WEBVTT - A OPEC+ Output Cut and Bullard Sees Higher Prices

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<v Speaker 1>This is Bloomberg day Break Asia for this Tuesday, April

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<v Speaker 1>fourth in Hong Kong, Monday April third in New York.

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<v Speaker 1>Coming up today, The surprise cut in oil production from

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<v Speaker 1>OPEC Plus could be another headache for central bankers. The

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<v Speaker 1>Reserve Bank of Australia may stand pat on infrast rate hikes,

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<v Speaker 1>and China is warning its top bankers that a crackdown

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<v Speaker 1>on corruption is far from over. Donald Trump in New

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<v Speaker 1>York to face arrangement tomorrow. Meeting between PRESIDENTSI and Speaker

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<v Speaker 1>McCarthy is on for Wednesday. Pentagon says China spy balloon

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<v Speaker 1>did get some intelligence. I'm at Baxter with Global News.

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<v Speaker 1>That's all straight ahead on Bloomberg Daybreak Asia. The business

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<v Speaker 1>news you need to start your day in just one

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<v Speaker 1>fifteen minute podcast available on Apple, Spotify, the Bloomberg Business

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<v Speaker 1>App and everywhere you get your podcasts. Good morning, I'm

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<v Speaker 1>Bonnie Quinn and I'm Dog Prisoner. Here are the as

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<v Speaker 1>we're following today, some oil analysts saying crude prices could

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<v Speaker 1>reach one hundred dollars a barrel this after OPEC plus

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<v Speaker 1>unexpectedly cut production. On that list is Goldman Sachs Bank

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<v Speaker 1>of America also said the unexpected supply cut could add

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<v Speaker 1>as much as twenty five dollars a barrel to the

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<v Speaker 1>price of Brent crude. However, Morgan Stanley broke away from

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<v Speaker 1>other major banks. Morgan lowered its forecast from ninety five

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<v Speaker 1>dollars a barrel to eighty seven fifty by the fourth

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<v Speaker 1>quarter of this year, and City Groups said the oil

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<v Speaker 1>market is nowhere near a rally that could produce a

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<v Speaker 1>hundred dollars a barrel oil Here's City Groups, ed Morris,

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<v Speaker 1>the global head of Commodities Research. To get to one

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<v Speaker 1>hundred dollars oil, we'd have to have significantly more oil

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<v Speaker 1>taken out of the market and have a lot of

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<v Speaker 1>uncertainty based on that oil taken out of the market.

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<v Speaker 1>That is to say, it would come from a destruction

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<v Speaker 1>to supply in countries such as it Ran, A rat

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<v Speaker 1>would be in Nigeria altogether at the same time, and

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<v Speaker 1>we would have no sense because of the domestic situation

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<v Speaker 1>in those countries of and that oil could come back

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<v Speaker 1>into the market. Meantime, Saint Louis FED President Jim Bullard

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<v Speaker 1>says it's not yet clear what higher oil prices could

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<v Speaker 1>mean for monetary policy. Here is Bullard speaking exclusively with Bloomberg.

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<v Speaker 1>This was a surprise that OPEC decision, But whether we'll

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<v Speaker 1>have a lasting impact, I think is an open question.

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<v Speaker 1>Oil prices fluctuated around. It's hard to track exactly. Some

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<v Speaker 1>of that might feed into inflation and make our job

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<v Speaker 1>a little bit more difficult. Bullets said that even without

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<v Speaker 1>OPEC pluses production cuts, oil prices were still likely to rise.

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<v Speaker 1>The FED chief said he expected higher prices with China

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<v Speaker 1>reopening sooner than expected, Europe skirting recession, and strong economic

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<v Speaker 1>data in the United States well. The Reserve Bank of

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<v Speaker 1>Australia will meet later today after the FED and the

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<v Speaker 1>ECB pushed ahead with tighter restrictions on monetary policy. Question

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<v Speaker 1>now is what will the RBA do? We have Paul

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<v Speaker 1>Allen with a preview. Economists divided over whether the RBA

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<v Speaker 1>will hike interest rates for an eleventh consecutive or pause

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<v Speaker 1>its most aggressive tightening cycles since nineteen eighty nine. Nineteen

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<v Speaker 1>economists survey by Bloomberg forecast the RBA will stand pad

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<v Speaker 1>at three point six percent, as do money markets. Eleven economists,

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<v Speaker 1>though see a quarter point hike to three point eight

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<v Speaker 1>five percent. Economists favoring in RBA pause site. The faster

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<v Speaker 1>than expected easing of inflation in February more subdued consumer spending,

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<v Speaker 1>as well as wiries about bank stresses becoming systemic. Economists

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<v Speaker 1>calling for a rate high can argue that inflation at

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<v Speaker 1>six point eight percent in February is still well above

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<v Speaker 1>the RBA's two to three percent target and the job

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<v Speaker 1>market is very tight. We'll get a monetary policy decision

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<v Speaker 1>from the Reserve Bank of Australia at two thirty pm

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<v Speaker 1>Sydney time. I'm Paul Allen Bloomberg Day Breacasia and Chinese

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<v Speaker 1>authorities have warned a crackdown on corruption in the finance

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<v Speaker 1>industry is far from over. Let's get more from Bloomberg's

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<v Speaker 1>at Joanne Won. Regulators and inspectors called in top executives

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<v Speaker 1>from at least six large state owned banks. The meeting

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<v Speaker 1>took place just as the investigation of the Bank of

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<v Speaker 1>China's former chairman Liu Niango was announced. This came just

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<v Speaker 1>about a month after he was abruptly removed as the

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<v Speaker 1>party chief of the nation's fourth biggest bank. Liu was

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<v Speaker 1>said to be suspected of quote serious voulations of discipline

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<v Speaker 1>and law. We hear. Chinese officials said the bankers should

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<v Speaker 1>draw lessons from Liu and that staff must comply with

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<v Speaker 1>laws and regulations and strength and self discipline. The latest

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<v Speaker 1>warning asked to evidence the Chinese president in Chijing. Ping's

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<v Speaker 1>antigraphic campaign continues to pick up steam in Hong Kong.

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<v Speaker 1>I'm join Wang Bloomberg Day Brigasia Well. HSBC senior executives

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<v Speaker 1>faced off with the bank's largest investor base in Hong

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<v Speaker 1>Kong at a shareholder meeting. Chairman Mark Tucker said he

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<v Speaker 1>regrets cutting a dividend payments during the height of the pandemic,

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<v Speaker 1>calling it a highly unusual event. Tucker told investors HSBC

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<v Speaker 1>has now substantial dividend distribution capacity. Also said the bank

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<v Speaker 1>is set for the best returns in a decade this year.

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<v Speaker 1>Executives at the bank also repeated their opposition to a

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<v Speaker 1>push by HSBC's top shareholders to spin off the company's

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<v Speaker 1>Asian operations. Ping On Insurance Group has been waging a

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<v Speaker 1>battle largely behind the scenes, asking HSBC to deepen cost

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<v Speaker 1>cuts and be open to some other suggestions. However, Tucker

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<v Speaker 1>told those investors in Hong Kong restructuring the bank would

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<v Speaker 1>create uncertainty and it would also destroy value. So the

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<v Speaker 1>big story, obviously is the rally that we had in

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<v Speaker 1>crude oil today and the question mark it puts over

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<v Speaker 1>FED policy. Bloomberg Economics today currently with a baseline for

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<v Speaker 1>the FED to hike another twenty five basis points at

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<v Speaker 1>the main meeting to bring the FED funds target to

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<v Speaker 1>around five and a quarter percent and then hold it

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<v Speaker 1>there for the remainder of the year. But now Bloomberg

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<v Speaker 1>Economics is saying, with a banking turmoil somewhat subsiding the

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<v Speaker 1>tight US labor market, China reopening, adding to global demand,

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<v Speaker 1>and the risk of higher inflation as a result of

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<v Speaker 1>the elevated oil prices, the prospect for a pause on

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<v Speaker 1>the part of a FED on the FED, I should say,

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<v Speaker 1>looks less certain. Vonnie, all right, well, it is also

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<v Speaker 1>a big story here in New York. Donald Trump arriving

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<v Speaker 1>in New York to face being processed under reigned tomorrow.

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<v Speaker 1>Let's get a Baxter. He's got global news for US. Yea,

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<v Speaker 1>it is definitely history, Vonnie. You're right, it's called from

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<v Speaker 1>major demonstrations which have not yet materialized. Bloomberg Xamer Hordern

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<v Speaker 1>was at Trump Tower a bit earlier today. On the

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<v Speaker 1>west side of the street. It is a long lane

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<v Speaker 1>of reporters, camera crews, lenses everywhere you look. It was

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<v Speaker 1>very confusing, Joe, I have to say, for some of

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<v Speaker 1>the tourists that just wanted to see Fifth Avenue. Then

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<v Speaker 1>the other side there were Trump supporters, but definitely the

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<v Speaker 1>journalists outnumbered them. Yeah. Police Chief Keachan Sewell says very

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<v Speaker 1>large police force will keep the peace as well. Violence

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<v Speaker 1>and destruction are not part of legitimate lawful expression and

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<v Speaker 1>it will never be tolerated in our city. Meanwhile, the

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<v Speaker 1>MAGA campaign says the indictment has been very good fundraising.

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<v Speaker 1>It says seven million dollars since the indictment not verified yet.

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<v Speaker 1>The meeting between Taiwan President Sion When and Kevin McCarthy

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<v Speaker 1>is on for Wednesday in Los Angeles. Bloomberg's Dan Flatley

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<v Speaker 1>says both sides are defending the meeting in the wake

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<v Speaker 1>of China protests, with some statements from the President of

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<v Speaker 1>Taiwan and the White House sort of talking about the

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<v Speaker 1>right of the President of Taiwan, Kingwen to meet with

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<v Speaker 1>whoever she chooses to meet with here in the US

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<v Speaker 1>a free country. Taiwan says no room for China comment,

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<v Speaker 1>but of course China will fire. Foreign Ministry says China

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<v Speaker 1>will take resolute measures to safeguard the sovereignty and the

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<v Speaker 1>territorial integrity. Meanwhile, the Pentagon is saying that that China

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<v Speaker 1>spy balloon was able to get some intelligence this while

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<v Speaker 1>investigation continues. Pentagon Deputy Press Secretary Sabrina saying, we do

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<v Speaker 1>know that the balloon was able to be maneuvered and

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<v Speaker 1>purposely driven along its track, but not going to get

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<v Speaker 1>into specific sights it was able to hover over. She

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<v Speaker 1>does say the US was able to take mitigation operations

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<v Speaker 1>once it did reach the US though. Finland becomes a

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<v Speaker 1>full fledged member of NATO tomorrow, and Secretary General Yan

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<v Speaker 1>Stoltenberg says the process is moving forward for Sweden as well.

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<v Speaker 1>We agreed on that he could move forward on finalizing

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<v Speaker 1>the Swedish accession, and the president on the Turkish Parliament

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<v Speaker 1>National gun Desamblas delivered on that. So that's the reason

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<v Speaker 1>why we are we are now with Finland full members

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<v Speaker 1>from tomorrow. Stoltenberg says both have followed through on their commitments.

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<v Speaker 1>And just of note, Russia today started its monthly turn

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<v Speaker 1>as head of the UN Security Council. Global News powered

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<v Speaker 1>by more than twenty seven hundred journalists and analysts and

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<v Speaker 1>over one hundred twenty countries. In San Francisco, I'm at Baxter.

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<v Speaker 1>This is Bloomberg. Let's get to our guest. David Waldell

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<v Speaker 1>is with us. He as the CEO also the chief

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<v Speaker 1>investment strategist at Waddell and Associates. He's on the line

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<v Speaker 1>from Nashville. David, thanks for being with us. I'm curious

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<v Speaker 1>what did you make of today's price action in the

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<v Speaker 1>face of the spike and crude oil. Well, it was

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<v Speaker 1>good for beating up energy names, so that was helpful.

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<v Speaker 1>I just think we're in a noisy market right here.

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<v Speaker 1>The deck is being reshuffled, so you see. You know,

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<v Speaker 1>once the banking panic took hold, that sort of knocked

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<v Speaker 1>off the MidCap trade and the small cap trade, it

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<v Speaker 1>knocked off the value trade, and so the markets in

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<v Speaker 1>sort of chern mode, just trying to hold on to

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<v Speaker 1>any short term trend line it can, and so you

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<v Speaker 1>got that in energy today. But it was certainly a

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<v Speaker 1>lukewarm response. You know, two of the indussees worked, one didn't,

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<v Speaker 1>and really the participation was pretty lame, so it was

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<v Speaker 1>just kind of an ugly tape. Today, in my opinion,

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<v Speaker 1>the market is so strange these days. There are so

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<v Speaker 1>many coals that are bearish, and the latest being James

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<v Speaker 1>Morgan's Marko kolonoish warning that stocks are in a calm

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<v Speaker 1>before the storm type mode. Is that how you see it.

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<v Speaker 1>I love bearish sentiment, right because that's what's required to

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<v Speaker 1>provide the fuel for rallies to go up. I mean,

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<v Speaker 1>people have been bearish all year long for a variety

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<v Speaker 1>of reasons, and yet here we are up seven percent

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<v Speaker 1>on the SMP and actually the international stocks are outperforming

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<v Speaker 1>the domestic stocks. So you know, bearish sentiment is a

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<v Speaker 1>good thing because it's the conversion of the skeptics which

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<v Speaker 1>provides the fuel for rallies. In terms of a really

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<v Speaker 1>determinant catalyst, I believe people are looking past twenty twenty three,

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<v Speaker 1>they're looking into twenty twenty four, and they're seeing all

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<v Speaker 1>of these cloth cutting efforts that we read about every

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<v Speaker 1>day that seemed depressing in the now, are going to

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<v Speaker 1>be really great relief in the future. And then you

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<v Speaker 1>add you know, some technology advances into that and you

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<v Speaker 1>could have serious margin expansion in twenty twenty four. So

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<v Speaker 1>if you think we're going to be in a garden

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<v Speaker 1>variety recession, I do. Even if you think there's going

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<v Speaker 1>to be a crisis, POWE will put is back in

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<v Speaker 1>play and so that neutralizes. So the sentiment can be barished.

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<v Speaker 1>But if you walk forward, you know, just a series

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<v Speaker 1>of months from now, you're back into sort of, you know,

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<v Speaker 1>a nice earnings environment. Why not participate in advance of that. Well,

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<v Speaker 1>that's a very interesting point, and it runs counter to

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<v Speaker 1>what we heard today from Chris Harvey over at where

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<v Speaker 1>Else Fargo. Given the possibility of a recession that seems

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<v Speaker 1>to look a little more certain these days. Harvey was

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<v Speaker 1>saying the upcoming earning season maybe the first of several

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<v Speaker 1>difficult quarters, and he puts his finger as you did,

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<v Speaker 1>on margins being compressed. So it's kind of the opposite

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<v Speaker 1>of what you're saying. Aren't you not at all concerned

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<v Speaker 1>about the possibility of recession and what that made due

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<v Speaker 1>to the bottom line for US corporates. I just think

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<v Speaker 1>we're out of sequence, right, So we're gonna have a

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<v Speaker 1>recession this year and we priced that in last year

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<v Speaker 1>because earnings were good last year, up four percent overall,

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<v Speaker 1>and you know, the economy was a nimic, but it grew. Typically,

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<v Speaker 1>that's not an environment where you see a big negative

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<v Speaker 1>year in the talk market. So we get recession returns

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<v Speaker 1>for this year last year, and we're going to get

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<v Speaker 1>recovery returns for next year this year. So I really

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<v Speaker 1>think it's a sequencing issue. I agree with him. By

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<v Speaker 1>the way, earnings are projected to be down from the

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<v Speaker 1>high ten percent already, so they topped out in June

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<v Speaker 1>of twenty twenty two, and you know for this quarter,

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<v Speaker 1>based upon today's estimates, they'll be down eleven percent from

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<v Speaker 1>that point. So maybe they go down fifteen percent, which

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<v Speaker 1>wouldn't be out of the range of a normal recessionary environment.

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<v Speaker 1>My point is we've already baked it in. Everybody knows this,

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<v Speaker 1>so everybody knows we're going into recession. Everybody knows earnings

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<v Speaker 1>are going down ten to fifteen percent, and yet here

0:13:03.679 --> 0:13:06.600
<v Speaker 1>we are up seven percent. So the market's looking past it,

0:13:06.640 --> 0:13:09.200
<v Speaker 1>and I think correctly so so are you in the

0:13:09.240 --> 0:13:11.760
<v Speaker 1>Compson that sees rate cuts before the end of the year.

0:13:13.280 --> 0:13:15.560
<v Speaker 1>I mean, if I was running the FED, you'd see

0:13:15.640 --> 0:13:17.760
<v Speaker 1>rate cuts before the end of the year. I do

0:13:17.880 --> 0:13:22.480
<v Speaker 1>think disinflation has taken hold. You know. I talked to

0:13:22.920 --> 0:13:25.720
<v Speaker 1>bankers just like everybody else, and I don't know anybody

0:13:25.760 --> 0:13:29.000
<v Speaker 1>out there who's really aggressively making loans right now because

0:13:29.480 --> 0:13:34.000
<v Speaker 1>the small banks are seeing outflows, which isn't encouraging, and

0:13:34.040 --> 0:13:36.600
<v Speaker 1>the large banks are seeing cash sorting, which is the

0:13:36.679 --> 0:13:40.720
<v Speaker 1>same thing. So nobody's really interested, I think, in extending

0:13:40.720 --> 0:13:43.600
<v Speaker 1>a bunch of loans right now. So finally, the yield

0:13:43.600 --> 0:13:48.600
<v Speaker 1>curve that's been dramatically inverted is starting to bite. So

0:13:48.720 --> 0:13:50.960
<v Speaker 1>if it were me running the FED, I'd let that

0:13:51.040 --> 0:13:54.040
<v Speaker 1>play out because they may have raised twenty five basis

0:13:54.080 --> 0:13:57.079
<v Speaker 1>points last month, but the tightness and the credit market

0:13:57.160 --> 0:13:59.920
<v Speaker 1>might have added another fifty to seventy five basis point.

0:14:00.520 --> 0:14:04.480
<v Speaker 1>So if you factor in and do dynamic modeling, how

0:14:04.600 --> 0:14:07.280
<v Speaker 1>much further do you really need to go? It's already

0:14:07.400 --> 0:14:10.640
<v Speaker 1>one of the fastest rate hike regimes in history. Why

0:14:10.679 --> 0:14:12.520
<v Speaker 1>not let it just play out for a little bit.

0:14:12.720 --> 0:14:15.480
<v Speaker 1>So are you seeing opportunities then? Given what you just said,

0:14:15.520 --> 0:14:20.080
<v Speaker 1>are you seeing opportunities in fixed income at all? You know,

0:14:20.160 --> 0:14:22.600
<v Speaker 1>I mean the yields are nice, and so you can

0:14:22.640 --> 0:14:25.320
<v Speaker 1>buy short term paper and get big yields and then

0:14:25.360 --> 0:14:27.920
<v Speaker 1>if you think their rate cuts coming in the future.

0:14:28.320 --> 0:14:30.360
<v Speaker 1>You know, the spreads haven't really blown out, so the

0:14:30.400 --> 0:14:35.960
<v Speaker 1>credit spreads are not indicating distress the way you know

0:14:36.040 --> 0:14:39.640
<v Speaker 1>the stock market gyrating round might indicate. So even with

0:14:39.720 --> 0:14:42.560
<v Speaker 1>the move index high and things kind of nutty, the

0:14:42.600 --> 0:14:45.600
<v Speaker 1>credit spreads will still remain tight. So I don't know

0:14:45.640 --> 0:14:48.200
<v Speaker 1>if if those will blow out a little bit. I

0:14:48.520 --> 0:14:51.880
<v Speaker 1>think you can just be in duration sort of yield

0:14:52.600 --> 0:14:56.400
<v Speaker 1>positions and be fine because you'll probably see a drift lower.

0:14:56.880 --> 0:14:58.960
<v Speaker 1>You know. I look at like the five year break

0:14:59.000 --> 0:15:02.840
<v Speaker 1>even year five year forwards, those are all benign at

0:15:02.880 --> 0:15:06.600
<v Speaker 1>two point three percent, etc. So the bondom market actually

0:15:06.680 --> 0:15:09.960
<v Speaker 1>is a lot calmer than the short term paper makes

0:15:10.040 --> 0:15:14.080
<v Speaker 1>it appear. This is Bloomberg Daybreak Asia, your morning brief

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