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tv   Bloomberg Markets  Bloomberg  September 7, 2022 1:00pm-2:00pm EDT

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kriti: session highs while oil goes lower and lawyer -- lower and lower. i am kriti gupta. "bloomberg markets" starts right now. the price action, a couple hours ago, we had stocks lower, record highs. that story has completely turned around. session highs for the s&p 500 up 1%. markets are starting to price in 75 basis points. yields down six basis points. the dollar was down .2% after
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comments from lyle brainard. look at what it is doing to brent crude. brent crude now with an $88 handle. i want to mention a key event we are waiting for. we are tracking the apple event. the company is set to unveil the iphone 14 line. analysts will be watching the pricing as inflation hits budget conscious buyers. let's go back to the currency stories. they have been the headliner all day. >> we have seen the dollar continuing to strengthen. that is tightening financial conditions, creating ripple effects. i think what is going on right now in europe is confusing. you laid out well over the last
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couple of days. tighter monetary policy and out a bazooka of fiscal stimulus potentially coming on. 5% of gdp in europe. those two things do not go together. kriti: joining us is our guest. we just heard emily roland talking about this dynamic. we have fiscal and monetary policy fighting each other. i would argue this is a stock story, as well. walk us through the connection. >> it has been a huge story. when you break down the s&p 500 revenue exposure index, companies more dependent on those sales, it has shed 22%. that includes companies like apple, microsoft, alphabet, tesla.
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if you strip it down and look at the s&p 500 u.s. revenue index, no-show companies more dependent on domestic sales. you can see the big difference when talking about a 22% decline versus a 10% decrease. you can see how it is impacting these multinational companies to have more exposure. we are talking about big tech names like apple. kriti: apple is a multinational conglomerate -- the american consumer, the s&p 500. if you look at the dollar strength, in theory, the consumer can spend more and more. you factor that into the apple supply chain and it does not work that way. jess: apple and other big tech companies have been moving beyond china. they have gone in recently as well.
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you look at some of the cheaper exports, korea, taiwan, they still have to deal with a headwinds, supply chain concerns. not only apple but netflix, google, ibm, they all warned this past earnings season about how the currency fluctuations will impact them moving forward. this afternoon, hearing from apple. jp morgan, they think the prices on the iphone 14 will be more of the pro models they are looking at. kriti: let's take it back to the stock market. you are looking at apple. a tenuous relationship with the benchmark itself. the idea -- a little bit of luxury demand. it takes me back to covid times
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when apple stores took down the entire index. to what extent is the entire s&p 500 hinging on the success of apple? jess: that is a great question because the trajectory of that stock, how tight is the consumer and the performance? typically if you look back over the past decade, anytime it is introduced with a of iphones, it has lost value on that date. taking a bigger step back, tech in general and apple had a big summer and rallied. that will be a key to see what that means for consumers. it is not just the iphone. jp morgan porting out how it will affect wearables if you are thinking about the apple watch. you are looking at how apple and the composition of other big tech and what that means for the
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s&p 500. it will have a big movement compared to when you are looking at energy, having a stellar year this year. kriti: a lot to digest. you walked us through everything. we thank you. jess menton, we appreciate your time on the show. the actual technology story underway, tim cook said the company will announce iphones, airpods. ed ludlow is helping us track the news. he joins us from san francisco. ed: we can expect the iphone 14 line, a new apple watch. on the iphone 14, just as with the iphone 13, we expect two pro models and two base models. in part because apple wants
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topline growth, it is forecasted to slow down. the blue bar on the right-hand side of your screen is the december quarter, fiscal first quarter. a key holiday period for the company. the street wants to see higher average selling prices, the growth outpaced topline growth. we want details of pricing, particularly the iphone models given how important the iphone is. the apple, the iphone and airpods all work together within an ecosystem. kriti: ed, it is fascinating, we are tracking some developments. tim cook talking about the essential companion, as he calls it, the apple watch. i want to zero in on that. when the apple watch was first
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introduced, my question was, why do we need that? walk us through the significance of that. ed: full disclosure, inn apple watch w -- i am an apple watch wearer. it will have a much bigger screen. this version of the apple pro watch will have an extended battery. . life it will be much bigger than previous models, that is a lucrative market. you are thinking about others, garmin, spending on higher end -- apple also has, just as with the iphone, an eye on fitness content. they have invested in the health capabilities of the watch.
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it will include a body temperature monitor, a new feature. a lot of eyes on how much that will cost. kriti: apple now announcing the new apple watch series 8. what is fascinating is the affordability at a time of inflation. i am curious how much of a hike apple will have at the end of the day when they are considered a luxury company. ed: emphasis on the pro. apple has designed three products it labels as "pro" it labels toward professionals. high-performance hardware for their work. that is how they have managed to justify the higher price points. it is interesting on the iphone lineup, the expectation is there is not a mini version of the
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iphone 14 like there was with the iphone 13. a slightly more smaller, more affordable model. apple is not just going in the direction of the rpo products to boost the price. there is also an emphasis on a much bigger screen size, 6.1, 6.5 or 6.7 inches. something reflected by samsung, as well. kriti: ed, as you were speaking, we were looking at a video of tim cook. some of this was pre-recorded. we will keep you up-to-date with all the news. ed ludlow will join us later in the hour, as well. thank you for your time. time for bloomberg's first word news with joe mathieu. joe: the new york governor said it is time to restore normal to our lives. the mask mandate has been lifted
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for public transit. she made the announcement shortly before getting her omicron targeted booster. it is now made available this week. the chinese city is extending a lockdown in most of its downtown areas to try to stem the spread of covid. it is the biggest city -- it reported 121 cases for tuesday, up from 90 on monday. a lockdown has been in place for a week. the head of nato says the war in ukraine is entering a critical phase. there could be a tough winter ahead for members of the military alliance that could include energy costs, disruptions and civil unrest. households and businesses will be tested. they face soaring energy prices and the rising cost of living
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caused by russia's invasion. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am joe mathieu. this is bloomberg. ♪
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kriti: this is "bloomberg markets." i am kriti gupta. let's go back to today's apple event. joining me is ray wang. what a time to discuss apple as a start to unveil some of their new products. moments ago, hearing about characteristics of their apple watch 8. walk us through your initial reaction. ray: just when you thought there was no more innovation you could put into a watch, we heard measuring wrist temperature when you think about women's health, it helps with ovulation patterns
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-- other improvements you will see, bigger screen size, better battery life. kriti: i have to ask you because it is a sign of the times, we are talking about women's health issues at a time when roe v. wade was overturned. a lot of legal pressures. and i would argue privacy when it comes to big tech. how much worry does apple have when it comes to legality? ray: that is a great question. if you look at the way apple has debt with privacy it is about the user keeps their -- has dealt with privacy, the user keeps their data. they are designed for the individual and from the individual's point of view. that is something they should not have to worry about because the user holds the data. kriti: we are showing the
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audience pictures of the new apple watch. i want to pivot a little bit and ask you about what is expected to be the highlight of this event, the apple 14 iphone. talk to us about the significance of this new product and what it might mean going to holiday season. ray: what is really significant about the iphone 14 is the fact we are 15 years away from when the first iphone was launched in june 2007. there are 1.2 billion iphones out there and 2/3 of them do not have 5g. over the years, with apple being able to put a chip in the software they have gotten performance improvements for battery life, processing capabilities and memory. people want all day battery life, a bigger screen or brighter screen. different types of radio signals.
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it has transformed our lives across the board in terms of a smartphone, which is a $460 billion. market what will they do in terms of extending capabilities, will they raise prices or not? can they deliver on the same mobile functionality? what kind of discount will be available? kriti: as you are speaking, we are getting headlines that the apple watch even in low power mode will get up to 36 hours of battery life. that is fantastic as someone who is constantly out of battery. i want to ask you about some of the motion sensors being acclimated as a feature in the apple watch. ray: they are just talking about pricing. those motion sensors are important especially when you think about fashion detection. the ability to realize something
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has happened, you are out of bounds, machine learning models to make sure they are not a false-negative or false-positive. they spend a lot of work simulating crashes to see what is a real crash versus what might not be to set off an emergency. they are just about to announce an extreme version of the apple watch. it will be interesting to see what features are coming up. kriti: you specifically mention pricing. that has been a key point especially on the macro basis when talking about a consumer who might be hesitant to spend some disposable income with inflation. i am looking at how much it apple iphone 13 costs. it is not cheap if you look at the raw numbers, just short of $1000. a price hike on the apple 14, what might that look like? ray: i do not know if they will run a price hike. it will probably look constant. we have to see what the carriers do in terms of incentives.
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somewhere between $500 and $1000. at&t, verizon, t-mobile, they are competitive and want to get iphones in the hands of people because they want to get everyone on 5g. 2/3 of the market has not been on 5g yet. kriti: we are getting some headlines that apple is seeing the series 8 watch begins at $399. "begins" is the key word. an easy google search on how much the series 7 cost, you can get it for $700 at an apple store. how much higher can it get, not the iphone, but the watch? ray: what we are seeing across the board with consumer pricing -- points that are affordable. when you think about style, bands, features and cases, it
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could be pretty expensive when you get to the high-end models, just like when you see with the iphone. that is the strategy apple has. most of the big features at the price of entry point. luxury features that allow you to personalize your experience with the apple watch. kriti: ray, last one for you. any curveballs you are expecting? ray: i am waiting to see what far out is all about. an iphone in space? a connectivity theme? we are still working on that. kriti: ray wang, we thank you. still ahead, china's exports to the u.s. we will be back with the details. this is bloomberg. ♪
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kriti: this is "bloomberg markets." i am kriti gupta. this is related to china. a big part of the apple supply chain is china at the end of the day. chinese exports, including chips, this brings me to chinese exports to the united states. up. on a five year basis, you can see it is negative on a year-over-year basis. for the first time in two years, going back to between 19. the red is a result of the trade war. supply chain issues, a massive surge going into the pandemic. the question is how much of this is a currency story? this is shown in dollars.
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the chinese currency, a much different story. currency is making up the story. something to keep an eye on we talk about the effects. let's get a look at some of the biggest stories in the news right now. united airlines has raised -- united is trying to capitalize on strong demand at the end of the summer travel season. revenue will be up 12% during the period compared to 2019. ups wants to hire 100,000 extra workers during the holiday season. online shopping has slowed after a pandemic surge but the figures are well about pre-pandemic levels. kim kardashian has a new business venture. she and a former partner are
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working with a private equity firm that will focus on businesses. the apparel business the kardashians started is valued at $3.2 billion. that is a business flash update. green on the screen when it comes to the s&p 500, up a whopping 1%. the nasdaq up 1.2%. russell up 1%, as well. all roads lead to the dollar. the dollar hit record high levels. it is crucial when we talk about the turnaround story driving the entire narrative. when you have stocks higher, you would expect that is a story that would stretch to oil, that is not the case. brent crude down 5%, $82 handle. we speak to tiffany wilding of
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pimco. this is bloomberg. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig.
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joe: i am joe mathieu with first word news. liz truss said she would tackle the energy crisis while still cutting taxes. she addressed the idea of a windfall tax on energy companies. pm truss: i believe it is the wrong thing to be putting companies off investing in the united kingdom. we need to be growing the economy. joe: she said the u.k. cannot tax its way to growth. the prime minister plans to lay out something tomorrow to help with the crisis so people are, "able to get through this winter." vladimir putin is blaming western nations for the shutdown of the nord stream pipeline.
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speaking at a forum today, the russian president said gas flows to europe could resume as soon as sanctions are lifted. president putin: nord stream 2 shut down and everyone is saying russia is using energy as weapons. more nonsense. we deliver as much as our partners need. we are do not deliver gas into the air. what happened? there are two lines in ukraine. ukraine shut one down on a made up pre-text. ukraine closed it, not us. joe: it is the first time he commented on nord stream since the conduit was closed indefinitely. global atomic monitors say iran is stonewalling critical investigations while ranting of uranian enrichment. they are trying to resurrect the 2015 accord. iran wants the atomic agency to end the probe into the source of
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uranian particles detected at several locations. global news 24 hours a day on air and on quicktake by bloomberg. powered by more than 2700 journalists and analysts in over 120 countries. i am joe mathieu. this is bloomberg. jon: i am jon erlichman. welcome to "bloomberg markets." kriti: i am kriti gupta. green on the screen. the s&p 500 around session highs. up 1.1% on the day, but to me, it is the cross asset action. the 10 year yield is lower, down eight basis points, as the market gets closer to pricing 75 basis points when we hear from the federal reserve in
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two weeks. you can see yields down and the dollar down. the dollar actually hitting record highs earlier in the session. as the dollar weakens the stock market gains more and more. we will keep an eye on that. brent crude hovering lower and lower with the $88 handle. jon: within the s&p rally today, most sectors are participating. one group that is not, concerned about the outlook for oil, continuing to weigh on big names. chevron off 1.5%. materials not doing too poorly. gold, which is not had a lot of upside, has been finding buying strength. apple will continue to monitor the headlines flooding in and we will have more, coming up.
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the message from retailers is that there is pushback on demand for consumer items and that has a lot to do with the inflationary reality we are living through right now. kriti: of all the movers, apple catches my eye. they announced the apple watch ultra will be a new product. we will keep you apprised of the headlines. part of that story is how much the currency move has to do with big tech. currency move the highlight of the week. earlier we spoke with deutsche bank about the fallout. >> historic times and i see what is going on is the valuation anchors are being launched. for example, producer prices are at 40% of the last 18 months. what does that mean for purchasing power? the market does not know and it is trying to grapple with that. you mentioned the yen.
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it is basically following the policy of collect. if you add all of these things together, the dollar is ending up as the safe haven of choice. jon: staying on the subject of central banking, the bank of canada delivered a fourth consecutive outsized interest rate hike to slow the nation's economy and fight inflation. it kept the door open for more hikes. let's get more perspectives on this wednesday. tiffany wilding, north american economist and director at pimco. do you see more rate hikes after today's musings on whether the bank of canada is getting close to the end of the rate hiking cycle? tiffany: thank you for having me. the bank of canada, is expected,
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hiked another outsized rate, 75. they also pointed toward additional hikes. we think that is right. ultimately, the policy rate probably gets around 4% or higher so that the bank of canada can position policy to be restrictive. we have already started to see the effects of the tremendous increase in rates in canada. housing prices have actually started to decline. in canada, nevertheless, the canadian economy was coming into all of this in a relatively strong position as a result of the oil dividend and the positive effects from reopening the economy. labor markets were also tight. it is completely reasonable of canada -- inflation is high -- reasonable for them to raise
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rates and position monetary policy to be more restrictive. kriti: walk us through the impact of the commodity markets. you talked about housing prices coming off. we are looking at brent crude at $88 and we see food prices and other commodities coming off. how much does that factor into the boc's decision? tiffany: from an inflation perspective, you are going to get -- assuming the easing in energy and food prices we have seen the last several months is maintained -- you're going to get headline inflation coming down. over the next couple of meetings, we still think the boc hikes rates more. underlying trends of inflation, you know, their core measures that the boc prefers, they are actually continuing to pick up. by the way, this is not just canada that these more sticky price measures are kicking up.
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you are seeing that in the euro zone, u.k. and uss well. i do not think the bank of canada is out of it yet. higher inflation might come more entrenched in people's's psyche and behavior. although they probably slow the pace of rate hikes over the next couple of meetings, you probably get some additional tightening from here. jon: tiffany, you talked about the housing market where we have seen a sizable slow down. a lot of people are trying to figure out whether it is the bank of canada, the fed, whether it is any central bank. how close to a soft landing and whether that can be accomplished. but things are moving quickly in this country because of the housing slow down. what do you see on that front? tiffany: i think the canadian economy is a little bit trickier because it is a relatively more
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open economy. and you have generally elevated volatility around the global outlook these days as a result of the war in ukraine and as a result of global central banks tightening. obviously, we have also seen weakness in china. all of these things are out of the hands of the bank of canada. but they still have to deal with them when deciding where to set monetary policy. it is certainly possible you could see these global tailwinds turn more acute, have a larger impact on the canadian academy. where the boc finds themselves, where the canadian economy is reacting more than they had expected, so the downside risks are materialized. i think overall although the bank of canada is hiking at a fast pace, faster than other
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central banks, i think if they need to cut once inflation comes down and they want to normalize policy, they probably could cut faster than other developed market central banks. kriti: how much of the currency story is something that is worrying for the bank of canada? we talk about dollar strength unabated. in the canadian dollar is not stronger on the day despite the 75 basis point rate hike. tiffany: i think the way you are seeing financial conditions tightening in the u.k. economy is more from higher interest rates and less on the currency side. this is a little bit different than in past cycles. the reason for that is all central banks, may be with the exception of japan, are doing the same thing. they are very coordinated, if you will. i do not think they are actually
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coordinating a policy, but they see the same things in the economy causing them to raise interest rates. this is less of a currency story with dein christ policy -- desynchronized policy. versus somewhere like the united states. kriti: we thank you as always on this crucial decision from the bank of canada. coming up, all the details from apple's brand up revealing california. they unveiled the of watches, including the ultra watch with all models at $799. this is bloomberg. ♪
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kriti: this is "bloomberg markets." i am kriti gupta alongside jon erlichman. we are going to continue with ed ludlow. we are seeing interesting new features and products. what have we learned since the last time we spoke? ed: apple watch ultra, the highest version of the latest generation really takes the limelight. we have not had any news on the new iphone. but at $800 it is really interesting pricing. it is significantly below some of the highest main competitors
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in the wearables space. updated gps technology it has a flat screen as opposed to the curved screen. it is a larger watch and tim cook talking about this idea that this is very much directed at high-performance athletes. it also has technology so it can be used for dieting. if you are in trouble on the mountain or you are in the ocean and have lost your way, it has an 86 decibel alarm that can be heard at a distance of 600 feet. mark gurman was talking about the important updated function of this high end watch, but also the idea it is competitively priced against the market leader. jon: i am hoping that we can get clarity on whether you can find new airpods in the snow, which is important for cold canadian winters. it is easy to lose your gear. the privacy issue, will that continue to get worked into this
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narrative with all these new products, and has been a hallmark of the apple pitch the last couple of years? ed: i think you are drawing on a personal experience, jon. in california, i have never lost my airpods in the snow. [laughter] apple doubled down on privacy every time we have one of these product reveals. analysts have been less concerned about the vulnerability of the hardware and apple's treatment of user data with regards or compares to, for example, meta, the parent company of facebook. what we are really looking for for the rest of the presentation -- we just moved on to airpods. they will give better audio experiences but not much detail beyond that. there is also this idea that they have invested in the ecosystem. if you are buying into the hardware, we want more on how that leads to more apple
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services. jon: we will continue to check in with you. ed ludlow with the latest on apple. let's get more analysis on all of these. pierre ferragu, head of technology infrastructure for new street research, which offers investment advisory and portfolio management services. nice to have you with us. i wanted to start with the demand picture because we have been talking about the inflationary effects. this company has a powerful brand. what is your sense on the appetite for these new products at a time when people are feeling more strapped in their wallets? pierre: if you look back at the last 12 months in the market overall, what you see is the brand doing well. it is very difficult to increase
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shipments for all manufacturers. that is a surprising phenomenon. it is called cancel and affect. when you have inflation, everybody are benefiting from this new flow of money into the market. the companies benefiting because consumers, who cannot regularly upgrade their $1000 iphone, have much inclination because they benefit from both ends. that is the situation today. my only concern is it creates strong compares. revenues today are at all-time highs and have been growing deeply the last 18 months.
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the environment for them remains positive. kriti: we have heard this from a lot of higher income brands, like nordstrom and macy's. if you are a wealthy client, if you can afford and eat the inflationary cost, your spending is not under threat. will apple benefit from that dynamic? or is there effort to target a more lower income crowd? pierre: very definitely apple is not going after the lower income, especially when you see the watch priced at $799. i think apple is following cancel and effect. they are going after people who will not hesitate to spend to get the best watch, the best phone. it is interesting to see this iwatch coming through today. it is very similar to what apple
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did with the iphone 6. the 6+ with the larger screen in 2016. after that the pro mac and iphone 10. they are taking the product line higher in terms of price points. i think apple understands the environment that is benefiting them and maybe one day they will look at broadening the scope, but that is not the direction today. jon: as you are speaking, apple officially announcing the new iphone 14, the iphone 14+. it will have a 7.6 inch screen. what will you be watching with that device, the iphone 14 and iphone 14+ in the next couple of months? pierre: in terms of functionality, i do not think anything critical you will hear
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today. what is going to be interesting is pricing. in this environment what is going to happen is the prices of the iphone 14 going to be $100 more? it might be the case. that is going to be the most important input today. the second aspect and pricing that is important is subscription. apple today, if you want to use their services, you need a subscription to use the hardware. if you move to the subscription model, it is fantastic because it goes into a regular upgrade cycle and gives more pricing power. it gives the more flexible it on pricing and you have a positive
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feedback. to come back to the question, the next two months -- first, today i am going to look at the pricing. in the next two months i, will look at how the market reacts. kriti: something we will be watching. always a pleasure. new street research head of technology infrastructure. with thank you for your time and your insight. live shot of the east room of the white house where president biden and the first lady are hosting former president barack obama and former first lady michelle obama for the unveiling of the white house portrait. let's listen in. >> i have the personal privilege of being with you and your mom when we inducted this into the smithsonian. may i say, the beauty of that
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white gown is only exceeded by -- [applause]
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kriti: this is "bloomberg markets." jon: i am jon erlichman -- kriti: go ahead. jon: we are both excited to speak. we have been talking about the apple story. the fact you have the details on the iphone story, we will be watching that closely. kriti: apple shares of sick 6/10 of 1%. jon: generally speaking, the tone of the markets relatively upbeat as we move into the afternoon. we will watch that as well.
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announcer: the most crucial moment in the trading day. this is "bloomberg markets: the close" with caroline hyde, romaine bostick and taylor riggs. caroline: it is 2:00 p.m. in new york, 7:00 p.m. in london. this is "bloomberg markets: the close." i am caroline hyde. romaine: i am romaine bostick. taylor: i am taylor riggs. caroline: yields are pulling back from multiyear highs. read between the lines of the beige book. taylor will have you covered. let's focus on the fed speech. they will fight inflation as


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