Speaker 1: Good morning. I'm Doug Krisner and I'm Brian Curtiz. Here
Speaker 1: are the stories we're following today. Saint Louis FED President
Speaker 1: Jim Bullard has stepped down from his post as head
Speaker 1: of the bank effective today. Bullard said that he would
Speaker 1: fully depart on August fourteenth to become the inaugural dean
Speaker 1: of Produced Business School. Wellard, who doesn't vote on rates,
Speaker 1: this year, has been seen as a bellweather because his
Speaker 1: views have sometimes foreshadowed FED policy changes. We heard earlier
Speaker 1: from Bloomberg's Kathleen Hayes.
Speaker 2: Coming out of the pandemic, Jim was one of the
Speaker 2: first people who made it clear that the FED was
Speaker 2: going to have to get much more aggressive. He was
Speaker 2: the one one of the first to start talking about
Speaker 2: needing to front load interest rate hikes.
Speaker 3: I'm going to have to move more.
Speaker 2: Going to have to move faster, rates are going to
Speaker 2: have to be higher, and continuing to push in that direction.
Speaker 2: He obviously, in the end isn't the only one. But again,
Speaker 2: Jim has been I think a big monetary policy thinker,
Speaker 2: and in terms of actual policy steps, he has been
Speaker 2: a major for all the.
Speaker 1: Saint Louis FED said that Bullard will remain at the
Speaker 1: Bank in an advisory capacity over the next month. The
Speaker 1: Bank also said that Bullard has recused himself from his
Speaker 1: monetary policy role and also other related duties, and he
Speaker 1: has ceased all public speaking.
Speaker 4: Well.
Speaker 5: A court ruling today that is being widely hailed as
Speaker 5: a victory for the crypto industry and that story from
Speaker 5: Bloomberg's and Kates.
Speaker 3: A federal judge has ruled that a Ripple Lab's token
Speaker 3: is a security when sold to institutional investors, but not
Speaker 3: the general public. The Securities and Exchange Commission has been
Speaker 3: aggressively targeting crypto firms for allegedly selling unregistered securities. Whether
Speaker 3: cryptocurrencies are securities had long been a major question hanging
Speaker 3: over the industry, which has argued it is not subject
Speaker 3: to the jurisdiction of the sec and other regulators in
Speaker 3: Washington and Kate's Bloomberg day Break Asia all Right.
Speaker 1: The US Federal Trade Commission has asked a California judge
Speaker 1: to temporarily block Microsoft from closing on its deal at
Speaker 1: sixty nine billion dollar takeover of Activision Blizzard, and it
Speaker 1: comes as the Agency of pearls a lower court ruling
Speaker 1: that greenlighted the deal in the US. The ruling had
Speaker 1: found that the deal would not thwart competition in the
Speaker 1: markets for gaming, and it would also not harm consumers.
Speaker 1: But the former FTC chair, William Kovacik, tells US that
Speaker 1: the regulator concerns over the deal aren't going away anytime soon.
Speaker 6: As organizations and institutions of this kind grow and grow dramatically,
Speaker 6: you start to wonder whether they become manageable even on
Speaker 6: their own terms. That is, to what extent do the
Speaker 6: managers of the large enterprises as they grow, as they
Speaker 6: move quickly, are they fully able to manage effectively what
Speaker 6: they're doing even with the best based efforts to manage effectively.
Speaker 1: That's William Kavasik, a former chair of the FTC. The
Speaker 1: FTC said that it would it would seek emergency action
Speaker 1: by the Ninth Circuit Court to stop the Microsoft deal
Speaker 1: from closing, as if its request to pause the deal
Speaker 1: is denied. Barring court act, Microsoft and Activision can complete
Speaker 1: the deal. As of eleven fifty nine pm in San
Speaker 1: Francisco on July fourteenth.
Speaker 5: Well US Treasury Secretary Janet Yellen is traveling to India
Speaker 5: and Vietnam next week with a goal of strengthening some
Speaker 5: economic ties. Yellen will first head to India for a
Speaker 5: meeting of G twenty finance ministers and central bankers. Now,
Speaker 5: the US Treasury says that Yellen will be pushing for
Speaker 5: reforming global engzing institutions to boost their scope of their firepower. Basically,
Speaker 5: Yellen is also going to be looking to advance talks
Speaker 5: on easing the burden of debt in poorer nations. Up next,
Speaker 5: after India, it's onto Vietnam, where she will be meeting
Speaker 5: with senior government officials and private businesses currency and trade.
Speaker 5: While those will be among the topics for discussion, the
Speaker 5: stated goals of the trip pretty simple. Improving ties with
Speaker 5: both India and Vietnam. The less obvious goal well perhaps
Speaker 5: smoothing the path of those supply chains away from China.
Speaker 1: And China is taking a friendlier approach now towards artificial intelligence.
Speaker 1: That story from Bloomberg's Joan Wong.
Speaker 7: China has loosened some of the guardrails that proposed for
Speaker 7: chat GPT like surfaces. Some twenty four guidelines have just
Speaker 7: been finalized, though go into effect on August fifteenth. They
Speaker 7: suggest more flexible regulation than in the initial draft back
Speaker 7: in April. The document is the products of months of
Speaker 7: consultation between the government and the industry. The hope is
Speaker 7: to ease concerns over who takes responsibility for governing AI
Speaker 7: content on the platforms. The revised rules seem to balance
Speaker 7: that responsibility between the regulators and the platform operators. The
Speaker 7: goal is to regulate AI but not stunnest development in
Speaker 7: Hong Kong. I joined Wong Bloomberg Day Brigasia.
Speaker 1: I'm Brian Curtis in Hong Kong along with Doug Prisner
Speaker 1: in New York. And Doug we have two major developments
Speaker 1: here stoking gains in risk assets. We've talked about this
Speaker 1: more benign inflation readings that we've seen of late in
Speaker 1: the past few days in the US, and then also
Speaker 1: Chinese policymakers clearly reaching out to the private sector. Both
Speaker 1: of these trends can be fickle, but at the moment
Speaker 1: the green light is flashing.
Speaker 5: Most definitely here in the States. One of the things
Speaker 5: that it has produced a much weaker dollar. I think
Speaker 5: for the four days that we have had of dollar trading,
Speaker 5: we're down about two point eight percent. If you look
Speaker 5: at the Bloomberg dollar spot index. Later today in China,
Speaker 5: this is going to be very interesting. There's going to
Speaker 5: be a press conference at ten am Beijing time, hosted
Speaker 5: by Deputy Governor of the PBOC Luk Wao Chung. Basically,
Speaker 5: it's going to be a look at a look at
Speaker 5: some of the financial data that we have seen for
Speaker 5: China in the first half of the year. Now we
Speaker 5: know there have been a number of challenges. All you
Speaker 5: have to do is to look at the trade data
Speaker 5: that we had yesterday, a twelve point four percent decline
Speaker 5: in exports for the month of June. Brian, you and
Speaker 5: I have talked about the disinflationary or deflationary trend when
Speaker 5: it comes to factory gate inflation in China. So based
Speaker 5: on a lot of the data that we've been looking at,
Speaker 5: there is a lot to be concerned about Bloomberg economics.
Speaker 5: I think I pointed this out earlier as expecting Beijing
Speaker 5: to do a lot more in terms of recharging growth.
Speaker 1: The way the market is looking at this, Doug is
Speaker 1: not so much the data, and not so much even
Speaker 1: you know, the ins and outs of the stimulus. It's
Speaker 1: really more the approach of policymakers. You asked me a
Speaker 1: couple of days ago, and I said, well, it really
Speaker 1: does seem to have the policymakers approach seems to have changed.
Speaker 1: It's a much different attitude. It's like all of a
Speaker 1: sudden the light went on that the way that they
Speaker 1: can get the animal spirits back is to stimulate the
Speaker 1: private sector. So we've seen a number of these developments
Speaker 1: who today we talk about balancing the approach to AI
Speaker 1: regulations that it's a little bit friendlier. We talked about
Speaker 1: the meeting between the premiere and the big tech companies
Speaker 1: and the relaxing or the loosening of some of the
Speaker 1: payback restrictions on property developers. It's more about the approach,
Speaker 1: which then it is the actual data here at the moment.
Speaker 1: That's why you had bad data yesterday. But look at
Speaker 1: the CSI three hundred is up one point four percent.
Speaker 1: The Hangksng Tech index was up three point eight percent.
Speaker 1: This is what investors are really feasting on.
Speaker 5: So perhaps it's a combination of both I hope for
Speaker 5: more stimulus and un understanding now that Beijing has come
Speaker 5: to the realization that the entrepreneurial class really needs to
Speaker 5: be embraced if you're going to recover an economy.
Speaker 1: Absolutely it sets up well, but as I mentioned, it's fickle.
Speaker 1: We don't know. We've got fed speak out there that's
Speaker 1: still very hawkish, But I think the market, the way
Speaker 1: the market's looking at that, perhaps you agree, is well,
Speaker 1: we expect them to do this for now.
Speaker 5: Perhaps perhaps I think one of the things that's going
Speaker 5: to be very interesting going forward here in the US
Speaker 5: is what we hear tomorrow from some of the big
Speaker 5: banks right the degree to which they're going to be
Speaker 5: positive or not on the trajectory for the American economy,
Speaker 5: because one of the things I think the data show
Speaker 5: in on the trade side for China, the recovery in
Speaker 5: the global economy, as tricky as it's been right now,
Speaker 5: if it's not there in a robust form, it's going
Speaker 5: to be even more difficult for China to recover, don't
Speaker 5: you think?
Speaker 8: Yeah?
Speaker 1: Absolutely, And we can put a lot of this Nancy Davis,
Speaker 1: Who've got her coming up in a few moments. Nancy
Speaker 1: Davis's founder in CIO at Quadratic Capital Management. Now it's
Speaker 1: time for global news. Actors and performers have decided to
Speaker 1: join writers on strike, saying it's an issue that will
Speaker 1: affect all elements of US labor that Baxter has Global
Speaker 1: News from the nine to sixty News from in San Francisco.
Speaker 9: Ed, Yeah, they make it a societal issue for sure,
Speaker 9: Bri and they go out tonight. The two main issues
Speaker 9: sided by union lead negotiator Duncan Crabtree Ireland streaming and
Speaker 9: AI actors.
Speaker 10: Deserve a contract that reflects the changes that have taken
Speaker 10: place in the industry. Unfortunately, the current streaming model has
Speaker 10: undercut performers residual income and high inflation has further reduced
Speaker 10: our members' ability to make ends meet.
Speaker 9: Now SAG after President Franz Rusher says they had no choice.
Speaker 4: If we don't stand tall right now, we are all
Speaker 4: going to be in trouble, we are all going to
Speaker 4: be in jeopardy of being replaced by machines.
Speaker 9: Dresher says this is important in every field in society
Speaker 9: because what's being done to them will be done in
Speaker 9: all fields of labor, AI and automation. This action will
Speaker 9: shut down most all productions. Some game shows, reality shows
Speaker 9: have been able to go on, but this well should
Speaker 9: dent them as well. China has issues has issued a
Speaker 9: statement telling the US and it needs to stabilize ties
Speaker 9: after meeting between Wang Yi and US Secretary of State
Speaker 9: Anthony Blink and China. Statement says the US needs to
Speaker 9: stop suppressing China's economic, trade, and technology development. Wang also
Speaker 9: urged the US to end sanctions against China and says
Speaker 9: channels of communication should be broadened. The statement also reiterated
Speaker 9: china stance over Taiwan Now. The US statement specifically aimed
Speaker 9: at the alleged China hacking of government offices, including the
Speaker 9: State Department and the State Department Secretary of Commerce office,
Speaker 9: and other businesses using Microsoft business software impacted by that hack.
Speaker 9: White House spokesman John Kirby says the government did act swiftly.
Speaker 11: We took it very very seriously, and we took actions
Speaker 11: immediately after to try to mitigate the effects of it.
Speaker 11: We're obviously taking a fresh look at our systems and
Speaker 11: our cloud computing capabilities to make sure we can be
Speaker 11: more resilient in the future.
Speaker 9: He says systems are now secure. US President Joe Biden
Speaker 9: says Russia cannot sustain years of war in Ukraine. Biden
Speaker 9: says it is taking extraordinary economic and political toll on Russia.
Speaker 12: What agreement is ultimately reached. Depends upon pud and what
Speaker 12: he decides to do, But there is no possibility of
Speaker 12: him winning the war in Ukraine, and he's already lost that.
Speaker 9: War, he says, for two reasons. One, Russia cannot maintain
Speaker 9: resources to go on fighting.
Speaker 12: Number Two, I think that there is going to be
Speaker 12: a circumstance where eventually prison Food is going to decide
Speaker 12: it's not an interest of Russia economically, politically, or otherwise
Speaker 12: to continue this war.
Speaker 9: Biden says, when the war is over, Ukraine will enter NATO.
Speaker 8: Oh.
Speaker 9: By the way, Biden had an off the cuff suggestion
Speaker 9: for Wagner Group, a chief progotion quote, I'd be careful
Speaker 9: what I ate. Global News powered by more than twenty
Speaker 9: seven hundred journalist and analysts in over one hundred twenty countries.
Speaker 9: In San Francisco, I'm Ed Baxter, and this is Bloomberg.
Speaker 1: I'm Brian Curtesy in Hong Kong, along with Doug Prisner
Speaker 1: in New York. Our guest is Nancy Davis, founder in
Speaker 1: CIO at Quadratic Capital Management. Nancy, thank you very much
Speaker 1: for joining us. One of the bullish trends that we've
Speaker 1: seen here just of late is that inflation is coming
Speaker 1: down while wages tick up, and that is strengthening consumer
Speaker 1: buying power. How does that work its way into the
Speaker 1: bond market and your approach.
Speaker 8: Well, definitely, the inflation expectations have been hugging two percent
Speaker 8: in the future for quite a while. We're having realized
Speaker 8: CPI data come in lower with the PPI this morning
Speaker 8: and the CPI print yesterday at three percent, so but
Speaker 8: still future inflation expectations are all right around the two
Speaker 8: percent level when you're looking at break events. So we
Speaker 8: do think the market is really pricing in this two
Speaker 8: percent level, and inflation protected bonds actually look pretty attractive
Speaker 8: right now because the real yield that you can get,
Speaker 8: so that's a yield beyond inflation. For instance, on a
Speaker 8: five year inflation link bond some of one nine percent
Speaker 8: of real yield, So higher real yields has really hurt
Speaker 8: the tips market. You saw that in twenty twenty two.
Speaker 8: In this year, we do think it's an interesting time
Speaker 8: for investors to say, look, you know, the data has
Speaker 8: been strong, but the said, you know, are the raid
Speaker 8: hikes really working? Because even though the CPI and PPI
Speaker 8: have been coming down, I don't know about you Doug
Speaker 8: and Brian. But I still feel a lot of inflation
Speaker 8: in my day to day life.
Speaker 4: Yeah.
Speaker 5: I mean in terms of what we learned yesterday from
Speaker 5: that CPI print, I think we had a core rate
Speaker 5: of what four to six and then if you look
Speaker 5: at four eight, we look at four to six when
Speaker 5: it's the core PCE. Here we have this idea that
Speaker 5: there is the long and variable lag. Do you have
Speaker 5: a sense of how much tightening has yet to be
Speaker 5: felt by the economy.
Speaker 8: Nancy, I think no one in twenty twenty one was
Speaker 8: really expecting the Fed to hike you know, to five
Speaker 8: over five percent in about a year. It was very
Speaker 8: surprising the speed and the rate at which they hiked rates.
Speaker 8: I think the question is is we still have you know,
Speaker 8: to your point with four point eight core? Is it
Speaker 8: really working?
Speaker 3: Is it enough?
Speaker 8: And the market The interesting thing is all markets move
Speaker 8: off of teacher expectations, and future expectations for inflation are
Speaker 8: well below both the PPI and the CPI. The US
Speaker 8: yield curve is near its all time levels of inversion
Speaker 8: since the eighties, so in the last you know, forty
Speaker 8: plus years. You can look on your Bloomberg terminal at
Speaker 8: the twos tens, sofur swap curve for instance, that is
Speaker 8: currently negative one hundred and four basis points, so it's
Speaker 8: near all time lows, even lower than it was in
Speaker 8: the late eighties.
Speaker 1: We were over one hundred basis points and spread between
Speaker 1: twos and tens, and now in the eighties it's not
Speaker 1: a lot. It's only maybe twenty basis points. But you
Speaker 1: seem to be saying that won't continue.
Speaker 8: Well, it's perplexing, right, because if you think about it,
Speaker 8: you can buy a T bill, for instance, you could
Speaker 8: buy a one month T bill and get paid you know,
Speaker 8: five twenty five thirty, or you can lend money to
Speaker 8: the US Treasury for ten years and get paid. Three
Speaker 8: point seventy six right now is the current yield on
Speaker 8: the ten year treasury. So it's a little bit bizarre.
Speaker 8: Like normally, when you win money longer, you get paid more,
Speaker 8: and you're actually getting a negative term premium. That's what
Speaker 8: the inverted yield curve means. It means loaning money in
Speaker 8: US dollars for longer you get paid less. And so
Speaker 8: that's really the deflation disinflation that's being priced into markets.
Speaker 8: As you and Brian Doug were talking about earlier on
Speaker 8: the show.
Speaker 5: You know, Brian and I were talking on the pre
Speaker 5: show call and he reminded me to take a look
Speaker 5: at a note today from Barry Banister over at Steefel
Speaker 5: and mister Banister is predicting that inflation is going to
Speaker 5: be more sticky than many are counting on, and he
Speaker 5: is also talking about the risk of recession for twenty four.
Speaker 5: You seem to be somewhat in that camp. I mean,
Speaker 5: I'm sensing a little bit of defensiveness. Maybe the tactic
Speaker 5: here is going to be a little different, But are
Speaker 5: you adverse to taking a position long the equity market
Speaker 5: right now?
Speaker 8: Well, I think the position that I'm taking is more
Speaker 8: about owning inflation protection as part of core portfolio. It's
Speaker 8: not so much a call on the equity markets. Equities
Speaker 8: have obviously had a pretty good year in the US
Speaker 8: and twenty twenty three, and that's coming off of the
Speaker 8: sixty to forty portfolio had one of the worst years
Speaker 8: ever in twenty twenty two. Bonds of really traded sideways
Speaker 8: for the most part. But I think the thing that
Speaker 8: is very compelling to me is that inflation is not
Speaker 8: it's not a trade, it's not like, do you think
Speaker 8: it's going higher or lower. It's something we have in
Speaker 8: our day to day lives. We live in a real world.
Speaker 8: We have a limited amount of savings, we have hopefully
Speaker 8: some investments, but at the end of the day, everybody
Speaker 8: has the cost of living and exposure to real inflation.
Speaker 8: And I think the opportunity that the market is giving
Speaker 8: investors that inflation expectations in the future are priced right
Speaker 8: around two and whether you think that's going higher or lower,
Speaker 8: the market is very confident that the Fed's interest rate
Speaker 8: hikes are going to cool future inflation expectations. And we
Speaker 8: could talk that way.
Speaker 1: We could talk a lot longer on this, but I
Speaker 1: wanted to pivot quickly to China. We're seeing policymakers there
Speaker 1: in the process of adjusting attitudes a little bit, and
Speaker 1: they're still tweaking their approach to stimulus. Do you do
Speaker 1: you have like a rosy view of this or a
Speaker 1: cautious view of this, or how you assessing it.
Speaker 8: I do think if you look at the private capital markets,
Speaker 8: whether it's private equity, private credit, those have been very,
Speaker 8: very good for the economy and for the credit mechanism
Speaker 8: to translate. Policy makers whatever they're doing in interest rates
Speaker 8: and in currencies into the real economy, and so I
Speaker 8: do think it's very hopeful to have more capitalism in
Speaker 8: the private markets and more extension of credit in markets
Speaker 8: in emerging markets and China as well. So I do
Speaker 8: think that's a positive. And I think the more policymakers
Speaker 8: can employ, you know, the entrepreneurialism that we have with
Speaker 8: companies and growing businesses, the better it is for everyone.
Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on the
Speaker 1: stories making news from Hong Kong to Singapore and Wall Street.
Speaker 5: Look for us on your podcast feed every day, on Apple, Spotify,
Speaker 5: and anywhere else you get your podcasts.
Speaker 1: You can also listen live each day on Bloomberg eleven
Speaker 1: three to zero in New York, Bloomberg ninety nine to
Speaker 1: one in Washington, Bloomberg one oh sixty one in Boston,
Speaker 1: and Bloomberg nine sixty in San Francisco.
Speaker 5: Our flagship New York station is also available on your
Speaker 5: Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: Plus listen coast to coast on the Bloomberg Business app.
Speaker 1: Sirius XM Channel one nineteen. The iHeartRadio app and on
Speaker 1: Bloomberg dot Com, I'm Brian Curtis.
Speaker 5: And I'm Doug Krisner. Us again tomorrow for all the
Speaker 5: news you need to start your day right here on
Speaker 5: Bloomberg Daybreak, Asia
Speaker 4: M.