Tesla Profit Falls Short, Elon Musk Demands Patience | Bloomberg: The Asia Trade 7/24/24
This is the age of trade. I'm Hattie Stroud Watts in Sydney. The top stories this hour. Tesla shares are tumbling in late trade as a fourth straight profit miss extends a rocky start to the year. Elon Musk is promising to unveil the company's ROBOTAXI in October. Alphabet's revenue beats expectations on cloud and advertising demand, but pressure grows to prove that it's keeping up in the race. And Kamala Harris hits the campaign trail with a direct attack on Donald Trump, saying Americans face a stark choice in November.
Let's get you straight to these markets. And before that, we do have the Australian PMI numbers just crossing the Bloomberg. Now, when it comes to that PMI composite number, this is a preliminary reading for the month of July coming at 50.2. So weakening from that 50.7 level still
in that space where we see expansion but just barely the manufacturing component there. Well within contractionary territory, 47.4 is still an improvement on the prior reading. And when it comes to the services component, they're looking a little bit more comfortable above 50 50.8, but still weakening from that 51.2 level that we saw in the prior reading. And a lot of this is kind of building a real test for the RBA, right, because we have so much economic weakness across some of these signaling, including of course what you've seen with the PMI numbers, with household spending, with just the impact that we've seen in rising cost of living on consumer spending.
But on the other side, the sort of remarkable jobs strength that we continue to see is going to make it quite difficult for the RBA going into the next couple of meetings, taking a look at how all of this is setting up when it comes to Asian markets. So it is a big focus on earnings, particularly across the tax base. We'll be watching for kind of the fallout from Tesla's big disappointment, right? The profit falling short again in that weakened EV market.
We also saw broader tech seeing some weakness in the late hours with that underwhelming sense of what earnings have come through so far. But we are seeing a little bit of upside for Sydney futures up about a 10th of 1% there. This market trading still pretty close to those record highs. Chicago Nikkei futures looking a little bit softer at this point, but of course, it really is about the start of the magnificent Seven earnings season. Really kind of failing to impress there,
watching China as well, A50 China futures looking also a little bit more weakness there as we sort of potentially continue to watch for some of the economic indicators coming out of China, even with that surprise rate cut from the PBOC earlier in this week? Switching it up to how we're setting up when it comes to US futures a little bit to the downside, particularly when it comes to the Nasdaq 100, you saying off by over half a percent there. At the moment. We're seeing crude kind of stabilizing at this point. Some of these growth concerns that have been playing out at the moment. We're seeing a bit of a recovery after four straight days of declines.
A lot of these algo trades in the summer session at play there. And as I mentioned, looking at Tesla and Alphabet after hours as we continue to focus on the disappointment across tech earnings, Tesla profit falling short again across a broadly weaker market, we did get some more sort of affirmation as to when we see that Robotaxi product. October 10th is expectations for the unveiling after delay. But there's also that pause on the Mexico factory as well on some of these Trump tariff worries as well. Let's get some more on Tesla transport. Reporter Daniel joins us now. So what was sort of the big standout headlines from these earnings? How much of this is because of a broadly weaker EV market and how much of it is kind of more idiosyncratic to some of the worries over Tesla itself? I think it's a combination of both. We can break down though, into the here
now and into the future, but for the here and now, with Tesla having an increasingly stellar lineup, what this earnings demonstrated was this fourth consecutive earnings miss that's just $0.02 a share on an adjusted basis was that was a profit number against a backdrop of $0.60 a share. Then we saw revenue there. It beat 25.5 billion over a 24.6 billion. So encouraging on the revenue front,
when you look at the core business of of automotive, when you strip out regulatory credits, that margin was down to 14.6 from 16.4 over the first quarter. So not a whole lot of encouraging signs in the numbers. And then when you look at what Tesla has been talking about, talking about continuing to double down on on cost cutting in the meantime. And, you know, Tesla has been reiterating this is going to be a year of notably lower growth and notably low growth where you see this year of 2020 as a transition period. As it looks to the future, the immediate reaction of the stock market was down around about 8%. At one point I pulled back a little bit.
But then when you look at the overall period, Tesla stock had been down around. Flatten down about 1% at the close of trade on Wall Street on Tuesday, but still better than the 40% it had been down at one point earlier this year. Danny, so much of this is about Elon Musk himself. He had been speaking on that earnings
call. How did he sound? Did he give sort of clues in terms of what the future shape of the business might look like? Yeah, absolutely. He did sound a little bit more down than usual given the these earnings, which were quite relatively next, I guess, from a Tesla point of view. But, you know, this is Tesla and Musk in particular trying to reframe that Tesla trade within that magnificent seven stock or picks to be more like air to you when you think about how Tesla is trying to talk about cybertruck talk more about that Robotaxi and even humanized robots.
You know I you know he's probably joking here, but he says the target market could be 8 billion people who would want a humanized robot. It's these kind of technologies, these kind of things, automated components, which will try to reframe that Tesla argument about the future. But this is long term groundwork he has to lay in order to eventually, hopefully revive the company from what is in a bit of a malaise at the moment. And so when we hear about the the Cybertruck sorry about the Robotaxi, which is also called the Cybertruck, which will come on October ten, which confirms a Bloomberg scoop on the delay, it's these kind of products and the low cost affordable model that Tesla has been speaking about for so long. These are the kinds of products that will help reshape and reframe Tesla and will hopefully help boost sales. But this all start to kick in from around the first half of next year. So in the here and now, not great for
earnings, but the future, the groundwork is very much being laid. Asia transfer reporter Jenny Lee there with the latest on Tesla and staying on disappointment in tech. Although somewhat well-balanced, we had alphabet reporting second quarter revenue that beat analysts expectations.
That was the boost from cloud computing demand and demand search ads as well. Let's bring our technology reporter julia love for more. So despite some of the more impressive numbers when it comes to that demand, we did see that fluctuation in shares for google. Yes. So it was a mixed report for doodle and it seemed that investors didn't know quite how to feel about it.
Search, which is the heart of the business, had a strong quarter and cloud did well too. And yet YouTube had a rough quarter and they failed to meet a analyst estimate for ad sales. It's coming off a series of lackluster quarters for YouTube. And in addition, Doodle reiterated that it will be continuing to spend heavily on capital expenditures to keep up in the AI race.
But it's hard to see the payoff from that so far, and investors are really craving more specifics. And of course, you know, Google once had this head start when it comes to investments in A.I., Right. Is it now a concern that it's going to struggle to keep up with the competition? Yes, I think that that concern has been there all along. It's just very plain to see how much Google has to lose in this race. Openai and Microsoft are trying to shake up the search market that Google has had a stranglehold on for so many years now.
They're trying to entice users with new chat based products, and it poses a real threat to Google. Technology reporter Julia Love with the latest on alphabet, Google. And of course we're already in that sort of busy period for tech earnings is about to get busier. Two of the big seven down five to go trade is now awaiting those updates from Microsoft, Metta, Amazon, Apple and video.
And you do want to stay right here with Bloomberg. We get you that live coverage and analysis as the numbers get to us. Also, of course, a lot of analysis when it comes to the US presidential race. And Kamala Harris has taken aim at Donald Trump in her first campaign rally since launching her White House bid by referencing her past work as a public prosecutor. And in those roles, I took on perpetrators of all kinds. Predators who abused women. Fraudsters who ripped off consumers. Cheaters.
Who broke the rules for their own gain. So hear me when I say I know Donald Trump's type. That's Glenn Beck's political news director. Jerry Schneider joins us from Washington. And Jerry Will keenly watching Kamala Harris's first rally in this bad battleground state of Wisconsin, of course. How does she perform and what would the sort of two choices she really set out for voters? Yeah, Heidi. Well, she seemed to have a rousing
crowd, as you can hear behind her there. A lot of support for her. And she took on Donald Trump directly, which political analysts say she's going to need to do that from the start. She only has a little more than 100 days in this campaign, which, of course, had been going on for months and months before this. But she stepped in just Sunday when the current President, Biden, said he would exit the race under great pressure from his own party, given a disastrous campaign performance of several weeks ago. So a debate performance. So it's really been incumbent upon her to show that the things they worried about with President Biden on the campaign trail, they won't have to worry about with her. And she came out.
It was a rousing speech. She took on Donald Trump directly and it seemed to be, you know, certainly well-received by people in the Democratic Party who have really come quickly behind her since this was announced just two days ago. She has not only won the support of a majority of the delegates she will need for the Democratic nomination, but also more than $100 million in campaign contributions. This this incredible sort of 32 hour blitz of support and donations.
Jody, we were talking earlier about when we could find out about her VP pick and how does that play into some of the procedural things that the Democrats don't need to do, including this virtual roll call? Yeah, So the Democrats, they had always talked about even before this, you know, turn of events, trying to do a virtual roll call before the actual roll call at the convention the week of August 19th, doing it in early August, basically to get on ballots. There's a lot of various states have various rules and some of them have fairly early deadlines to get on the ballot. So the decision was already made, and there'll be a meeting among campaign officials tomorrow to cement the actual date, but to try to get this done by a virtual roll call and then kind of cement it with the actual, you know, kind of historic roll call, all the states coming together at the convention. So to do that, she will need her vice presidential nominee to be chosen because they have to be on the ballot together. So the thinking is that this could occur in early August and that she'd need to do it by then. People don't really expect it to be in the next few days, perhaps next week. And of course, there's a lot of names
being floated, but she will have to do this pretty soon. It also will help her on the campaign trail to have a partner on the campaign trail in this. And also that will help with fundraising, particularly, you know, to have that person out there as well. She got that huge boost in fundraising, but you can't expect that every 32 hours. We know that there's a debate scheduled for September, but Donald Trump is now coming out and saying he's he's actually willing to go head to head in perhaps multiple debates. Yeah, that's right. We heard from Donald Trump today saying
he wants to debate Kamala Harris and he wants to do it relatively soon. So we will have to see what the schedule will be. But it looks like that will happen, whether there'll be a vice presidential debate, we don't know. Of course, we still don't know who the vice presidential candidate is for the Democrats. But we did hear from J.D. Vance that he was disappointed that he
would not be debating Kamala Harris as vice president. She will not be debating Donald Trump. Political news director Jodi Schneider there in Washington with the latest. And we do have some updates when it comes to what we're hearing from the Philippine central bank at the moment. Some trading updates for today. The stock exchange says no trading at
the peso today. Trading of a dollar pairs as well as monetary operations will be closed today. So we're just hearing that at the moment. The Philippine Stock Exchange saying there will be no trading at the stock exchange today. And in particular, when it comes to currency trading with the dollar and monetary operations also closed as well. We're also seeing sort of sort of some announcements around the rest of the region as well.
The Philippines more broadly has seen that suspension of other work across the government as well as schools. All of this due to the oncoming of typhoon gain without causing floods, flight disruptions and also some emergency situations for people having to flee to safer ground. So some of that suspension covering the likes of Manila and other nearby cities. So we'll continue to watch what some of the other recommendations from the disaster response agency are and the impact on markets. But no trading today on the PRC. Coming up next on the Asia trade, we're
talking investment strategy with German capital. They see conditions favouring equities growth into next year. We also have the SEC chair, Joe Longo, joining us next hour. Australia's market watchdog facing calls to be split into two amid criticism that it's a toothless tiger. We'll also be digging into an underwhelming start to big tech earnings.
Warren Capital and CFR will be with us with more analysis. This is Bloomberg. We are awash in what I would refer to as grey swans. We had former President Trump shot at an assassination attempt.
We've had the current leading contender for the Democrat Party, current President Biden. I, you know, step back. This is an unprecedented time. Guggenheim Partners Investment Management CEO John Walsh. There was Brian Shoemaker, who's the
client portfolio manager at Drummond Capital. Nick, always great to have you with us. And I wanted to get your view on this idea of gray swans. Right. We're seeing no shortage of certainly political risk and it's been a year already awash with more broadly geopolitical risk as well. Do you think there's further volatility, volatility ahead of it? Yeah. Great to see you, Heidi. And I'd say it's a really good point.
Political risk has been a mass effect of this year, whether it's been in Mexico, India, South Africa, Europe and certainly the US. I think political risk is definitely going to be an ongoing catalyst for risk plays in markets now, potentially even more than rights risk, because we got so many unorthodox ways to intervene and stabilize capital markets. But political risk is a different beast to manage. So I think as we head towards November, it's likely that we will see more volatility. We've seen, you know, the so-called Trump trade recently, a bit of a rotation out of taken into small. So it's obviously been due to rate cut expectations in the US in September as well.
But there's a whole host of things to consider, whether it's tariffs, taxes, debt supply in the US, which we know has resulted in that long end weakness in the bond market. And I guess the other thing to consider at the most extreme example is if we got anywhere near a close election. There really is the extreme result that we could get some civil unrest like we saw back of the Capitol building if there is a very close election result.
So I think to answer your question, Heidi, that there will be more tumult to come related to politics and in the US for sure. And a lot of this will sort of come down to not just how equities perform, but the direction of the US dollar and how the Fed goes from here. Right. If there is sort of more of a pro-growth, inflationary or reflationary fiscal policy out of the next administration. Where where do you predict we'll see the dollar going, given that we know that the former president wants it weaker? Yes. So the market has been, as you know, we
saw just recently commodity prices sell off on the back of a strong dollar related to the Trump trade. You're very right. There's been advisors of Trump for the last six months talking about a weaker dollar. You know, if you think about the US dollar compared to the Japanese yen compared to the Korean currency, it's very strong. So that doesn't help the US in its
efforts to industrialise the manufacturing sector there. There is trade exposed sectors in the US that are very weak. It's hard to have inflation if tariffs are more inflationary spendings, more inflationary tax cuts are more inflationary, and to have a weaker dollar two we can see some things about who the Treasury Secretary is, the nomination there and if there can be policies to see a weaker dollar. But there's been no hiding the fact that Trump thinks the dollar is a problem. So it's going to be something to watch really closely. But this probably equal odds, I think, of dollar weakness, of dollar strength with Trump coming in at the moment.
Nick, I wanted to talk about, you know, what's really dominating is low for equities at the moment, which is this disappointment that we've had so far from big tech. How hard do you think and this is a question of the day, these tech woes will kind of hit global equities, particularly as there had been optimism that after the recent tech slide that maybe earnings would be the catalyst to drive the next leg of the rally. Yeah, So the market's certainly driven by either either, you know, bond yields or earnings. And I guess the tech stocks have been priced to perfection almost for a couple of years now. It has been a one legged stool with Nvidia essentially driving the market's advance for, you know, over a year. So any susceptibility around those earnings is likely to be a cause of volatility.
I think on a medium term basis, you know, the winners are going to continue to be the winners. I think we will see some broadening out to earnings now and the other 493 stocks. But I think big tech is likely to you know, we've seen the genie. They led out of the big tech bubble. And I think that will continue to drive the market forward from here. But I think there's going to be some
shorter term volatility and just some nervousness, trepidation around what we're seeing with the US election as well. So we are going into a seasonally weak period for markets as well at the moment. So there's probably some caution around that. So there is going to be big focus on the
earnings and it will drive, I think, the direction of global equities having. Said that we do have some good news with Fed speak about the progress in Q2 of inflation coming down after some may see inflation prints in Q1. So there's a bit of a confluence of factors driving markets and not to mention as well, just that softening in US growth is another thing to watch.
There are some indicators of some forward looking indicators showing weakness in US GDP from year to year. What are some of your sort of preferred international diversification strategies and. Yeah. So we're trying to be as diversified as we can. We do like the US still thinking that the US and the NY thing will continue. We've still been very cautious on emerging markets. I mean, you've seen just the China, the
GDP growth. The Q2 year on year was 4.7 versus 5.1, just the doldrums in the property sector. You've seen the monetary policy move just over recent days by the People's Bank of China didn't really support the market either.
So we're still being cautious in emerging markets. If we do see reasons for a weaker dollar, that would be a catalyst to look at D and equities, but not for now. So just with Europe, the US, but still favouring quite a strong neutral allocation, but with a slight tilt to tilt towards quality. Nick, always great to have you with us.
Nick Shoemaker, who's a portfolio manager at Drummond Capital. More ahead on the Asia trade. This is Bloomberg. Take a look at how we're trading when it comes to futures. And of course, we saw a big tag, the disappointment of a Tesla primarily, but also a mixed picture when it comes to alphabet numbers really dragging down broader sentiment. We're seeing still quite a bit of downside. S&P futures are off by just about half a
percent. A little bit worse are faring when it comes to Nasdaq 100 futures. The Dow also off by about a quarter of 1%. We've still got five more of the seven to come. But there is some concern that after the most recent tech slide that we're not going to get that positive catalyst necessarily from this set of numbers. We do have much more ahead on the Asia trade as we count down to the start of trading in Asia in just about half an hour's time. This is Bloomberg.
Tesla fell short of Wall Street profit estimates in the second quarter, extending what's been a rocky start to the year that's been marked by slower sales, mass firings across the company. And this was in fact the fourth consecutive miss for the EV maker. The company saying its focus still remains on cutting costs. Joining us now is Sue Hong, who's the CEO of One Capital One. Do you hold just reading kind of your
immediate reaction, I guess not much of these numbers surprised you? I think the sales numbers were known a few weeks ago. So the call is primarily focused on the FSD Robotaxi road map. And that seems like a there's a delay of the deployment of the robotaxi and there's a lot of questions on the regulatory process. So in other words, there are a lot of uncertainties, a lot of sort of ambiguities around the whole concept of FSD as a new growth driver to stimulate demand for Tesla even. You sound pretty bearish when it comes to FSD. In fact, you say that there's sort of
quite a significant kind of question mark over whether the existing tech infrastructure that they have is suitable or whether they need something else entirely. There are a lot of discussion of FSD among the early adopters. I mean, you're not just pursuing all five autonomous driving technology. There really are want to be the pure
play of only end to end autonomous driving, and that's really difficult. So and it is very hard for them to walk back and to say, okay, we realize this is a really tall order to get to, you know, level five without any sensors and additional devices. So they have to because because if they do that, they will only become one one out of the half dozen players in the field. And they're not a first mover. Waymo already has robo taxis in select cities roaming around. And then in China, they expand by to far away.
So they have to differentiate themselves and claim to be the best in AI in a sense that they can't do a level five without any additional sensors. How much of I guess, the the broader stories about, you know, what's being projected into the future? Right. The Robotaxi manufacturing, when we could actually see that start to come into fruition? I think that's a really good question. I think we don't know. I don't think Elon Musk knows. So that's why you see the stock performance reacts as such to the earnings call. I think there's no robot taxi yet.
All the analyst questions and all the investor questions center around the robotaxi. So they're asking if you're far ahead of the of, frankly, Elon Musk himself. They're asking questions about regulatory approval. You know how that is. I will be without paddles, without a steering wheel. The reality is, I mean, there's no product.
There's no product. There's no product. There's no we just don't know anything about this. I think that, frankly, doesn't exist. So so I think I think a few things need to be squared away. One is the legal liability. The fact the difference between Waymo and the Tesla right now is Waymo. There's no one behind the wheel. So if any collision or accident Waymo
takes for legal responsibilities versus Tesla, it's FSD supervised the So when there's a collision or accident happens, that driver needs to take full responsibilities. But there will be a different if robo Tesla robo taxi is seen on the road because no one's behind the wheel. So that's something that's really new to Tesla. And like I said, I think they need time to figure that out themselves. But are they still oversupplied over capacity issues, particularly if you're talking about in the context of a broadly weakened EV market and what we're seeing in China in particular for Tesla? I think the adoption seems to have hit the wall globally.
In California, the sales style 25% year over year in second quarter. I mean, probably has something to do with his increasingly political controversial comments. It's right that we are that we are a fan to some of the demographics that he's trying to sell the car into.
And in China, it's a little bit different. It's probably more about competition because you see in China, the adoption is approaching 50% and still very aggressive administrative incentives and they are in China. Tesla sales are down 7% year over year in second quarter. That's on top of very aggressive
incentive programs they use, such as zero financing. So that's why I think FSD is such an important component for Tesla to hold on to and to pivot the growth story from the adoption to a new technology to boost the growth. When you take a look at what investors have really been investing around, which, as you say, is a robotaxi is the expectation of humanoid robots, all of this being kind of just around the corner as opposed to some undetermined time in the future. Do you think that justifies the argument that maybe there's further downside for this stock? Of course, car sales is only about 20% of this 800 billion market valuation. So the $600 billion is A.I.. So there shouldn't be a compute shortage within Tesla because you already have 100,000 x 100 DPU servers. Right? And it's supposed to have lots of data, but I don't think that they are Quality is very good. So if you are just using FSD to cruise
from point A to point B in your average of 20 minutes daily, come you one way. That's not a type of data that's useful for FSD. That's, you know, repetitive data are very well marked roads. What they need is data. They need a corner data.
So like you know how the car needs to react to when there's a dog passing it or jumping on a highway or there's a plastic bag just flying across your window, the car, a car window type of scenario like that. So, I mean, it's not all data created equal. I think they need to find a ways to access and harvest those type of data along with 100,000, you know, dpu clusters. Keep in mind that they actually have more CPU m100 than open air. And the matter, the fact is they still don't have level five autonomous driving, which suggests to me maybe the underlying AI system needs to be overhauled altogether. But it has been always great to have you with us. John Lee, who's a CEO at Joe Warren
Capital. Well, Mr. CEO, Mark Zuckerberg is urging the US not to close off tech from other parts of the world, even as it tries to win the arms race against China. He told us exclusively what the best strategy could be. There's this question, which is how should the US approach this kind of competition with China? And there's one strain of thought which is like, okay, well we need to like lock it all down. And I just happen to think that that's really wrong because the US thrives on on just kind of open and decentralized innovation.
I mean, that's the way our economy works. That's like how we build awesome stuff. But I think the leading companies should work with the US government and make sure that that our kind of national defense and things like that have sort of a perpetual first mover advantage on the leading technology in the world. So we win the air wars this way. I think there there's the question of what can you hope to achieve if you're trying to say, okay, should the US try to be five or ten years ahead of China? I just don't know if that's that that's a reasonable goal.
So I'm not sure if you can maintain that. But what I do think is a reasonable goal is maintaining a perpetual, you know, six month to eight month lead by making sure that the American companies and the American folks working on this continue producing the best AI system. And you can catch that wide ranging interview with the CEO, Mark Zuckerberg on the circuit with Emily Chang. That first full episode is streaming right now on Bloomberg Originals. Let's take a look at some of the other
headlines that we're following this morning. In India has unveiled a budget that includes massive spending on employment and projects favored by key political allies. Finance Minister Nirmala Sitharaman pledged nearly $24 billion to create new jobs, but addresses a top concern for voters in the recent elections, which denied Prime Minister Narendra modi's BJP a majority in parliament for the first time in ten years. Ukraine's foreign minister Dmytro Kuleba, has arrived in China to discuss Beijing's possible role in ending Russia's invasion. It is a first visit to Beijing by a
senior Ukrainian official in eight years. China has put forward proposals for peace initiative that would include Russia at the table. Ukraine is attempting to improve ties with Beijing as Western support wanes. US Secret Service director Kimberly
Cheadle is resigning after taking responsibility for security failures at the rally where Donald Trump was shot. Deputy Director Ronald Ver will lead the Secret Service as acting director. Both Republican and Democratic lawmakers had called for Cheadle to step down amid a barrage of criticism over perceived security lapses. We're just about 20 minutes away from the start of trading here in Asia, expecting really that tech heavy component when it comes to the the downward pressure that we could see in Asia as well. Big tech really disappointed the first
two out of the seven to report. Of course Tesla really disappointing there and a mixed picture when it comes to alphabet and Google's numbers as well. We are seeing Asian stocks kind of poised to open a flat to a little bit lower there. We're seeing a little bit of upside when it comes to Sydney. Futures going to the start of that staggered session in about 20 minutes time. But over in Japan, as well as South
Korea, we're looking like a little bit more weakness with those tech heavy markets to be affected as well. Japanese as well as Hong Kong. Shares are looking lot declines there. We also have some market closures when it comes to new trading on the Philippine Stock Exchange, as well as the markets in Taiwan as well due to the typhoon effect. Well, Guggenheim Partners, CIO and Walsh says investors are facing an unprecedented time of what she calls gray swan events. She told Bloomberg exclusively that these historic happenings are coinciding with a series of unusual economic milestones. If we just take one step back for a second and just think about the gravity of where we are in history, we are awash in what I would refer to as grey swans.
We had former President Trump shot at an assassination attempt. We've had the current leading contender for the Democrat Party, current President Biden. You know, step back. This is an unprecedented time and in an otherwise larger backdrop, if you will, of all sorts of other unprecedented economic milestones that we've seen, a huge amount of fiscal spending in a very low unemployment world.
You know, tightening by the Fed. All of this is going on. And now we have, of course, the volatility made worse by by the question of policies. So to your question, with regard to where we are in the risk of inflation, quite clearly the bond market thinks so, that there's a risk of inflation in these policies being inflationary because we've seen a bear steepen. And and so as a result, I think the market is perceiving additional risks.
I'm not entirely sure that I'm convinced that it's because of inflation fears. I think it's just because of the sheer amount of volume that we have to see get placed into the markets in the Treasury space. And what we're seeing is a bit of a sell off in advance of expectations of more Treasury issuance. We'll keep on with the spigots are still on in Washington. We're still seeing fiscal spending and
that's still going to continue. Kathy Jones of Charles Schwab made a great point on our weekend special because to your point, there's been a lot of history happening. But on that weekend special, she said when it comes to politics. Short term, it doesn't matter. But long term it does. When you think about some of the potential policies that are being floated right now until that point. I'm wondering how you're thinking about it as an investor.
We talk about the steep or the flatness or these one off moves that we're seeing. But long term, how are you thinking about actually putting this into a portfolio? Well, so in the what I call the intermediate term, I think that probably the more important information is still coming from inflation coming down. And I and our expectation that it will continue to decline. And I think we're going to see the core PCE in line with expectations may be coming in better and by the end of this year, substantially better, relatively speaking, and a little better than our peers are expecting.
And then at the same time, we can say we see GDP slowing, we see unemployment rising a bit. So in the intermediate term, I think that Fed policy is really going to drive the markets, at least in the fixed income space and obviously earnings and the potential slowdown in the S&P 500 and the equity markets moving forward beyond that. I think the number one thing I'm looking at is tax policy. Guggenheim Partners, CIO and Walsh, they're speaking to us a little bit earlier. More ahead on the Asia trade. This is Bloomberg.
Well, the US election is bringing renewed uncertainty in the global fight against climate change. Investors are already buying into a Trump winner, positioning for him to undo many of President Biden's energy transition policies. Trump has vowed to end what he calls Biden's mandate, which Nomura research says would dampen the sector. The former Interior secretary, Sally Jewell, has voiced concerns that a Trump presidency could unravel climate games. Meanwhile, Kamala Harris is expected to
be tough on the oil industry and a record of advocating for environmental justice. Let's get more from our climate and ASG reporter Oren Clark. So let's start off with Kamala Harris. What do we know so far in terms of her stand on climate change and how that could potentially inform a Harris administration's possible policies? Yeah. Kamala Harris has has really been a strong spokesperson for the Biden administration on climate change. To give you a couple examples.
Last year, she was one of several White House officials who fanned out, fanned out across the US to tout the one year anniversary of the Inflation Reduction Act. Of course, that was President Biden's signature climate policy. She also stood in for President Biden at the COP 28 climate summit in Dubai last year, where she said the US would contribute $3 billion to a climate aid fund for developing countries. When we look at her past record when she was a senator from California in 2019 and launched a presidential bid, her climate policies were actually more aggressive than President Biden's. She supported a carbon tax, and she also
envisioned $10 trillion in public and private funds going towards fighting climate change. I think where we begin to see distinctions are in her policies and views on on oil and gas. In the past, she's opposed hydraulic fracturing and also offshore drilling. Yeah, it's interesting because certainly as attorney general, she was very combative against big oil and gas. Right.
Does our track record suggest that there would be a similar approach as president? I mean, I think, you know, it's very clear she's going after big oil and gas and she hasn't been afraid to do that. You know, she she launched a litigation against California, Southern California gas after a methane leak caused, you know, resulted in the evacuation of 4000 families. She also prosecuted BP for storage violations at 780 gas stations. She also investigated Exxon Mobil for misleading the public over climate change. So, you know, this Kamala Harris is someone who's a fierce is not afraid to go after big oil where there's evidence of of pollution or she sees, you know, climate justice issues. One of the biggest climate achievements for the Biden administration was the Inflation Reduction Act in 2022.
This was the biggest investment in cutting emissions and boosting clean energy in US history. Do we expect any changes depending on what happens in November? I don't think so. This was with President Biden's signature climate policy. Like like you mentioned, it's resulted in major tax cuts for clean energy manufacturers. We've seen many solar manufacturers
especially expand their footprints in the US, and I don't think anyone sees any major changes with the Harris administration, either to the vision or the financing behind the Inflation Reduction Act. I think, you know, she would largely stick to the climate pathway and decarbonization pathway that that President Biden has charted both domestically and internationally, which is which is sort of anchored by the Inflation Reduction Act. Climate and ESG reporter Aaron Clark there. Would you have more ahead on the Asia trade? This is Bloomberg.
Take a look at our setting up. We're just under 10 minutes away from the start of trading across major markets, including the market open in Tokyo. We're expecting quite a bit of downside pressure, particularly when it comes to some of these tech heavy markets as well. Nikkei futures up by about 6/10 of 1%. Of course, some of the sort of rotation out of flows into Japan is the question where that next catalyst is going to come from.
But certainly we are hearing from the head of Japan exchange group really credited with turning Tokyo into one of the best performing equity markets over the past few months, also saying that this nearly $2 trillion rally is just getting started. Aside from kind of the recent missteps perhaps that we've seen when it comes to confidence, we are seeing yen trading pretty steady at this point, 155 there at the moment. And this is a story that I'm talking about behind that $1.7 trillion rally. He says it is just a starting Hiromi your money who's sort of been behind quite a lot of unconventional reforms and a lot of global sales pitches to turn Japan's equities scene around. He's ahead of the Japan Exchange group
has been really the focus of our big take that you're seeing on your screen at the moment. Bloomberg investing. Reporter Lisa Dow Jones are from Tokyo. So Lisa, tell us more about our amir maggi himself. And, you know, I guess we can't really
overstate the impact that we've seen on Japanese, Japanese equity markets. Yes. Good morning, Heidi. Yes, this is he told me I'm as you said, he's the CEO of Japan Exchange Group, which runs the country's exchanges, most notably the Tokyo Stock Exchange.
Now, he's an ex Nomura investment banker, but this is a head of Japan Exchange Group, which is the position he's had for the past year and a half. He's really become credited with and become the face of this very popular rally you're seeing in Japanese equities. I know, you know, recently the markets aren't doing so well.
But kind of if you look at it in the past year, you know, Japan was one of the best performing markets in the developed world. And that's another trend that you're seeing going into this year. Now, there's many reasons for that. Obviously, the weak yen is a big draw for foreign investors. They're stronger. You're seeing stronger macro economic fundamentals in Japan.
Additionally, there's also the pull back from China. But many foreign investors we spoke to were very quick to name Yamaguchi as kind of a very potent lure to the Japanese market. You know, he's done he's traveled a lot overseas. He gives speeches, is fluent in English. He visits the office of these managers. All of this is doing a lot to create the image of a more accountable and open Japanese market. And these investors are keeping that in
mind when they decide where to allocate their money. He's pretty honest about one of the, you know, the challenges that remain and what else needs to be done. Right. Yes, definitely. On his big policies has been a push to get Japanese companies to get those share prices to trade above book value.
And it's been very instrumental in kind of setting off the string of share buybacks, dividend increases and more companies are selling off their non-core business holdings to private equity. But, you know, he also acknowledged that a lot more needs to be done to get companies to take reform very seriously, to think more about their corporate value. And this is something that I think he will need, that that will continue to be a challenge for him, especially in keeping Japan top of mind for investors to get the money to stay here in the medium to long term and not to just have Japan be a momentum trade where investors get in and get out to make a quick buck. Yeah, and attracting more listings across Asia. Right Lisa do with that big tech story
you can read more of that on the terminal. It's a great piece of investing. Reporter there in tokyo and of course we do have the market open in Tokyo next, looking like a bit of a downward pressure for some of these Asian markets, particularly those that are heavy with tech names. With the disappointment across Tesla and alphabet earnings we do have the market opens in Sydney, Seoul and Tokyo almost almost upon us. This is Bloomberg. This is the age of trade. We're counting down to Asia's major market. Open counting downs are bracing for the
impact of that sort of tech sell off to continue here in Asia. Yeah, not a great start to the Magnificent Seven reporting season. I mean, a reasonable set of numbers there from Google, but Tesla missed four earnings misses in a row up. Yeah.
And also the question as to everything that was promised from the robo taxi to human AI robots, how far away really is Elon Musk from being able to deliver those things? Right. Let's get you straight to a look at the open. We are expecting quite a bit of pressure when it comes to some of these tech heavy names across Japanese as well as Korean markets. Take a look at what we're seeing in the early part of trading here as we get into the open for Australia, Korea as well as Japan. Really that focus when it comes to Apple, whether or not we could see that sustained kind of tech recovery after the recent sell off, there's still five more of the magic seven to go. Let's get you to the start of trading,
though. A bit of downside as expected for the Nikkei 2 to 5 as we come online. Dollar yen has been holding pretty steady at that 155 level. But of course, the questions is really as to whether we see the Bank of Japan moving into the end of next week and whether that's going to kind of spur another round of yen weakness out up to a career as well. Of course, a lot of the chip related
names that were so heavily punished in the most recent sell off, we're expecting to see further weakness there. And of course, as you mentioned, that biggest kind of drag is the theme of Tesla. Yeah, that's right. A second quarter missed their earnings per share, $0.52. The expectation was for $0.60. So if we take a look at some of those Tesla suppliers, LG, GM, LG in a take, Samsung Electronics as well might see a little bit of downside cybersecurity cloud but performing well. And of course we did have those
reasonable numbers out of Google its second quarter revenue beat or alphabet rather cloud computing search engine ads performing pretty strongly will have some questions to answer around either. We'll get to that later. But for more now, let's get to Garfield. Reynolds leads our markets live coverage they got for off to a start. Let's just call it that with tech
things. How do we expect this to weigh on markets? And what about the other five of the Magnificent Seven? Well, I think it is going to weigh on on markets, especially more broadly because of, you know, these are these are poor results. There'd been some optimism that tech could turn around rapidly. To some extent.
It's almost more of a problem outside the tech space because Tesla and Alphabet and Alphabet did not disappoint to the extent that Tesla did, but it didn't beat by any serious amount. But they're a little bit peripheral to the AI boom, and the AI boom was what had been really driving this extreme concentration on tech as the driver for, you know, for for equity gains. So we still have the potential that, you know, the more tightly linked AI names will do much better as things go forward, but the broader market becomes that much more anxious. And, you know, I mean, if you do end up having the Magnificent Seven rescued by the AI boom, then does that boost the narrative that the AI boom is a fairly narrow driver, that there's a narrow group of beneficiaries and the rest of it? You have to hope for some fairly meager crumbs to fall off the table. What about the potential for a rotation trade, though, if we do actually see this? Well, again, that that to some extent speaks speaks to that certainly that you would think this could encourage, you know a shift to rotate away from.
Yeah. From tech in particular. Yeah. With that caveat that we're not sure yet what the real AI story will be. And certainly
there's been a narrative that for equities to sustain what's been some pretty impressive gains this year, you need them to broaden out. So it's not just about NVIDIA and TSMC in Asia and the electronic Japan, a couple of a couple of others. So the question is to what extent could that occur? And perhaps unsurprisingly, a big determinant there I think is going to be central banks.
Yeah, well, precisely because you you'll go you're going into a softer growth outlook. So that rotation away from AI and tech, it's only going to work if central banks do come to the party to the extent that they've signaled that they probably will because otherwise the growth outlook is concerning enough that you might decide, you know, if you want to rotate away from big tech, you want to rotate into bonds or something fairly safe. And right now to let the markets live coverage as we get with that market opening, some downside there for Asia. But of.
Also focused on politics with the US presidential race. Ladies and Kamala Harris taking aim at Donald Trump in her first campaign rally since launching her White House bid. Referencing her past work as a public prosecutor, Bloomberg's political news director, Jodi Schneider, joins us now from Washington. A lot of people will say that sort of combative Kamala Harris in her former life as an attorney general, this is kind of approach that is needed going into what is the dwindling days before we get to the election in November. That's right, Heidi. She only has about 100 days, a little more than 100 days, which, of course, for a U.S. election cycle is pretty short.
This came well after the primaries and she doesn't have the luxury of time. So she came out sort of swinging today. But to a rousing crowd in Milwaukee, Wisconsin, where the Republicans had their convention just last week.
I don't think that's probably a coincidence. And it's a swing state. And she made it clear right off that she's going to go right against Donald Trump.
She's going to attack his record. And she actually used her past as a prosecutor as part of that, saying that she would she had done these things to protect people in California. And she knows what Donald Trump's about and she's going to take him on. So that's what we're seeing. We're seeing the Democrats rally behind her. Today, we heard from Chuck Schumer and and Hakeem Jeffries, the Democratic leaders of the House and the Senate, and they basically came out and said they were all for her. And that really wraps up most of the
Democrats. She has enough delegates now to be nominated as the presidential nominee for the Democratic Party. And she's raised 100 the campaign since the current president, Joe Biden, said he wasn't going to run. It said that about 34 hours ago.
They've raised $100 million or something. Well, Jody, in terms of Joe Biden, he's not been he's been heard from but not seen yet. That's all going to change very soon, though. And he's got a meeting coming up with Benjamin Netanyahu as well. So what's left on the agenda for Joe
Biden for his last few months in office? Yeah, he's got a busy few days. He came back to Washington today. He was recovering from COVID. He was self-isolating, made that announcement over the weekend that he wasn't running in a tweet and then got on the campaign call. Kamala Harris was meeting the campaign staff in Delaware. He got on a call, but we haven't seen him over the weekend, you know, since he's made this announcement. He will address the nation at 8 p.m. Washington time tomorrow in an Oval Office address.
That's expected to be him, saying that while he is, he is not going to run again. And he's very happy to hand this off to Kamala Harris and will support her will campaign for her, that he very much intends to still be president through the rest of the term, which is about six months until whoever the next president will be inaugurated in January. He will be meeting with Prime Minister Netanyahu in a meeting, we believe, at the White House on Thursday of the prime minister of Israel will be addressing a joint session of Congress tomorrow. And then he will be heading to Florida to meet Donald Trump, the Republican nominee at Mar a Lago.
Yeah, that that bit is quite interesting. Brad, how much of this, I guess, is the Republican candidate, the Republican camp, kind of trying to build these ties? How much of it is maybe global leaders also kind of trying to hedge their bets a little bit? Yeah, I think that's a good way to put it, Heidi. They are hedging their bets. They don't know what's going to happen. It's been such a tumultuous campaign season. The Democrats seem to now, you know, be
at somewhat ascendant after really the last month since that disastrous debate by President Biden really kind of back on their heels. But again, you know, not and Yahoo! Has had a relationship with the former President Trump. And even though it's been rocky at times, he does clearly want to meet with him. He wants to have that conversation in case Donald Trump wins the presidency. And he has to we'll be dealing with him later, too.
Later. Donald Trump has also met with Zelensky of of Ukraine and recently met with Viktor Orban of Hungary. All right. Political news director Jodi Schneider there in Washington. We have more ahead on the Asia train. This is Glenn Beck. Take a look at all the assets, which is about 10 minutes into the start of the staggered session, of course. But the downside for risk assets more
broadly, we did see that sell off really sparked by two of the big seven names reporting some disappointing numbers, particularly when it comes to Tesla. Of course, not too much exposure to tech when it comes to Australia, but a bit of downside, about 3/10 of a percent. We're seeing the Aussie dollar holding pretty steady as well. But it's interesting, we are starting to
see a little bit of positioning going into the Fed and DOJ next week, potentially some market effects volatility to come. Well, Australia's securities regulator says it's establishing a new team dedicated to insider trading investigations. It's ramping up efforts to crack down on market manipulation following calls from a Senate committee for the watchdog to be split into two to sharpen its enforcement capabilities with new protections for whistleblowers.
With us now is Joe Longer is a chair at the Australian Securities and Investments Commission. Joe Billy, great to have you with us. You're going to give us your thoughts when it comes to these calls that I've just spoken about. Well, the insider trading team that you opened with, the thought, their thought process there was we have six current insider trading prosecutions before the court. We have multiple existing investigations.
We don't know whether they will lead to prosecutions and we have a new Commonwealth Director of Public Prosecutions. So the idea is to leverage our expertise in this area to increase the number of referrals to the DPP and to So it's really an efficiency initiative. We've we're probably one of the most active insider trading investigators and prosecutors globally in any Western market. But what we're doing here is trying to
raise the bar. And in raising the bar, you've also got sort of broader and deeper penalties at your disposal as well. So in light of the perhaps critique of the capabilities at us, do you think that's also helping deter wrongdoing? So the critique you're referring to in your opening was. Senator. That's right, yeah. Well, the the areas that we've been
focusing have focusing on have been happening quite separately from the of that inquiry. The attack is at a long standing priority of dealing with market abuse. We are focusing on insider trading at the moment that we also have a very strong track record dealing of market manipulation. And so we have the pump and dump charges that were laid yesterday and you can expect more court action from us in the coming days relating to market manipulation.
There's a matter pending that we expect to commence shortly, and we're very active with continuous disclosure cases. So we're the market regulator in Australia and we're very active dealing with market abuse. One of your cases and look, I know you can't talk about cases that are under way, but we do have to ask, can we be interested in some broad timelines around the investigation of the government bond syndication process, that particular investigation, the irregularities you found, where are we at in terms of that and the time that that trading pull occurred late last year? So our investigation and it is an investigation is ongoing. It's very complex. There's a lot of work going on, interviewing people, assessing the data. So we haven't made any findings yet.
So we're at the early stages of the investigation. In a matter like this, I wouldn't expect a conclusion much before the end of the year, possibly early into next year. These very complex markets investigations can take a while. Expert evidence is required. And so so in terms of timeframes, that's what I can say about that matter. More broadly, we're very interested in pre hedging activity and this investigation is broadly related to that. So it recently we settled or there was a court outcome with Westpac in its pre hedging activities some years ago now with the squid and Asik is doing a lot of work globally on this subject as well.
So there's the ANZ investigation which is serious and ongoing. No findings have been made in that yet, but there's an ongoing interest that has we've had pre hedging in general. You mentioned before that, you know, globally speaking the regulator here is one of the most active, one of the most successful, but of course there is an inquiry underway. There's always room for improvement. What areas do you think could be
improved for asylum? Well, the critical thing facing any regulator and ask is no exception is how we use our resources. So regulation and enforcement is all about choices. We cannot do everything all the time. So the mark of the successful regulator is to make good decisions about what is a problem and what's going to be done about that problem. And so ask has been very. Be transparent and accountable as to what its priorities are and what matters it can take on. So in any 12 month period, we will be
having between 150 and 200 investigations a year. Now, an investigation isn't just writing somebody a letter and asking for a response within 14 days. It's a major use of resources as compulsory information gathering powers. We interviewed people, we call for data, we retained experts, we retained counsel. So an investigation is a serious matter. We conduct between 150 and 200 of those a year. As far as court action is concerned.
We are in court every day of the week, literally somewhere in Australia. And so every day we are in court. So we lit
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