i'm craig melvin. thank you for watching.

good morning, everybody. welcome to street signs. it is uk inflation day and what we are seeing is that stirling is taking slightly higher after july inflation dates painted a mixed picture for the uk economy. headline inflation came in at 6.8% because you can see behind

me, that was in line with expectations. but, both the core and services cpi numbers came in hotter than expectations. jeremy hunter says the nation is not yet at the finish line in its fight against inflation as today's figure puts wage growth ahead headline inflation. the latest cpi print has overnight swap rates pricing and at an almost 90% chance the bank of england will hike rates again by 25 basis points at its september meeting and just over a 10% chance of a half percent inflation point. that is 50 basis point increase. now, this is the reaction we are getting across the income curve today. interesting. we have two-year yields stronger on the day. 5.10 is where we are at. 5.1%. the markets are pricing in at this rate just north of 6%. a lot of the upward movement in

yields we saw happened yesterday after very hot wage growth numbers. the two-year yield is tracking 10 basis points higher. further down the curve we continue to see more selling off. yields are moving higher today. we have that tenure guilds also trading at the same level, 4.6. on the week, tenure guilds are about 20 basis points higher. we have traveled a long way indeed and you can see that with the price of where it is trading, 89 cents on the dollar. in terms of the pound, this is the reaction on the pound today, you can see stirling is trading firmer versus the u.s. dollar, 0.3% but again, if you go back to where we were a month ago, we are about four major figures lower, close to 131, just one month back. we have got a long way for the pound. given how markets are reassessing interest rate hikes and the profile for the uk economy, we are seeing some strength in the pound transpire over the past couple of days. switching over to the major index, the 5100, slipping a bit

here, we are below 7400, 7385 is where we are in nominal terms. it is of course not just all about the interest rate hikes, but we have been talking a lot about the sectors that have exposure to china, so the commodities sectors within started to drop. we have been monitoring over the last couple of weeks, though today the are doing better. broadly speaking, we are trading slightly weaker today. and, in terms of the banks, this is the profile for the banks. a mixed picture, there is a lot of political pressure on some of these banks to start raising the savings rates for many depositors, and so far, the pass-through of higher interest rates has only been about 30% versus political pressure on banks to reduce margins they are making from these higher interest rates. this is the reaction on the board today for the uk banks. but, we are pouring through all

of this inflation data. standing in piccadilly right now, that is a great spot to be. the sun is just coming up behind your. email, give us a sense for the cpi figures. we are seeing a downward trend in food, prices, energy prices, but is it going to be enough to get to the bank of england's target? >> reporter: yeah, possibly not. i think really the critical element to note here is that the underlying cost pressures are -- price pressures, that is, those that would probably worry the bank of england the most. we talk about services inflation, which went up from 7.2% to 7.4%. that figure will probably stick out today for the bank of england because they will see that things are actually a little bit more difficult than they anticipated. you can also take a look at the overall core cpi inflation, that is the one we hoped would also fall off. it strips away food and energy,

and those are what actually soared, 7.9% to 6.8%. so, that strips itself out completely, and you still have core cpi sitting at 6.9%, clearly, there is still a lot of pressure in the inflation print. plus, that is seen in the way gross numbers which we saw at 7.8%. still higher than inflation for the first time in over six months, plus higher than it has been since the numbers have come out in 2001 think that has been absolutely critical for me to look at. there are a lot of worries still for the bank of england here, now anticipating an almost certainty of hiking interest rates by 25 basis points in september. early on, we also got to see, steve and cara both interviewed the exchequer secretary to the uk treasury, that was gareth davies. and really spoke about how the debt burden in the uk is also something that would expect to

grow the economy a lot more, but, at the same time, the biggest impact on that will be the inflation print. this is what he had to say when it comes to that debt burden for the uk. >> the key is to grow our economy. to grow our economy we need to invest in our people, boost investment, get more people into the workforce, that is what the budget was all about in march, but critically, we have to get inflation down if we want to grow our conomy. you are right to point out that the debt levels, that is as you know, partly based on the significant support of the government provided businesses and families through the pandemic, and then most recently with the energy spike and providing nearly 94 billion pounds of support to meet energy costs. so, it is no surprise that debt is up. to get it down and get the economy back on track we need

to get inflation down and as i said, that is the critical factor, here, and that is why today's figures are so positive, but we are not complacent. >> reporter: one thing is for sure, the job market is beginning to loosen, ever so slightly, right? we saw it in those numbers that came out yesterday. the bank of england will look to a lot of this data and ask themselves whether enough has been done, and what ore they can then do when it comes to those interest rate increases. do they have to put in one more after september, or is it time to pause those rate hikes? >> certainly saying they have one more and then. thank you for that report but let me bring in the director for the center for growth. wonderful to have you with us. what do you make of the data we had from the uk in the last few days. wage growth is strong, services and inflation strong, core cpi higher than expectations but the headline is moving in the right direction. >> the headline will be down but i think the bank will be

concerned the persistence of core and services inflation going up. i think all the decrease in headlines is due to energy, basically. food is welcome as well but we are not really seeing any impact yet of interest rate rises from the bank feeding through to the wider economy and wider inflation. that will be of concern. and is well on labor market data, yes, some signs of easing, vacancies coming down quite sharply which is again, welcome. wage growth at record highs. still, three months, i think, trending upwards. quite a mixed bag. i think they will be concerned about the fact that the falling days of domestically driven inflation will be a concern for them. >> you know, one of the things the bank of england said at the last press conference is that they expected this headline figure two go through, reaching 7% and they are exciting it to hit 5% by october or november, which is where the uk government wants to see it by the end of the year. but, and this, i think is an element which goes unnoticed, three quarters of that decline is due to lower energy and core

goods. they cannot really give themselves a pat on the back, can they? it is just technical factors that are bringing down these numbers, not the bank of england's interest rate heights. >> exactly. it is very much due to energy prices, the base effects we are seeing as the taken. like i said, that will be a bit of concern for them as we continue to see broad-based inflation across the economy in certain services in core inflation and they will then have to review what they need to do to really have an effect on that but i think that they are hoping that as interest rates start to feedthrough a bit more, looking at the mortgage market over the next few months we are starting to see an effect on core and services inflation but if we don't and it has the ball in the court about whether they need to go further than hey are currently planning to. >> can the british economy withstand rate of 6%? >> it will be difficult. i do think there is a chance, if we are already at quite low growth going into that with rates where they are, now, or even at lower levels, i think

6% rates will be painful for the economy. the one positive is that the mortgage market is smaller in terms of people that have mortgages on their homes, then maybe 10 to 20 years ago. >> more of them are fixed instead of floating. >> exactly. as they roll off and i think people also forget the impact of things like corporate debt, there is a lot of refinancing to be done towards the 2025. so if rates stay higher longer, you know, the pain for both corporations and households could be significant. >> what is the remedy? to put it all together, if core inflation, services inflation, wage inflation, all of these numbers are running north of 7%, the bank of england has no option but to keep rates high? >> i think so. look, we are at basic capacity. even though the economy is not performing great, we have a tight labor market, we seem to be at our productive capacity because business investment and other things have been really poor. there is not much else that can be done in the banks view, then

continue to raise rates and try to have the impact. but, it will probably have the effect of pushing the economy into a small recession, certainly hampering growth and driving up unemployment. >> is your growth outlook lower than what the bank of england has penciled in? looking at their latest forecast, there is nothing really to shout about, the forecast is about 0.3% for the next few years but it's not great but it's not negative. >> i think in the short term our outlook is similar. may be a bit lower because we are feeding through the impact of higher rates. that, in the longer-term, the question facing the uk economy, you know, there are lots of questions about how the uk will position itself vis-@■vis the u.s. with the inflation reduction act, the eu response in terms of the industrial deal, where growth is going to come from in the next few years with uk business investment lacking and there needs to be a major shift to try to change that because -- >> but there are structural issues, and this is something that i think stood out to me, of the numbers that came up yesterday.

we were focused on the strong wage growth trend but at the same time, if you look at the unemployment figures, there has been a big uptick in the number of people leaving the workforce mainly because of long-term sickness or for other reasons as well but these are structural issues, these are not issues that the bank of england can fix. so, i do have sympathy for them, because these are the types of issues that make their job more challenging. what is the remedy? >> i think you are right, there are structural issues and i think that if you look at our labor force compared with other countries, compared to where we expected it to be, the gap is much larger. are excited labor supply is much lower than we would have thought, and that is down to long-term sickness and also a combination of brexit and covid. people leaving as well, i think we have to look at long-term the productive capacity of the economy which means driving a business investment, do the basics better, providing energy at a cheaper level, having better infrastructure, improving our grids, and driving business investment so that we can grow ai and

renewables, in other areas, and having probably a bit more of an industrial strategy type approach, because that is what everyone is adopting globally to try to compete. >> do you think that is on the right track to do all of those? are they doing the right thing? >> i think they are doing some good things. certainly ai is making a big push. we are doing some things in that space. we haven't had an idea of how the uk is dealing with china's and the eu's actions and it feels like the uk is being a bit buffeted by these changes. and what we hear on a day-to day basis, with changes from the industrial sector and our services, they just don't know how the strategy is for how to drive growth and where we want to compete. >> the inflation reduction act was quite costly for the u.s. and people in the u.s. still talk about the huge amount of issuance that the treasury has to put into the market month-to- month and there are buyers of u.s. treasuries but it has become more of a concern.

the uk is in a worse situation because we have a twin deficit. and so, if we want to finance these huge investment plans, to compete with the likes of the ira and artificial intelligence, chipmaking, et cetera, how do we find that? where is the money coming from? >> realistically we cannot compete on money and scale but we already give quite a lot of subsidies and intensive the thing we hear from businesses is that it's not just the size of the ira but also, the ease of access. in the ea it is very collocated to get those kinds of tax breaks. we also have to look at financial incentives, the ay that we regulate, bringing products to market, smoothing the path in terms of getting permits through renewable projects but there is a lot on the regulator side, which can help investment as well. it is not easy, it is not simple, but i think if we know we cannot compete on scale we really need to see what else we can do and start fishing in

that pond. at the moment, a lot of people are wondering, what is the incentive to invest in the uk? >> that is a great place to leave it. thank you so much for joining me today to talk through everything, and the outlook for the uk economy. the director for the center of growth at ecg. if you want to get involved in the conversation, if you have any views on anything you have heard this morning, you can treat me, i would love to hear your thoughts. and also coming up on street signs, sliding stocks, jittery growth and a real estate sector under pressure. we unpacked the latest from china after the break.

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welcome back to street signs everybody, let's get a check on markets. we saw a down day yesterday for wall street. all three majors slip into negative territory. the s&p 500 down 1.1%, below its 50 day moving average for the first time since march. so, one of the questions investors are asking here is, is this the end of the bull run? or are we at the cusp of a bear run going forwards, or is this just a mild --, as far as global indices are concerned. the handover from asia was also

pretty negative as well. more negative data coming in through from china. new-home sales falling there for the first time this year, that set the tone for the asian session but over here in europe we are shrugging off some of those concerns from the u.s. and asian sessions, and you can see that we are slightly more positive. actually up a 10th of a percentage point in the early hours of trading. let's dive deeper and break it down. this is the picture today, you can see back online again, we are playing a bit of catch-up versus how some of these indices performed in yesterday's trades but they did end the session weaker, yesterday. about a 10th of a percent today, we are seeing at the likes of mercedes, bmw right at the top there. 3/10 of a percent, also some of the authors names doing quite well. and then, a lot of talk about what has been happening with the data drop over the last couple of days. we did have the cpi number today come in line with

expectations, but if you scratch the surface, we are still seeing very strong pressures from services inflation as well as core cpi numbers. to strip away those volatile components, so it is keeping the pressure on the bank of england going into the next meeting. the market is certainly pricing and further interest rate hikes out of the bank. in terms of sectors, this is where the leadership is coming from. retail off the top at 8/10 of a percent. we are seeing good reaction there, insurance up have a percent and utilities doing slightly better today, some of the more defensive sectors are performing today, and on the flipside, we have telco underperforming down 3/10 and then travel and pleasure also down about 2/10 of a percent as well. no major moves, but it does tell you at least for the most part, we are leaning towards a more green session. as for asian markets. i touched on this earlier, the handover was not pretty at all. shanghai composition down 0.8%. shanghai down 1.3%, due to home

sales falling in china. also the shadow banking sector coming under further scrutiny, showing signs of distress there with a leading hinese trust firm missing payments on investment products. this falls after we hear the likes of some other companies missing bond payments as well. so, the turmoil within the property sector in china continues and the nikkei 225 also down 1 1/2%. we saw in the banking sector, falling within the nikkei 225 and that was a knock on effect from what we had in the u.s., yesterday. after this announcement suggesting that maybe they could be at some point thinking about downgrading the industrywide rating for u.s. banks and on the back of that we saw a big selloff that some major banks there. but, as for analyst, some of the analyst at these banks have cut their forecast for china's

growth outlook. this, after july's transfer in industrial productions and retail sales on tuesday coming to/interest rates. j.p. morgan says it expects china's gdp to grow 4.8% this year, down from 6.4% in may and 5% last month. berkeley has trimmed its forecast by 40 basis points, now seeing 4.5% for this year in japan also pulled back projections from 5.5% to 5%. home sales fell 0.1% on the year. prices fell in 48 of the 70 cities surveyed. the figures he put more pressure on beijing to prop up the country's real estate sector, which is facing a slump in demand and investment, with several high-profile developers defaulting in the past few years. let's take a closer look at some of the market action. jp, i went over the highlights of the last couple of days but another down day, a lot of red

today. tell us what you are seeing. >> good morning, joanne, good to see that europe is opening in the green. a sharp contrast to how asian markets ended this wednesday as he saw across the board and pointed out from tokyo to taipei, sydney to shanghai, we saw most major indexes closeout in major fashion, also linked to concerns about the chinese economy and slowdown of the seventh largest economy, one of the biggest trading partners for many of these major economies in this region. and, those home prices dipping for the first time this year, also pointing at more stress in the property sector. some analysts are saying that the property sector is overall connected to about 20% to 30% of china's entire gdp and if there are concerns and question mark over the property index, as raised by those declining home prices, you can see how much of a concern this poses, not just in terms of what it means for the chinese economy, but knock on effects for other economies in the region, showing itself

across those major indices from australia down to south korea, even. we also want to take a look at how the banking sector did today. you did mention those japanese banks taking their lead from the poor showing of lenders on wall street after fitch said they may have to downgrade dozens of lenders if the overall industry outlook in the u.s. does not improve. that a sense of chill across asia, not just for the japanese banks, we saw the a sx 200 financials index close in the red showing that many of these lenders in asia are also a bit concerned about what is going on in the u.s. and potential knock on effects from the financial sector. it is interesting that you bring up property in china. as we near with the hung saying closing today. the property index held onto a slight gain of about 0.5%. country garden, trying to recover after hitting its all- time low earlier this week. some of these did well, despite

all those lackluster data pointing at a possible slowdown and downturn in the property sector. investors also speculating and hoping that this will possibly tip beijing's hand and convince them that more stimulus is needed, more support for this very important sector and the chinese economy. but again, this is all hopeful thinking at the moment until beijing comes up with something credible and something tangible and substantial in terms of stimulus, you might not see sentiment improve in china and across asia pacific. this could cast a pervasive cloud over sentiment here in asia over the next couple of weeks, and even the next couple of months. again, also supporting those dour downgrades by major banks based on outlook for the chinese economy. back to you.

>> jp, i think you captured the sentiment very well there. a pervasive cloud of negative sentiment over the next couple of weeks which all boils down to how authorities will respond at this point. thank you for the overview of what has been happening in overnight markets. you can stay up-to-date with all the market action out of europe and beyond in our newsletter, the daily open. subscribe by scanning the qr code on your screen right now.

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welcome back to street signs. these are your headlines. july's uk inflation reinforces market bets that the bank of england will continue to hike rates as the headline cpi figure comes in line with expectations at 6.8%. but, core inflation and services inflation overshoots. >> really it is coming down significantly, you got inflation lower than at any point since february last year, but clearly, we are not out of the woods. we have some ways to go. >> new home prices in china slip, putting more pressure on

policymakers to prop up the ailing property sector while investment banks/outlooks for chinese growth. wall street eyes july's fed minutes for more information on whether the u.s. central banks will hit pause on rate hikes come september. but, minneapolis fed president insists the fed has some ways to go. and, intel terminates it's a $5.4 billion acquisition of is really chipmaker tower semiconductor amid reports that chinese authorities failed to improve a deal first announced in february of 2022. before we went to break we were talking about a negative sentiment prevailing in asian

markets, not the case for european markets today, trading on firmer footing with these up about 1/4%. doing quite well ahead of the action we had yesterday, all three majors deep in the red we had, but that is a 3/10 of a percent as you can see behind me, some of the automakers doing well today, also up about half a percent. a lot of focus on uk, the 5100 is trading sideways after cpi numbers, headline coming in line with expectations. but, again, the pressure is still on the bank of england to go for one or even two more interest rate hikes. that is the reason we are seeing some of the interest-rate sectors come under selling pressure. then playing catch-up with the rest, we were out yesterday for holiday down 2/10 of a percent. so, a couple of names we are watching out for in today's session, carlsberg has posted a first half net profit of 4.16 billion danish krona on revenues of 37 point eight

alien krona, slightly below expectations. beer volumes rose slightly in the six months of the year, supported by premium grants and strong demand in asia but nevertheless we are seeing a slight downtick in where stocks are trading, almost down 1% today. aviva has reported a first half earnings beat, operating profit for the period rose 8%, to 715 million pounds to the uk- based insurer says it expects to exceed its own medium-term targets for 2023 operating profit growth around 5.7%. being received quite well by the market, though of course, the story for the year has been quite downbeat. alcon has raised its outlook after reporting a 9% rise in net sales in the second quarter, ahead of analyst expect asians. we will be hearing from the ceo

on tomorrow's show. i will be sitting down with him later today. as for u.s. futures, this is what the u.s. open is looking like, this is, well, e've got all three in front of us, all three images opening in positive territory and of course this is breaking away with the end of the session yesterday, the close is pretty negative across the board as you can see behind me. all of these indices down more than 1% for the day, the dow below 35,000, the s&p at 1.1% lower, but crucially below its 50 day moving average for the first time since march. on the earnings front, home depot has reconfirmed its lower annual sales forecast after second quarter results beat expectations. they posted a 2% sales decline on the year, but beat revenue expectations for the first time in the three quarters, with $42.9 billion. the home-improvement retailer benefited from the steady demand for small-scale projects, but warned of shifting spending habits from

goods to services. that was the reaction yesterday at home depot come up about two thirds of a percent. but there are more retail results to come this week as investors look for more insight into the health of the u.s. consumer. target will report before the bell today, and target is expected to post their first quarterly drop in revenue in around six years after the company warned of sluggish sales in its last set of numbers as consumers buy fewer discretionary items. a fitch analyst has said the ratings agencies may have to downgrade a host of u.s. banks including j.p. morgan and bank of america after cutting its assessment to double a- in june. chris wolfe told cnbc.com in an inclusive interview that another ground downgrade of the sector could force a reevaluation of its ratings on more than 70 american banks. this is because a move to a+ would be a lower rating than

some of its top-rated lenders and banks cannot be rated more than the environment that they operate in. our u.s. colleagues will be speaking to christopher wolf, the managing director and head of north american bank trading's later today at 1900 cet. it is worth reminding viewers that this was based on a report from a couple of months ago, we sought quite a stark reaction yesterday, and where some of these key stocks traded, bank of america down 3.2%, j.p. morgan down 2.5 but of course, it is highly hypothetical and the downgrade has not happened, i want to remind viewers of that. elsewhere, the fed is set to release the minutes of its july meeting today, with chair jerome powell keeping his options open on the banks next move. the next meeting is scheduled for mid-september, and wall street is betting on the central bank closing its rate hike cycle after strong jobs data and a sharp decline in interest rates. meanwhile, minneapolis fed president says the fed may need

to hike rates further. he said, quote, i'm not ready to say we are done highlighting the importance of considering more data before deciding the next move despite signs that inflation is slowing. and, this is a look at how u.s. treasuries are trading today, a bit firmer action on the session. 10 units at 4.19%, and we are really sitting at some very high levels versus where we were, the highest levels for the year. 4.19, very impressive price action going on, there, especially because so many people have come on this show and have been quite bullish about the direction of travel. we will talk about that shortly. the two-year note sitting at 4.91, as well, just shy of that key 5% level. happy to say that our senior fixed income strategist joins me, let me start by asking you, your view on how much we have traveled in 10 year bonds. 4.9%, sitting very close to the

highs which we have not seen in many years. what is happening in this space? why have yields been moving upwards? >> well, what is happening here is that the market is realizing that the federal reserve, like the ecb, for example, they have their hands tied. they are going towards the last quarter of the year, where the economy is going to stagnate, and the reason is they are scared that inflation will take higher. however, we have received strong economic data from the u.s., and that had bond investors slightly higher than what we can see now. so, just to understand that what we are going towards, and

what is pushing yields higher, we have to understand that it is an inflationary kind of environment. the federal reserve will not be able to hike, because otherwise we would put the economy in jeopardy but it would not be able to cut interest rates either because otherwise it would put pressure on interest rates. so, there comes the message that policymakers tried to convey until now, that they would need to keep rates higher for longer. and, what does that mean? it means that yields will be more or less anchored with where they are now, but long term yields are free to rise slightly, and then, to trade range bound, as the cutting cycle begins. we believe that 10 year yields are very likely to rise to 4.5%, and 30 year u.s. treasury yields

rising to 4.75%. >> interesting. so, you are bearish on the outlook for yields looking ahead. what do you think positioning is like? i have spoken to a lot of people again, the last couple of weeks, and many seem to think that steepening is the way to go for fixed income. >> we believe so, too. the great thing about stiffeners is that we don't care if it is bearish or bullish, as long as that is our trade. but, we also favor other kinds of products. in an inflationary kind of environment, we really like inflation protected securities, and the reason for that is that they will gain as the federal reserve and the hiking cycle and possibly begin to cut rate, but they offer protection against inflation.

so if we see as active inflation as we expected, to house, during the last quarter of the year, that would provide a nice buffer against this risk. we also very much like short term u.s. treasuries, and high quality bonds, but we don't see much value in taking a long duration because duration is expensive. you get 80 basis points less than when you buy 10 year u.s. treasuries, and you can maximize a return, seeing much less risk. in terms of risk and reward ratio, we don't believe it is time at the moment. >> is something that you regards with regard to your appetite, that is an

interesting one, because again, if you go back to what you are saying about us being in a sticky inflationary environment, surely, the central banks will want to keep real yields as positive as possible. you want to keep them as restrictive as possible. so, what makes you think that real yields on the front and will move lower? >> well, real yields are composed by a nominal component, and a real rate component. so, if we see economies moving down or even tilting towards a recession, the nominal component will definitely gain, because the market will expect the federal reserve to begin to cut rates. the real rate component will slip, depending on where inflation is. so, the thing is, the last year, a lot of people were buying into tips, thinking that they would provide a nice hedge against inflation.

they did, but the nominal component had to widen, because the federal reserve was hiking rates. now that the rate hiking cycle has ended, that is not going to happen anymore, and tips are going to offer that hedge many were hoping to offer last year. what about the supply outlet that many are talking about the fact that the u.s. auction sizes keep increasing, in particular, because they do have a huge funding program that they need to account for. who is going to buy these u.s. treasuries? >> that is the question that everybody is asking, especially because in the past, the few weeks, we have seen stabilizing around 1.2 trillion. this means that there is no outflow coming in from the facility to buy deals which put

a big question marks on whether we are going to see some flow coming in from bank reserves. if we start to do that, then there is going to be less liquidity in the financial system, and banking sector pressure might become a crisis. obviously this is something we are monitoring closely, and if we have tail events coming up from that, we might have a chance of the federal reserve starting to cut rates by the end of this year. though, we believe that it won't happen until next year. >> very clear, good to have your views on our show today, i appreciate it. senior fixed income strategist. >> morgan stanley has picked some of the companies already making money for generative ai.

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we have just got info from $.10 hitting the wire, the world's largest videogame company, and let me just bring it to you, in terms of headline number, they have actually disappointed disappointed versus expectations, revenues have come in at 149 billion renminbi versus expectations.

but, if you look at it in terms of the breakdown, online advertising numbers actually blew through expectations coming in at 25 billion renminbi, versus expectations of 18.6. so, better-than-expected of their. and, in terms of other parts as well as the business, the social network growth puckett came in at 40 million renminbi, so some improvement there. i think the key is that there has been improvement from a year ago, 2023 was a challenging year for tencent, but things are moving in the right direction, albeit not as much of the market would have hoped for. what stood out to you from these earnings? >> just looking at the results, it was a big mess but when you are seeing the biggest growth in profit in terms of the pace of that, since the fourth quarter of 2020 one.

certainly a rebound, i think expectations were high. it was a tough 2020 through pretense and on many fronts, there was the gaming approval frees from the chinese regulators and there was also the fact that people weren't playing as many games versus the previous year when there were widespread lockdowns in china. so, the comparisons were tougher but one of the things that stood out was the fact that international gains revenue, which is a big area at $.10 a focusing overseas was up 19%, year-over-year as well, that was a big one, meaning the games they are developing in china are hitting with international audiences. domestic game revenues remained flat, which i think, when you look at the state of the market in china and the intense regulatory scrutiny there has been on gaming is quite a good thing, i think the positives here really are that when you look beyond tencent core businesses, the areas they are really trying to focus on and expand, their ad business, you might think well tens and is surely a huge advertiser and

yes it is, but actually has not really been expanding on this platform until the last couple of years where you are seeing more ads and things like we chat now and of course the gaming as well. so, online ad revenue is up 34% year on year. pretty rapid growth as well and that shows you that as the ad market begins to slowly recover in china, the initial shoots of recovery are going to big platforms like 10 sent and i think that finally, syntax and business services up 50%. tencent runs one of the biggest global payment services in china and they are seeing extension both online and off- line conversion payment activities of that is a positive. again, we know that chinese consumers over the past few months, but clearly they are still seeing some positives of that and business services cloud, seeing growth there. >> a quick one nondomestic sales growth in the videogames business which is their bread and butter. a lot of people are talking about the fact that chinese authorities have no longer been

reporting youth unemployment numbers. we know that you can implement has been an issue with the level of people between the ages of 16 to 24, out of work in china, does that work for or against 10 sent? >> i think chinese authorities are always concerned about gaming addiction. we have seen a number of over the past number of years for them to curb that. one was limiting under 18 gaming time to three hours per week. there is a new proposal being floated to limit smart phone screen time to just two hours per day. and so, there are these little things here coming into effect, so 10 sent as a chinese company would also be very careful in the way that it expands domestic gaming because it does not want to look like it is really pushing gaming addiction, so it has to take this quite responsible approach to not fall foul of the regulators. that is why i think there is one reason why the domestic gaming business has been strained, and when you are

seeing massive growth in international gaming where they are pouring on a lot more effort. >> it has a lot of ground to cover to get back to where the stock was just a couple of years ago at the height of the pandemic. tencent was really soaring. but, to that point, hedge funds across the world reportedly dumped chinese stocks this month. as a concern over beijing's troubled property sector and weak economic data take a toll on sentiment. according to goldman sachs, a shares led the selloff, accounting for 60% of shares. and investors including tiger global and d1 capital have pared down exposure to chinese companies in the second quarter. d1 and entire capital dumped their position while ali baba reduced their position in tiger.com by 20%. this morning we are watching this story closely. u.s. shares of tower semiconductor sharply lower after intel announced it is terminating its planned acquisition of the israeli

chipmaker. intel will pay a termination fee of $353 million to end the deal and said the decision was due to not being able to secure regulatory approvals. this is an interesting story as well. intel has kind of been behind a bit on the chip race as of late. this was their attempt to get involved again, but the deal won't happen. >> fascinating story. it is a big blow for intel because tower semiconductor manufacturers a number of more specialized chips, such as radiofrequency chips that go into mobile phones. and so, this was a chance for intel to get into the game that it has not typically been strong. opening up the number of new markets. this is a big moment in that sense, but also, it speaks to the broader geopolitics of technology right now. if -- what reuters reported was true, which is that the chinese authority have not approved the deal in time before the deadline is past, you know, that means that this deal was held up by chinese regulators

and of course there would be reason for them to do so, given the fact that the u.s. has put a number of sentience on chinese chip companies and try to lock off china's chip development. and so, the chinese block would still be some sort of retaliation. we have not had official confirmation on that yet. >> what is china's official association with tower? >> it is more with intel. a lot of chinese electronics companies pcs and other devices do still rely on intel processors and still buy intel processors. so for intel, china is still a very physical market and i think that is where chinese regulators got involved. this is also a very big geopolitical story, for sure. >> this is part and parcel of the various shots that the u.s. and china have been firing at one another. remember it all kicked off in october of last year when the biden administration issued as export restrictions and a few weeks ago now they have come out with this data latest round of artificial intelligence investment ban for u.s.

companies, investment firms to steer clear of china and back then we were saying how can chinese authorities respond? >> this is an example with the instigation into micron and a few other areas where china does have a little bit of leverage. the u.s. has a lot of leverage given the technology it owns, it's companies owns, certainly china is using what it can in these instances to sort of retaliate in some sense. >> complicate life for u.s. companies. >> certainly. >> thank you. an excellent overview of what has been happening in chinese tech companies today. a quick look at u.s. futures before we head out for the session, all are trending into positive territory. that is it for our show. robot exchange is coming up next.

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it is 5:00 a.m. here at cnbc global headquarters. here is your five at 5:00. we begin following a down day. all the major averages dropped by more than 1%. stocks looking for a reversal of fortune today. futures are pointing to some small gains. and we're getting a fresh snapshot of the state of the eurozone economy a live report from london ahead on the breaking gdp numbers. and walking away reports say that intel will back out of a more than $5 billion deal to buy rival chipmaker after failing to get the approval of one major global regulator. and the retail earnings season, it c