Good morning and welcome to daybreak australia. Im paul allen. In about im annabelle. Cutting down to asias major market opens. Shery the top stories this hour, investors way mixed corporate results. Microsoft jumping up your First QuarterSales Top Estimates while alphabet sinks as cloud avenue paul chinese stalks, lawmakers raise the deficit ratio as xi jinping makes his first visit to the central bank. Shery china removes the defense minister ending speculation over his status after disappearing from public view. Take a look at how u. S. Futures are coming online. Downside after stocks rebounded ending the longest slide in 2023. Corporate earnings and really a little bit of a push up because of forecasts from verizon and ge in a busy week, 15 trillion dollars worth of companies reporting. Treasuries were mixed. 10 year yield edging higher following intense volatility on monday. The bloomberg dollar index rising for the first time in four sessions, u. S. Business activity picked up in october. Oil right now is unchanged after falling below the eighth or dollars a barrel level to the lowest in one week. We have concerns about the conflict in the middle east using but also reports of supplies coming from russia with crewed exports rising but the action in the afterhours session, microsoft climbing there posting its strongest sales increase posted by Cloud Computing growth. Different story from alphabet the cloud unit missed estimates. Metain amazon, a mixed picture. Results on wednesday and from amazon on thursday. For more on what is moving the session right now, technology coanchor ed joins us now. Lets start with alphabet in the big mess when it comes to Cloud Computing. What happened . Is interesting, the ceo of alphabet told me this is a case of customers cost optimizing. There was evidence that customers cut their costs as it relates to cloud, that can be dialing back on the storage or they might transition to a lower spec on the processor side in the process. That cloud platform. Its interesting because across the board there were beats on the top line. If you look at something for example like search or youtube, there was stabilization in search and resilience but not enough to offset the longstanding concern about google cloud and how it trails behind amazon and microsoft in the direction of travel has not been catching up. Paul lets talk about microsoft, a beat across the board but what are we seeing in terms of ai eating into the search space . They are to complete different cloud stories. Microsoft cloud was the area of growth, topline growth for microsoft was the best in six quarters but topline growth, 27 , corporate cloud 24 and a big part of that is the ai story, a lot has been discussed about the investment and leveraging gpt technology in microsofts existing software, so there are questions about how that looks. For example all of us have used Microsoft Office and office 365. Whats coming is copilot and a lot emphasis from investors is microsofts ability to charge more for where ai has been added to existing software. Theres evidence that was good but questions about how good it can be. Paul Bloomberg Technology coanchor ed ludlow. Tech earnings to digest ahead of the open in asia, what are we watching . Quite a mixed bag so when you look at futures, they are pointing lower, early moments for trading but not a great signal to investors given how much anticipation there had been around these results and broadly earnings had been expected to climb more than 30 for the big tech names. But we have new zealand stocks online trading negative aussie futures still pointing but the indexes closer were not seeing prices on that last trade. The other big thing is china and working through the details but the Golden Dragon index move is the biggest intraday move since july so certainly another big factor driving sentiment in the Asian Session today. Paul china is stepping up support for its struggling economy raising the budget deficit ratio. This is when xi jinping made a rare visit to the central bank. Lets bring in Stephen Engle in hong kong. So is this the big intervention everyone has been waiting for . Stephen it is something we reported on a couple of weeks ago that they are considering and according to state media have done which is making an extremely rare move, raising the budget deficit ratio. You set the target at the beginning of the year at the annual session, the National Peoples congress in march and you stick to it and its generally 3 of gdp. Now we are learning that indeed china will raise that to around 3. 8 . They are issuing additional sovereign debt worth one trillion yuan, 137 billion u. S. Dollars in the fourth quarter. Is it the bazooka . Not necessarily but it is showing urgency that the economy takes priority. Xi jinping over his last decade has prioritized basically party discipline, National Security and other things other than the economy as he took on the platform, property, online education, gaming. Multiple shocks combined with the covid pandemic that locked china down from the outside world for three years is they are paying the price for those simultaneous issues at once and the chinese economy is sputtering. So what we are likely to see is sovereign debt. That will put a big burden on the Central Government. Usually when beijing has marching orders, the responsibility falls on the local governments but because of the pandemic finances that local governments are strained beyond belief so it looks as though beijing has realized the Central Government will need to take on a greater fiscal burden. And anxiety is clear. The 9. 1 trillion u. S. Dollars stock market anxiety is gripping that and other shocks in the sector are weighing on confidence and willingness to spend at Investor Sentiment into china. There was a flurry of announcements which i will get to. Personnel levels and cabinet member positions. One that stood out was the removal of the finance minister and the replacement. Yet another change in xi jinpings cabinet positions. Widely expected after what was announced last week as the new communist party chief, he is likely to spearhead as i alluded to, spearhead dare i say at least a plan from beijing to diffuse local Government Debt levels at the provincial level. Shery lets talk about those other announcements that you alluded to. Former defense minister and foreign minister as well. Qin gang we knew he was removed but now hes at his last title removed as well in a flurry of announcements from beijing. The one we didnt know about was the man on the right, the defense minister confirmed now that he has been ousted from his position as the top general in the pla. He has been removed as state counselor, something we expected when he left public view since august. I asked directly this question to Nicholas Burns last week in beijing, he is the u. S. Ambassador, whether he knew about the fate of li qiang food which he said he didnt. And i said is this given opportunity for the u. S. And china to resume military to military top level dialogue that had been cut off more than a year because this gentleman, we shown fu was sanctioned by the united states. Maybe another person could pave the way. This is what Nicholas Burns had to say. Nicholas china shut down our military to military channels following speaker pelosis visit to taiwan which we supported. We believe the channels should be reopened at every level. Working level, commander level and ministerial level, that has been our consistent position because the last thing we should want in this relationship is the absence of communication that would just add to the difficulties we have had in having a straightforward conversation between military leaders stephen interesting developments overnight punctuated by saying in xi jinpings third term one year in three cabinet ministers have been a move finance minister, defense and foreign, interesting. Paul Stephen Engle there. With more on chinas economic support measures. Ahead were going to get insight from pboc Deputy Governor and imf deputy managing director. Before that more tech earnings and insights and why they are cautious on the magnificent seven, this is bloomberg. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com a streaming service. Fubo is like the best of cable. Plus the best of streaming. Thinking of calling yourselves the big kickit because youre helping people kick cable. Sorry, uh, i feel like its a little close ahh. Imagine them chanting the big kickit. As you dominate the paint. Are we still talking about tv . Live tv and sports. And more but mostly sports. Thats fubo we will see higher Interest Rates for longer. You have a conflict environment. We have a backdrop of the aftermath of the terrorist attack and it is desperately sad. Im optimistic but uncertain. You would be foolish to not look at some of the things taking lace today. We will not see a hard or soft landing. High Interest Rates in europe. If you take the time horizon the monetary policies will have great effects on the world and you look at the world gaps. Its difficult to be optimistic on that. Wall street bankers are pessimistic on the Global Economy as we get a mixed bag when it comes to tech earnings. Microsoft is climbing after posting and strongest sales increase in six orders. Cloud computing growth and recovery in the sector helping the company but a whole different story for the cloud unit of alphabet which missed estimates and can see a drop of more than 6 in the after hours. Seeing metadata and amazon falling, we have the results later in the week on wednesday and thursday respectively. Our next guest is cautious on tech earnings saying it is there show me quarter. Lets discuss with Investment Analyst shelby. Great to have you in the studio. Your positioning around cash rich companies. The riches stocks out there, why are you cautious . We are cautious for the reasons demonstrated thus far. When we look at the google cloud versus microsoft, you might have assumed this is great for Cloud Infrastructure but google showed us that it does depend on how management allocates the capital and the skill within their Business Model which is reflected in down trading ahead of companies that have not reported. We look at the Balance Sheet versus the valuation we can look at microsoft and say they are cash rich but a rich valuation does not translate to Free Cash Flow and thats why im cautious on these tech earnings going through. Shery what do you think about the rally around Artificial Intelligence . How much could be offset by search in yields . It can help with the only way it will help fundamentals is if companies have a plan to leverage on it. As you mentioned with a higher cost of capital it may be more difficult for nascent companies to build out ai but when you look at microsoft that is highly mature and google and alphabet, they can continue to be nimble and a higher rate environment. Paul if we look at the s p this year weve got a chart that illustrates strongly just how much big tech has been carrying the broader index, outside of these magnificent seven do you see other options for any reason to be optimistic at all . At the team we see a lot of options when we look at the longer term. A lot of reasons to remain invested. One example could be consumers even though they are getting up we seen opportunities in higher and affordable Luxury Consumer names, names that deliver value, cosco and walmart. There are names that are still delivering intech as we have seen. Microsoft but also netflix. Tech that is heavily reliant on the consumer. It depends on who will be operating their model, who can leverage and who is able to keep their boat floating when the lake is starting to dry up across the board. Paul are you surprised by the strength of the consumer . Yes, it is shocking with the strikes going on and the pressure that higher Interest Rates are putting on and again also pressure on consumers by tightening credit lending so i am surprised but at the same time, we look at key risks especially student loan repayments, that may put more pressure and a lag of affect unwillingness to use credit as debit dwindles may come through in 24 so the consumer has been robust. Shery especially when you have another Government Shutdown and confidence being shaken. We have not had a House Speaker in almost a month already. It is a risk we are thinking about because we have to consider that there will be millions of government workers losing paychecks that they will get after the fact but not ahead of the Holiday Season so its not just consumption, it is logistics. Any companies dealing with contract crises that they have to face because they are not dealing with spots. There are products that have to be moved in bills that have to be paid regardless of whether the product will be sold. Shery how much will the Holiday Season help . Not a lot, they cannot spend, they are not getting a American Consumers find a way to make christmas happen so there may be some trade down. I would expect a relative peak but if were dealing with two different stripes, autoworkers plus the Government Shutdown i think the peak will look more like a plateau. Shery good to have you with us, shelby. Portfolio manager with her views on the markets and you can get all the stories you need to know to get your day going in todays edition of daybreak go to dayb , customize your settings so you only get the news on industries and assets you care out. This is heard this is bloomberg. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Paul minnesota lawmaker tom emery has become the third House Republican to drop his bid for the speakership following criticism from donald trump, lets go to bloombergs congressional editor mike in washington. Is there any candidate for speaker that republicans can agree on . Thats over going to try to find out. It is tough because you have a conservative hardliner essentially knocking out anyone who might appeal to traditionalists or moderates and then you have moderates and traditionalists to our knocking out conservative hardliners, so they will go back at it again tonight and see where they are. It may be tough to do. Shery why dont you get a moderate who can appeal to democrats and get those votes if you are not going to move the hardliners in the reef looking already . Thats the way you think about it in most classic democracies but in the u. S. , particularly at the moment with these very polarized, entrenched partisan differences it is hard for republican moderates to make a deal with democrats and survive in primaries later on or get support they need from party activists. Its possible that might happen in the end but there is a very strong resistance and right now there is still more resistance to forging a deal with democrats and trying to reconcile differences that seem almost irreconcilable with these republican factions. Shery what is not getting done because we dont have a House Speaker into a fourth week, and what would it mean if we get to be november 17 deadline and have another shutdown . Well now that could be an action forcing event because the house rules do not allow the house to do anything without a speaker, so they would either have to give more powers which they can only do mime by majority vote to a caretaker speaker or come up with a speaker. As we get closer to the november 17 Government Shutdown that could put pressure on republicans to do something. Likewise if the situation in israel in ukraine got much worse, the Administration Says this aid that they need to get to the middle east, to ukraine is urgent, time sensitive but if that got worse that could put more pressure on them. Shery and were hearing kevin of oklahoma has dropped out of the race and is backing johnson according to politico. Mike johnson of the we nana. Mike dornan is in washington with the latest on the u. S. House speakership bid that would enter four weeks now where we do not have a House Speaker. Coming up next, former Deputy Governor of Chinas Central Bank on his assessment of the chinese economy read this as weve got the latest measures from beijing with president xi jinping stepping up support for the economy issuing additional sovereign debt and raising the budget deficit ratio. We even had the president himself making an unprecedented visit to the central bank. We will have more, this is bloomberg. 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Let me get started with these measures from beijing because in an economy that has tried to deleverage four years, has a problem with debt, this seems highly unusual. How should this be perceived by someone on the outside . Chinese economy facing to sort of demand contractions after 30 years of strong growth, growth is slowing down. When you have a big bass you have a demographic change, productivity gradually slows down, so you dont go back to eight or 10 of gdp growth. Basic fundamental issues. But we have structural issues. Such as the previous Growth Engine is gone, infrastructure investments, real estate sector and exports. Real estate is an oversupply issue with the demographic change and the need to be restructured is a big issue. Infrastructure return is low because we invest too much. Exposure just a lot. Global growth is slow and geopolitical risks played quite a big factor. So chinese net exports are the Growth Engine so you have to shift to a new Growth Engine, number one is domestic servicing. You will pick up slowly but the second is digital manufacturing. We realized the strength is chinese manufacturing. In accounts for 30 of Global Manufacturing equivalent to south korean total. So if manufacturing is strong, skill is important issue. The third engine is Climate Change and investing more in carbon neutrality. Shery lets talk about these measures because were talking about sovereign debt and midyear budget adjustments, thats rare. We saw them in the 1990s financial crisis in asia to the chinese economy that bad . Consult that bad. It is slowing by nature but we need more on the structure base, not general stimulus. So i have a issues. So this is to earmark the stimulus, gradually adding to real estate sectors Climate Change issues, that helps. Shery you warned we are seeing china having a high debt already. So is this targeted enough not to compound those issues . Thats the point because chinese debt is high. So over five oversize stimulus is the whole purpose. So it is not big but the impact would be big with focus on Climate Change, renewable issues , new sectors will become competitive. Stephen Stephen Engle here. Great to see you. You are in new york, part of a team going there to improve. A lot of people hope relations between china and the united states, there could be a summit between xi jinping and biden in november on the side of apex. What is your key message . You are a smart guy. What is the key message . First of all, thank you for the kind words, great to see you again. I think the mentality is to join the committee it hinges on the peoples dialogue which is amazingly warm. Broad things from economics to Financial Insurance and histories. They will even pair a chinese delivery worker with an american truck driver. We share a lot of things in common. People. I think the key message is whatever happens in the end, china and the u. S. Will have to Work Together. People share a lot of things in common, that is the future for all of us. Stephen the two nations are competitors. Their skepticism on capitol hill and the Biden Administration about chinas intentions, we know about the limiting of exports of advanced technologies like chips to china. What is this going to do . Will this be the overhang because you talked at davos, i saw your panel. You said chip restrictions will backfire on the united states, its going to accelerate chinas advancements and eventually flood the market with chips and be counterproductive. Is this the message you are taking to Commerce Department officials in america russian mark we will compete but we have to incorporate working together in other ways. We have to understand both things. On the technology side, china will develop its own technology so we will see. But we still have to Work Together. A chip is a big supply chain. You need so many countries and Companies Involved in the whole project model we know what it can do by its own so we still have to Work Together but we have to compete and Work Together even within the chip sector, this is important. China is developing its own Chip Technology but still looking for cooperation from the u. S. On this as well. Shery we are in an uncertain geopolitical environment, we have two wars ongoing. Do you have concerns about how that could impact the chinese economy . Unfortunately we do have two wars happening so there are concerns about political risks. Clearly on commodity price issues, on other issues, the real uncertainty is you do not know what will happen tomorrow, so strategically, china moving into the growth model to more domestic Market Driven toward technology for that reason, that will become the key issue for todays economic interference. Shery what can policymakers in china do when you have a divergent Monetary Policy from western economies like the u. S. Keeping rates higher for longer and the threat of duplicate attention leading to potentially more inflation as well . Monetary policy is the key. Different countries are in different stages. U. S. Is tied to Interest Rates that will stay high for a while. Other countries, china Interest Rates are still relatively low, so Monetary Policy cooperation becomes very important. Keep the capital flow, keep Exchange Rate flexibility and make sure there is liquidity not only for the u. S. And china but emergingmarket developments as well. So in a sense, they u. S. And china financial teams are talking to each other, that is good stephen since you were Deputy Governor of the pboc in 2009 and 10, how significant was a visit by xi jinping to the pboc . What is he trying to figure out and im not asking you to criticize policies but has there been too much emphases on National Security and ideology and these measures rather than the bread and butter of the chinese economy that is sustaining the Growth Engine . Monetary policy should be independent and should play a key role to keep inflation lower and support growth. This is mostly important functions. And given the interconnectivity and globalization, International Cooperation becomes also very important. Those are the Central Banks performing now and i used to work for the central bank in china. I still watch, they continue to reform and make Exchange Rates more flexible and Interest Rates close to the market, supply and demand, this is important. But have them adjust to the international environment, particularly with interest policy is important. Stephen what should we expect from authorities now that the priority clearly there is a sense of urgency to lift up the economy but also not exacerbating debt levels at the local government level, what should we expect beyond what we just saw, 1 trillion in new issuance of sovereign debt as well as raising the budget deficit ratio . The whole economy is stabilizing already. New stimulus tried to support the sectors we designed, asset manufacturing, carbon neutrality. Those new sections are important. Those are the new issues that we will see in the future. Meanwhile, trying to make sure that it is not increasing dramatically. Shery what would be a reasonable target next year for the government . Next year will be around 5 , may be lower. Four and a half to 5 would be reasonable because we are still adjusting the structure in a sense. Growth is not a key issue but qualitative growth is important. So the emphasis is moving away from an old growth model to a new growth model. So the big issue is pay more attention to structure but not the growth number. Shery thank you for joining us. Chairman of the National Institute of financial research. If you missed part of the conversation tv is your function and you can watch us alive or dive into securities or bloomberg functions that we talk about and become part of the conversation by sending instant messages. This is for terminal subscribers, check it out at tv , this is bloomberg. The chase ink business premier card is made for sam who makes, everyday products, designed smarter. Genius like 2. 5 cash back on purchases of 5,000 or more, so sam can make smart ideas, a brilliant reality chase for business. Make more of whats yours. You dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh paul youre watching daybreak australia, keeping our eyes on tech names in after hours trade all and earnings from microsoft in alphabet. Lets discuss investor reaction. Annabelle is on hong kong. What are we hearing . Annabelle a mixed bag coming through essentially as you been discussing, reactions, microsoft, alphabet, going in opposite directions. Texas instruments, snapon different tracks. Visas relationship a lot for investors to grapple with and interesting when you look at the Broader Market reaction because qqq is the largest u. S. Etf tracking and that has been stable given mixed moves for different stocks canceling each other out. Well be discussing this with interactive brokers. There saying mixed results, mixed reactions make it harder to pick an index direction for stocks on the basis of where the earnings is going to be and to note there had been anticipation around tech, Solid Earnings were predicted to come through from analysts, that was to help drive the stock market into the end of the quarter but a lot of anticipation now hinging on the next results so we have amazon aftermarket on thursday and apple as well do next week. Shery what are we getting in terms of the outlook for the Global Economy . Annabelle in the middle east there is the future Investment Initiative in saudi arabia and will be hearing from bigname bankers as you can see. A group including jamie dimon, solomon, noel quinn, jane frazier. Different bankers speaking about their outlook for the Global Economy going into 2024 but solomon was one of them and his take, take a listen. Longterm i am certainly optimistic but i am uncertain. If you are a ceo and uncertain you tend to be cautious about doing significant things that will change the trajectory of your business. Annabelle David Solomon speaking about how reluctant he is to make big commitments. Something else that is weighing into that is jamie dimon. He is quite cautious about what will happen next year. He says theres a lot of doubt based on historical experiences looking back to the 1970s. Times when we saw high debt loads and slowing growth, rising inflation. He is doubting central bankers will be able to manage the fallout. He had quite choice words to make around forecasting done by Central Banks on the outlook for inflation, Economic Forecast generally and jamie dimon said central bankers got that dead wrong. Paul thanks. Australian Central Banks new governor says Interest Rates can be raised further if there is a material upgraded to its inflation outlook and we will get the latest cpi numbers in a couple of hours. Bloombergs economics reporter joins us now from sydney. We heard from Michelle Bullock last night in a speech saying yes, rate rises could be on the way but also weve heard from a former assistant governor of the rba now saying we are on hold. What is going on . Jawboning . It does look like jawboning because its been a month since Michelle Bullock took office and her rhetoric has been more hawkish. She is definitely talking a lot about the dangers of inflation remaining higher for longer than philip lowe did. And markets are still kind of uncertain around what will happen in november, so if you saw pricing go up to about 14 chance of a rate hike, if it does not happen in november markets are saying it may happen next year. So there is still uncertainty around whether the rba will raise Interest Rates or whether they are just kind of telling markets and people we are not done. If this remains a threat we can go again. Paul we will get a big piece of the puzzle in just under two hours time. But we are seeing of see upside surprise . There is a risk because that is what we saw in u. S. Data, the core measure. Headline inflation is something the rba is willing to look through if there are temporary supply stock related spikes but Michelle Bullock talked about shock aftershock aftershock, so it is hard to overlook supply related things. But core measure is what they are really going to be looking very closely at, that is a measure they are worried about as well because that strips off the volatility and focuses on measures which are not really volatile. So if that remain sticky and Services Inflation remains sticky, definitely it is a cause for concern. Paul economics reporter swati. The Australian Government announced an expansion including minerals financing as part of an effort to move toward clean energy and boost exports. The announcement follows talks between the Prime Minister and u. S. Officials. The issue of Critical Minerals was a key agenda for albanese in washington on a four day visit. Tune into Bloomberg Radio to hear more from todays big newsmakers and get indepth analysis from the Daybreak Team broadcasting live from her studio in hong kong, listen via the app for bloombergradio. Com. Plenty more to come, stay with us. Pgim. Our investments shape tomorrow today. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Were not going to sign a deal that does not allow us to be competitive. There challenges teams have responded to whether it be covid or Semi Conductor shortage or supply chain issues, the team has been remarkably resilient and this is another challenge but one we can rise to and i believe we can hit our goals. Shery General MotorsPaul Jacobson on the possibility of striking a deal with uaw. Those strikes are stretching into their six week. Uaw expanded its walk out on tuesday targeting a plant in arlington. For more automotive reporter keith joins us from detroit. 5000 people walking out, what is the significance of this plan and how important will it be for gm . This is gms most profitable plant. It makes big suvs, chevy tahoe, escalade, yukon. It is a money machine, so this will hurt gm, thats what the uaw has in mind because they are trying to squeeze more out of them at contract negotiations. Paul whats next in the strike . Where are we in terms of negotiations . We are six weeks in. All companies are offering a 23 wage increase. The union started asking for 40 in the hope is they will meet in the middle. They are offering restoration of costofliving allowances. So they have come and long way but this last stretch is getting hard and the union is taking down at all three companies their biggest most profitable plants. Paul automotive reporter keith norton. Lets have a check on asian markets. Trade in australia in exactly five minutes time. Futures pointed to a positive start. The aussie dollar 63 and a half cents against the u. S. In a very important piece of data out of australia in 90 minutes. Third quarter cpi numbers are expected to slow 5. 3 on the year and this will have a major bearing on what the reserve bank of australia does next. Elsewhere, new zealand in negative territory. Nikkei futures are looking flat ahead of the open in japan and the yen just hovering below the 150 level. That is it for daybreak australia, lets take you with us, daybreak asia is up next. This is bloomberg. So, youve got the power of xfinity at home. Now take it outside with xfinity mobile. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. All on the most reliable 5g network nationwide. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com. Shery you are watching daybreak asia. We are counting down