Speaker 1: Good morning.
Speaker 2: I'm Richard Salamat and.
Speaker 3: I'm Doug Krisner. Here are the stories we're following today.
Speaker 2: J Pale very much here.
Speaker 1: I sent to stage, going to fix at that symposium
Speaker 1: at Jackson Hole in Wyoming, and we should get his
Speaker 1: assessment not just of what's happening monetary policy wise, but
Speaker 1: of course the state as he sees it of the
Speaker 1: American economy. Let's get details out from bluemo's Denise Pilgrini.
Speaker 4: Cher Paul will deliver remarks on the economic outlook at
Speaker 4: the FEDS Annual Symposium in Jackson Hole on Friday last year.
Speaker 4: He used the event to say policymakers would keep raising
Speaker 4: interest rates until inflation was under control, and he said
Speaker 4: doing so would cause some pain. And even with all
Speaker 4: the interest rate hikes since then, we're still seeing strengthen
Speaker 4: labor markets and consumer spending. And minutes of the July
Speaker 4: FED meeting out last week showed some officials in July
Speaker 4: saw more inflation risks ahead and thought more tightening could
Speaker 4: be required. Since that meeting, no key data points have
Speaker 4: shown price and wage pressures continued to dissipate. And on
Speaker 4: top of all this, FED watchers may also be hoping
Speaker 4: that Paul will at least give a hint about whether
Speaker 4: the Fed might cut rates or not next year. Denise Pelgriny,
Speaker 4: Bloomberg Daybreak, Asha, Well.
Speaker 3: The S and P five hundred has lost ground for
Speaker 3: three consecutive weeks. Bloomberg's Charlie Pellett now with a look
Speaker 3: at the drivers for the week ahead.
Speaker 2: With little in the way of earnings this week, investors
Speaker 2: will be keeping an eye on China's economic turmoil and
Speaker 2: the jump in bond yields. Cameron Dawson is chief investment
Speaker 2: officer at New Edge Wealth.
Speaker 5: This current correction is not about growth fears. We're not
Speaker 5: seeing EPs estimates come down. You're not seeing these worries
Speaker 5: about recession kick up. This is all valuations in light
Speaker 5: of a context of higher interest rates.
Speaker 2: Among the US companies schedule to report earnings this week,
Speaker 2: tech names including in Nvidia, Analog Devices, Autodesk, and into It.
Speaker 2: We'll also hear from home improvement retailer Low's and Dollar
Speaker 2: Tree in New York. Charlie Pellett, Bloomberg Daybreak Asia.
Speaker 1: All Right, well, we are looking at what's going to
Speaker 1: you now with President Biden going into the weekend, announcing
Speaker 1: spans announcing plans for annual leader level meetings with the
Speaker 1: Japan and South Korea. The allies also agreed to a
Speaker 1: new hotline to swiftly share intelligence. Here he is the
Speaker 1: President speaking at his Camp David summit.
Speaker 6: We've all reaffirmed our shared commitment to maintain peace and
Speaker 6: stability in the Taiwan Straits and addressing economic coercion. We're
Speaker 6: going to continue to counter threats from the DPRK, including
Speaker 6: cryptocurrency money laundrying, the two to billions of dollars potential
Speaker 6: arms transfer in support of Russia's brutal war against Ukraine.
Speaker 1: Biden saying the United States, Japan, and South Korea were
Speaker 1: also launching annual multi domain military exercises. We hear that
Speaker 1: North Korean hackers try to infiltrate security related companies to
Speaker 1: obtain information on joint US South Korea military drills that started.
Speaker 1: That start actually on Monday by South Korea police saying
Speaker 1: they obtained no classified information.
Speaker 3: Negotiations are underway for some high level talks between China
Speaker 3: and Australia. We have more on that from Bloomberg's Paul Allen.
Speaker 7: Australian Foreign Minister Penny Wong told ABC News that officials
Speaker 7: are working on a time to host China's foreign minister.
Speaker 7: This comes as Camera and Beijing are working to improve relations.
Speaker 7: China scrapped import tariffs on Australian bali earlier this month.
Speaker 7: Let's after Beijing had accused Australian exporters of dumping on
Speaker 7: the Chinese market. Meantime, Australia still holds a deep concerns
Speaker 7: in relation to two of its citizens being detained in China,
Speaker 7: and Penny Wong says she's keen for more meetings between
Speaker 7: the country's foreign ministers in Sydney. I'm Paul Allen Bloomberg
Speaker 7: day Break Asia.
Speaker 1: All right, well, let's have a look now at what
Speaker 1: is happening with Global News. California Governor Gavin Newsom has
Speaker 1: declared a state of emergency to deal with a potential
Speaker 1: damage that could be done by tropical storm Hillary. Let's
Speaker 1: get over to Ed Baxter in some Francisco.
Speaker 8: Ed Ah Rich, thank you. Hillary is now a tropical storre.
Speaker 8: I'm having hurricane status, but flood warnings have been issued
Speaker 8: for most all of southern California. It's been raining heavily
Speaker 8: in some sections of San Diego are already. Mayor Todd
Speaker 8: Gloria in San Diego, we have.
Speaker 9: Hundreds of additional city employees on hand station throughout the city.
Speaker 9: Everyone from public works employees looking for backed up drains
Speaker 9: and pumps stations, to police officers, firefighters, and lifeguards all
Speaker 9: positioned to be able to deal with the brunt of
Speaker 9: the storm.
Speaker 8: And in Los Angeles, Fire Chief Christian Crowley says, people
Speaker 8: need to remain vigilant.
Speaker 10: If you are in a flood prone area, move immediately
Speaker 10: to high ground. A flash flood is a sudden, violent
Speaker 10: flood that can take from minutes to hours to develop.
Speaker 8: And Mayor Karen Bass sums.
Speaker 3: Up, stay safe, stay home, and stay informed.
Speaker 8: And now the hardest hit areas will actually be outside
Speaker 8: of Los Angeles proper, in the mountains and the deserts,
Speaker 8: Palm Springs. Mayor Grace Garner, do you know.
Speaker 5: That there's going to be flooding, because, like I said,
Speaker 5: even an inch or two of rain in the desert
Speaker 5: can cause damage.
Speaker 8: And Nancy Ward with a Governor's Office of Emergency Services says,
Speaker 8: at the very least, be prepared to lose power.
Speaker 11: There will be power outages, Make no mistake, there will
Speaker 11: be power outages across southern California.
Speaker 8: And now we're getting word of a five point zero
Speaker 8: magnitude quake in O High which is north of Los
Speaker 8: Angeles inland from Santa Barbara. Yeah, during the tropical storm Rain.
Speaker 8: US President Joe Biden First Lady Jill will visit Maui tomorrow. Meanwhile,
Speaker 8: FEMA Director Dion Criswell, and ABC has heard on Bloomberg
Speaker 8: says they are making some search progress.
Speaker 11: The search efforts are seventy eight percent complete in Lahina
Speaker 11: Town and we continue to have our teams on the
Speaker 11: ground going through all of the structures that were lost
Speaker 11: as a result of this fire.
Speaker 8: And Governor Josh Green says a process of the recovery
Speaker 8: will now change.
Speaker 12: More than a thousand. They are unaccounted for about one
Speaker 12: thousand fifty. It will take several weeks. Still, some of
Speaker 12: the challenges are going to be extraordinary now we go
Speaker 12: into the larger buildings, which require peeling back some of
Speaker 12: the floors and structures. That last fifteen percent could take weeks.
Speaker 12: We do have extreme concerns that because of the temperature
Speaker 12: of the fire, the remains of those who have died
Speaker 12: in some cases may be impossible to recover meaningfully.
Speaker 8: And Grain directly attributes some of it to climate change.
Speaker 12: We've had six fire emergencies this August. We had six
Speaker 12: fire emergencies between nineteen fifty three and two thousand and three.
Speaker 8: Well Famous says well over eight million dollars have gone
Speaker 8: to families that have been impacted and registered with FEMA.
Speaker 8: Global newspower by more than twenty seven hundred journalists and
Speaker 8: analysts in over one hundred and twenty countries in San Francisco,
Speaker 8: I met Baxter in this as Bloomberg.
Speaker 3: In a moment, Ben Emmons will join us for a
Speaker 3: look at what's happening in the Chinese economy. Ben is
Speaker 3: senior portfolio manager. You're also head of fixed income at
Speaker 3: New Edge Wealth. It was on Sunday that Beijing said
Speaker 3: it again pushed banks in China to boost lending. We
Speaker 3: have more from Bloomberg's Joanne Wog in Hong Kong.
Speaker 13: China Central Bank has also urged to adjust an optimize
Speaker 13: policy for home mortgages. This comes as concerns heightened about
Speaker 13: a deteriorating economic outlook. Chinese media Tai Sine also reported
Speaker 13: Beijing clients to allow local governments to sell two hundred
Speaker 13: and six billion dollars of special bonds.
Speaker 2: To help repay debt.
Speaker 13: Last week, top leaders have pledged to expand domestic consumption
Speaker 13: and support the private sector, but it fell short laying
Speaker 13: out specific details. Meanwhile, banks are said to cut their
Speaker 13: key lending rates by fifteen basis points. Later today in
Speaker 13: Hong Kong, I'm joined Wang Bloomberg Day Brigasia.
Speaker 3: All right, let's bring in Ben Emmons, Ben a senior
Speaker 3: portfolio manager and the head of fixed income at New
Speaker 3: Edge Wealth. How serious is the situation right now in
Speaker 3: China and the degree to which it has the potential
Speaker 3: to spread through the global financial system?
Speaker 2: Is that a risk?
Speaker 14: It's a risk, Dug, But I don't think it's the
Speaker 14: same as when we had, like say, back in twenty
Speaker 14: fifteen sixteen, when the Chinese economy started to suddenly slow down,
Speaker 14: we had a lot of manufacturing slow down globally. This
Speaker 14: time around, it seems to be more driven by that
Speaker 14: you had that reopening. You shot off the economy for
Speaker 14: so long that the manufacturing sector had a lot of
Speaker 14: trouble to restart. There's a lot of discussion about long
Speaker 14: COVID in China. That's causing additional disruption. There is a
Speaker 14: lot of confidence issues that people are very wary there,
Speaker 14: so they don't really behave exactly the way we used
Speaker 14: to do when we reopened, even though in the very
Speaker 14: early stages of reopening it did show someone that major
Speaker 14: V shaped type of recovery. And then lastly, it is
Speaker 14: about the China government being initially somewhat conservative in terms
Speaker 14: of stimulus, a lot of discussion but little implementation, and
Speaker 14: I think you're seeing it coming through now, Like at
Speaker 14: these measures that the Jusia College talked about, you know,
Speaker 14: that's to me like that was sort of pending, so
Speaker 14: to speak. So they're going to try to push it
Speaker 14: a little harder, I feel, to get to their growth target.
Speaker 14: Because the real time trackers that are out there from
Speaker 14: Goldman and several other investment banks that try to track
Speaker 14: Chinese activity on the ground, Yeah, there's a difference between
Speaker 14: those trackers around three twenty a half percent and where
Speaker 14: the government wants to be at five and a half percent, right,
Speaker 14: So I think within the Chinese government they probably have
Speaker 14: that understanding themselves, and hence you's seeing the sort of
Speaker 14: urgency emerging now of pushing stimulus into the economies to
Speaker 14: get to that growth target, which could be by the
Speaker 14: Way's last point, it could actually be meaningful for markets
Speaker 14: in the fall well.
Speaker 1: Being it they keep on sort of playing at the
Speaker 1: edges because they don't have the money. The physical tools,
Speaker 1: the manetary policy tools are not going to work particularly
Speaker 1: well either, because this is a structural or shift for
Speaker 1: the Chinese economy. But of course one of the symptoms
Speaker 1: has been deflation. Are we feeling any of the effects
Speaker 1: of that, and how closely you think the FED looks
Speaker 1: to what's going on in China and takes into account
Speaker 1: of that when it's looking managery policy.
Speaker 14: To some extent rich But I think that the deflation
Speaker 14: that we currently have in China was vainly driven by
Speaker 14: food and transportation predominantly, whereas some on the services side
Speaker 14: of the economy there there's actually more strength as in inflation.
Speaker 14: So the import of deflation out of China is somewhat
Speaker 14: limited at this stage. But it isn't to say that
Speaker 14: it could become a bigger issue obviously, right because if
Speaker 14: it does turn out to be that this near term
Speaker 14: stimulus they're trying to push in the economy isn't really
Speaker 14: working and they don't get that growth target achieved this year,
Speaker 14: there will be more downward pressure on prices coming out
Speaker 14: of China, and we know we will import some of that,
Speaker 14: so it will affect the US economy at some point.
Speaker 3: So the question is whether the slowdown might snowball and
Speaker 3: represent something similar to what we saw in Japan in
Speaker 3: the nineteen nineties. Is that a possibility.
Speaker 14: Perhaps, although you know that comparison to the Japan is
Speaker 14: as being a bit difficult even with the US and
Speaker 14: Europe right that we are. At times people made their
Speaker 14: comparisons in the same way, you know, demographics and economy
Speaker 14: aging and all those two typical factors that a side
Speaker 14: around Japan. I'm not sure that it's entirely the case
Speaker 14: in China. One thing that's really different from from our
Speaker 14: economy is that a plan based economy. You know, they
Speaker 14: can't inject liquidity and measures across the economy really fast,
Speaker 14: so it's a little different way of I think it
Speaker 14: responds to what we do. But that isn't to say
Speaker 14: that that overhang from the property sector is really serious,
Speaker 14: and we know from the Japanese situation that's how the
Speaker 14: deflation started. It was a banking issue with real estate
Speaker 14: that that we had to be worked out for many,
Speaker 14: many years, and that's to an extent now in China too.
Speaker 14: You know, there's that much you can do with you know,
Speaker 14: the faults on dollar bonds, right, It's another thing to
Speaker 14: have the bank sitting on loads of death from the
Speaker 14: property sector and having to solve that with liquidity and
Speaker 14: with more issues of death, and we know that's going
Speaker 14: to put pressure on the economy.
Speaker 1: Ben you mentioned dollar dollar bonds. I want to go
Speaker 1: and use that as a sort of awkward seguae to
Speaker 1: talk about what's going on with treasuries and give me
Speaker 1: a sense of what you are looking at when it
Speaker 1: comes to the bond market. How does the FED look
Speaker 1: at what's happening there and beyond.
Speaker 14: Yeah, Rich, I think it's interesting that this month we
Speaker 14: had a significant rising rates and people are pointing to
Speaker 14: this maybe have something to do more than just the economy.
Speaker 14: But I did a little event study on it, and
Speaker 14: I noted that quy ah, the majority is still the economy.
Speaker 9: Right.
Speaker 14: You know, on every data we had stronger data than expected.
Speaker 14: If you add up all the times that the yields
Speaker 14: went up, that's more than on the days when let's
Speaker 14: say the Fitch downgrade or the Dirty Auction dailing or
Speaker 14: the Treasury funding announcement that had impact on raids, but
Speaker 14: not as much as the economy. So it's still that's
Speaker 14: strong economy story that's dominating. But we have to take
Speaker 14: note of that what has happened by you know, adjusting
Speaker 14: the borrowing to such a larger amount, by issuing more
Speaker 14: long term bonds while the downgrade was happening, while we
Speaker 14: had the whole you know, bringmanship of the of the
Speaker 14: death ceiling sort of putting into focus in that in
Speaker 14: that downgrade has made people wary of that. You know,
Speaker 14: there is there is a sustainability issue here that at
Speaker 14: some point we have to reckon with, you know, for
Speaker 14: many years one.
Speaker 3: But I just want to take it back to China
Speaker 3: for a moment, because we know that the government is
Speaker 3: a big holder of US treasuries. They've been defending the
Speaker 3: currency lately, and I'm wondering whether there is a connection
Speaker 3: there sell US treasuries to raise the funds necessary to
Speaker 3: defend the currency. Is it a big factor?
Speaker 14: So so fortunately, Doug, they do have sufficient reserves to
Speaker 14: address the currency that way, so they I don't think
Speaker 14: have to tap into the direction you're talking about, like
Speaker 14: ultimately you know, liquidating more treasuries to raise the funds
Speaker 14: to defend the currency. Yeah, as we know, China is
Speaker 14: a kind of interesting system of how currency is managed, right.
Speaker 14: It's it's a completely control currency on shore within the
Speaker 14: offshore market the c n H. Yeah, it's traded a
Speaker 14: lot by funds and hedge funds and people do that
Speaker 14: and the banks ultimately, the Chinese banks can be very
Speaker 14: effected there by the PBOC, meaning like what happened is
Speaker 14: now right, they instructed the banks start selling dollars and
Speaker 14: bring those back of bringing you on back on shore,
Speaker 14: so to speak. So it strengthened on that way, you
Speaker 14: on that way, and that's I think I had a
Speaker 14: big impact immediately because it's not a very liquid currency
Speaker 14: like unlike the end or any other major currency. Right,
Speaker 14: So it depends a bit what goes from here. If
Speaker 14: you go back to twenty sixteen, there was a huge
Speaker 14: amount of capital outflow at that time out of China.
Speaker 14: They stopped up with capital controls and kept it in
Speaker 14: place for a long time, and that's still the place.
Speaker 14: So I think they can manage it so far with
Speaker 14: what there's buffer of reserves that they.
Speaker 3: Have without selling you as treasure, without selling you.
Speaker 2: Okay, Ben, this.
Speaker 3: Is Bloomberg day Break Asia. You're a morning brief on
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