Tech Earnings Disappoint; Trump Sends Mixed Signals on Xi Meeting

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

0:37So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

1:02Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with some big tech earnings disappointments, starting with Netflix. Those shares are down nearly 7 % in early trading. The world's most valuable entertainment company posted quarterly operating income of almost$3.25 billion. That was about$400 million below analyst estimates. Netflix says a tax dispute with Brazil cut into its third quarter results. On the company conference call, Netflix co-CEO Ted Sarandos addressed speculation the company's weighing bids for parts of Warner Brothers Discovery.

1:46We've been very clear in the past that we have no interest in owning legacy media networks. So there is no change there. But in general, we believe that we can be and we will be choosy. We have a great business. We're predominantly focused on growing organically, investing aggressively and responsibly into the growth and returning access cash flow to shareholders through our share repurchase. Netflix co-CEO Ted Sarando says the company had to pay about$619 million to settle a multi-year tax dispute with Brazil going back to 2022. He says the company would have beaten forecasts if not for that expense.

2:21Nathan, another earnings disappointment has shares of Texas Instruments down almost 9 percent. The biggest maker of analog chips gave a lackluster forecast for the current period, adding to concern that a chip industry recovery is sputtering. While staying in tech, Karen, Bloomberg News has learned Google is in talks for a mega deal with artificial intelligence company Anthropic. Let's get the very latest on that with Bloomberg's John Tucker. John, good morning. Good morning, Nathan. Yeah, the race for AI dominance may have gotten more intense. If this deal goes through, Google would provide Anthropic with computing power worth tens of billions of dollars.

2:58It would allow Anthropic to use Google's chips custom designed to accelerate machine learning workloads, and it would further cement the relationship between Google and the AI startup. Founded in 2021 by former OpenAI employees, a San Francisco-based Anthropic best known for its clawed family of large language models which compete directly with OpenAI. Google has previously invested about$3 billion in Anthropic, And Google parent alphabet up 1.2 % pre-market. In New York, I'm John Tucker, Bloomberg Radio. All right, John, thank you. We turn now to commodities where gold and silver are rebounding from yesterday's sell-off.

3:38Gold fell nearly 6 % yesterday for its biggest intraday drop in more than a dozen years. At one point, silver was down almost 9%. Mike McGlone covers commodities for Bloomberg Intelligence. Right now, it's just a little bit of profit-taking. But it's what's happening in gold that's very disconcerting. As of yesterday, it was up 66 % in the year. That put it among the top four of the last 100 years with only 1979, 73, and 74 ahead of it. So it's very expensive. At the same time, crude oil was down about 20%. That disparity around 86 % has never happened. It's never been that extreme. In Bloomberg Intelligence, Mike McGlone checking prices of gold right now.

4:20Alcomex gold is down about two-tenths of a percent at$4 ,100 an ounce. Silver is down about a third of a percent. Let's get to the latest, Karen, on the trade front. President Trump is sending a mixed message ahead of a possible meeting with Chinese President Xi Jinping. During a White House Rose Garden lunch with Senate Republicans, the president said the tariff rate on Chinese exports would be about 155 percent by November 1st if they don't make a deal. Now we're going to have a fair deal. I think we're going to have a very successful meeting. Certainly there are a lot of people that are waiting for it.

4:52Maybe it won't happen. Maybe it won't happen. Things can happen where, for instance, maybe somebody will say, I don't want to meet. It's too nasty. But it's really not nasty. It's just business. President Trump says he wants to make a good deal with China, but he says it has to be fair. Treasury Secretary Scott Besson plans to meet with his Chinese counterpart over the weekend before the talks between Presidents Trump and Xi. Those are expected at the APEC summit in South Korea, though the date and time have not yet been announced. Nathan, India and the U.S. are reportedly near a trade deal that could lower tariffs on Indian exports to 15 to 16 percent from about 50 percent.

5:30The Mint newspaper is reporting India may agree to gradually reduce its imports of Russian oil as part of the deal and allow the U.S. to export more non-genetically modified corn and soy meal. Overnight, Karen, Russia launched multiple drone and missile strikes on Ukraine as a planned second summit between President Trump and Russian President Vladimir Putin is thrown into jeopardy. The president addressed that possible meeting yesterday. I don't want to have a wasted meeting. I don't want to have a waste of time, so I'll see what happens. But when I said go to the line, go to the line of battle, the battlefield lines, and you pull back and you go home and everybody takes some time off because you got two countries that are killing each other.

6:13Two countries are losing five to seven thousand soldiers a week. So we'll see what happens. It's we haven't made a determination. President Trump had said he planned to meet with President Putin in Budapest in the coming weeks. Now, Nathan, to a report that's raising conflict of interest questions at the White House. According to The New York Times, President Trump is demanding the Justice Department pay him about$230 million for past investigations against him. That includes the probes into Russian interference in the 2016 campaign and the FBI search of his Mar-a-Lago home. President Trump appeared to acknowledge the report when he was asked about it in the Oval Office.

6:52We have numerous cases having to do with the fraud of the election, the 2020 election, and because of everything that we found out, I guess they owe me a lot of money. But President Trump says if he gets the money, he would give it to charity or use it to restore the White House. Any decisions about paying the president's claims would be made by senior Justice Department officials, some of whom could be the president's own personal lawyers. The Justice Department says all its officials follow the guidance of career ethics officials. Let's turn back to the markets and earnings now, Karen. We're watching shares of Barclays.

7:27They're up about 4 % in Europe. The British lender raised its earnings guidance for this year and unveiled a$500 million stock buyback. We spoke with CEO C.S. Venkata Krishnan. We had a top-line beat of 11 % growth year-over-year to$7.2 billion on the top line. We've had 9 % consecutive quarters of tangible net asset value growth. CEO C.S. Venkata Krishnan says Barclays is conducting a review of its entire LORN portfolio after the collapse of Tricolor Holdings. On the economic front, Nathan, U.K. inflation unexpectedly held steady in September after food bills fell for the first time in 16 months.

8:02Consumer prices rose 3.8 percent from a year earlier. The data is fueling market bets on a Bank of England interest rate cut before the end of the year.

8:15Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. It is now day 22 of the government shutdown. Democrats say Republicans refuse to negotiate on Democratic demands for health care funds. President Trump says he'll discuss health care, but... I'd love to meet with them. I just want them to open up the country first. Senate Democratic leader Chuck Schumer says he and the House Minority Leader have reached out to President Trump for a meeting. People are just struck of the difficulty they will be in.

8:50not having health care, not being able to pay the rent if they pay for health care. They're just shocked at how bad this is. And Trump has an obligation to negotiate with us and solve this problem. New York City's Canal Street vendors are nowhere to be seen. At least for now, there was an immigration crackdown in New York City as federal agents descended on Canal Street, famous for its bargain shopping and knockoff designer goods and parts of Chinatown. The scene turned chaotic as agents made arrests. New York City Mayor Eric Adams' office said this was a federal action and the city officials were not involved in the operation.

9:29President Trump said that allied nations in the Middle East were prepared to send troops into Gaza to confront Hamas if the group did not cease its alleged violations of his peace plan. There was violence just days ago prompting Vice President J.D. Vance to make a last-minute trip to the Middle East. There are going to be hills and valleys. There are going to be moments where it looks like things aren't going particularly well. But given that, and given the history of conflict, I think that everybody should be proud of where we are today. Tonight is the second New York City mayoral debate. Democrat Zoran Mamdani, former Governor Andrew Cuomo, running as an independent and Republican Curtis Sliwa, will square off at LaGuardia Community College.

10:10Global news, 24 hours a day, and whenever you want it with Bloomberg News Now. I'm Michael Barr, and this is Bloomberg. Karen. Thanks, Michael. Time now for our Bloomberg Sports Update. And for that, we bring in John Stashauer. Thanks, Karen. Opening night of the NBA at Oklahoma City, the Thunder hoisted their championship banner, got their rings, and for the sixth time ever, a season opener went to double overtime. First time it's happened since 2005. OKC beat Houston 125-124. Last year's MVP, Shea Gilgis-Alexander, scored 35 points. He had only five at halftime. Golden State beat the Lakers 119-109.

10:47Kurt Suzuki, former Major League catcher, never been a coach or a manager, named the new manager of the LA Angels. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients.

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12:34That's the Bloomberg Surveillance Podcast with Tom Keen, Paul Sweeney, and me, Alexis Christophorus. Subscribe today wherever you get your podcasts. Bloomberg Surveillance, essential listening each and every business day. Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. Investors were expecting a solid quarter from Netflix, and they mostly got it after the release of K-pop Demon Hunters and some other big hits during the quarter gone by. But a tax dispute with Brazil is putting a hit on the results for the streaming giant.

13:18Let's get more now. We're joined by Bloomberg Intelligence Senior Media and tech analyst Matthew Bloxham. Matt, good morning. We are seeing a big drop in Netflix shares. Could this tax dispute be an ongoing overhang for Netflix? Is that what we're seeing in the price reaction this morning? Yeah. Do you know what? I think it's a bit of a red herring. I mean, they were quite clear yesterday in saying that they didn't expect this dispute to have any impact on forward profits. I think what we're seeing is more of a reaction to an in-line performance, particularly on the top line. and I think people were expecting something a bit better than what they delivered on the back of that slate of popular and well-received content and which also included a widely viewed live boxing event so I think you know people just thought they'd done enough to boost the momentum just a bit more than they'd guided to and we just saw it in line and so I think it's just a little bit of a reaction to that kind of whisper number being a bit better.

14:21But yeah, it came in a bit short. And coming into these earnings, there's been all this speculation around what's going to happen with Warner Brothers Discovery. The reports confirm that Netflix is part of that discussion. Does it need to be more a part of that discussion to get investors more enthused about this stock now? I think, you know, the investors are probably a little bit more evenly balanced. I mean, again, Netflix were clear yesterday that the majority of their growth will be organic and they'll look at these deals where they make sense. So, you know, I don't think they're in a position where they just need to buy a studio's business for the sake of it to kind of keep them in the game to scale up.

15:05They have scale. They're clearly a great producer of content. So I think investors will be looking at them to be careful and cautious and consider about any transaction that they were to make. Clearly, it can bring some strategic benefit to them, but price is going to be an important factor for them here. And in terms of the content coming up, we've got the next season of Stranger Things, some other big blockbuster hits that I think Netflix is hoping are going to pay off for them. What's the outlook going forward? Yeah, I mean, you know, Netflix is still by far and away the leading streaming platform.

15:45We've seen a number of other streaming platforms struggle to some degree as what's going on at Warner Brothers. So, you know, I think that they've got a great rhythm of producing content and building the customer base and also pushing through price increases. And obviously, they've got the ads business, which is still relatively young, but expanding. And that's going to continue to be an extra leg of growth for them. So, as streaming platforms go, they're in a very strong position. Just about a minute left here, but we've got some pretty significant news, it seems, in the tech space with this report from Bloomberg News that Google's making a deal on cloud compute power with Anthropic.

16:30What's your read on that? Yeah, so Anthropik, obviously a big rival to open AI. Anthropik's large language models called Claude. We're going to have to wait to see the details of this transaction. The Bloomberg story talks about a deal worth tens of billions of dollars. I think we've seen a lot of so-called circular deals in the AI space recently. So, it can be interesting whether this is just more of a straightforward commercial deal or whether there's essentially an exchange of equity for the services Google is going to provide. Now, Google is already an investor at the tune of$3 billion into Anthropic.

17:12But it also sits alongside a co-investor that's Amazon. And so far, Amazon's been a big provider of the kind of cloud services to Anthropic. And this is going to take some of that business away from Amazon going forward. So I think we'll have to wait to see the details and the structure of the transaction. But in big picture terms, it looks like a good deal for Google in terms of boosting their cloud business. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen.

17:51You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121. Plus, listen coast-to-coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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