Welcome to daybreak australia. We are counting down to asias major market opens. Kathleen good evening from new york. The top stories this hour,apples iphone sales disappoint overshadowing record Quarterly Services revenue. Amazon gaining after the bell as its Sales Outlook beats the street. Haidi u. S. Stocks fall as the bond market slide deepens ahead of fridays jobs report. The bank of england signaling a long period of higher rates. Kathleen and donald trump pleads not guilty to trying to obstruct the 2020 president ial election. A quick check on wall street. The stock market had some movement, waiting mostly for apple and amazon results after the bell. The big story, the treasury bond market, the 10year note fell about. 75 points. 4. 17 , the highest since november. The yield touching 4. 1 . Adp employment numbers yesterday suggesting maybe the u. S. Payrolls tomorrow, friday, u. S. , could come and strongerthanexpected at a time when jay powell and his colleagues at the fed are looking to see if the job market is still hot, if inflation is not going to come down enough to justify a september hike. The 10 year has now topped a double top march and july at 4. 09 , another bearish sign. The dollar, little change. The big story, the brazilian real down more than 2 . Yet that it a cut larger than expected. They promise more 50 basis cuts ahead. Oil closed above 81 a barrel. Saudi extending their one Million Barrels a day cut to september. Want to look at the after hours on amazon and apple. You can see apple actually down 2. 1 . Disappointing iphone sales is one of the main themes. Amazon ecommerce looking really good. Their relatively new ceo is saying they are going to double facilities for sending out packages and that is such a very important point as they are trying to sell more and more, which they have been doing. Haidi lets get more of those results from ed ludlow. Lets start with apple, not immune to the broader slump in smartphone demand. Ed in the fiscal Third Quarter iphone sales softer than expected. It was the third consecutive quarter where open all revenue fell on a yearoveryear basis. That has not happened since 2016. There is an interesting pocket in there. The month of june so records in markets like india. In Greater China overall they have returned to growth from a period of basically declined there. And sequentially going into the fiscal fourthquarter which is the period ending in september, they are expecting things to get better for the iphone worse for iphone ipad and mac. So its a mixed picture. Our colleague said he was expecting a boring quarter and he got a boring quarter so we should just all go home. But i think we got exactly the numbers that were forecast in many cases. This is apple not being able to escape the macro headwinds eating consumers all around the world. Kathleen services did better. Tim cook emphasizing that. How important is services and how important part of it is their overall revenue picture . Ed super important. It is what they want us to be talking about. Breaching 21 billion of revenue for services in the quarter. It is being driven by more users around the world who have some sort of apple device actually paying for a subscription. The math is interesting. There are two billion apple devices around the world in this part of the ecosystem. One billion paid subscription accounts pretty so the equation for apple is getting more people that have an apple device to not just be a user of Apple Services that are free, but to start paying for them on a subscription basis. That is the evidence we got the quarter. The commentary is that that is something that will continue throughout this year. Haidi for amazon it was twofold. Better sales than expected, and certainly the forecast looks good, as well as lower spending. Ed exactly. You showed the after hours reaction. Just before i came on the stock was up 8 . I think it is now up 10 . The commentary the last few minutes has been about how capital expenses will be lower this year than in 2022. Cost discipline is definitely something the street has been looking to. At the same time, andy jassy has been really thinking about how he can get passing packages to the consumer more quickly. In the u. N. when i have an amazon package arrived on my doorstep it likely came from a Fulfillment Center local to me in Northern California where previously it might have come from the midwest and traveled further. They localized the chain. The real bright spot and the most important one for investors is aws, the cloud unit. Topline growth 12 , betterthanexpected. Azure is their direct competitor and they reported slowing growth last week. That did not translate to aws. So there is confident in what is essentially the cash cow for this business. Kathleen what are they doing so right . I am wondering to what extent good sales, good ecommerce results at amazon suggest a u. S. Consumer that is still firing on also wonders . Ed i find the macro part of it really interesting. On the one hand you have apple saying that here in the u. S. We have a weak smartphone market. Consumers are not spending money on new smartphones. The commentary from amazon kind of contradicts. Consumers still seem to be willing to pay for convenience. That is one of the main takeaways we had from uber, for example, where they had tangible evidence on the demandside consumer continues to pay for the convenience of right healthfood delivery. That is very much of ridehail food delivery. Andy jassy is not the same as jeff bezos and they are not in the same era. The story in the pandemic was throw money at getting packages to people as quickly as possible. Andy jassy has unwound that endless spending but still focused on the strategy side of it that is what is paying off now. Kathleen ed ludlow bringing us the amazon and apple results. Ahead of those earnings, u. S. Stocks ended slightly lower as the treasury route continued. Lets get more details from alexandra some anova. Kind of a mixed bag for these very important companies. We already had a skittish last few days amid turbulence of the bond market and now the focus is on these big tech results. The bar was incredibly high for them going into results because of the incredible run we had in Technology Shares this year and the picture was very mixed. Apple missed estimates and investors took that as a sign of a broader slump in iphone sales which of course is a sign perhaps consumers are still being weighed down by higher Interest Rates and still stubborn inflation. This is a sign apple amazon Sales Outlook topped estimates with Strong Performance in its ecommerce business helping powershares higher. When it comes to these earnings results, as important as they are, what is driving this is soft landing optimism. That is why the jobs report tomorrow will be so important to investors and give them a sign of whether or not the fed is done with its rate Hiking Campaign and that will determine whether or not they can stick the soft landing and whether equities can go higher. Haidi the dows outperformance to the s p 500, what do we see as to how sustainable that is . Alexandra the dow, which tracks oldschool stocks, is now finally outperforming the s p 500. All focus has been on the s p and nasdaq this year given the run on Technology Shares. A lot of people have been worried about a really significant concentration in the stock market with the magnificent seven stocks powering higher but we are finally seeing signs of this broadening. A lot of companies that are the backbone of the economy, a lot of sectors including manufacturers, major financial institutions, health care and some others are starting to look viable to investors. This is a testament that a lot of investors are optimistic about the direction of the economy. Of course we saw the dow closed 13 sessions positive last week, its longest winning streak in 35 years. A lot of strategists had predicted this. If you look back on history concentration is not necessarily something to be concerned about. Any time concentration in the stock market has reached extreme levels we have usually seen the rally broaden out and the laggards catch up. That is what we are starting to see signs of. Kathleen thank you to alexandra semenova. Another big story here is the bank of england. As you know, raising their key rate 25 basis points. That was the for sure bet although they were open to 5 50 basis points, excuse me. Mixed signals, too. Confident that maybe policy is restrictive, that is the governor enter bailey talking, that inflation will get to 5 or lower by the end of the year. The headline is currently 7. 9 and the core is 5. 9 . So they have a long way to go. There is one dissent that wanted to hold and there were two dissents that wanted to do 50 places point hike. Markets pricing in two more 25 basis point hikes but clearly this will be a situation like so many Central Banks, particularly those who have hiked aggressively, whose inflation rates are off their peaks. When do you stop and when have you done enough . It is the last mile where policy is really doing the work and we have to see policy stay restrictive. It will have to remain restrictive to have this effect of bringing inflation down particularly next year. Haidi of course the other big data point we are looking for is from payrolls particularly in the context of how this potentially drives the next move in not just treasury yields about the global bond market. We are at a pain point when it comes to the souring sentiment for the world bond markets. It raises the stakes for fridays u. S. Monthly jobs data. We are expecting gelati showed job gains moderating slightly but still a solid advance and potentially adding to the soft landing, less chance of a recession chatter. But when it comes to bond markets, higher since november. The u. S. Treasury market is close to shedding all of its gains for 2023 and crushing hopes for a more sustained rebound. Given how painful the midweek jobs indicators we had were for this section of the market, this will be very keenly watched, as always. Lets turn to one of our other big stories. Former President Donald Trump has pleaded not guilty to charges of conspiring to obstruct the 2020 president ial election. For more, our washington Senior Editor wendy joins us from the seat what did we see joins us from d. C. What did we see today . Wendy it was kind of an extraordinary moment. He showed up, as he was required to at the federal courthouse just down the street from the capital where the mob, on his behalf, tried to overturn the 2020 election. The judge kept him waiting for 20 minutes, which i thought was interesting. Then she comes in and they read the charges, he pled not guilty, and he was ordered to not talk to any of the other potential witnesses except through his attorneys. And then he, as you are seeing here, he got in his suv and drove back to the airport. I can tell you that this is factually incorrect, he said d. C. Is covered with broken buildings and graffiti everywhere, and everything has gone wrong since he left the white house, and now he has gone back to bedminster. They will be another hearing august 28 in which a trial date will be set. Kathleen what does this mean . Trump wants to lead the republicans in 2024. If hes being tried for these alleged crimes, they will be debate, they will be all kinds of things. How are these two paths going to mesh for him . Wendy no one knows for sure and that is going to be really interesting. The one trial we know that is set is in late march and that is in new York State Court for the hushmoney payments to the actress stormy daniels. Then in may will be his trial on the classified documents he was waving around and refusing to return to the archives. So those are happening sort of as the primaries are just about winding down. By may 20, that trial, they will be over. But this trial may happen in the middle of that. Nevertheless he needs time to work with his lawyers on his defense and he needs time to prepare and he will be out campaigning in iowa, new hampshire, and south carolina, for the nomination. And as a country we have never seen anything like this before in the united states. Haidi Wendy Benjaminson with the latest. Lets have a look at how asian markets are shaping up. The bond store is when we are watching very keenly in terms of unwinding so much of the progress we have seen and treasury markets so far this year with the extent of the pain trade we have seen over the past few days. This treasury in question is whether we are going to basically see a repeat like what we had late last year with the fiscal scare in gilts. All of this is going to overshadow a lot of the equities markets trading that we see. Sydney futures looking flat at the moment, about. 1 . Aussie dollar holding steady. We saw the dollar paring some of those gains. The pound raises its drop post boe hike. Bloomberg dollar index was little changed as well. Still ahead, tigris Financial Partners joins us to discuss amazons stronger outlook fueled by growth. We will also get the latest on amazon on apple, i should say. This is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. woah. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh that is sort of an unemployment with slowdown which is really what is going on and we could talk more about it but that is what is really going on. People are employed and spending money and the fed is trying to slow down the economy and it looks like we are reaching a pretty good equilibrium. Kathleen the bank of america ceo talking about the state of the u. S. Economy. Joining us to discuss the markets and the economy in more detail, how they connect, francis stacy. I want you to connect the dots for us. We just got the results from amazon. Really good, they are selling a lot, updating facilities. Apple, sagging iphone sales, services doing pretty well. One of your views is even though gdp and growth look really good, that you do not think that people are seeing decelerating things in the background. These very important reports, i dont want you to get into the details of it, but in terms of the message, the signal, how does your view mesh with that . Frances just looking at earnings it is really interesting because if you look at the cycle peak and you look at the comparisons for the second quarter, yearoveryear the aggregate of earnings is down 8 . I think that is not really the narrative that is being talked about. Expectations, Many Companies guided lower and they are beating expectations. We are looking at that is if it is a positive on earnings. It depends on how you look at it. In the larger scheme of the Business Cycle where you have to have credit reconciliation at the end of a Business Cycle typically, you start to look at that and we cannot ignore those have decelerated and they would have to reaccelerate in order to remain strong even though we may or may not i am in the camp we will have a recession coming forward. Kathleen you sure are. One of the things you are looking at is credit markets. You say fed rate hikes have a 14 to 16 month lag and we are now at month 15. You think that is one of the things that will start showing up. Plus you are worried about people in the 60 lower part of the economy who are kind of living paychecktopaycheck. Frances we are living in a bifurcated economy and 60 of the economy, i think it is up to 70 of millennials, are living paychecktopaycheck. 50 are dependent on their parents. At some point you have a really high amount of credit card usage that is accelerating rapidly. You have aprs over 20 ready consistently. At some point the consumer with student debt coming back on is going to probably struggle and you might be seeing that in iphone sales. It will be indicative of whether iphone 15, if there is a lot of enthusiasm around the holidays for that. But we are dealing with this record amount of debt. Also Household Debt is at an alltime high of 17. 1 trillion. Yet on the government side of things we have had deficit spending accelerate yearoveryear plus 3. 8 for the second quarter. That is a lot. We have 1 trillion in Interest Payment service for the federal debt alone. The fed is trying to tighten but what is really buffering that is government sharing. It is going to remain to be seen how it plays out with a bifurcated economy. If you are in the upper 40 this year has been great for you because you own assets. If you are in the lower 60 things are getting more expensive and reaccelerate. The commodities index is up, many of the foods are up 10 to 20 and that will have a ford eight month lag. The fed is not going to get excited. We are not pricing a lot of risk in the credit markets right now but at some point there will be risk in the credit markets for sure. Haidi is that why you are buying oil and also advocating to position in gold . Frances i like oil because the fundamental story is still the saudis cutting production. And then there is still a substantial amount of demand if you have been on an airplane recently they are full. And gold does really well. If we have a reacceleration of inflation because we have lagging effects show up in cpi later in the year, it depends. Oil and gas are up pretty drastically. Food can have a four 28 month lag. That could have four to eight month lag. Gold will still do well. If we get those credit issues, gold is still strong. Ita, defense spending, obviously they will try and refill those supplies being sent over to ukraine. So there is a fundamental backdrop to each of those things. Haidi i want to get your views on the bond rout because it has been quite a week. Take a look at this chart which is one of the ways to illustrate. Its reminiscent of what we saw back in 2022, and of course the likes of the boe having to intervene. But in october 2022, we saw similar magnitudes of moves in the 30 year after the fitch downgraded this week. Is it going to get worse from here . What are the risks . Frances i fully expect now that rates are going to test the october highs. So that will continue to put pressure on bond prices. There is just no reason to think that they wont. With the impending reacceleration potentially in inflation, the fed will not remove its hawkish rhetoric. There is nothing going on in the markets where the fed has to reserve reverse course. That tends to happen subtly and all at once suddenly and ought once when it happens. I would be interested when you you are looking at the tlt, when it reaches that Double Bottom when rates when it correlates with rates hitting that october high, it will depend on the backdrop whether or not i would be a buyer at that juncture. But we are either going to have a higher low, a Double Bottom, or a lower low, and probably some kind of a reversal in that market as the year goes on and we see demand erosion in the consumer. We have had an inflection in bankruptcies. Corporate bankruptcies are up 63 this year. Foreclosures haidi sorry, we are out of time. We have to leave it there. Frances stacy, great to have you with us. Much more ahead. This is bloomberg. If youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. Kathleen final day of the trading week, lets see how currencies are doing. You can see some strength in the aussie dollar, the new zealand dollar. And of course with the japanese yen, a little bit of weakness. We are going to watch for more pushing on the japanese yen level in the japanese trade coming up soon. Big focus on the chinese currency. This is bloomberg. Its an amazing thing when you show generosity of spirit to someone. And you want people to be saved and to have a better life, then you dont stop. The idea that we have saved five million peoples lives, its overwhelming. Its everything. Haidi take a look at the majors we are watching. A tale of two stories when it comes to apple. After hours trading session, still seeing a bit of weakness about 2. 5 . The sluggishness when it comes to smartphone demand persists this quarter, posting his Third Straight quarter of declining sales, predicting a similar performance and the current period. Theres been an industrywide slump although there has been certain bright spots. At amazon though we are seeing a surge of almost 10 , gaining on that positive outlook fueled by booming ecommerce sales. They reported Quarterly Sales that rose faster than expected. The slowest pace of spending in at least a decade and cutting back on Capital Spending for 2023 to 15 billion. It was a twofold aspect of that revenue projected for the Current Quarter at 138 billion to 143 billion, long past expectations. Lets get some views from ivan feinseth. Always great to have you on big tech earnings day. Lets start with apple put it was not all bad. We saw that more optimistic recovery in the chinese market. But this is really showing that the iphone and other devices are not immune to the broader industry slump. Ivan well, i mean, still its about services and they continue to grow their ecosystem and that means more services, more fastgrowing and highly profitable services. The trends in iphone sales are going to ebb and flow and i think we are going to see a slowdown in 14 because we know the 15 is coming. It will be announced in a few weeks and will be available shortly thereafter. If you know that a new phone will be available for putting much the same price, because they said they are Holding Prices steady, except for the pro models which they are going to increase the price because there seems to be strong demand. So you would wait about a month or so and get the next greatest phone. Haidi it sounds like you think that the services aspect of the numbers are perhaps being overshadowed, and perhaps unfairly so if you look at how investors have reacted. Ivan well, they react to the headlines and look at the strong headlines out of amazon. That is being bid up in the postmarket. And apple is being sold in the postmarket. I continue to view any weakness in apple as a buying opportunity. Also apple returned 20 6 billion in cash to the shareholders it is quarter between Share Repurchases primarily and dividend payments. That gives powerful support to the stock. Kathleen quick followup on the ipad. The revenues were pretty bad, down pretty sharply. Is that becoming a thing of the past . Ivan if you can get a lot of speed and functionality on the phone, which is now smaller than the ipad and much more affordable, but when you look at other Wearable Computers like the macs, they did a little better. The ipad maybe weaker, macs a little bit better. Consumers buying a more powerful computer rather than the ipad. Kathleen from a macro standpoint, if you look at apple it is like, well, there is a slump, people are waiting for the 15 to come out. Amazon is a story of, boy, the consumer is still spending. Could that eventually healthy iphone . Ivan yes. First of all, peoples smartphones are such an integral part of their personal and professional life that they will pay up for it. By the way, a lot of purchases that take place at amazon take place on peoples iphones. So i think they do go hand in hand. History has shown any weakness in apple has been a buying opportunity, and i continue to believe that that will play out. Haidi if you take a look at the geographic breakdown, the china market of course is so key for apple. Were you encouraged there by what you saw . Ivan absolutely because we know that has been to malt been tumult in the japanese market. And apple is expanding into india and that has also done well for them. Haidi it is interesting to me looking at the investor reaction given how the slowdown and supply for smartphone uptake was well flagged given the indications given to apple suppliers. How much were focus now will there be on the cost side . Obviously the other side with the enthusiasm of amazon is how much they have tighten the reins when it comes to spending. Ivan cost has been a major focus in light of the significant increases in inflation we have seen over the past year and inflation pressure has started to abate. But you can only grow revenue so far and so fast and increased profitability you also have to cut costs. If we look at Meta Platforms year of efficiency they started to get focused on costs and look what happened to that stock. It is all a function. Input costs are a function of profitability as well as revenue growth. Ideally you want to see revenue growth, but a Cost Containment is positive sale. Kathleen does amazon have an achilles heel . It seems like all they can do is grow, all they can do is do better, not just with ecommerce but with the cloud. What stops them, or what is their challenge coming up . Ivan well, i mean, should we get this longawaited recession that seems to elude us, but any pullback in the consumer on Discretionary Spending will affect all retailers. Then, if they start to pull back, they will look for bargains which will also help amazon. And amazon continues to growth to benefit from the growth of their prime members. People paid to be prime members and prime members are their best customers. Also the increase in fulfillment. Personally when i am looking at an item on amazon and they say when i buy it now i can get it tomorrow, that is a powerful driver. Now i can see i can get it today, and i have already benefited from sameday delivery, it is phenomenal how efficient and powerful their fulfillment capabilities are. Haidi are you worried about cash bone when it comes to Ai Investment across the board . Ivan ai is this new paradigm and this new revolution that is going to require significant investment i would almost be concerned if companies were not investing in ai because ai is going to drive everybodys competitive advantage. To quote the founder of csuites ai, every company is going to be an ai company. Everybody is going to use ai to optimize supply chain, manage inventories, to analyze Customer Behavior and drive pricing and inventory. So every company is going to have to use some level of customized ai capabilities to drive their competitive advantage. So we are going to need to see significant investment in this. Haidi ivan feinseth, cio at tigress Financial Partners. Lets look at some other earnings news we are following. Apollo Global Management soared to an all time high. Grew to 1 billion, beating wall street estimates. The results reflect their tilt towards creditor assurance. The copresident says it is a golden time for private creditors while warning of challenges ahead. Financial conditions will and are getting more challenging. They are getting more challenging in england and parts of europe. They are going to get more challenging in Certain Industries in the u. S. That is how we think about the world in 2024 and 2025. So, along with the evolution of how capital gets provided, certainly the higher cost of capital in tougher financial conditions are what we would expect as a base case. Haidi paypal shares slumped after a key measure of profits shrank in the second quarter. It says adjusted operating margin narrowed to 21. 4 during the period. The company had to set aside more money to cover souring loans made to merchants. The paypal ceo says he expects the provision to be a temporary blip across results. They generated about 437 million in sales from yeezy sho es. They say consumer demand remained high despite controversy over the antisemitic views of rapper kanye west. Adidas scrapped their partnership last october, leaving some 1. 3 billion worth of sneakers in limbo. Kathleen proposed new Capital Requirements for the biggest lenders could shift more financial activity outside wellregulated sectors. We spoke exclusively to Brian Moynihan who told us the rules will make u. S. Banks less competitive globally. Brian i think if you step back, this industry is wellcapitalized. It is wellmanaged and wellregulated. You have had success of fed regime, people working in chairs over the years saying it is wellmanaged and wellcapitalized. Banks will fail. They fail throughout history. That happens. But since the financial crisis, more people are under the tent. The problem is if you get capital regulations of the Banking System too tight, you push outside the tent. That is a concern. Bank of america will adjust to make it work. What has been interesting is its the u. S. Versus europe and others. This is making it all banks, less competitive to mid sized u. S. Companies. Thats more of a trade question than a balance of question. Im surprised by the amount of dissent. I have been working on Federal Reserve stuff for my whole career, four years now. It shows you whether it is mortgage loans, tax benefits, treatment for clean energy investments, or the basic trading, theres a lot that has to go over the dam to get these rules right. There is debate about what the right answer is. What is the problem being addressed . That is what i dont understand. I am not sure this addresses it. Brian read the dissents in the debate. Strong regulation is important. Rapid growth in banks tends to come from things that turn out to not be interesting after the fact. Thats the thing. They need to come to a common agreement across the world we are just applying it with much more rigidity and requirements. If you look at the largest bank of france, u. K. , and germany, they have about half Capital Requirements as the u. S. Do. I think people have to look at it seriously, look at it relative to what we are trying to do here. We want the strongest banking industry. On the other hand, our multiples are half or less than the s p multiples. Investors are saying wait a second, if capital demands dont stop, we are not sure we can into two invest. Back to your point, every one basis points of capital is 150 billion less loans we can do. They cannot be done at other places. Kathleen that was the bank of america ceo speaking exclusively to david westin. Plenty more to come. This is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Fabulous surroundings. But everyones looking at their phones for Financial Insights from merrill. Is he hailing a ride to the concert hall . No. Hes making sure his portfolio and retirement plans work in harmony. They want to adopt a child and build a new home. So theyre talking numbers with their merrill adviser. Shes not researching her next role. Shes learning how to handle market ups and downs without the drama. Personalized advice so impressive your money never stops working for you with merrill. A bank of america company. Haidi oil is gaining after saudi arabia extended production cuts by another month. The opecplus leaders is a decrease of one Million Barrels a day will last into september. That leaves daily output at 9 Million Barrels. They also said the reduction may be extended or even deepened. Opecplus is said to hold a meeting on friday to gauge the impact of those supply cuts. Billionaire harold hamm says oil prices could end the year below current prices. The Continental Resources chairman spoke to bloomberg about his outlook. Harold you need to look forward two or three years and demand keeps rising. Hopefully they will get by the depression since the area we have been in for the last two to three years with what has happened here with the economy in the u. S. So, looking forward, we need to be prepared for that. I am saying we are nearing a breaking point, certainly we are here in the u. S. I was talking to Scott Sheffield and he said we could see 100 by the end of the year. Do you agree with that . And if we are at a breaking point, what is the price we see a breaking point . Harold i dont see 100 by yearend. Goldman thought maybe 86 on the high side. Hopefully they just report that. I think that is being optimistic. We hang high 70s, low 80s. Alix if we unleash more American Energy though, doesnt that wind up hurting the price and make it harder for you to actually do business . Harold well, yeah, it affects price, it certainly does. But the count keeps dropping. Maybe as it should. But we are in an oversupply situation. Had the economy rebounded around the world, we would not be oversupplied. So it has been lagging. We keep shooting ourselves in the foot with the American Economy here at home and that affects the buddy abroad. Affects everybody abroad. Alix inflation is holding in harold inflation, the rate of inflation perhaps is waning and coming down a little bit. Which is good. You never get rid of that inflation that happened. Alix so you feel it is sticky right now . Harold it hit us about 20 . Hit everybody in the field 20 . That becomes steadystate. The rate of inflation is still going up. It is lessening, which is good. We are glad to see that happening finally. But it definitely had about affect. Alix sounds like that is going to stay. That 20 , thats in it for awhile. Harold i think everybody understands you never get rid of that. It happens and it sticks. Alix what about labor . We have the jobs report tomorrow. I am wondering how you look at the labor market. Are you keeping all the people that you want . Are you going to have to hoard labor . Are you going to have to let go of some people if things get tougher . How do you think about it . Harold we have a culture at continental, we dont lay off anybody. In their downtime, they suffer, we suffer. But we all stick together through those times. So we dont lay anybody off. We have all the folks that we need at continental. I think the industry does as well. It was painful for a while but today is not bad. Alix in the market lots of happening lots of stuff is happening. How does that affect your Capital Allocation . Harold well, certainly Interest Rates affects everybody. We all have debt. We have debt at continental. Those are real costs. So it absolutely hurts. Alix does it affect how you spend money . Do you spend money or produce less oil because you have to pay more in interest . Harold absolutely. It affects our cash flow and our ability to spend in the field. Kathleen that was harold hamm speaking to alix steel. Be sure to tune into Bloomberg Radio to hear from the big newsmakers. They are broadcasting live from our studio in hong kong. You can listen as well via the app, radioplus, or bloombergradio. Com. Plenty more ahead. Let Innovation Refunds help with your erc tax refund so you can improve your business however you see fit. Rosie used part of her refund to build an outdoor patio. Clink dr. Marshall used part of his refund to give his practice a facelift. Emily used part of her refund to buy. I run a wax museum. Let Innovation Refunds help you get started on your erc tax refund. Stop waiting. Go to innovationrefunds. Com you really got the brows. Haidi chinas growing presence and influence in the pacific is prompting new zealand to update its defense and National Security strategy. Paul allen joins us now with more. This fits broadly into the australian and pacific direction. What are we healing from new zealand . Paul the purpose of this review is to pursue and protect new zealands interest in the pacific and wants to have a combatcapable Defense Force. Hang on, shouldnt your Defense Force be combatcapable . In the case of new zealand there has been a slow erosion. 20 years ago the combat air wing was disbanded. The surveillance p3 orions were retired. Three navy ships are currently idle because of not enough staff. The two frigates new zealand has, i went on a sea trial of one of them 26 years ago, so they are getting pretty old now. The military is not in a fit state to respond to challenges. Cyberattacks, this information, confirmation competition in the region. Kathleen how does this strike a balance between paul the review is not shy about calling out china by name. T very diplomatic language usually but not in this case. Notes the significance of the relationship with china, that cooperation is essential, but the chinese governments assertive pursuit of objectives is a major driver of competition in the region. So the review is very much focused on china. New zealand only has one formal ally, australia. So this focus on the fence be very welcomed here. The alliance with the u. S. Suffered some setbacks in the 1980s with new zealands antinuclear policy, but that has been slowed. But there is extra defense spending in this years budget which was already announced. Just 450 million u. S. And more than half will just go to better paying staff and the rest goes to of grading assets. And new zealand is a small country and has plenty other demands as well. Kathleen certainly does. Lets take a look at some currencies because in the world of currencies right Central Banks are such drivers. I have to go right to the u. S. Dollar, the brazilian real, it is down more than 2 . Today was the worstperforming Major Concerns he today it was the worstperforming major currency in the world. It said were going to do more rate cuts of this size. But remember, brazil was among latin american countries that started raising long before others dead because they were hit first by the supply chain constraints by pandemic. 1300 basis points. They were up to 14 on their key rate. So, as they cut and signaled that they are going to do more as an agent has come down so much, they are paying the price. But lets not feel too sorry for them because their currency was up 18 this year. British pound up against the dollar after the boe hiked, dollar down a bit, pretty much flat. Were watching the yen, anything that has to do with the yen, with japanese bond yields. After two rounds of bond purchases that is another player to watch in todays trade. Haidi a big end to a busy week. Coming up in the next hour, we will be talking market strategy. Staying optimistic when it comes to japanese stocks. But, plus, why they are bullish on chinas oil majors. Daybreak asia is next. This is a picture across futures as we count down to the start of trading in major markets across the region. This is bloomberg. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates, exemption certificates or filing returns. AvalarAhhh Ahhh Ahhh ahhh back in the day, sneaker drops meant getting online to wait in line. Ahhh now with xfinity mobile. We get the Fastest Mobile Service and can get the freshest kicks asap. I got this. Save hundreds a year over tmobile, at t and verizon with the best price for two lines of unlimited. Nice job, little sis they grow up so fast. Im a fan. From xfinity. Kathleen welct