Speaker 1: Good morning.
Speaker 2: I'm Brian Curtiz and I'm Doug Krisner. Here are the
Speaker 2: stories we're following today.
Speaker 1: Higher bond yields affecting markets generally right around the globe.
Speaker 1: We had also the US government reporting producer prices rising
Speaker 1: more than expected in July. Service costs were up the
Speaker 1: most in nearly a year. The benchmark tenure yield, the
Speaker 1: baseline for the broader financial system, has been pushing back
Speaker 1: toward last year's highs of about four and a quarter percent.
Speaker 1: As mentioned, we're at four point fifteen as we get
Speaker 1: started this week. The former bond king Bill Gross says,
Speaker 1: the yield on the tenure is headed higher.
Speaker 3: You know, if you had one hundred and thirty five
Speaker 3: basis points to two and a half or even three
Speaker 3: percent on FED fund check, you get to a point
Speaker 3: where we are now. And that suggests that all of
Speaker 3: the bulls on treasuries, on the tenure and maybe even
Speaker 3: on the long run, I think their arguments are a
Speaker 3: little misplaced.
Speaker 1: In the coming week, markets who will be analyzing minutes
Speaker 1: from the Fed's July I'm meeting for clues on where
Speaker 1: rates might be headed. In the following week, the focus
Speaker 1: will shift to the fed's annual gathering of global Central
Speaker 1: bankers in Jackson Hole, Wyoming.
Speaker 2: Well, some of the biggest US retailers are about to
Speaker 2: grab the earning spotlight in the week ahead. We'll hear
Speaker 2: from Walmart, along with Home Depot and Target. They are
Speaker 2: all scheduled to report quartal results. One question is on
Speaker 2: how middle income American consumers will have responded to higher prices.
Speaker 2: Here's Joe Feldman, senior analyst at Telsey Advisory.
Speaker 4: Middle is kind of squeezed right now, and that's where
Speaker 4: we're seeing that middle has been trading down, That aspirational
Speaker 4: customer has traded down a little, and middle has traded down.
Speaker 4: So I think that still positions Target and Walmart pretty well.
Speaker 2: That is Joe Feldman speaking on the Bloomberg Surveillance podcast.
Speaker 2: By the way, last quarters, some retailers like Target and
Speaker 2: Macy's were very cautious, but now with recession calls fading.
Speaker 2: Here's one analyst, Andrea and Yee over at Barclay. She
Speaker 2: is forecasting the US retail shares will outperform next year.
Speaker 2: Ran well.
Speaker 1: US Steel is exploring multiple offers now as it rejects
Speaker 1: a buyout offer from its rival Cleveland Cliffs. Let's get
Speaker 1: the story from Bloomberg's Denise Pellegreeni.
Speaker 5: Manufacturer Cleveland Cliffs offering to buy the iconic Pittsburgh based
Speaker 5: steelmaker and a cash and stock deal as it looks
Speaker 5: to create one of the world's largest steel makers. Cleveland
Speaker 5: Cliffs offering to pay seventeen dollars fifty cents a share
Speaker 5: in cash and one point two to three of its
Speaker 5: own shares for each US steal stock, and says that
Speaker 5: applies a value of thirty two bucks fifty three cents
Speaker 5: per share as of Friday's clothes, and that would be
Speaker 5: a forty three percent premium to US Steel's last closing
Speaker 5: price of twenty two seventy two. But US Steel calls
Speaker 5: Cleveland Cliffs offer unreasonable. Earlier in the day, US Steel
Speaker 5: senator received multiple offers for all are part of the
Speaker 5: company and was initiating a strategic review. Denise Pellegreni Bloomberg
Speaker 5: Day Break Asia.
Speaker 1: And again, as Denise mentioned there, Cleveland Lifts was flat
Speaker 1: of the session on Friday, but we did have a
Speaker 1: very modest gaining US deal, as she mentioned, up about
Speaker 1: one percent to twenty two seventy two.
Speaker 2: We go to China next, where the government is issuing
Speaker 2: a plan to attract more foreign investment. The story from
Speaker 2: Bloomberg's Juan Wong in Hong Kong.
Speaker 6: China State Council is encouraging foreign companies to set up
Speaker 6: research and development centers here. The plan will help accelerate
Speaker 6: work on foreign projects in the biofarm and telecom sectors.
Speaker 6: Will also increase fiscal and tax support for foreign businesses.
Speaker 6: The goal is to improve the business environment as China
Speaker 6: seeks to bolster ris economy. So far, the economy has
Speaker 6: shown few signs of a rebound. New stress and the
Speaker 6: property market and deflation are threatening the growth outlook in
Speaker 6: Hong Kong. Join Wong Bloomberg Day, Brick Asia and with
Speaker 6: more on properties.
Speaker 1: Chinese developer Country Garden says it will suspend trading in
Speaker 1: nearly a dozen onshore bonds. Six yuan denominated corporate bonds
Speaker 1: issued in twenty twenty one and twenty two will be
Speaker 1: suspended from trading today. That's according to five links to
Speaker 1: the Shenjen Stock Exchange. Three additional bonds will be subject
Speaker 1: to suspension on the Shanghai Exchange. It comes after Country
Speaker 1: Gardens said he would report a multi billion dollar loss
Speaker 1: for the first half of the year. The developer apologized
Speaker 1: and said that his planning to hold meetings soon with
Speaker 1: bondholders on various repayment options. The company's shares fell another
Speaker 1: six percent in Hong Kong on Friday, closing below one
Speaker 1: Hong Kong dollar for the first time ever. DOUG The
Speaker 1: China loan data that came out late Friday was shockingly low,
Speaker 1: around just one eighth of the previous month and less
Speaker 1: than half of the Bloomberg survey estimate. So it seems
Speaker 1: that both both businesses and households are de leveraging there.
Speaker 1: We'll keep a close eye on trust funds today and
Speaker 1: trust products. A lot of rumors circulating on Friday. I
Speaker 1: mentioned that stocks were slammed. The CSI three hundred traded
Speaker 1: down two point three percent. That's spread as well to
Speaker 1: Hong Kong and also through the Shanghai market, so today
Speaker 1: could be quite fascinating.
Speaker 2: It's interesting with the weakness that we're seeing in China's economy.
Speaker 2: Even so, Bloomberg Economics is expecting the PBOC to hold
Speaker 2: its one year medium term lending facility rate steady this week.
Speaker 2: That's a two sixty five This would mark the second
Speaker 2: month of what Bloomberg Economics is essentially calling a tactical pause.
Speaker 2: We did have that ten basis point rate cut back
Speaker 2: in June, and I think Bloomberg Economics would agree with
Speaker 2: what you're saying, Brian, that the economy clearly needs a
Speaker 2: lot more in the way of support and it will
Speaker 2: be delivered. B E sees that happening in the third
Speaker 2: quarter of the year.
Speaker 1: It's such a cautious, piecemeal approach. It's just really surprising.
Speaker 1: People are looking for something dramatic, something that's in the
Speaker 1: shock and aw category, but we're not getting it.
Speaker 6: Yeah.
Speaker 1: I wanted to mention Neil Ferguson as well. I don't
Speaker 1: know if you saw his pride, but he's not a
Speaker 1: kid anymore, doesn't believe in Santa Claus, the tooth Fairy
Speaker 1: and soft landings. I thought it was great. He said
Speaker 1: if pilots had the same success rate as the Fed,
Speaker 1: none of us would fly. And he gets Humpty Dumpty
Speaker 1: and Goldilocks and Ulysses in there as well. I guess
Speaker 1: you know, he's maybe not so far away from what
Speaker 1: Bill Gross is saying, and that he sees too hot
Speaker 1: becoming too cold and rates. He thinks rates are going
Speaker 1: to head.
Speaker 5: Up from here.
Speaker 2: On the other side, I want to point out what
Speaker 2: the economist over at Goldman Sachs are saying. They are
Speaker 2: expecting the Fed to begin lowering interest rates by the
Speaker 2: end of next June, you know.
Speaker 1: And there was an interesting piece that Neil put in there.
Speaker 1: I didn't see this in the Wall Street Journal, but
Speaker 1: I know you really read the newspaper, so you might
Speaker 1: have seen this from James Macintosh that if the US
Speaker 1: measured inflation the way Europe does, then inflation and core
Speaker 1: inflation would already be down to two point three percent.
Speaker 1: Apparently Europe doesn't use owner's equivalent rent. Yeah, so that's
Speaker 1: quite interesting.
Speaker 2: It's a good point.
Speaker 1: Right now, it's time for Global news. The Maui wildfire
Speaker 1: is now the deadliest in the US in one hundred
Speaker 1: five years. At Baxter as Global News from the nine
Speaker 1: sixty newsroom in San Francisco.
Speaker 7: D Yeah, that's right, Brian. The death troll now stands
Speaker 7: at ninety three for the fires. But my police chief,
Speaker 7: John Pelletier says the search and recovery efforts are at
Speaker 7: a very early stage.
Speaker 8: We're going as fast as we can, but just so
Speaker 8: you know. Three percent, that's what's been searched with the dogs.
Speaker 8: Three percent. We got twelve more dogs on the way today.
Speaker 8: We just made that. I made that request, FEMA made
Speaker 8: that happen. They're on their way. But think about how
Speaker 8: hot and how humid it is, and we can only
Speaker 8: go as fast as that animal can go.
Speaker 7: But tongress Jill Takuda on CBS has heard here on Bloomberg,
Speaker 7: so she understands people want to get back into the
Speaker 7: area to see if there's anything left or to recover,
Speaker 7: but that it's too dangerous and that the sanctity of
Speaker 7: the people who didn't make it out must be observed.
Speaker 7: She did, though, visit Lihinatown herself, to.
Speaker 9: Still see fires smoldering in the distance, to see cars
Speaker 9: literally melted into the puddles that have hardened over on
Speaker 9: the road, x's on buildings and cars, to say that
Speaker 9: it has been searched, signs of casualties or even life.
Speaker 7: Meanwhile, Governor Josh Green says the state will investigate why
Speaker 7: the emergency siren systems were not activated and whether life
Speaker 7: and property could have been protected.
Speaker 10: We have doubts that much could have been done with
Speaker 10: a fiery, fast moving fire like.
Speaker 7: That, but he says that it's caused by climate change
Speaker 7: and hurricane passing through producing winds now. One thing he
Speaker 7: does say interesting, he knows for sure Maui needs to
Speaker 7: protect itself from outside interest moving in and buying up
Speaker 7: any land that could be abandoned.
Speaker 10: We will, through whatever emergency powers we have to use,
Speaker 10: prevent this land from going outside of state ownership.
Speaker 7: Now four days on, still remains unclear the cause, although
Speaker 7: Hawaiian law firm says it is going to look into
Speaker 7: the possibility that down power lines could have triggered at
Speaker 7: least one of them. China's Foreign ministries criticized Taiwan's Vice
Speaker 7: Premier Lai Chang tay stopover in the US. Official statement says,
Speaker 7: seriously violate. It's the one China principle. Orange barricades have
Speaker 7: been set up around the Fulton County Courthouse in Atlanta,
Speaker 7: where Donald Trump may face his fourth criminal indictment this week,
Speaker 7: oh at the Georgia Secretary of State's Office. Gabriel Sterling
Speaker 7: today on ABC Has Heard on Bloomberg said that Trump
Speaker 7: knew he had lost the election but continued to push
Speaker 7: for the votes.
Speaker 11: We've been saying this over and over again. We counted
Speaker 11: the ballots three times. He lost this state, and he
Speaker 11: continued to say he didn't lose it. And it's just
Speaker 11: creating a lot of tension and a lot of chaos.
Speaker 7: Which Sterling says could lead to violence.
Speaker 11: Somebody will be motivated by some of this kind of
Speaker 11: language at some point and do something stupid. It's not
Speaker 11: me an organized thing. It's not going to be a
Speaker 11: bunch of conspirators together. It's mean one probably mentally unstable
Speaker 11: individual who's going to be radicalized to this process.
Speaker 7: And the Grand Jury is due to meet on Tuesday,
Speaker 7: and oh no, no, it looks as if the Musksuck
Speaker 7: cage fight is not going to happen. Mark Zuckerberg says
Speaker 7: it's time to move on from the speculation. He says, quote,
Speaker 7: if Elon ever gets serious about a real date and
Speaker 7: official event, he knows how to reach me. Otherwise, time
Speaker 7: to move on. I'm going to focus on competing with
Speaker 7: people who take the sports seriously well. Global news power
Speaker 7: by more than twenty seven hundred journalists and analysts in
Speaker 7: over one hundred twenty countries. In San Francisco, I'm at
Speaker 7: Baxter and this is Bloomberg.
Speaker 1: This is Bloomberg Daybreak Asia. I'm Brian Curtis along with
Speaker 1: Vonnie Quinn in New York, and a guest is Walter Todd,
Speaker 1: President and Chief investment Officer and managing director at Greenwood Capital. Walter,
Speaker 1: So we can talk about higher yields, and we can
Speaker 1: talk about possible soft landings and such. I wanted to
Speaker 1: point out that we've now seen Nvidia, Broadcom, Microsoft and
Speaker 1: Apple all selling down now about ten to thirteen percent.
Speaker 1: I'm curious from your point of view whether that's reality
Speaker 1: setting in or if it's Algos and their mean reversion
Speaker 1: strategies or programs or just sort of sensible rotating and balancing.
Speaker 12: Yeah, well get evening from the US. Yeah. I think
Speaker 12: it's probably a little bit of each of those things.
Speaker 12: Quite honestly. I mean, I think when you look at
Speaker 12: the reactions that stock so far I've gotten from earnings,
Speaker 12: it's they've been pretty quote unquote violent, but in both directions.
Speaker 12: And I think the super micro computer SMCI last week
Speaker 12: could be a potential playbook for Nvidia. You really good earnings,
Speaker 12: but yet the stock was down twenty five percent. Not
Speaker 12: that Nvidia is going to drop twenty five percent, But
Speaker 12: you get my point. So I think there is some
Speaker 12: kind of rationalization going on and people looking for more
Speaker 12: undervalued parts of the market. You've seen that with energy,
Speaker 12: You've seen it a little bit in healthcare, although not
Speaker 12: to a great degree, And I think you could see
Speaker 12: some more of that as we work through the fall, Walter.
Speaker 11: We have been seeing breath improved just a little bit
Speaker 11: in the S and B five hundred.
Speaker 6: Does that give you any hope that maybe we are
Speaker 6: not in for a correction?
Speaker 12: Yeah, it is, you know, encouraging to see more than
Speaker 12: more than seven days participating, for sure, But you're still
Speaker 12: you still see a pretty you know, dramatic spread between
Speaker 12: the SMP and the equal weight SMP almost a little
Speaker 12: over nine hundred basis points there on a year to
Speaker 12: date basis, So it's still pretty narrow from from that perspective,
Speaker 12: I think, you know, if you look at the past year,
Speaker 12: we've had two kind of eight to nine percent corrections,
Speaker 12: one in December of twenty two, one in February March
Speaker 12: around the bank failures. So I think it would be
Speaker 12: natural and probably healthy ultimately, if not too much fun
Speaker 12: necessarily to have a eight to nine percent. We're down
Speaker 12: about three percent right now. You know, down eight to
Speaker 12: nine would take you to around forty two hundred on
Speaker 12: the SMP.
Speaker 1: So we have still a lot of bears around, although
Speaker 1: many have capitulated. But in the bear camp you have
Speaker 1: some that think that inflation will rear its ugly head
Speaker 1: again and the FED has to just get on steroids
Speaker 1: once again. And then you have others that say, no,
Speaker 1: they've already done too much, and you know you've got
Speaker 1: recession coming and there's really no way to avoid it.
Speaker 1: How do you actually see the full picture at the moment.
Speaker 12: Yeah, it's very complicated, honestly. Right now, I keep going
Speaker 12: back to this Mark Twain quote, is it ain't what
Speaker 12: you don't know that gets you into trouble. It's what
Speaker 12: you know for sure that just ain't so. And that
Speaker 12: feels like that captures the moment right now. So I
Speaker 12: do think it's going to be tough to get inflation
Speaker 12: down from three percent to two. So if the FED
Speaker 12: is truly intent on getting there in a hurry, then
Speaker 12: I think they're going to continue to raise race and
Speaker 12: I do think that would be a mistake. Right now, I.
Speaker 1: Got a question. I hate to cut you off, and
Speaker 1: I got a question and we got a sneak itting,
Speaker 1: which is, I'm a little bit confused because we hear
Speaker 1: a lot that recessions are usually caused not by what
Speaker 1: you know, and you just mentioned that by some sort
Speaker 1: of exogenous occurrence. And yet many people really believe in
Speaker 1: the in the inversion of the yield curve as a
Speaker 1: signal that you have to have recession. I mean, they
Speaker 1: can't both be right.
Speaker 12: No, I agree, that's what makes it so complicated. I mean,
Speaker 12: that's what everyone knows for sure. I mean myself in
Speaker 12: the same camp. I mean, I'll look at the history
Speaker 12: and what these signals are. You know, I've told you
Speaker 12: in the past, and they're not working at this point.
Speaker 12: I think a lot of that has to do with
Speaker 12: the distortion coming out of COVID and some of the
Speaker 12: dynamics there with the labor market and all the excess
Speaker 12: capital floating around in the financial system right now. I
Speaker 12: think it's just making a very confusing picture right now.
Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on this
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Speaker 2: And I'm Doug Krisner. Join us again tomorrow for all
Speaker 2: the news you need to start your day right here
Speaker 2: on Bloomberg Daybreak Asia