Bloomberg Daybreak Weekend: Fed Policy, Tech Earnings, and China's Economy

Federal Reserve Policy Outlook

• 💡 The market widely expects the Federal Reserve to hold interest rates steady at its upcoming policy meeting due to political pressure and uncertainty surrounding the impact of tariffs.
• ⚠️ There's a slight chance of a rate cut in September, but the consensus points to October for the next potential reduction, reflecting a shift in market expectations.
• 📊 Fed Chair Jerome Powell emphasizes that decisions are data-dependent, particularly concerning the impact of tariffs on inflation and the overall economy.
• 📉 The Fed faces a dilemma: lowering rates too soon could reignite inflation, while holding steady might miss opportunities if the economy cools.
• 🎯 The summary of economic projections shows a division among Fed governors, with some favoring no rate cuts this year and others anticipating two.

Tech Earnings: Magnificent Seven Insights

• 🚀 Alphabet (Google) reported an upside surprise, with Google Search growing double digits and integrating Gemini AI, boosting ad monetization.
• 💰 Meta Platforms is expected to show high teens or 20% plus growth, with YouTube and Cloud contributing significantly, though increased capex spend might impact free cash flow.
• ☁️ Microsoft's Azure business is anticipated to deliver another strong quarter, benefiting from AI infrastructure spend, similar to Google's cloud momentum.
• 📈 Amazon's cloud growth, while strong at 17-20%, lags behind Microsoft and Google, raising questions about its strategy to increase market share in AI workloads.
• ❓ Apple faces a question mark regarding its AI strategy, with expectations for partnerships and hardware enhancements over the next 12-24 months, rather than immediate device refreshes.

President Trump's Scotland Trip and Trade

• 🤝 President Trump's visit to Scotland involves meetings with UK Prime Minister Keir Starmer and Scotland's First Minister John Swinney, focusing on trade concessions.
• ⛳ The trip blends business and pleasure, with Trump visiting his Scottish golf properties, though past visits have been met with protests.
• 📈 The White House is actively engaged in trade agreements, with an August 1st deadline for collecting revenue from various countries, potentially leading to more announcements.
• 🥃 A key focus for Scotland is the potential reduction of tariffs on Scotch whiskey, a major export, though final decisions rest with Prime Minister Starmer.
• 🇺🇸 The US-UK relationship is considered important, with efforts to maintain stability despite differing approaches to trade and global negotiations.

China's Economic Outlook and PMI Data

• 📊 Bloomberg Economics has raised its full-year growth forecast for China to 4.8%, but policy support and remaining hurdles are noted.
• 📉 Manufacturing PMI is expected to soften due to a slowdown in front-loaded exports and the lingering cloud of trade wars, impacting capacity expansion.
• ☀️ The services sector is expected to be supported by summer holidays, leading to a potential acceleration in non-manufacturing PMI.
• 🏠 The property market remains a significant drag on the Chinese economy, with no immediate signs of rebound despite government stimulus.
• 💡 Production remains resilient, but the key focus is now on boosting consumption to drive the economy and address overcapacity.
• ⚠️ Authorities are concerned about deflation, particularly at the wholesale level (PPI), which impacts manufacturing sector profitability, and are considering measures to remove overcapacity.