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Speaker 1: This is Bloomberg Daybreak Asia for this Tuesday January thirty

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Speaker 1: feet in Hong Kong, Monday January in New York and

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Speaker 1: coming up this hour, US stocks decline is the market

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Speaker 1: awaits the Fitts rate decision. Ford slashes EV prices in

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Speaker 1: response to Tesla's action and the Biden administration ways of

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Speaker 1: ban on all US components sales to Huawei, final plans

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Speaker 1: being made for the blank and visit to Beijing. China

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Speaker 1: reacts to check Taiwan phone call. Ford joins the US

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Speaker 1: electric vehicle price cuts. I met Baxter with Global News

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Speaker 1: at American soccer star Moose from Italy to England on

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Speaker 1: Dan Schwartzmann. I'll have that story more coming up in

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Speaker 1: Bloomberg Sports. That's all straight ahead on Bloomberg Daybreak Asia

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Speaker 1: on Bloomberg eleven and three on New York, Bloomberg n Washington,

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Speaker 1: d C, Bloomberg one, O six one, Boston, Bloomberg nine sixties,

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Speaker 1: San Francisco, Sirius x M one nineteen and around the

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Speaker 1: world on Bloomberg Radio dot Com and via the Bloomberg

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Speaker 1: Business Actor. Good morning, I'm do Prisoner and I'm Brian Curtis.

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Speaker 1: Here are the stories we're following today. The White House

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Speaker 1: is considering cutting off Huawei technologies from all of its

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Speaker 1: American suppliers. Four years ago, the Trump administration limited sales

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Speaker 1: by US companies when Huawei was added to the US

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Speaker 1: Entity List out of national security concerns, but now officials

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Speaker 1: in the Biden administration are calling for an outright ban.

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Speaker 1: It's not clear how soon the administration would act on

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Speaker 1: this kind of policy change. We're told that the discussions

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Speaker 1: are still at an early stage. Officials said that timing

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Speaker 1: could coincide with the anniversary of Huawei's addition to the

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Speaker 1: Entity list in May. There was no comment today from

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Speaker 1: either the National Security Council or the Commerce Department. Well,

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Speaker 1: on Wednesday, two pm Wall Street time, we will have

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Speaker 1: a FED rate decision. The goals seems to be dialing

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Speaker 1: back on the nature of how a rest with the

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Speaker 1: FED has been in its fight against inflation, without signaling

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Speaker 1: a readiness to stop entirely. Now, despite the rates that

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Speaker 1: we have seen last year, the rate hikes, I should say,

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Speaker 1: financial conditions are at the weakest level that they have

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Speaker 1: been in about eleven months. Somewhat hard to believe. And

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Speaker 1: now the f O m C seems to be worried

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Speaker 1: that markets maybe missing the message. Paul Krugman is Nobel Laureate.

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Speaker 1: We spoke with him earlier. I'm a little worried that

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Speaker 1: the markets may be getting ahead of themselves. I mean,

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Speaker 1: I'm I'm a big inflation dove. I'm still basically I

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Speaker 1: believe that that inflation is going to come down. But

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Speaker 1: the degree of certainty uh that we're seeing in the

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Speaker 1: market is the degree of certainty I'm seeing in financial

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Speaker 1: newsletters that inflation is behind us. That makes me nervous.

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Speaker 1: That is economist Paul Krugman. By the way, the market

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Speaker 1: is expecting the Fed to raise rates by a quarter point,

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Speaker 1: so we would have the target for the Fed Funds

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Speaker 1: and Arrange of four and a half to four and

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Speaker 1: three quarter percent. And as you know, Brian, last month

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Speaker 1: we were up a half point following four consecutive seventy

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Speaker 1: five basis point rate hikes. So it's a little difficult

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Speaker 1: to know exactly where we are there and also in China,

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Speaker 1: but listen to this. Boeing is set to add a

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Speaker 1: fourth assembly line for its seven thirty seven Max in

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Speaker 1: a move to capitalize on growing demand for narrow body jets.

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Speaker 1: The work will come satisfactory in Everett, Washington, and it's

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Speaker 1: expected to start in the second half of four The

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Speaker 1: decision comes on the heels of an optimistic outlook for

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Speaker 1: China travel, as reopening propels passengers back to the skies.

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Speaker 1: According to Boeing's vice president of Commercial Marketing Darren Holst,

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Speaker 1: air travel worldwide was back to seventy seven percent of

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Speaker 1: twenty nineteen levels in December. Those numbers are expected to

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Speaker 1: rise to by the end of June as China's travelers returned.

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Speaker 1: Holst reiterated the playmakers expectations that airlines will need roughly

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Speaker 1: aircraft over the next twenty years to meet demand and

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Speaker 1: replace aging planes, and he says that China will be

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Speaker 1: a major driver of orders. Malaysia State owned Investment Fund

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Speaker 1: one MDB was supposed to promote economic development, but instead

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Speaker 1: it spurred a global multibillion dollars scandal, and now Malaysian

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Speaker 1: Prime Minister on War Ebram is calling out Goldman Sacks

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Speaker 1: to honor the settlement for its role in this ordeal.

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Speaker 1: I think Woldman's sex to come out clean and and

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Speaker 1: and deal with militia and don't don't think that you can,

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Speaker 1: you know, dismiss this as something um small that you

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Speaker 1: can just use your strength to dictate your terms now.

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Speaker 1: An agreement reached back in July called for Goldman to

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Speaker 1: pay two and a half billion dollars in exchange for

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Speaker 1: Malaysia to drop its charges. Goldman was also asked to

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Speaker 1: return one point four billion dollars of one MDB assets

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Speaker 1: that were seized by authorities around the globe. Now. According

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Speaker 1: to of filing from Goldman last year, the current issue

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Speaker 1: remains over an August two payment deadline. At that time

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Speaker 1: for the filing, Goldman stated the party has had three

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Speaker 1: months to resolve this dispute. The matter will now head

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Speaker 1: to arbitration if no resolution is reached. Briefly, copper prices

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Speaker 1: lower as investors reassess the outlook for demand in China.

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Speaker 1: More from Bloomberg's Anibal Jewelers. Bloomberg's index of early Chinese

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Speaker 1: economic indicators shows a slight uptick, but copper has been

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Speaker 1: constrained as China's home sales during the holiday period fell

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Speaker 1: four from a year earlier. Sentiment has now turned more

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Speaker 1: cautious as investors trying to gauge the health of the

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Speaker 1: recovery a note from gin Ray Futures said China's economic

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Speaker 1: recovery will continue, but Kappa has already priced in some

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Speaker 1: of the more recent macro bullishness. It's trading a relatively

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Speaker 1: high levels, which increases the risk of a pullback in

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Speaker 1: Hong Kong. I'm Annibal Rulers Bloomberg Daybreak Asian coming up

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Speaker 1: on Global News. Final preparations are being put on high

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Speaker 1: level US China talks later this week at Baxter with

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Speaker 1: more from the Bloomberg Newsroom in San Francisco. Eddie, Yeah,

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Speaker 1: exactly right. Douglas U s Secretary of State, and today

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Speaker 1: Blincoln is traveling to Beijang. It's been billboarded as a

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Speaker 1: major conversation. Asia Society Institute Vice President Wendy Cutler on

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Speaker 1: Bloomberg's Balance of power today, says, very important first step

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Speaker 1: going forward. What's the most disturbing is how little engagement

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Speaker 1: there has been between officials. And when there's little engagement,

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Speaker 1: then there's little prospects for cooperation in those areas where

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Speaker 1: either we need to cooperate because it's in the public good,

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Speaker 1: or it's in our interest to avoid a military conflict

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Speaker 1: or a military incident. Cutler says in the benefit of

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Speaker 1: both sides to talk, but at the same time, we

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Speaker 1: should not expect that a major breakthroughs Again, that's the

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Speaker 1: end of the week, within the week. Blincoln meanwhile, as

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Speaker 1: an Israel today, saying the US commitment to Israel has

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Speaker 1: never wavered, but peace in the region will only come

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Speaker 1: with a two state commitment. We continue to believe the

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Speaker 1: best way to achieve it is through preserving and then

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Speaker 1: realizing division of two states. Yeah, Israeli Prime Minister Benjamin

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Speaker 1: that Yahoo mean, while says on the top of the

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Speaker 1: list and cooperation, is it wrong? I think there's a

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Speaker 1: common consensus that this regime must not acquire nuclear weapons,

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Speaker 1: and that Yaho says it has to be stopped at

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Speaker 1: all costs. Meanwhile, a drone hit in an Iranian advanced

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Speaker 1: weapons production facility today Wall Street Journal reporting it was

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Speaker 1: an Israeli drone. Beijing has reacted angrily after reports that

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Speaker 1: the check President elect Peter Pavo called Taiwanese President Sim

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Speaker 1: Wang over the weekend to discuss their shared values of

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Speaker 1: democracy and human rights. China says it is considering blacklisting

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Speaker 1: Check made products and making them largely unable to clear

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Speaker 1: Chinese customs. Meanwhile, China's warning how speaker Kevin McCarthy not

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Speaker 1: to repeat Nancy Pelosi's visit to Taiwan. Well, we're starting

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Speaker 1: to see signs of an accelerating electric vehicle price war

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Speaker 1: in the US. TESTA went first and Forward is cutting

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Speaker 1: forty dollars off it's Mocke Mustang version. But Bloomberg's Ed

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Speaker 1: Ludlow says, as you move up the scale, the most

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Speaker 1: significant cuts are at the higher end. The GT Extended

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Speaker 1: range has a price trim of fifty dollars, and so

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Speaker 1: that actually starts to indicate that this might be more

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Speaker 1: about getting those vehicles in line with the i ra

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Speaker 1: A requirements for seventy federal credit or discount. It also

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Speaker 1: says you could have to do with the fact that

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Speaker 1: the chip supply is better now, so the supply demand

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Speaker 1: ratio for consumers may tip more to the buyer for

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Speaker 1: it also has at a discounted financing and an effort

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Speaker 1: to boost sales. White House are our US House speaker

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Speaker 1: Kevin McCarthy is going to the White House on Wednesday,

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Speaker 1: he says, to talk about the debt ceiling. But Bloomberg's

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Speaker 1: Jennie Schanzeno says, the White House has been firm on

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Speaker 1: its position on the debt ceiling. They keep to their

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Speaker 1: point that they are not going to negotiate on the

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Speaker 1: debt ceiling. I think what they'd really like to do

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Speaker 1: on the debt ceiling is have the Republicans come forward

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Speaker 1: with where they want to cut spending. McArthur has said

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Speaker 1: that he's open to talks about raising the death ceiling,

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Speaker 1: but that he wants guaranteed caps on spending. So we'll

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Speaker 1: see how this plays out. On Wednesday in San Francisco,

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Speaker 1: I'm at Baxter. This is Bloomberg. This is Bloomberg day

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Speaker 1: Break Asia. I'm Brian Curtis along with Rashad Salama, and

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Speaker 1: our guest is on Witty Bahoganah, head of multi assets

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Speaker 1: strategy at Columbia thread Needle Investments. And what we just

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Speaker 1: heard those comments from Paul Krugman, which are all the

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Speaker 1: more interesting since he is at Dove. But as a

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Speaker 1: counter to that, HSBC is predicting that the Fed will

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Speaker 1: will change course this year and will cut quite significantly,

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Speaker 1: cutting as soon as recession uh you know, is apparent.

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Speaker 1: HSPC is looking for a full percentage point in in

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Speaker 1: cuts and that's double the market Right now, the swaps

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Speaker 1: market sees just fifty basis points of a cut. Your

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Speaker 1: thoughts on that. How do you see the FED moving? Hey, Brian,

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Speaker 1: thank you for having me in a very happy new year.

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Speaker 1: Lots of debate in the market about production and really

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Speaker 1: um you specified just now with the market is expecting.

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Speaker 1: You know, I suspect the FED stays on hold this

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Speaker 1: year if the soft landing scenario um comes through and

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Speaker 1: the other scenario, which is recession, would actually be very

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Speaker 1: much in line with what HSDC is thinking. If there

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Speaker 1: is inter pocession, they're likely to cut and quite aggressively,

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Speaker 1: not just fifty basis points. Well, yeah, that's quite a

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Speaker 1: cool actually, but you know when did that happen? And

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Speaker 1: you know we've got three central banks. You know, we've

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Speaker 1: got the Bank of England and then then the ECB

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Speaker 1: and the FED. As we've been talking about what other

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Speaker 1: separate narratives here, So which that's an excellent question. I

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Speaker 1: would say that, you know, market grappling with three different

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Speaker 1: narratives when it comes to growth and inflation going forward.

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Speaker 1: We just talked about of this the session scenario and

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Speaker 1: the soft landing where we have, you know, inflation come

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Speaker 1: coming down without a mass of it to growth. And

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Speaker 1: the other scenario out there is the scenario where growth

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Speaker 1: actually re accelerate and or that inflation re accelerates, and

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Speaker 1: that's what Yeah, that's what Kuipman was saying. But you know,

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Speaker 1: out of the last thirteen FED hiking cycles, the average

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Speaker 1: time in between the last hike and the first cut

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Speaker 1: is five months five months, and in six of the

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Speaker 1: thirteen cycles the time was two months or less. So

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Speaker 1: I think that investors would be wise to think about

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Speaker 1: that before pillering the bond market for suggesting a cut

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Speaker 1: later this year. And indeed HSBC is full one percentage

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Speaker 1: point exactly. And I think if you think about the

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Speaker 1: fact that market bond markets are sort of reflecting probabilities,

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Speaker 1: then the part of the market it doesn't expect any

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Speaker 1: cuts would would you know, would expect things to stay flat,

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Speaker 1: whereas the HSBC sort of scenarios would expect the cut

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Speaker 1: and are finding probabilities that waited to have, which is

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Speaker 1: actually what the swop curves are reflecting. All right, so

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Speaker 1: let's have a look at what all this really played

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Speaker 1: it plays out on markets. I mean, we've had so

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Speaker 1: much euphoria at the start of this year equity wise,

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Speaker 1: you know, we know the risks to all of that

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Speaker 1: becoming a damp squibt I eat a real recession of course,

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Speaker 1: also a geopolitics, but would actually turn around for the

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Speaker 1: dollar and strength for the dollar also be a big,

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Speaker 1: big how can I say a headwind absolutely, I mean

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Speaker 1: that was the scenario all of last year. The shot.

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Speaker 1: You're absolutely right. If the dollar, you know, takes off

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Speaker 1: again like it did, most of that would be a

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Speaker 1: growth dampener globally. It's seen that happened again and again

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Speaker 1: in the past, and in the last three months or

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Speaker 1: so we've had dollar correct about ten percent. I'm talking

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Speaker 1: to d X y here um, which has really helped

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Speaker 1: the sentiment globally. We've seen the rally in the developed

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Speaker 1: market x US and E M far supart s apart

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Speaker 1: any of the enthusiasm you've seen in the US markets

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Speaker 1: and always been a huge factor in that M So

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Speaker 1: we'll get the jobs data this week now. If we

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Speaker 1: get a negative print on jobs seems unlikely, but it's possible.

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Speaker 1: I'm sure it would embarrass the Fed right after a hike,

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Speaker 1: But how do you think the market would respond that's

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Speaker 1: a very interesting question, Brian. I think I would say

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Speaker 1: that the bond market would you know, the treasury and

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Speaker 1: the sort of safer parts of the bone market would

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Speaker 1: rarely hard because that would price out any more hikes,

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Speaker 1: because a recession seems more likely. You know, the soft

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Speaker 1: data has been calling for that, but we haven't seen

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Speaker 1: it any of the hard data. Um. The equity picture

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Speaker 1: is a little bit mixed, you know. Um, so far

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Speaker 1: the correlation has been that both equities and bonds have

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Speaker 1: moved quite together, and in this is the one scenario

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Speaker 1: where when we see growth downgrades, I think equities might

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Speaker 1: not do quite as well as the bonds. Right, So

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Speaker 1: this brings us nice and you ready to talk about

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Speaker 1: whether you think that this momentum faquities can continue now

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Speaker 1: and if so, is it time to be loading up

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Speaker 1: on risk or is it time to probably take stock

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Speaker 1: part of the punk so I, you know, our positioning

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Speaker 1: is actually sort of what I would call barbelled. We

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Speaker 1: we love taking risk in emerging markets at this point. Um,

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Speaker 1: that's one area where we see quite a scope for

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Speaker 1: growth recovery. So e M has done quite well Richard

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Speaker 1: in the last two three months already, But Most of

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Speaker 1: it has been sort of multiple expansion in anticipation for

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Speaker 1: better earnings growth and better um economic growth. And if

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Speaker 1: that does come through, then I would say there is

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Speaker 1: more room in e M markets for more repricing of

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Speaker 1: a better growth scenario. The other side of it is

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Speaker 1: they also own a lot of treasuries because I think

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Speaker 1: the recession risk is real. Also, it's interesting how you

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Speaker 1: read China, so you can give me that because you're

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Speaker 1: on year and you're to date kind of squishy, but

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Speaker 1: last week pretty good. Yeah. You know, I've never seen

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Speaker 1: our China analyst as bullish as of late. And you know,

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Speaker 1: really the new year is starting UM policy wise quite nicely.

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Speaker 1: There there is some impact finally, of all the property

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Speaker 1: developed measures they had taken last year, some of them

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Speaker 1: are bearing fruit now. UM and monetary policy and credit

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Speaker 1: policy is all supposed to be very supportive. At the

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Speaker 1: same time, the draconian COVID policy have all been put aside,

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Speaker 1: So we are quite bullish in China. This is Bloomberg

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Speaker 1: on Bloomberg dot Com. I'm Brian Curtis and I'm Doug Chrisner.

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