Bloomberg Daybreak Weekend: Fed Policy, Tech Earnings, UK-China Relations

Federal Reserve Monetary Policy Outlook

• 💡 The Federal Reserve is expected to hold interest rates steady at its upcoming meeting, with no rate cuts anticipated due to stable labor market data and rising inflation concerns.
• 📈 Inflation, measured by PCE, was at 2.8% in November, with expectations of a rise to 3% in December, which will concern the Fed.
• ⚠️ The Fed's dual mandate of controlling inflation and maintaining employment is complicated by economic uncertainty, particularly from trade policies.
• 🏛️ Federal Reserve Chair Jay Powell's ongoing Justice Department investigation is unlikely to impact monetary policy decisions but may dominate the press conference.

Tech Earnings and AI Investment

• 🚀 Investors will focus on Tesla's earnings for explanations regarding its second consecutive annual sales decline and future growth targets, including robo taxis and humanoid robots.
• 💰 Meta Platforms and other hyperscalers are expected to continue significant capital expenditures on AI and data centers, signaling confidence in future revenue and profit growth.
• ☁️ Microsoft's Azure cloud business is a key focus, with growth in this segment indicating the payoff from AI investments.
• 📈 Valuations for tech stocks are currently justified by growth narratives, but a slowdown in growth could challenge current stock prices.

UK Prime Minister's Visit to China

• 🇬🇧 UK Prime Minister Keir Starmer is set to visit China, aiming to improve diplomatic ties after years of strained relations following issues like the Hong Kong crackdown and espionage allegations.
• 🤝 Starmer advocates for a pro-business approach to China while acknowledging national security threats, seeking a more cooperative yet realistic stance.
• 🇨🇳 China views the UK as a transactional trading partner, seeking to benefit from business and investment, and potentially using the relationship to create divisions within the West.
• ⚖️ Key obstacles for Starmer's visit included the approval of a new Chinese embassy in London and a collapsed espionage case against two Britons, both of which have recently been resolved.

Apple's Business in Asia and Supply Chain

• 📱 Apple's iPhone sales in Greater China saw significant growth (28% year-on-year) in the holiday quarter, outperforming the overall smartphone market despite competition from local brands.
• ⚙️ The global memory chip shortage, driven by AI demand, is impacting the supply chain, though Apple's premium market focus may shield it from the worst price increases.
• 🏭 Apple is accelerating manufacturing diversification, with India becoming a major hub for production outside China, while Vietnam handles products like iPads and AirPods.
• 💡 While AI on mobile devices is not currently a major selling point for consumers, Apple's iPhone 17 saw significant specification upgrades, including more memory, without a price increase.