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Speaker 1: This is Bloomberg day Break Asia for this Monday, June

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Speaker 1: twelfth in Hong Kong, Sunday June eleventh in New York,

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Speaker 1: and coming up today.

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Speaker 2: Fed officials appears set to take a breather after a

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Speaker 2: year of interest rate increases.

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Speaker 1: The US expands a ban on Chinese imports from the

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Speaker 1: Shinjong region over forced labor concerns.

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Speaker 2: And Goldman Sachs pulls back on its forecast for crude oil.

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Speaker 3: Farmer Trump Attorney General William Barr says if half the

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Speaker 3: charges against Trump are proven, he is toast Honduras to

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Speaker 3: set up embassy in Beijing and Taiwan relations US acknologists

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Speaker 3: China spy activities in Cuba. I'm at Baxter with Global News.

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Speaker 4: Novak Djokovic makes history at the win at the French Open.

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Speaker 4: Dan Schwartzman, I'll have that story more coming up in

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Speaker 4: Bloomberg Sports.

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Speaker 5: That's all straight ahead on Bloomberg day Break Asia, The

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Speaker 5: business news you need to start your day in just

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Speaker 5: one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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Speaker 5: Business App and everywhere you get your podcast.

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Speaker 1: Good morning, I'm Brian Curtiz.

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Speaker 2: And I'm Doug Prisner. Here are the stories we're following today.

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Speaker 1: Doug, FED officials, as you mentioned, are likely ready to

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Speaker 1: take a breather here after more than a year of

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Speaker 1: driving up interest rates. Policymakers are expected to leave rates

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Speaker 1: in that range of five to five and a quarter

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Speaker 1: percent at the meeting this week. The pause would allow

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Speaker 1: them to take stock of the outlook following recent strains

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Speaker 1: in the banking sector. Now, Bloomberg opinion columnist muhammaedel Arian says,

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Speaker 1: all eyes will be on the chair Jerome Powell and

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Speaker 1: his newser after this week's meeting. Here he is speaking

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Speaker 1: to Bloomberg.

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Speaker 6: The press conference is going to be absolutely the most

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Speaker 6: interesting element. How they described that the skip, which the

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Speaker 6: market expects, is going to be critical.

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Speaker 5: Now.

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Speaker 6: If they don't get favorable inflation and numbers, they're in

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Speaker 6: a really hard situation because they will have to surprise

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Speaker 6: the market.

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Speaker 1: Policymakers could signal their expectations for higher rates through updates

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Speaker 1: to their economic forecasts. Those forecasts will be released following

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Speaker 1: the meeting this week, and as Doug mentioned, the FED

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Speaker 1: meets on Tuesday and Wednesday.

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Speaker 2: Well between the FED meeting and this week's CPI data,

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Speaker 2: Wall Street will also have an eye on a handful

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Speaker 2: of earnings reports. We have a preview from Bloomberg's Charlie Pellett.

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Speaker 7: The stock market rally has been fueled most recently by

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Speaker 7: expectations of a pause in interest rate increases and resilient earnings,

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Speaker 7: which for now are outweighing sticky inflation and faltering economic growth.

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Speaker 7: And Maletti is head of active investing at all Spring

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Speaker 7: Global Investments.

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Speaker 8: Even this quarter, we had very little Ernie's growth. In fact,

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Speaker 8: I think it only came from two sectors, technology and industrials.

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Speaker 8: But we are seeing companies that are being able to

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Speaker 8: hold margins pretty well, being able to hold arnians pretty well.

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Speaker 8: Those are the type of companies that we're looking for.

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Speaker 7: Among the company's schedule to report earnings this week, supermarket

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Speaker 7: chain Kroger, homebuilder Lenar, along with tech names Adobe and

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Speaker 7: Oracle in New York Charlie Pellett Bloomberg Daybreak Asia.

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Speaker 1: The US has expanded a ban on imports from China's

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Speaker 1: Shinjong region. Bloomberg's Juan Wong has the story from Hong Kong.

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Speaker 9: The US has placed two more companies on its so

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Speaker 9: called antity list. These are the first additions since the

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Speaker 9: US law targeting forced labor took effect a year ago.

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Speaker 9: The companies are nine Star, a printing firm as well

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Speaker 9: as eight of its subsidiaries, and Sinjiang Jong Thai Chemical.

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Speaker 9: The US Department of Homeland securities that the companies worked

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Speaker 9: with the Chinese government to recruit a wikers and other

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Speaker 9: ethnic minorities for forced labor. This widens the list to

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Speaker 9: twenty two companies. The move is certain to anger China

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Speaker 9: just as the US tries to mend worsening ties. The

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Speaker 9: two companies say they're looking into the impacts of the

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Speaker 9: US action. In Hong Kong and Joan Wong Bloomberg day.

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Speaker 2: Brigasia oil prices have not benefited from last week's production

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Speaker 2: cut by Saudi Arabia. You might remember the kingdom as

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Speaker 2: reducing July output by a million barrels a day. Today,

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Speaker 2: the Saudi Energy Minister said OPEK and its allies are

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Speaker 2: trying to combat uncertainties and sentiment. Prince Abdulah Ziz Bin

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Speaker 2: Salmon was speaking at the Arab China Business Forum in Riod.

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Speaker 2: He called the measures precautionary and suggested the aim is

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Speaker 2: to tackle short sellars well. Even so, since the Saudi

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Speaker 2: cuts were announced. Brent krude is down nearly one and

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Speaker 2: a half percent. Prices appear to be reflecting greater concern

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Speaker 2: over higher interest rates and recession. Goldman Sachs had been

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Speaker 2: one of the most bullish banks on oil, but now

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Speaker 2: the firm has cut its forecast. Goldman is dropping its

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Speaker 2: Brent forecast for December to eighty six dollars. That's down

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Speaker 2: from its previous estimate of ninety five bucks. By the way,

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Speaker 2: this is Goldman's third downward revision in the last six months.

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Speaker 1: Brian and billionaire George Soros is handing control of his

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Speaker 1: Open Society Foundations to one of his sons. We get

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Speaker 1: that story from Bloomberg's Denise Pelgrini.

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Speaker 10: The ninety two year old investor in philanthropist is seding

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Speaker 10: control to thirty seven year old Alex Soro. The foundation

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Speaker 10: donates money to humanitarian and democratic causes, including climate change

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Speaker 10: in US politicians. It also controls the majority of the

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Speaker 10: assets managed by Sorol's twenty five billion dollar family office.

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Speaker 10: The senior Sorels made a billion dollars betting against the

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Speaker 10: British pound and breaking the Bank of England in a

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Speaker 10: huge financial event in nineteen ninety two, known as Black Wednesday.

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Speaker 10: He at one point said he did not want any

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Speaker 10: of his five children to control osf Alex studied history

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Speaker 10: at NYU and has a PhD from UC Berkeley, and

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Speaker 10: he recently said he's more political than his father. Denise

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Speaker 10: Pelliguney Bloomberg day Break show him.

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Speaker 1: Brian Curtis here in Hong Kong along with Doug Krisner.

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Speaker 1: Rashad Salama will join us in a few moments, and

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Speaker 1: we'll have William Lee joining us as well as our

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Speaker 1: guest this morning, the chief economist at the Milken Institute.

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Speaker 1: And there's lots to discuss Doug. The timing on this

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Speaker 1: US ban on companies in China allegedly using forced labor

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Speaker 1: is not particularly good in terms of improving US China relations,

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Speaker 1: and especially with Anthony Blincoln and his reported trip to China.

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Speaker 1: But it's not very likely this story will have a

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Speaker 1: big impact on the markets today other than those companies themselves.

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Speaker 1: They are both listed in China, so we'll see.

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Speaker 5: Yeah.

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Speaker 2: I think the bigger story is obviously the interest rate

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Speaker 2: story in this division that seems to be happening. You

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Speaker 2: have Wall Street firms on one hand, suggesting perhaps the

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Speaker 2: threat of recession has eased. However, some of the big

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Speaker 2: bomb managers like Fidelity and Alliance are saying that thinking

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Speaker 2: risk a grave error. These bond firms are sticking with

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Speaker 2: their forecast for an economic downturn and they are advising

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Speaker 2: hedging on any bets related to risk assets.

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Speaker 1: I wonder if we could get some sort of surprise here,

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Speaker 1: because we got one from the Bank of Canada, right,

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Speaker 1: and also from the RBA. I know it's not expected.

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Speaker 1: It's a it's a hawkish spot pause that is expected, right,

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Speaker 1: that they'll they'll stay on hold, but they will talk

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Speaker 1: kind of tough, almost tell us.

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Speaker 4: That July is likely.

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Speaker 1: And as you mentioned earlier, that's what the swaps market

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Speaker 1: is telling us.

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Speaker 2: One of the things, I think, Brian, that makes the

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Speaker 2: US story so unique is the meltdown that we had

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Speaker 2: among regional banks in March. We've talked on this show

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Speaker 2: about credit contraction. I think it's going to continue. Last

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Speaker 2: week at the Bloomberg invest conference, the CEO of Sorrows

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Speaker 2: Funds Management, Don Fitzpatrick, was saying there will be more

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Speaker 2: trouble where regional lenders are concerned. In fact, I think

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Speaker 2: that she is expecting additional failures, and one problem is

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Speaker 2: obviously what's unfolding in the commercial real estate market.

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Speaker 1: Yeah, that's a really interesting market. I've enjoyed the guests

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Speaker 1: that we've had on that have tried to kind of

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Speaker 1: delineate where you have real problems in commercial real estate

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Speaker 1: and where you actually have a bit of strength. And

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Speaker 1: that's something we can get into a little bit later.

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Speaker 1: I think the oil story that you mentioned is pretty interesting.

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Speaker 1: The Goldman call it kind of settles to a degree,

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Speaker 1: the state and off between Ed Morris over at City

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Speaker 1: and Jeff Curry at Goldman. As you mentioned, Goldman's been

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Speaker 1: way up there in the high nineties and lowering it

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Speaker 1: now to what'd you say, eighty six dollars I think,

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Speaker 1: But for City they have long said Ed Morris has

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Speaker 1: been saying that oil will finish the year down below

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Speaker 1: eighty dollars, and right now you're at seventy, almost right

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Speaker 1: on the button.

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Speaker 2: I think some of this is related to the China story, right,

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Speaker 2: and the weakness there.

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Speaker 5: Yeah.

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Speaker 1: Yeah, And it's interesting because you have the oil market

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Speaker 1: more in line with the bond market, whereas the stock

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Speaker 1: market seems to think that soft lending is in the picture.

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Speaker 1: We'll put that to Bill Lee coming up in a

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Speaker 1: few moments from the Milkin Institute. He's an old friend.

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Speaker 1: Now it's time for global news, all right, let's get

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Speaker 1: right to it. Reaction has been emerging here through the

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Speaker 1: weekend regarding the opening of the indictment against Donald Trump.

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Speaker 1: Let's get through some of that with Ed Baxter in

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Speaker 1: the nine to sixty news rom in San Francisco.

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Speaker 3: Ed Brian exactly the most damaging may have come from

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Speaker 3: Trump's former Attorney general, William Barr, and Fox has heard

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Speaker 3: here on Bloomberg.

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Speaker 11: If even half of it is true, then he's toast.

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Speaker 11: I mean, it's a pretty it's a very detailed indictment,

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Speaker 11: and it's very very damning. And this idea of presenting

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Speaker 11: Trump as a victim here, a victim of a witch hunt,

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Speaker 11: is ridiculous.

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Speaker 3: Republican Senator Lindsay Graham says Trump is the victim of

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Speaker 3: a weaponized Department of Justice.

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Speaker 12: I cannot stress to you enough that we live in

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Speaker 12: a world today for most Republicans believe that Hunter Biden's

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Speaker 12: laptop was real, and people knew it was real, but

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Speaker 12: they told the public something else to help Joe Biden.

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Speaker 3: But as you heard, bar says, a victim argument is wrong.

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Speaker 11: He's not a victim here. He was totally wrong that

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Speaker 11: he had the right to have those documents. Those documents

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Speaker 11: are among the most sensitive secrets that the country has.

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Speaker 11: They have to be in the custody of the archivist.

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Speaker 11: He had no right to maintain them and retain them,

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Speaker 11: and he kept them in a way at Mara Lago

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Speaker 11: that anyone who really cares about national security with their

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Speaker 11: stomach would churn at it.

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Speaker 3: And ABC legal expert pre Bara says the most damning

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Speaker 3: piece of evidence was an audio file recording at Westminster.

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Speaker 13: You have powerful evidence in the defendant's own words, which

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Speaker 13: comes right into trial very easily.

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Speaker 4: He knew he had them, knew he had them. He says,

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Speaker 4: this is secret information.

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Speaker 11: See as President, I could have declassified it.

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Speaker 7: Now I can't.

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Speaker 3: And Barra says a charge that Trump having documents removed

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Speaker 3: with a subpoena pending is also damning. Politically well, political

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Speaker 3: analyst Ric Client says Trump polling is up.

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Speaker 13: Back on April fourth, when those charges against Donald Trump

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Speaker 13: in Manhattan were first unveiled, Donald Trump was leading Rond

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Speaker 13: De Santis' closest rival by about twenty points.

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Speaker 7: Now you fast forward.

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Speaker 13: Two months to this weekend, Donald Trump is leading DeSantis

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Speaker 13: by thirty points plus.

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Speaker 3: And Republican Senator Chris Sanunu on CBS has heard on Bloomberg,

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Speaker 3: says it is still a problem in the long run

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Speaker 3: for the party.

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Speaker 14: It's just another example that he could win the nomination

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Speaker 14: but cannot mathematically cannot win in November of twenty four

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Speaker 14: which is why the Republican Party needs to look to

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Speaker 14: another candidate. And they've got a lot of great options

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Speaker 14: before and.

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Speaker 3: Trump will surrender for arrest. Tuesday, in Miami, Hinwa was

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Speaker 3: reporting that China Hondura's high level business meetings have concluded

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Speaker 3: as first of its kind since the establishment of diplomatic

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Speaker 3: relations in March March twenty sixth. In doing so, it

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Speaker 3: broke off relations with Taiwan and it is going to

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Speaker 3: set up an embassy in Beijing. And the White House

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Speaker 3: is now acknowledge the existence of Chinese spy facilities in Cuba,

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Speaker 3: saying that their presence dates back to the Trump administration

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Speaker 3: and that Beijing is continually pushing to expand them. The

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Speaker 3: statement says China has long had intelligence operations, but that

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Speaker 3: it's substantially expanded in twenty nineteen under Trump Global News

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Speaker 3: powered by more than twenty seven hundred journalists and analysts

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Speaker 3: in over one hundred twenty countries. In San fram Cisco,

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Speaker 3: I'm Ed Baxter, and this is Bloomberg.

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Speaker 1: I'm Brian Curtis in Hong Kong, along with Rishide Salamat,

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Speaker 1: and our guest is Bill Lee, Chief economis stat Milken Institute.

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Speaker 1: So Bill, the dead seiling deal is such old news here.

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Speaker 1: Now are we getting close to the Fed and its

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Speaker 1: machinations being old news?

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Speaker 4: Well, we are.

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Speaker 15: The markets are perennially being expecting the Fed to be

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Speaker 15: pausing or even dropping rates, and finally the probabilities seem

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Speaker 15: to be on their side. But it'd be a shame

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Speaker 15: if the Fed actually did that, because the data coming

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Speaker 15: in are showing that inflation has been persistently high, and

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Speaker 15: the so called slowdown that we've been expecting from the

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Speaker 15: higher rates has been coming in through mixed data.

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Speaker 4: For six months. We've had incomes slowing.

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Speaker 15: Down and going negative in the United States, but GDP

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Speaker 15: still stays positive and the latest GDP now from a

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Speaker 15: le Atlanta FED shows two point two percent, So we

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Speaker 15: don't have the kind of recessionary fears that are cause

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Speaker 15: people to stop spending and bring that service inflation down

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Speaker 15: to that two percent level of the FED once.

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Speaker 16: So is that the case then, and does that ultimately

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Speaker 16: mean that the medicine is not working well?

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Speaker 15: Richard, That's a great question. In fact, a lot of

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Speaker 15: my colleagues and I have been debating that point. Has

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Speaker 15: the US economy become less interest rates sensitive? Even the

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Speaker 15: so called credit crunch that we're expecting from the banks

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Speaker 15: hasn't resulted in a lot of crunching in those interest

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Speaker 15: rate sensitive sectors. The commercial real estate market, where the

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Speaker 15: local bank lending has been very concentrated, hasn't quite cracked yet.

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Speaker 15: I mean, there's signs of weaknesses all over the place,

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Speaker 15: but we don't see the kind of downturn that we

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Speaker 15: traditionally see with the coming of a recession. And so

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Speaker 15: I think the FED at this point, if they were

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Speaker 15: being honest with themselves, are saying we really haven't tightened enough.

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Speaker 15: Loretta Mescher and Jim Bullet have been saying that for

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Speaker 15: quite a while now, and all this dove talk seems

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Speaker 15: to be caving into Wall Street, in my opinion, and

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Speaker 15: I think it would be a little bit too smart

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Speaker 15: to play the game of Oh, let's pause, but then

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Speaker 15: we'll be sure to continue in July because we need more.

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Speaker 4: If you need more, put in more.

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Speaker 15: And so to me, all this talk of pausing or

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Speaker 15: stopping or skipping is just a lot of blah blah

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Speaker 15: blah for playcating markets bill.

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Speaker 16: So you know, that brings me to the point here

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Speaker 16: that you know, we've had the tightest, probably one of

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Speaker 16: the typest rounds of management policy aggressiveness perhaps in the

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Speaker 16: post war era, and in terms of how far we've

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Speaker 16: come in such a short period of time, aren't we

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Speaker 16: just ultimately the normalizing interest rates?

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Speaker 15: Oh that's a great point. I think if you really

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Speaker 15: look at where real interest rates are right now five

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Speaker 15: percent less four percent inflation, we have about one percent

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Speaker 15: real interest rates and that's about where interest rates normally

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Speaker 15: would be operating in traditional times. And that's not considered

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Speaker 15: extraordinarily tight by any standard. And we can see that

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Speaker 15: because the GDP numbers just haven't turned down the way

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Speaker 15: they would if we were in very tight conditions.

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Speaker 1: But there are some other signs. Oil, for instance, is

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Speaker 1: a sign that there's trouble ahead, and the bond market

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Speaker 1: has delivered that, you know, really over the past six

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Speaker 1: nine months, so you know, it's probably I think you

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Speaker 1: can argue that the way that the FED has positioned

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Speaker 1: itself is perhaps a pause here and then another hike

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Speaker 1: in July. And that's consistent with the fact that the

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Speaker 1: goal was not to shut down the economy. The goal

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Speaker 1: was to bring inflation down. Inflation is coming down, just

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Speaker 1: not fast enough. That's a nuance that you seem to

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Speaker 1: set aside.

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Speaker 15: Bill Well, it's not coming down fast enough as certain

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Speaker 15: areas and particularly the service areas.

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Speaker 4: And I think you're absolutely right.

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Speaker 15: The oil story will contribute even further to lowering overall CPI.

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Speaker 15: But I think the oil story, the oil slowdown, is

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Speaker 15: more a function of the slowdown in China than it

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Speaker 15: is a potential slow down in.

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Speaker 4: The United States.

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Speaker 15: So the fact that the China is no longer a

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Speaker 15: great locomotive for growth, and it's China's exports are have

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Speaker 15: turned down, which reflects the slow down the global economy.

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Speaker 15: But the heart of the matter still remains service sector

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Speaker 15: inflation stays persistently high.

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Speaker 4: Cut in rents we haven't seen yet.

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Speaker 1: Yeah, I get it, But I mean if China slows

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Speaker 1: and if the global economy slows, I mean inevitably that

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Speaker 1: would have.

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Speaker 15: An impact on the US right, yes, absolutely, But so

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Speaker 15: far it has had enough of an impact to get

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Speaker 15: people to stop going on vacations, to stop going to restaurants.

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Speaker 15: And until the unemployment rates starts to hit four four

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Speaker 15: and a half percent, we're not going to see that happen.

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Speaker 16: Well, talking of unemployment rates, and you look at youth

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Speaker 16: unemployment in China and we're looking at just about twenty

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Speaker 16: percent over twenty percent there between people at age sixteen

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Speaker 16: to twenty four. That is something which must be a

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Speaker 16: really serious headache for the Communist Party, the rooting party

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Speaker 16: there in China. And what does it mean for the

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Speaker 16: overall picture of the landscape economically speaking?

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Speaker 15: Oh Rashad, that I think is the China problem right

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Speaker 15: now is to somehow ensure that employment stays strong and

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Speaker 15: and really picks up for the youth unemployed. And it

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Speaker 15: really asks the question for Western investors is China going

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Speaker 15: to be investable in the same way it was in

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Speaker 15: the past. Not only are their political considerations, but the

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Speaker 15: real economics of China, the demographic slow down and also

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Speaker 15: the question of whether or not to continue production increasing

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Speaker 15: production in China or to relocate to other parts of

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Speaker 15: Asia is a real question for facing Western investors right now.

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Speaker 1: One of the interesting questions is whether or not inside

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Speaker 1: China they feel as though they've gone too far. I

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Speaker 1: know you've got sources there, and I'm interested in what

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Speaker 1: you're hearing about whether or not you know this sort

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Speaker 1: of stand up to the West and you know, sort

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Speaker 1: of fight back and restore our reputation and all that.

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Speaker 1: There's nothing wrong with that, it's just if if you're

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Speaker 1: looking for the timing, the right timing. Some would say

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Speaker 1: maybe China has moved a little too early. Now they

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Speaker 1: have angered the West and they are souring relations with

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Speaker 1: the West. Are you in that camp and what are

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Speaker 1: you hearing from your contacts?

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Speaker 15: Well, to talk on the sidelines of the Milk and

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Speaker 15: Global conference was about the availability of information that people

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Speaker 15: need to invest in China, and now with the crackdown

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Speaker 15: on information sources, that is the readily available information that

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Speaker 15: people need to do due diligence, companies like Bane and

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Speaker 15: Company being questioned about their activities there. I think Western

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Speaker 15: investors are feeling less and less able to do the

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Speaker 15: due diligence that they need to do to actually decide

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Speaker 15: where to put the money in China, and if they

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Speaker 15: face these kind of roadblocks in terms of information, I

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Speaker 15: think that will sour future money going into China in

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Speaker 15: favor of money go into Asi On Korea and other

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Speaker 15: parts of Asia where they know a lot of the

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Speaker 15: growth will be curry and a lot of the exodus

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Speaker 15: of industries from China are going.

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