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Speaker 1: Good morning.

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Speaker 2: I'm Richard Salamat and.

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Speaker 3: I'm Doug Krisner. Here are the stories we're following today.

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Speaker 2: J Pale very much here.

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Speaker 1: I sent to stage, going to fix at that symposium

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Speaker 1: at Jackson Hole in Wyoming, and we should get his

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Speaker 1: assessment not just of what's happening monetary policy wise, but

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Speaker 1: of course the state as he sees it of the

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Speaker 1: American economy. Let's get details out from bluemo's Denise Pilgrini.

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Speaker 4: Cher Paul will deliver remarks on the economic outlook at

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Speaker 4: the FEDS Annual Symposium in Jackson Hole on Friday last year.

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Speaker 4: He used the event to say policymakers would keep raising

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Speaker 4: interest rates until inflation was under control, and he said

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Speaker 4: doing so would cause some pain. And even with all

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Speaker 4: the interest rate hikes since then, we're still seeing strengthen

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Speaker 4: labor markets and consumer spending. And minutes of the July

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Speaker 4: FED meeting out last week showed some officials in July

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Speaker 4: saw more inflation risks ahead and thought more tightening could

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Speaker 4: be required. Since that meeting, no key data points have

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Speaker 4: shown price and wage pressures continued to dissipate. And on

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Speaker 4: top of all this, FED watchers may also be hoping

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Speaker 4: that Paul will at least give a hint about whether

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Speaker 4: the Fed might cut rates or not next year. Denise Pelgriny,

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Speaker 4: Bloomberg Daybreak, Asha, Well.

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Speaker 3: The S and P five hundred has lost ground for

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Speaker 3: three consecutive weeks. Bloomberg's Charlie Pellett now with a look

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Speaker 3: at the drivers for the week ahead.

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Speaker 2: With little in the way of earnings this week, investors

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Speaker 2: will be keeping an eye on China's economic turmoil and

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Speaker 2: the jump in bond yields. Cameron Dawson is chief investment

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Speaker 2: officer at New Edge Wealth.

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Speaker 5: This current correction is not about growth fears. We're not

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Speaker 5: seeing EPs estimates come down. You're not seeing these worries

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Speaker 5: about recession kick up. This is all valuations in light

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Speaker 5: of a context of higher interest rates.

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Speaker 2: Among the US companies schedule to report earnings this week,

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Speaker 2: tech names including in Nvidia, Analog Devices, Autodesk, and into It.

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Speaker 2: We'll also hear from home improvement retailer Low's and Dollar

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Speaker 2: Tree in New York. Charlie Pellett, Bloomberg Daybreak Asia.

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Speaker 1: All Right, well, we are looking at what's going to

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Speaker 1: you now with President Biden going into the weekend, announcing

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Speaker 1: spans announcing plans for annual leader level meetings with the

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Speaker 1: Japan and South Korea. The allies also agreed to a

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Speaker 1: new hotline to swiftly share intelligence. Here he is the

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Speaker 1: President speaking at his Camp David summit.

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Speaker 6: We've all reaffirmed our shared commitment to maintain peace and

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Speaker 6: stability in the Taiwan Straits and addressing economic coercion. We're

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Speaker 6: going to continue to counter threats from the DPRK, including

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Speaker 6: cryptocurrency money laundrying, the two to billions of dollars potential

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Speaker 6: arms transfer in support of Russia's brutal war against Ukraine.

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Speaker 1: Biden saying the United States, Japan, and South Korea were

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Speaker 1: also launching annual multi domain military exercises. We hear that

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Speaker 1: North Korean hackers try to infiltrate security related companies to

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Speaker 1: obtain information on joint US South Korea military drills that started.

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Speaker 1: That start actually on Monday by South Korea police saying

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Speaker 1: they obtained no classified information.

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Speaker 3: Negotiations are underway for some high level talks between China

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Speaker 3: and Australia. We have more on that from Bloomberg's Paul Allen.

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Speaker 7: Australian Foreign Minister Penny Wong told ABC News that officials

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Speaker 7: are working on a time to host China's foreign minister.

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Speaker 7: This comes as Camera and Beijing are working to improve relations.

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Speaker 7: China scrapped import tariffs on Australian bali earlier this month.

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Speaker 7: Let's after Beijing had accused Australian exporters of dumping on

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Speaker 7: the Chinese market. Meantime, Australia still holds a deep concerns

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Speaker 7: in relation to two of its citizens being detained in China,

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Speaker 7: and Penny Wong says she's keen for more meetings between

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Speaker 7: the country's foreign ministers in Sydney. I'm Paul Allen Bloomberg

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Speaker 7: day Break Asia.

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Speaker 1: All right, well, let's have a look now at what

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Speaker 1: is happening with Global News. California Governor Gavin Newsom has

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Speaker 1: declared a state of emergency to deal with a potential

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Speaker 1: damage that could be done by tropical storm Hillary. Let's

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Speaker 1: get over to Ed Baxter in some Francisco.

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Speaker 8: Ed Ah Rich, thank you. Hillary is now a tropical storre.

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Speaker 8: I'm having hurricane status, but flood warnings have been issued

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Speaker 8: for most all of southern California. It's been raining heavily

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Speaker 8: in some sections of San Diego are already. Mayor Todd

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Speaker 8: Gloria in San Diego, we have.

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Speaker 9: Hundreds of additional city employees on hand station throughout the city.

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Speaker 9: Everyone from public works employees looking for backed up drains

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Speaker 9: and pumps stations, to police officers, firefighters, and lifeguards all

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Speaker 9: positioned to be able to deal with the brunt of

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Speaker 9: the storm.

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Speaker 8: And in Los Angeles, Fire Chief Christian Crowley says, people

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Speaker 8: need to remain vigilant.

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Speaker 10: If you are in a flood prone area, move immediately

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Speaker 10: to high ground. A flash flood is a sudden, violent

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Speaker 10: flood that can take from minutes to hours to develop.

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Speaker 8: And Mayor Karen Bass sums.

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Speaker 3: Up, stay safe, stay home, and stay informed.

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Speaker 8: And now the hardest hit areas will actually be outside

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Speaker 8: of Los Angeles proper, in the mountains and the deserts,

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Speaker 8: Palm Springs. Mayor Grace Garner, do you know.

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Speaker 5: That there's going to be flooding, because, like I said,

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Speaker 5: even an inch or two of rain in the desert

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Speaker 5: can cause damage.

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Speaker 8: And Nancy Ward with a Governor's Office of Emergency Services says,

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Speaker 8: at the very least, be prepared to lose power.

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Speaker 11: There will be power outages, Make no mistake, there will

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Speaker 11: be power outages across southern California.

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Speaker 8: And now we're getting word of a five point zero

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Speaker 8: magnitude quake in O High which is north of Los

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Speaker 8: Angeles inland from Santa Barbara. Yeah, during the tropical storm Rain.

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Speaker 8: US President Joe Biden First Lady Jill will visit Maui tomorrow. Meanwhile,

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Speaker 8: FEMA Director Dion Criswell, and ABC has heard on Bloomberg

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Speaker 8: says they are making some search progress.

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Speaker 11: The search efforts are seventy eight percent complete in Lahina

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Speaker 11: Town and we continue to have our teams on the

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Speaker 11: ground going through all of the structures that were lost

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Speaker 11: as a result of this fire.

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Speaker 8: And Governor Josh Green says a process of the recovery

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Speaker 8: will now change.

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Speaker 12: More than a thousand. They are unaccounted for about one

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Speaker 12: thousand fifty. It will take several weeks. Still, some of

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Speaker 12: the challenges are going to be extraordinary now we go

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Speaker 12: into the larger buildings, which require peeling back some of

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Speaker 12: the floors and structures. That last fifteen percent could take weeks.

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Speaker 12: We do have extreme concerns that because of the temperature

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Speaker 12: of the fire, the remains of those who have died

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Speaker 12: in some cases may be impossible to recover meaningfully.

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Speaker 8: And Grain directly attributes some of it to climate change.

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Speaker 12: We've had six fire emergencies this August. We had six

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Speaker 12: fire emergencies between nineteen fifty three and two thousand and three.

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Speaker 8: Well Famous says well over eight million dollars have gone

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Speaker 8: to families that have been impacted and registered with FEMA.

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Speaker 8: Global newspower by more than twenty seven hundred journalists and

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Speaker 8: analysts in over one hundred and twenty countries in San Francisco,

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Speaker 8: I met Baxter in this as Bloomberg.

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Speaker 3: In a moment, Ben Emmons will join us for a

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Speaker 3: look at what's happening in the Chinese economy. Ben is

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Speaker 3: senior portfolio manager. You're also head of fixed income at

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Speaker 3: New Edge Wealth. It was on Sunday that Beijing said

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Speaker 3: it again pushed banks in China to boost lending. We

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Speaker 3: have more from Bloomberg's Joanne Wog in Hong Kong.

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Speaker 13: China Central Bank has also urged to adjust an optimize

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Speaker 13: policy for home mortgages. This comes as concerns heightened about

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Speaker 13: a deteriorating economic outlook. Chinese media Tai Sine also reported

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Speaker 13: Beijing clients to allow local governments to sell two hundred

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Speaker 13: and six billion dollars of special bonds.

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Speaker 2: To help repay debt.

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Speaker 13: Last week, top leaders have pledged to expand domestic consumption

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Speaker 13: and support the private sector, but it fell short laying

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Speaker 13: out specific details. Meanwhile, banks are said to cut their

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Speaker 13: key lending rates by fifteen basis points. Later today in

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Speaker 13: Hong Kong, I'm joined Wang Bloomberg Day Brigasia.

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Speaker 3: All right, let's bring in Ben Emmons, Ben a senior

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Speaker 3: portfolio manager and the head of fixed income at New

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Speaker 3: Edge Wealth. How serious is the situation right now in

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Speaker 3: China and the degree to which it has the potential

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Speaker 3: to spread through the global financial system?

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Speaker 2: Is that a risk?

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Speaker 14: It's a risk, Dug, But I don't think it's the

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Speaker 14: same as when we had, like say, back in twenty

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Speaker 14: fifteen sixteen, when the Chinese economy started to suddenly slow down,

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Speaker 14: we had a lot of manufacturing slow down globally. This

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Speaker 14: time around, it seems to be more driven by that

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Speaker 14: you had that reopening. You shot off the economy for

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Speaker 14: so long that the manufacturing sector had a lot of

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Speaker 14: trouble to restart. There's a lot of discussion about long

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Speaker 14: COVID in China. That's causing additional disruption. There is a

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Speaker 14: lot of confidence issues that people are very wary there,

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Speaker 14: so they don't really behave exactly the way we used

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Speaker 14: to do when we reopened, even though in the very

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Speaker 14: early stages of reopening it did show someone that major

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Speaker 14: V shaped type of recovery. And then lastly, it is

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Speaker 14: about the China government being initially somewhat conservative in terms

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Speaker 14: of stimulus, a lot of discussion but little implementation, and

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Speaker 14: I think you're seeing it coming through now, Like at

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Speaker 14: these measures that the Jusia College talked about, you know,

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Speaker 14: that's to me like that was sort of pending, so

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Speaker 14: to speak. So they're going to try to push it

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Speaker 14: a little harder, I feel, to get to their growth target.

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Speaker 14: Because the real time trackers that are out there from

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Speaker 14: Goldman and several other investment banks that try to track

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Speaker 14: Chinese activity on the ground, Yeah, there's a difference between

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Speaker 14: those trackers around three twenty a half percent and where

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Speaker 14: the government wants to be at five and a half percent, right,

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Speaker 14: So I think within the Chinese government they probably have

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Speaker 14: that understanding themselves, and hence you's seeing the sort of

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Speaker 14: urgency emerging now of pushing stimulus into the economies to

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Speaker 14: get to that growth target, which could be by the

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Speaker 14: Way's last point, it could actually be meaningful for markets

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Speaker 14: in the fall well.

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Speaker 1: Being it they keep on sort of playing at the

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Speaker 1: edges because they don't have the money. The physical tools,

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Speaker 1: the manetary policy tools are not going to work particularly

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Speaker 1: well either, because this is a structural or shift for

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Speaker 1: the Chinese economy. But of course one of the symptoms

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Speaker 1: has been deflation. Are we feeling any of the effects

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Speaker 1: of that, and how closely you think the FED looks

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Speaker 1: to what's going on in China and takes into account

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Speaker 1: of that when it's looking managery policy.

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Speaker 14: To some extent rich But I think that the deflation

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Speaker 14: that we currently have in China was vainly driven by

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Speaker 14: food and transportation predominantly, whereas some on the services side

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Speaker 14: of the economy there there's actually more strength as in inflation.

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Speaker 14: So the import of deflation out of China is somewhat

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Speaker 14: limited at this stage. But it isn't to say that

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Speaker 14: it could become a bigger issue obviously, right because if

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Speaker 14: it does turn out to be that this near term

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Speaker 14: stimulus they're trying to push in the economy isn't really

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Speaker 14: working and they don't get that growth target achieved this year,

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Speaker 14: there will be more downward pressure on prices coming out

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Speaker 14: of China, and we know we will import some of that,

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Speaker 14: so it will affect the US economy at some point.

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Speaker 3: So the question is whether the slowdown might snowball and

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Speaker 3: represent something similar to what we saw in Japan in

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Speaker 3: the nineteen nineties. Is that a possibility.

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Speaker 14: Perhaps, although you know that comparison to the Japan is

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Speaker 14: as being a bit difficult even with the US and

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Speaker 14: Europe right that we are. At times people made their

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Speaker 14: comparisons in the same way, you know, demographics and economy

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Speaker 14: aging and all those two typical factors that a side

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Speaker 14: around Japan. I'm not sure that it's entirely the case

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Speaker 14: in China. One thing that's really different from from our

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Speaker 14: economy is that a plan based economy. You know, they

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Speaker 14: can't inject liquidity and measures across the economy really fast,

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Speaker 14: so it's a little different way of I think it

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Speaker 14: responds to what we do. But that isn't to say

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Speaker 14: that that overhang from the property sector is really serious,

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Speaker 14: and we know from the Japanese situation that's how the

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Speaker 14: deflation started. It was a banking issue with real estate

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Speaker 14: that that we had to be worked out for many,

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Speaker 14: many years, and that's to an extent now in China too.

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Speaker 14: You know, there's that much you can do with you know,

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Speaker 14: the faults on dollar bonds, right, It's another thing to

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Speaker 14: have the bank sitting on loads of death from the

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Speaker 14: property sector and having to solve that with liquidity and

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Speaker 14: with more issues of death, and we know that's going

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Speaker 14: to put pressure on the economy.

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Speaker 1: Ben you mentioned dollar dollar bonds. I want to go

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Speaker 1: and use that as a sort of awkward seguae to

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Speaker 1: talk about what's going on with treasuries and give me

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Speaker 1: a sense of what you are looking at when it

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Speaker 1: comes to the bond market. How does the FED look

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Speaker 1: at what's happening there and beyond.

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Speaker 14: Yeah, Rich, I think it's interesting that this month we

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Speaker 14: had a significant rising rates and people are pointing to

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Speaker 14: this maybe have something to do more than just the economy.

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Speaker 14: But I did a little event study on it, and

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Speaker 14: I noted that quy ah, the majority is still the economy.

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Speaker 9: Right.

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Speaker 14: You know, on every data we had stronger data than expected.

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Speaker 14: If you add up all the times that the yields

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Speaker 14: went up, that's more than on the days when let's

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Speaker 14: say the Fitch downgrade or the Dirty Auction dailing or

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Speaker 14: the Treasury funding announcement that had impact on raids, but

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Speaker 14: not as much as the economy. So it's still that's

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Speaker 14: strong economy story that's dominating. But we have to take

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Speaker 14: note of that what has happened by you know, adjusting

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Speaker 14: the borrowing to such a larger amount, by issuing more

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Speaker 14: long term bonds while the downgrade was happening, while we

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Speaker 14: had the whole you know, bringmanship of the of the

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Speaker 14: death ceiling sort of putting into focus in that in

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Speaker 14: that downgrade has made people wary of that. You know,

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Speaker 14: there is there is a sustainability issue here that at

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Speaker 14: some point we have to reckon with, you know, for

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Speaker 14: many years one.

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Speaker 3: But I just want to take it back to China

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Speaker 3: for a moment, because we know that the government is

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Speaker 3: a big holder of US treasuries. They've been defending the

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Speaker 3: currency lately, and I'm wondering whether there is a connection

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Speaker 3: there sell US treasuries to raise the funds necessary to

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Speaker 3: defend the currency. Is it a big factor?

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Speaker 14: So so fortunately, Doug, they do have sufficient reserves to

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Speaker 14: address the currency that way, so they I don't think

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Speaker 14: have to tap into the direction you're talking about, like

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Speaker 14: ultimately you know, liquidating more treasuries to raise the funds

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Speaker 14: to defend the currency. Yeah, as we know, China is

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Speaker 14: a kind of interesting system of how currency is managed, right.

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Speaker 14: It's it's a completely control currency on shore within the

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Speaker 14: offshore market the c n H. Yeah, it's traded a

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Speaker 14: lot by funds and hedge funds and people do that

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Speaker 14: and the banks ultimately, the Chinese banks can be very

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Speaker 14: effected there by the PBOC, meaning like what happened is

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Speaker 14: now right, they instructed the banks start selling dollars and

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Speaker 14: bring those back of bringing you on back on shore,

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Speaker 14: so to speak. So it strengthened on that way, you

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Speaker 14: on that way, and that's I think I had a

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Speaker 14: big impact immediately because it's not a very liquid currency

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Speaker 14: like unlike the end or any other major currency. Right,

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Speaker 14: So it depends a bit what goes from here. If

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Speaker 14: you go back to twenty sixteen, there was a huge

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Speaker 14: amount of capital outflow at that time out of China.

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Speaker 14: They stopped up with capital controls and kept it in

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Speaker 14: place for a long time, and that's still the place.

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Speaker 14: So I think they can manage it so far with

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Speaker 14: what there's buffer of reserves that they.

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Speaker 3: Have without selling you as treasure, without selling you.

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Speaker 2: Okay, Ben, this.

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