. although we do have a successor come if for the foreign minister position. why he was qin gang's predecessor we have not gotten a n explanation. we do not know what transpired. we may in the days or weeks get more information.

if there were officials who were under investigation, and we have no indication that is what happened yet, but if there were in the past such officials, there have been announcements. if there was health reasons, we had the foreign minister earlier saying there was a physical condition that kept him from attending the meeting in indonesia. if there was a health issue, we may get an announcement of that. unfortunately, there is no guarantee that beijing will be forthcoming with more details. there is no guarantee we will ever find out exactly what happened. shery: we have gone back to the former foreign minister now again predecessor wang yi taking the helm. perhaps more continuity in geopolitics. what about continuity in geopolitics, given we have the governor of the central bank. >> there is a theme developing

with these changes in personnel and that is continuity. obviously, economics, china finds itself in as complicated a situation as it does in terms of diplomacy and recovery has not been as good as people had hoped. there's a lot of challenges. use unemployment is notable. i think a situation like this, the president would like to see someone who is a trusted head at the wheel -- has overseen the currency for many years and has been at the foreign exchange for many years. he is somebody who knows how the financial system works. he is 70 who has had many years experience, a veteran to call on during a difficult time. shery: still ahead, allspring global investments explained why they see recession risks continue to linger and the

lagging impact of previous fed rate hikes. more on their market strategy next. this is bloomberg.

♪ shery: sk hynix earnings just crossing the bloomberg.

second-quarter consolidated operating loss of 2.8 a trillion yuan, slightly steeper than estimated. more or less in line with estimates. second-quarter sales coming in at 7.3 trillion yuan, beating expectations. the consolidated net lost just shy of three trillion yuan, slightly steeper than estimates. consolidated operating loss more or lined -- more or less in line with estimates. we had been expecting a fourth straight quarter of sliding sales. we have seen increasing signs of chip recovery being long-delayed. we have had memory chip prices decline, but overall market demand remaining weak. -- indicating we would see further weakness to come. sk hynix announcing it would cut production even further.

we are also seeing the kind of promise of ai is broadly supporting memory chip stocks but analysts have been focusing on rising demand for electronics and service. as we know through those microsoft and alphabet numbers as well, the monetization aspect of ai has not come to fruition just yet. sk hynix, as well as other chipmaking rivals, focusing on developing high bandwidth memory to try to pack in more storage. there maintaining the previously set cap explants for 2023. second-quarter sales driven by smaller demand on ai related memory markets. continuing to watch for some of those developments. second-quarter sales beating estimates. we were expecting a further quarter of decline. this bring in our next guest to says recession risks more broadly are still lingering.

and malecki -- ann miletti. it is interesting chip stocks is one example because you see this divergence between how investors feel when it comes to ai exuberance and when we see chip name valuations at the moment. and the reality of the actual business. do you see that split when it comes to what we are seeing in stock markets? >> i do see that a little. certainly the stock market has been reacting quite well this year. that has been a relatively good sign. i would say the better sign has been the broadening we have seen since the end of june where you have seen more than just large cap names participate in the market. i still think there is still risk of recession out there lingering. as you stated earlier, it is really the impact of the rate increases we have seen earlier

that have not fully impacted the economy yet. although the market has seemed to move on and produce a soft landing, it is just a little too early for us to fully predict that. shery: -- haidi: we are continuing to see comments that the memory market is recovering after hitting a bottom in the first quarter. when you look at where valuations are out for the ai rally that is so significantly driven the bulk of gains we saw in the first half, do you think there is still room for opportunity and value there? value being a relative term. >> what i think is interesting is that this is the earliest part of the ai cycle. i have seen these types of cycles before in my career. whether it has been other types

of technology cycles, biotech or others. the early part of the cycle, there is always certain parts, certain stocks that rally hard. some turn out to be clear winners. others do not. there is very often broader areas of the market that get ignored in the beginning. i think what our investment teams are doing right now is looking for opportunities to invest long-term in areas that will benefit from ai technology. and more broadly, even though what i said earlier about being fearful that recession is still upon us, we would suggest that investors need to stay invested in the market and history would tell us that. timing the market is not a good thing. it is the time you spend in the market that is important. looking for unique opportunities is key.

there's so many of them out there, even today. it is really taking very careful looks at risk versus return and valuations. valuations is a critical area that all of our teams are really keen on right now. shery: would you find better bargains in china where the economic data has not necessarily been great, but there is so much expectation right now that we might see more stimulus? >> that's an important point. china is an area where there has been a lot of fear. for good reasons. with markets also kind of priced, given that not much can go right. when i talk to our experts that focus on emerging markets, what they are saying is the markets are not priced for much to go right. and so, there is opportunity. much like domestic markets

within china, there are companies. when you look at the top down, it does not look super attractive. but when you look from the bottom up, there are certain industries, certain companies that have been weathering what is going on, the lower growth rates, the other changes within china. they have been weathering it well. earnings expectations within china amongst many companies have been surprisingly doing quite well. we think there is opportunity in china and our emerging markets teams are looking there. they are not ready to take an extreme overweight because they are excited about other emerging markets as well. but, china is not an area they are willing to ignore either. especially because so many other people are. shery: i am curious, where exactly in china? are you talking about state

owned enterprises that have the backing of the government? what about the private sector? we have seen random crackdowns in different sectors. >> it is obviously more the private sector. it is in companies where there is still good growth opportunity and where there have been those crackdowns, you can see, with the language changing, the government is filling the need to maybe ease up on pressures. just given what is going on with their top-down growth projections. i think we will start to see some change. we will also start to see more stimulus. not the same kind of stimulus we see here, but more stimulus going into the market. haidi: good to have you with us, ann miletti. more to come. this is bloomberg. ♪

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shery: sk hynix los coming in larger than expected despite the fact sales beat expectations of 73 point -- 7.3 one trillion yuan. what cut my eye is how much they are on the frenzy. solid demands on ai related memory. we will discuss with clsa. this is bl back in the day, sneaker drops meant getting online to wait in line. now with xfinity mobile... ...we get the fastest mobile service and can get the freshest kicks asap. i got this. save hundreds a year over t-mobile, at&t and verizon with the best price for two lines of unlimited. nice job, little sis! they grow up so fast... i'm a fan. from xfinity.

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also, sk hynix numbers just coming through. we are watching reaction to see atl in the greater china markets. we had so much exuberance when it comes to the gains in hong kong and milan markets. we will see whether that rally will continue given that in addition to this -- the pledge to support the economy, we have political uncertainty. removal of the prime minister who has been absent from public you -- public view. an appointment of wang yi. this is what we are seeing, a little upside in sydney. watching aussie bonds in particular they look vulnerable to potentially a nasty surprise. we have quarterly inflation cpi number for australia do in just a couple of hours time. we are seeing bond markets pricing in one more hike in the rba. we could see that really have a reaction to the bond markets particularly if we see a more hawkish fed.

also watching nikkei futures. down about .1%. and watching a lot of chip and tech related names. shery: what a week. 500 earnings results this week. sk hynix just reported consolidated operating loss for the second quarter of 2.8 8 trillion you one for the better part of two years. they have all struggled, given the collapsing demand for memory chips essential to smartphones, servers and computers. let's bring in sanjiv verano. despite this downside we have seen in this space, sk hynix also seems optimistic about what to expect from ai demand, saying when it comes to second-quarter sales, they were driven by solid demand on ai related memory and they expected to continue through the second half. are they right in banking on

artificial intelligence? >> inc. you for having me. yes. i think they did right. we are seeing a fast pickup in demand for high-value memory ad solutions which includes memory and gdr five. we are seeing increasing adoption of ai up by major customers. that makes us believe a turnaround for memory is very near. shery: when could we see that? >> if you look at sk hynix, there is -- for memory already turned around. this is the first turnaround since the first quarter of 2021. in a way, the memory space has already turned around and that signals the end of the memory down cycle. in coming quarters, as shipments for this high-value add memory solutions pick up, we think they will show growth. on top of it, we believe major

memory customers are done with -- so for smart phones pcs we expect incremental improvement in the second half. haidi: are these numbers highly relevant to investors? or are we still seeing dislocation still driven by anticipation of future earnings from ai? >> no. in the case of sk hynix, the numbers we have got, there -- they're operating loss narrowed to about 2.8 trillion yuan. we are seeing some sequential improvement and this is primarily driven by increased ship -- shipment volumes. as for sk hynix, it is not all

hype. it is now showing up in the company's numbers. the shipments of high-bandwidth memory solutions, especially to nvidia, will pickup in the coming quarters. haidi: what other opportunities do you see as we enter this part of the cycle? who is best placed in the industry? >> in the coming months, we will see the full impact of the high -- these companies have made in the last two quarters. in a major production cycle, it takes five or six months for production cuts to show up and supply numbers. we expect memory supply to tighten significantly in the second half and this will continue into 2024 as well. as far as memory stocks are concerned, we will see the demand-supply balance finally turn in supplier's favor after

almost seven quarters. we can expect a big improvement in earnings for memory companies in the coming quarters as well as 2024. shery: we will also get more details on samsung this week. what are you expecting? how will these south korean companies actually get impacted by the ongoing u.s.-china tech rivalry? >> samsung are ready -- already released preliminary guidance two weeks ago. i do not think there will be surprise on the operating profit side. given that samsung is -- in a normal year, 50% of their earnings come from memory. samsung's share price movement will be very much driven by what happens in the memory industry. there we see signs of recovery and this is driven partially by -- rebuilt by major smartphone

customers as well as reduction in supply thanks to the big production cuts these companies have made in the last several quarters. as far as these companies being impacted by u.s.-china trade tensions, i would say these are not so much impacted. there are only three major suppliers of ram memory globally and china is a big consumer. so, they need memory. i do not think they will have any issues for korean companies in supplying memory to the chinese companies. in fact, the u.s. government has been going soft on korean companies operations in china. these companies have got -- from the u.s. government to import equipment and this waiver is unlikely to be extended in october.

tim: sanjeev rana, head of career research. staying with semi conductors, texas instruments has given a lukewarm forecast for the current period, adding to signals that a slump in demand for electronics is dragging on. ti seeing revenue of four point -- the midpoint of that range would come in below the average analyst estimate which sits at $4.59 million. that report sent shares sliding in extended trading. counting down to samsung's galaxy unpacked event. they will showcase new devices as it seeks to edge out its main competitor apple. mark gurman joins us. mark, what are you excited about? what are you looking ahead to? >> based on what i am hearing,

there is nothing entirely too exciting to expect. we are talking about three categories to see updates. to set the stage, new vulnerable phones, new watches, new tablets. the phones, two new phones, an up rates to their full double flip and their full double fold. the big one and the small one. the upgrades there are about the hinge. the hinge is now stronger and allows the phone to go thinner. the full one, the bigger one with the screen on the inside cover that gets slightly lighter. other than that, the improvements are very minor. and the processor gets a bump as well. battery life remains the same. very modest upgrades. the tablets, three new tablets. the s-nine, s-whole -- the big news is the entry-level version is going to get a faster

processor. the other ones get that as well but also for the first time, an oled display. that puts them far ahead of apple which i do not anticipate adding oled to their tablets for three to five years. the watch upgrades are decent as well. bigger screen sizes. those watches are $300 and $400 respectively. modest improvements across the line. week on the phone for the tablets are more exciting. shery: you do not seem excited about the event overall. what will investors be watching for? >> it is the technology industry at large. you look at what apple is doing, google, samsung, there's really not a ton of major excitement and innovation coming out of any of those companies. if you really take a step back and look at how long these development cycles are, these are three to five-year cycles.

we had covid preventing people from being able to engineer and develop new products across 2020, until the tail end of 2022. right now you are seeing the impact of covid on those development timelines and they think things will normalize maybe only two years from now. investors, it does not matter how exciting the products are, as long as they sell. you see the full double market growing. the market was under 0.5 percent less than five years ago. now, it is already 5%. imagine what it is going to be in three years. the good news for investors is that samsung owns this category and it is the most profitable and revenue-based category that gives the highest revenue of any type of smartphone. $1800 for these phones. $2000 with higher storage. as long as people are buying full doubles and samsung remains the flagship at the forefront of

that category, samsung investors have good things to think about. haidi: mark gurman with the latest on the samsung event. we will be getting a little more when it comes to plant -- for luminary results to be got from the company later in the weekend we will be speaking exclusively to a samsung executive vice president. we will take a closer look at the new flip and fold phone line up and plans for incorporating ai into their products. this is bloomberg. ♪

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♪ shery: china's push to rev up consumer confidence and reinvigorate faltering recovery has not come a minute too soon as economists continue to downgrade growth forecasts. our editor kathleen hays is here with the results of our latest survey. what do we see? >> we see an economy that is slowing. that is what people have been looking at more and more. the economic recovery has faltered. consumer confidence has faltered. revenge spending has not lived up to expectations. all of these are not suggesting huge recession, but definitely suggesting a slowdown over the next couple of years.

therefore, putting more emphasis on how important a more aggressive response from the government could turn out to be if that is what we see. the survey was done from july 17 through july 24. that is just after the raft of data we saw showing a disappointment. it got the markets rattled not only in china but the u.s. right before the monday statement from the politburo came out that has also created such a storm. let's talk about the numbers. in terms of what is going on in terms of fourth quarter this year, gdp is expected at 5%. that is the government target, down from 5.4%. for the year, the forecast is 5.2% year-over-year. it had been 5.5. for 2024, even weaker. 4.8 percent down from 4.9%.

for 2025, just 4.6% growth year-over-year. in terms of inflation, we are seeing a slowdown for this year from an expected 1.2% to 0.9 percent. there are deflationary forces in the economy but it is not that things are falling apart. but it does suggest the government could heed these signs that the longer they withhold stimulus, the longer this sense of things not quite working out could continue. in fact, -- markets are on the low side. they see a 4% rise in growth next year and are calling this the new normal. this was a survey of 73 economists. haidi: response from the government? >> not overwhelming yet. in terms of the one-year median

term lending facility rate, it is expected to be cut by 10 basis points to 2.5% in the third quarter. that is a bit more than five basis points, but still not a big move. in terms of the rrr cut, people are expecting it to come in at 25 basis points. there were questions in the survey about bigger picture things like president biden's high-profile trips to china. and, would this ease u.s.-china tensions, reduce the risk of spillover. not everybody answer the question. seven of the economists say it will. not a big resounding move. in the survey itself, you get the sense of uncertainty. a lot is riding on everything the government does right now. haidi: kathleen hays. the international monetary fund has raised its gdp growth

forecasts. the chief economist pierre olivier told us more about where the fund is seeing improvement and where there is ongoing risk. >> the biggest threat remains inflation. we have had good news on growth, we revised upwards a bit and there was quite a bit of resilience in the global economy. especially in the first quarter. momentum is slowing and this is why at the end of the day, revision is not strong and why we are going into next year also with relatively modest growth. behind this, we are seeing headline inflation come down because energy prices are coming down. below the surface, if you look at underlying, core inflation, it is proving persistent. that persistence is a real challenge. a means central-bank monetary policy needs terrain -- needs to remain in contractionary category.

that is clearly the main focus and should remain the main focus going forward. >> the question remains whether or not central banks doing so, keeping policy type ticket inflation back down to target, is ultimately going to come at the cost of a recession. when you talk about growth that is moderating, even moderating growth is still growth. your forecast for the u.s. specifically, 1.8% this year, 1% next year. is it your anticipation that the fed can achieve a soft landing? >> that is right. recession is not our baseline forecast. it is a very narrow path. when you get to a growth rate of 1.1%, this is fairly low. you wouldn't think much -- it wouldn't take much of a shock, increased energy price or whatnot, to knock that trajectory off its rails. in a sense would be are saying is that it is a narrow path, but achievable.

we are seeing a slowdown of the economy. good news on inflation in the sense that core inflation remains high but is expected to decline. monetary policy weighing down on the economy overall, as it is expected to be come a as it needs to do. if we can stay on that path, we are avoiding a hard landing. >> what about europe? you wrote the euro area is set to decelerate sharply. how sharp? could be look at a troubling recession? >> the slowdown in the euro area is much sharper. we are expecting growth will come down from 3.5% last year to 0.9%. this is quite a bit of a slowdown pair but there is a lot of variation between european economies. when you look under the surface. some of the sharpest slowdowns are in germany, for instance. some economies like italy and

spain are doing better than expected. what is driving this is how global demand has been rotating away from goods and into services, including tour is impaired companies that -- tourism. haidi: that was the imf fund chief economist speaking to kailey leinz. breaking news out of japan, we are getting services ppi number. you're on your growth of 1.2%. we are seeing it stay in positive territory. for the month of june, actually below estimates and easing from the previous two months when it stayed at around 1.6%. interesting how those ppi services numbers in japan are actually starting to ease. potentially something that will go into the calculation of the boj this week. later, as we see inflationary

pressures, perhaps easing. more to come. this is bloomberg. ♪

shery: after rebranding twitter, elon musk is planning to turn the at into a one-stop shop for financial services. let's bring in vonnie quinn.

i am confused, what are we doing? are we tweeting? what would this look like? vonnie: i have no idea. what this would look like is also a mystery. but at least elon musk seems to be ambitious that it will happen. he has been tweeting about it. he even tweeted about it in 2022. it is highest -- it is his idea that we need to have something more akin to we pay, or we chat. but we know the payments graveyard is filled with former attempts from mega tax. remember libra? from facebook? mastercard and visa were on board with that until facebook abandoned the project. we also had google planning a digital financial offering and lined up 11 partners before it nixed the idea. although it did have some success in india. we even had amazon try to come up with one of these, but also

abandon the plan. too expensive, too ambitious and so on. it is the holy grail because consumers are sticky. we love to stay with our bank. it is one way to make money. >> that was a blast from the past with those names. he is nothing if not ambitious. >> exactly. he always thinks upscale. it is difficult to bet against him. most experts we spoke to would say it is not possible. of course it is, but a lot of time, a lot of money and you have to stay compliant globally. is elon musk able to stay compliant? lawmakers and regulators in the united states and most countries are hugely focused on anything banking related, particularly consumer banking. it is extraordinarily difficult to get licenses. that said, they have four licenses from four u.s. states so far.

maybe that is a tiny step forward. many of his ideas are pie in the sky. remember the tunnel between new york and d.c.? many of his ideas also do come to pass so i don't think you will find many people saying this is not going to happen. he may want to get some advertising revenue back so he can invest in this. haidi: market opens in sydney, seoul and tokyo next. this is bloomberg. ♪

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>> this is daybreak answer.

not to mention, we have sk hynek's reporting. it could be as well. the reappointment after. kluth is all coming on the eve of the federate decision. we are heading toward the doj decision as well. look at how the japanese markets are coming online. we are seeing a little bit of downside there. we can apply volatility near our four month high. we are watching the bond space as well.

investors are cautious ahead have the doj policy decision. a lot of people are just hedging and selling this at the moment. look at the 10 year yield. we are seeing it slightly higher. that 389 getting close to that 390 level. a two year yield down. we have that increase in consumer confidence. this is really factoring into the markets at of the federate decision. we are watching the semisoft closely. sk hynek scanning about 2% at the open. they reported better than expected revenue. declaring that the market is

recovering because of surging interest in artificial intelligence. we did see that consolidated operating loss. >> maybe this is one of the few that can show in their numbers where ai is starting to pay off. in terms of what we are seeing in these earnings. look at the start of training. we're also watching the australian bond market. a bit of a downside is that if we get a bit of a surprise from the court of as well.

we also watching the aussie dollar. this is alleviating those d10 gains on the back of the china valley. the pledge for more broad scale economic support there. really sending risk assets. we are still watching these markets as well. all is in the asian session, edging a bit lower. the fed decision is in focus. mpi numbers are offering a mixed picture of stockpiles before we get the official figures. we are seeing the wti falling to $79 per barrel. we are seeing a confluence in the energy markets. prices have big implications for inflation more broadly.

because they expect asian corporate earnings to accelerate significantly. let's bring in hsbc, the head of equity strategy here. great to have you with us. how much of that upside will come from the tech hardware sector? because it is fairly broad-based. because profit numbers in china, in the first half of the year, q3 and q4 are increasingly look better. these are the consumer sectors. we are looking for in a celebration there in the second half. it comes with risk. the earnings numbers for the moment are pretty ok. >> what do you like? because if you look at this, there are a couple of times

across the region. let's look at china. the economic outlook is difficult. and the numbers are coming down. but they're actually holding up reasonably well. shave off some risk down there. that is actually not too bad. add to that that the global macros will help out. i think there are areas to look for. i can see that market doing well. the other markets we like our india. those are interesting both stories for the next couple of years. >> it is interesting. india has been one of the proxy alternatives, seeing flows out of china. this is the other one.

>> i think that if china performs well, the feeling is that -- i think it might actually work out a little bit differently this time around. that's where people are really well-positioned. particularly in japan. those funds are pretty much over there. people are up to the noses in japan. really well-positioned in korea and taiwan as well. those are export markets. that is a bit of a risk. it might actually flow toward india in due chorus. we will definitely be cautious on japan. >> you also overweight thailand equities as well. mostly sidestepping the political ones there.

is that having an impact on on broader corporate sentiment? because the few we have taken to a certain extent, that shows the political side away in thailand. the first time i was in thailand was the late 80's and early 90's. there is a disjunction with what happens on the street and in the markets on thailand. mainland chinese, if it goes out, this might lift that market. to be honest, the numbers coming through our lead. that is kind of a tactical call made on thailand.

close you are right. the foreign minister there, remember, the foreign minister if the mets if there are pockets in china that are ok for a variety of reasons. as an equity strategist, we have the benefit of looking at that. that is exactly what i try to do in china. >> hello, i was going to talk to

you. the head of asian equity strategy. coming up next, china will change foreign minister's under -- after just seven months. we look for answers. richard mcgregor of the little institute is with us. this is bloomberg. ♪ 76% ofndme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme. and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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it has removed its missing foreign minister is doing little to answer more fundamental questions. he is being replaced by his predecessor for 10 years before him. let's bring in richard mcgregor. the chinese government has been systematically removing him from the foreign ministry website. it is hard to see if there is anything other than that. we should be humble about what

we know. it seems increasingly likely that he is gone for good. >> what does it tell you about the internal fashion politics? >> we will learn everything over months and years. it is pretty clear medially.

>> it is a lot for one man to handle. he is juggling multiple responsibilities. >> he has a more senior job as the director of the foreign affairs commission. i think where china needs to be representative is more than perfectly capable. i think what we bought for now is who will replace. i think he will be. >> what does this mean for the next generation of chinese leaders? we knew this was the front -- youngest foreign minister in decades. >> yes. we might sort of revert to the normal service.

it is very hard to see someone coming from nowhere as it were. there are a couple of candidates. the head of the liaison department. at the right level of seniority, they are at the right level of age. they're both extremely competent performers on the international stage. i suspect if there is a new foreign minister, it will be one of those two. >> coming up, a longtime central banker now. this is just a sign of continuity for economic policies in china. >> it is a sign of contribution. economic policy is another thing altogether. we have a lot of contradictory economic signals.

that is the fbi private sector, dual circulation, the firebombing of the economy. this is becoming much more volatile. i think in that respect, this is where the pbs he represents stability and a firm hand. >> what comes next from this follow-up? do they need to do it to show they were handpicked even though he broke a number of expectations within the party to put him in that position? that no one is immune? >> xi jinping has proved no one is immune. i think the point about the investigation is very interesting. whether it is by corruption or

personal misbehavior. the parties stand as criminal law. it is not just about corruption. it is also because if you have had an extra marital affair, if you had a mistress, if you have in the child out of wedlock in the united states, that is the sort of thing the party can also hold you to account for. that is not clear at the moment. i expect we will get a statement eventually. it is hard to know when the proper parties are at some stage. >> domestic reporting and speculation.

close generally speaking, there is no large change in policy. educational policy has been hindered. because this has generally been turned down. this was very tough for many people in europe,, new zealand, the united states. there is no big change in policy. and a new foreign minister has to find their feet. it is a setback but not a fundamental change. courts will degrade to have you with us. the senior fellow for east asia at the little institute. you can get a round up of the stories to get your day going in today's edition of daybreak. it is also available on the mobile in the bloomberg anywhere app. you can customize settings you get the news on industries and assets.

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>> courseware doubling up on this responsible. building on the printable's that have guided our work for many years. because we have been sharpening our focus as a company. investing responsibly with great discipline. this will weaken operate cost-effectively. quickly, betsy with the company's development of ai technology. you can see help about shares have accentuated training while

microsoft was really prescient on a top sales forecast. sue keenan has been delving into these reports on the earnings call. let's start with the alphabet. we have seen google search, withstanding the competition. they help thinking throughout the conference call. often we will see a drop off a bit as comments are made to spend all the investor focus on ai on the day. it was the biggest driver of growth. ad revenue continue to rise. she was at even in the face of competition. the concern that chanting team might be able to soften my users from google search. google cloud is still going strong and deliver yet another laughable quarter. it was also a new chapter for alphabet pasta ceo steps into a new role as president and chief investment officer.

this is one of the most powerful women in silicon valley. she says she is very excited about the move and wanted to emphasize that she would remain in the role of cfo until a successor has been named. she talked about the pride and all that off but have been able to achieve. as part of pass for 62 billion. there was mardi gras -- modest growth from youtube. you have heard from the ceo talking about the company's chapa. they say this is going well. investors appear to hear enough excitement about ai. capital spending is huge in ai for alphabet and so starkly performed well after hours. that is expected to translate.

>> microsoft disappointing on sales growth. and the guidance on at -- guidance on ai? >> microsoft had a huge pop here today. a lot of people were listening for application and more details. perhaps more detailed guidance. they did not really get that to the extent they wanted. also, modest growth for cloud computing demand. it is really easing after years of spending. microsoft is forecasting a continued slow down. that overshadowed all the optimism about the product, revenue rose. that is a come down from 31%. there is an array of new ai programs.

they have said demand has continued strong. perhaps they did not hear the details to the extent they wanted. it is a big race out there. other analysts saying it was very early in the game to declare anyone is. overall, results did. >> sue keenan there. let's look at some of the other earnings. this was more robust and more

expected as consumer demand for mental strong. it comes as u.s. consumer confidence evolves to a multiyear high in july. texas instruments has given a lukewarm earnings forecast for the current time. in the midpoint of their branch will come in below the average analyst estimate of 4.5. chinese battery maker's court -- quarterly profit has soared. and stabilizing prices of key materials including lithium.

$14 billion. both of those figures beating analyst estimates. question do -- take a look at some of the stocks. we are seeing some upside. this even as we see. they are seen quarterly profit really sore. strong growth when it comes to battery. a little bit of downside.

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>> the third may be facing an especially hard decision as they gather for what may be a pivotal moment in the fight against inflation. kathleen hayes is here with the latest. it is getting hated.

what is each camper arguing? >> you won't be surprised to hear. this includes jim bullard. the president of the st. louis fed. meanwhile, he will be at this meeting along with his former director of research, chris waller who is now at the board of governors. basically they are saying they could be in favor of two or rate hikes depending on information that core inflation has not come down anywhere near as much as the headline number. right in the middle is a camp led by jay powell. studies disinterest. the centrists agree there could be more rate hikes needed. beyond this one but they think the pace has to start out. even if they leave the door open to a rate hike, they will probably emphasize that.

if you provide phil bostic come the president of the atlanta fed as one of the leaders of that cap. along with the new chicago fed president. both of them pretty dovish. they think there has been a lot done. inflation is coming down and it is not worth risking damage to the labor market. basically, markets are with the doves -- darkside. that is a, no more. investors are voting dovish. ultimately, i think a lot of people are betting that we probably get the hike for july. keeping the door open to more hikes if more are asked they needed. >> economists have downgraded their forecast for china's gdp

growth in g20 24 and 2025 as well. are downgrades significant? >> what is most significant about this is -- they are not forecasting the session. once you get below 5% growth, that is a big concern. if you look at the fourth quarter is coming up, i downgrade to 5.0%. the government would be fine with that. when you look at the first quarter and you see the forecast no seat at 4.3%, a little less than what we have seen before. that is when we will see more concerning. that is the average of 73 economists in this bloomberg survey, down at 5.5. by 2025, down 4.6 from what we see overall. in terms of inflation, also seeing it a little bit weaker on the year for the cpi year-over-year.

a little bit is inflationary. not with the chinese government wants to see. they are one of the more bearish ones. 4.0% for china's gdp. this is what they think is the new normal. the medium-term lending facility right is expected 10 basis points. that is double what was expected. that is still very much. they expected 25 basis points. no change on that. the markets are not expecting -- economists are expecting that stimulus will pick up. this survey was taken after july 17 after a rash of weaker than

expected economic data in china. and then the statement before that was given out on monday. the messaging from the government, where that make a difference? not all the questions were answered by all the people who were asked to do the survey. those high-profile trips using you as time tensions these things out. they don't think they are going to do much. >> kathleen hayes there. take a look at the set up right now. we are seeing downside pressure for japanese and korean stocks. the nikkei being the lower by an energy consumer discretionary and real estate stock. every factor in the red for the nikkei. the cosby is not -- now .8%. samsung is losing against sk hynek's. it is up around 1% after this is reporting better-than-expected

revenue. >> bloomberg intelligence expects asian-pacific airlines to extend their strong rebound in the second half as post-pandemic travel kicks into full swing. joining us now is the association asia-pacific headlines. as i was saying, i think last time we had you here was actually during the pandemic so much has changed since. we are still not full capacity and there are concerns that some airlines are not in a rush to add that capacity. through staffing, equipment or otherwise. how close are we to a full recovery? >> recovery as a whole is almost 95%. the asian-pacific is lagging a little bit. the asian-pacific words only

open six months after the rest of the world. it probably takes another six months for the asian-pacific to be back to the 2019 levels. in this industry, it is a very difficult industry. it is like driving a car by looking in the rearview mirror. there will be a lot of traffic growth. then something like covid happens. when borders reopen, it takes time. make sure you have enough aircraft to operate and then you have three tensions. also, the servicing of aircraft takes time. also, we lost a lot of people during covid but only because he

left the industry after two years of closures but also through retirement. so getting people back also takes time. to be up and running again. it is not that the airlines are putting on as much flights as they need to but capacity constraints will continue to weigh. have they been optimistic about the china recovery? china has been relatively resilient on the recovery. >> i saw an imf report that said your travel recovery -- i think the same would apply to china. although the chinese recovery has been rather subdued. china accounted for something like 24% of international

travel. now it is about 5%. i think the chinese are also based on the same issues. put them back to capacity. i would say china would be back to 2019 levels. >> what about inbound travel into china? what are you seeing in terms of international traffic? should the government be doing much to spur some excitement over going into the country? >> chinese inbound travel is actually a bit better than outbound. i think the problem we face with china is really outbound travel. the chinese carriers cannot put back on the fights they cut because of the type order restrictions in china.

inbound travel is already waking up. the chinese have also relaxed many of the restrictions. prior to the opening up of their borders and other countries have also lifted all restrictions they had for travel to and from china. i would say that inbound is happening strongly and no need to see the outbound from china. >> global trade is huge. what are you seeing in terms of the economic slowdown in china affecting the trade picture and target when it comes to these airlines? this is one sector that remained resilient during the pandemic. >> you are right. i think cargo help the airlines to pull through during the covid time. cargo is actually declining. this is a lot to do with the

manufacturing sector. manufacturing, especially in china. it takes a bit of time for the global trade to return. supply chain issues should resolve. it is good to see that this is not just affecting your cargo. maritime is also backup. in the scheme of things, i think they are back to about 18 or 20% which is more or less where they used to be during the pandemic, cargo is accounting for almost 40% of the revenue and cost. close to you expected to be expensive for a while?

when will we see that elevation come down? >> prices are a function of supply and demand. now, supply is lagging demand because of the issues the industry is facing. >> i think supply from june, july and always is closer to demand levels. prices are respected to moderate. more to come here on the radiator. this is bloomberg. ♪

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>> the international monetary fund has raised his real gdp forecast to 3%, up from the 2.8% projection in april. we were told more about where the fund is seeing improvement and ongoing risk. >> the biggest threat remains inflation. we have had some good news on the growth. there was quite a bit of resilience in the global economy. especially in the first quarter. the momentum is slowing down. this is why at the end of the

day, the revisions were not as strong as what it is. behind this, what we are seeing is headline inflation coming down because energy prices are coming down. if you look at underlying inflation, core inflation, it is proving persistent. that persistence is a real challenge with some settlements and banks and monetary policy remains in contractionary territory. pro-kurdish >> the question remains whether or not central banks doing so, keeping policy tied to get inflation back that's target will, the cost of a recession. as you talk about growth moderating, even moderated growth is still growth. take your forecast for the u.s. specifically.

is it your anticipation that we avoid recession here? >> a recession is not in or baseline forecast at this time. it is a very narrow forecast. this is a fairly low growth rate. you wouldn't think much of -- you would think this would be much of an external shock to knock that trajectory of its rails. what we are seeing is a narrow path but it is achievable. we are seeing a slowdown of the economy. we are seeing good news on inflation, core inflation remains high. it is expected to decline. we see monetary policy weighing down on the economy overall as it is expected to be, as it needs to -- needs to do. if we can stay on that path, we are avoiding this. >> what about europe? >> you wrote that the euro area is set to decelerate sharply.

could we look at not just a slight recession but more troubling recession? >> there is slowdown in the euro area, that is certainly much sharper. we are projecting growth will come down from 3.5% last year to 0.9% this year. this is quite a bit of a slowdown. there is a lot of variation between the european economies when you look under this surface. economies like italy or spain are doing better than expected and what is driving this is how global demand has been rotating away from goods and into services. countries like germany are suffering more and tourist destinations are doing slightly better. >> singapore's sovereign wealth

funds has reported its worst five-year returns since 2016. the consequences of rising interest rates are yet to fully pay out. furthermore, let's bring in david who joins us out of singapore. we saw a similar sentiment. why has that file your return actually risen? >> it is mostly a matter of simple math. we have seen the pandemic, rising inflation and efforts to combat that. you contrast the 20 returns, the gse has not done the 12 month returns. in the last 20 years, 2003 has dropped off rotating numbers. because of that really bad fi three -- fy 03 drop off, it

looks good when the fiber looks terrible. >> how domestic is jazzy for the year ahead? " given the short term issues they have already discussed, you can see this in the five year not very. they see substantial issues going ahead. you have ongoing surprising worries as well as problems with continuing inflation. maybe even slowing consumption. broadly speaking, there warning that the markets could be quite troubled and growth could continue to slow. >> any bright spots? >> in a weird way, the fact that the economy is going to slow is contributing to some of the areas of investment. they are really focusing on things like private credit right now. if you presume that things are going to be tighter in lending, that in turn means that companies need money from people willing to lend them money and

jesse is increasingly playing that role both directly and indirectly. forcing bright spots in property believe it or not. when there say property, they don't mean housing or offices per se, they are talking areas like logistics. they give one example in an interview. indian logistics and warehouses along with consumption growth in the country. close you can see our past interviews on our interactive tv function, tv go. we can become part of the conversation sending us instant messages, doing our shows. this is for bloomberg subscribers only. this is bloomberg. ♪

>> >> getting breaking news regarding that political reporting.

that was step down by mutual consent on an 11:00 p.m. board meeting. they have agreed to step down as group ceo with immediate effect. we knew that meeting was taking place. the board meeting was to be meeting on her future and all of this going back to the mounting political pressure that allison rose has phased to resign after she spoke to a bbc journalist about the decision to close the bank account. they are speaking to that reporter. thinking she should reconsider her position. we are now hearing that allison rose will step down as the ceo effective immediately. >> we are headed for the china market opens. we will be seeing if that rally can sustain after xi jinping's pledged to revive growth.

we will finally know for some investors. >> for the broader level, we are watching how the market will go today. we have seen these episodes before with chinese markets jumping ahead of themselves. today will be a good opportunity to assess how much faith investors have in china's leadership. will the rally stabilize today? then we are seeing some company moves. we have the chinese battery leader that is sending strong signals -- lent despite competition.

also improving its margins for the first half. and we have the jeffries analyst upgrading the stock earnings. we are also seeing the chinese restaurant supply chain posting strong earnings for the first half. a lot of earnings today. quick charlotte younger. let's take a look at how futures are trading at the moment. u.s. futures are looking like this. quite process when it comes to the big tech earnings we had in the previous session. also, chip earnings in today's asian session. futures are looking pretty flat at the moment. we are seeing a bit of downside after what was a really robust rally.

the tech sector railing about 6%. we are seeing a little bit of a pull back there for what was really interpreted as a declaration of more broad support for the economy from that readout. also, geopolitical considerations of the absent foreign minister. i guess i can't -- a continuity candidate. that is if her daybreak in asia. our markets coverage continues, next. ♪

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