WEBVTT - Traders Look Ahead To Jackson Hole, China Urges For More Loans

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Richard Salamat and.

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

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<v Speaker 2>J Pale very much here.

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<v Speaker 1>I sent to stage, going to fix at that symposium

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<v Speaker 1>at Jackson Hole in Wyoming, and we should get his

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<v Speaker 1>assessment not just of what's happening monetary policy wise, but

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<v Speaker 1>of course the state as he sees it of the

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<v Speaker 1>American economy. Let's get details out from bluemo's Denise Pilgrini.

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<v Speaker 4>Cher Paul will deliver remarks on the economic outlook at

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<v Speaker 4>the FEDS Annual Symposium in Jackson Hole on Friday last year.

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<v Speaker 4>He used the event to say policymakers would keep raising

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<v Speaker 4>interest rates until inflation was under control, and he said

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<v Speaker 4>doing so would cause some pain. And even with all

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<v Speaker 4>the interest rate hikes since then, we're still seeing strengthen

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<v Speaker 4>labor markets and consumer spending. And minutes of the July

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<v Speaker 4>FED meeting out last week showed some officials in July

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<v Speaker 4>saw more inflation risks ahead and thought more tightening could

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<v Speaker 4>be required. Since that meeting, no key data points have

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<v Speaker 4>shown price and wage pressures continued to dissipate. And on

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<v Speaker 4>top of all this, FED watchers may also be hoping

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<v Speaker 4>that Paul will at least give a hint about whether

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<v Speaker 4>the Fed might cut rates or not next year. Denise Pelgriny,

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<v Speaker 4>Bloomberg Daybreak, Asha, Well.

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<v Speaker 3>The S and P five hundred has lost ground for

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<v Speaker 3>three consecutive weeks. Bloomberg's Charlie Pellett now with a look

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<v Speaker 3>at the drivers for the week ahead.

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<v Speaker 2>With little in the way of earnings this week, investors

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<v Speaker 2>will be keeping an eye on China's economic turmoil and

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<v Speaker 2>the jump in bond yields. Cameron Dawson is chief investment

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<v Speaker 2>officer at New Edge Wealth.

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<v Speaker 5>This current correction is not about growth fears. We're not

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<v Speaker 5>seeing EPs estimates come down. You're not seeing these worries

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<v Speaker 5>about recession kick up. This is all valuations in light

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<v Speaker 5>of a context of higher interest rates.

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<v Speaker 2>Among the US companies schedule to report earnings this week,

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<v Speaker 2>tech names including in Nvidia, Analog Devices, Autodesk, and into It.

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<v Speaker 2>We'll also hear from home improvement retailer Low's and Dollar

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<v Speaker 2>Tree in New York. Charlie Pellett, Bloomberg Daybreak Asia.

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<v Speaker 1>All Right, well, we are looking at what's going to

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<v Speaker 1>you now with President Biden going into the weekend, announcing

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<v Speaker 1>spans announcing plans for annual leader level meetings with the

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<v Speaker 1>Japan and South Korea. The allies also agreed to a

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<v Speaker 1>new hotline to swiftly share intelligence. Here he is the

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<v Speaker 1>President speaking at his Camp David summit.

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<v Speaker 6>We've all reaffirmed our shared commitment to maintain peace and

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<v Speaker 6>stability in the Taiwan Straits and addressing economic coercion. We're

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<v Speaker 6>going to continue to counter threats from the DPRK, including

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<v Speaker 6>cryptocurrency money laundrying, the two to billions of dollars potential

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<v Speaker 6>arms transfer in support of Russia's brutal war against Ukraine.

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<v Speaker 1>Biden saying the United States, Japan, and South Korea were

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<v Speaker 1>also launching annual multi domain military exercises. We hear that

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<v Speaker 1>North Korean hackers try to infiltrate security related companies to

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<v Speaker 1>obtain information on joint US South Korea military drills that started.

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<v Speaker 1>That start actually on Monday by South Korea police saying

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<v Speaker 1>they obtained no classified information.

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<v Speaker 3>Negotiations are underway for some high level talks between China

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

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<v Speaker 7>Australian Foreign Minister Penny Wong told ABC News that officials

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<v Speaker 7>are working on a time to host China's foreign minister.

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<v Speaker 7>This comes as Camera and Beijing are working to improve relations.

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<v Speaker 7>China scrapped import tariffs on Australian bali earlier this month.

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<v Speaker 7>Let's after Beijing had accused Australian exporters of dumping on

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<v Speaker 7>the Chinese market. Meantime, Australia still holds a deep concerns

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<v Speaker 7>in relation to two of its citizens being detained in China,

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<v Speaker 7>and Penny Wong says she's keen for more meetings between

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

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<v Speaker 7>day Break Asia.

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<v Speaker 1>All right, well, let's have a look now at what

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<v Speaker 1>is happening with Global News. California Governor Gavin Newsom has

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<v Speaker 1>declared a state of emergency to deal with a potential

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<v Speaker 1>damage that could be done by tropical storm Hillary. Let's

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<v Speaker 1>get over to Ed Baxter in some Francisco.

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<v Speaker 8>Ed Ah Rich, thank you. Hillary is now a tropical storre.

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<v Speaker 8>I'm having hurricane status, but flood warnings have been issued

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<v Speaker 8>for most all of southern California. It's been raining heavily

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<v Speaker 8>in some sections of San Diego are already. Mayor Todd

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<v Speaker 8>Gloria in San Diego, we have.

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<v Speaker 9>Hundreds of additional city employees on hand station throughout the city.

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<v Speaker 9>Everyone from public works employees looking for backed up drains

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<v Speaker 9>and pumps stations, to police officers, firefighters, and lifeguards all

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<v Speaker 9>positioned to be able to deal with the brunt of

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<v Speaker 9>the storm.

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<v Speaker 8>And in Los Angeles, Fire Chief Christian Crowley says, people

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<v Speaker 8>need to remain vigilant.

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<v Speaker 10>If you are in a flood prone area, move immediately

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<v Speaker 10>to high ground. A flash flood is a sudden, violent

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<v Speaker 10>flood that can take from minutes to hours to develop.

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<v Speaker 8>And Mayor Karen Bass sums.

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<v Speaker 3>Up, stay safe, stay home, and stay informed.

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<v Speaker 8>And now the hardest hit areas will actually be outside

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<v Speaker 8>of Los Angeles proper, in the mountains and the deserts,

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<v Speaker 8>Palm Springs. Mayor Grace Garner, do you know.

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<v Speaker 5>That there's going to be flooding, because, like I said,

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<v Speaker 5>even an inch or two of rain in the desert

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<v Speaker 5>can cause damage.

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

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<v Speaker 8>at the very least, be prepared to lose power.

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<v Speaker 11>There will be power outages, Make no mistake, there will

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<v Speaker 11>be power outages across southern California.

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<v Speaker 8>And now we're getting word of a five point zero

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<v Speaker 8>magnitude quake in O High which is north of Los

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<v Speaker 8>Angeles inland from Santa Barbara. Yeah, during the tropical storm Rain.

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

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<v Speaker 8>FEMA Director Dion Criswell, and ABC has heard on Bloomberg

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<v Speaker 8>says they are making some search progress.

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<v Speaker 11>The search efforts are seventy eight percent complete in Lahina

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<v Speaker 11>Town and we continue to have our teams on the

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<v Speaker 11>ground going through all of the structures that were lost

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<v Speaker 11>as a result of this fire.

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<v Speaker 8>And Governor Josh Green says a process of the recovery

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<v Speaker 8>will now change.

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<v Speaker 12>More than a thousand. They are unaccounted for about one

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<v Speaker 12>thousand fifty. It will take several weeks. Still, some of

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<v Speaker 12>the challenges are going to be extraordinary now we go

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<v Speaker 12>into the larger buildings, which require peeling back some of

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<v Speaker 12>the floors and structures. That last fifteen percent could take weeks.

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<v Speaker 12>We do have extreme concerns that because of the temperature

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<v Speaker 12>of the fire, the remains of those who have died

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<v Speaker 12>in some cases may be impossible to recover meaningfully.

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<v Speaker 8>And Grain directly attributes some of it to climate change.

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<v Speaker 12>We've had six fire emergencies this August. We had six

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<v Speaker 12>fire emergencies between nineteen fifty three and two thousand and three.

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<v Speaker 8>Well Famous says well over eight million dollars have gone

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<v Speaker 8>to families that have been impacted and registered with FEMA.

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<v Speaker 8>Global newspower by more than twenty seven hundred journalists and

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<v Speaker 8>analysts in over one hundred and twenty countries in San Francisco,

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<v Speaker 8>I met Baxter in this as Bloomberg.

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<v Speaker 3>In a moment, Ben Emmons will join us for a

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<v Speaker 3>look at what's happening in the Chinese economy. Ben is

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<v Speaker 3>senior portfolio manager. You're also head of fixed income at

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<v Speaker 3>New Edge Wealth. It was on Sunday that Beijing said

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<v Speaker 3>it again pushed banks in China to boost lending. We

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<v Speaker 3>have more from Bloomberg's Joanne Wog in Hong Kong.

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<v Speaker 13>China Central Bank has also urged to adjust an optimize

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<v Speaker 13>policy for home mortgages. This comes as concerns heightened about

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<v Speaker 13>a deteriorating economic outlook. Chinese media Tai Sine also reported

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<v Speaker 13>Beijing clients to allow local governments to sell two hundred

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<v Speaker 13>and six billion dollars of special bonds.

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<v Speaker 2>To help repay debt.

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<v Speaker 13>Last week, top leaders have pledged to expand domestic consumption

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<v Speaker 13>and support the private sector, but it fell short laying

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<v Speaker 13>out specific details. Meanwhile, banks are said to cut their

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<v Speaker 13>key lending rates by fifteen basis points. Later today in

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<v Speaker 13>Hong Kong, I'm joined Wang Bloomberg Day Brigasia.

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<v Speaker 3>All right, let's bring in Ben Emmons, Ben a senior

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<v Speaker 3>portfolio manager and the head of fixed income at New

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<v Speaker 3>Edge Wealth. How serious is the situation right now in

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<v Speaker 3>China and the degree to which it has the potential

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<v Speaker 3>to spread through the global financial system?

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<v Speaker 2>Is that a risk?

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

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<v Speaker 14>same as when we had, like say, back in twenty

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<v Speaker 14>fifteen sixteen, when the Chinese economy started to suddenly slow down,

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<v Speaker 14>we had a lot of manufacturing slow down globally. This

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<v Speaker 14>time around, it seems to be more driven by that

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<v Speaker 14>you had that reopening. You shot off the economy for

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<v Speaker 14>so long that the manufacturing sector had a lot of

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<v Speaker 14>trouble to restart. There's a lot of discussion about long

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<v Speaker 14>COVID in China. That's causing additional disruption. There is a

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<v Speaker 14>lot of confidence issues that people are very wary there,

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<v Speaker 14>so they don't really behave exactly the way we used

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<v Speaker 14>to do when we reopened, even though in the very

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<v Speaker 14>early stages of reopening it did show someone that major

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<v Speaker 14>V shaped type of recovery. And then lastly, it is

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<v Speaker 14>about the China government being initially somewhat conservative in terms

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<v Speaker 14>of stimulus, a lot of discussion but little implementation, and

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<v Speaker 14>I think you're seeing it coming through now, Like at

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<v Speaker 14>these measures that the Jusia College talked about, you know,

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<v Speaker 14>that's to me like that was sort of pending, so

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<v Speaker 14>to speak. So they're going to try to push it

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<v Speaker 14>a little harder, I feel, to get to their growth target.

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<v Speaker 14>Because the real time trackers that are out there from

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<v Speaker 14>Goldman and several other investment banks that try to track

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<v Speaker 14>Chinese activity on the ground, Yeah, there's a difference between

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<v Speaker 14>those trackers around three twenty a half percent and where

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<v Speaker 14>the government wants to be at five and a half percent, right,

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<v Speaker 14>So I think within the Chinese government they probably have

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<v Speaker 14>that understanding themselves, and hence you's seeing the sort of

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<v Speaker 14>urgency emerging now of pushing stimulus into the economies to

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<v Speaker 14>get to that growth target, which could be by the

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<v Speaker 14>Way's last point, it could actually be meaningful for markets

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<v Speaker 14>in the fall well.

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<v Speaker 1>Being it they keep on sort of playing at the

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

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<v Speaker 1>the manetary policy tools are not going to work particularly

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<v Speaker 1>well either, because this is a structural or shift for

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<v Speaker 1>the Chinese economy. But of course one of the symptoms

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<v Speaker 1>has been deflation. Are we feeling any of the effects

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<v Speaker 1>of that, and how closely you think the FED looks

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<v Speaker 1>to what's going on in China and takes into account

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<v Speaker 1>of that when it's looking managery policy.

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<v Speaker 14>To some extent rich But I think that the deflation

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<v Speaker 14>that we currently have in China was vainly driven by

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<v Speaker 14>food and transportation predominantly, whereas some on the services side

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<v Speaker 14>of the economy there there's actually more strength as in inflation.

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<v Speaker 14>So the import of deflation out of China is somewhat

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<v Speaker 14>limited at this stage. But it isn't to say that

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<v Speaker 14>it could become a bigger issue obviously, right because if

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<v Speaker 14>it does turn out to be that this near term

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<v Speaker 14>stimulus they're trying to push in the economy isn't really

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

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<v Speaker 14>there will be more downward pressure on prices coming out

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<v Speaker 14>of China, and we know we will import some of that,

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<v Speaker 14>so it will affect the US economy at some point.

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<v Speaker 3>So the question is whether the slowdown might snowball and

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<v Speaker 3>represent something similar to what we saw in Japan in

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<v Speaker 3>the nineteen nineties. Is that a possibility.

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<v Speaker 14>Perhaps, although you know that comparison to the Japan is

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<v Speaker 14>as being a bit difficult even with the US and

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<v Speaker 14>Europe right that we are. At times people made their

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<v Speaker 14>comparisons in the same way, you know, demographics and economy

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<v Speaker 14>aging and all those two typical factors that a side

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

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<v Speaker 14>in China. One thing that's really different from from our

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<v Speaker 14>economy is that a plan based economy. You know, they

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<v Speaker 14>can't inject liquidity and measures across the economy really fast,

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<v Speaker 14>so it's a little different way of I think it

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<v Speaker 14>responds to what we do. But that isn't to say

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<v Speaker 14>that that overhang from the property sector is really serious,

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<v Speaker 14>and we know from the Japanese situation that's how the

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<v Speaker 14>deflation started. It was a banking issue with real estate

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<v Speaker 14>that that we had to be worked out for many,

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

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<v Speaker 14>You know, there's that much you can do with you know,

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<v Speaker 14>the faults on dollar bonds, right, It's another thing to

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<v Speaker 14>have the bank sitting on loads of death from the

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<v Speaker 14>property sector and having to solve that with liquidity and

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<v Speaker 14>with more issues of death, and we know that's going

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<v Speaker 14>to put pressure on the economy.

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<v Speaker 1>Ben you mentioned dollar dollar bonds. I want to go

0:12:11.120 --> 0:12:13.079
<v Speaker 1>and use that as a sort of awkward seguae to

0:12:13.120 --> 0:12:15.160
<v Speaker 1>talk about what's going on with treasuries and give me

0:12:15.200 --> 0:12:17.440
<v Speaker 1>a sense of what you are looking at when it

0:12:17.480 --> 0:12:21.040
<v Speaker 1>comes to the bond market. How does the FED look

0:12:21.080 --> 0:12:24.160
<v Speaker 1>at what's happening there and beyond.

0:12:25.000 --> 0:12:27.319
<v Speaker 14>Yeah, Rich, I think it's interesting that this month we

0:12:27.400 --> 0:12:30.760
<v Speaker 14>had a significant rising rates and people are pointing to

0:12:31.440 --> 0:12:34.239
<v Speaker 14>this maybe have something to do more than just the economy.

0:12:34.640 --> 0:12:36.240
<v Speaker 14>But I did a little event study on it, and

0:12:36.240 --> 0:12:39.960
<v Speaker 14>I noted that quy ah, the majority is still the economy.

0:12:40.000 --> 0:12:40.120
<v Speaker 9>Right.

0:12:40.840 --> 0:12:44.080
<v Speaker 14>You know, on every data we had stronger data than expected.

0:12:44.120 --> 0:12:46.160
<v Speaker 14>If you add up all the times that the yields

0:12:46.200 --> 0:12:49.319
<v Speaker 14>went up, that's more than on the days when let's

0:12:49.360 --> 0:12:53.680
<v Speaker 14>say the Fitch downgrade or the Dirty Auction dailing or

0:12:53.720 --> 0:12:57.320
<v Speaker 14>the Treasury funding announcement that had impact on raids, but

0:12:57.400 --> 0:12:59.840
<v Speaker 14>not as much as the economy. So it's still that's

0:13:00.040 --> 0:13:03.480
<v Speaker 14>strong economy story that's dominating. But we have to take

0:13:03.559 --> 0:13:06.960
<v Speaker 14>note of that what has happened by you know, adjusting

0:13:07.000 --> 0:13:09.920
<v Speaker 14>the borrowing to such a larger amount, by issuing more

0:13:10.000 --> 0:13:13.040
<v Speaker 14>long term bonds while the downgrade was happening, while we

0:13:13.120 --> 0:13:15.880
<v Speaker 14>had the whole you know, bringmanship of the of the

0:13:15.920 --> 0:13:18.680
<v Speaker 14>death ceiling sort of putting into focus in that in

0:13:18.760 --> 0:13:22.080
<v Speaker 14>that downgrade has made people wary of that. You know,

0:13:22.160 --> 0:13:25.400
<v Speaker 14>there is there is a sustainability issue here that at

0:13:25.440 --> 0:13:28.040
<v Speaker 14>some point we have to reckon with, you know, for

0:13:28.080 --> 0:13:28.720
<v Speaker 14>many years one.

0:13:28.720 --> 0:13:30.760
<v Speaker 3>But I just want to take it back to China

0:13:30.840 --> 0:13:33.120
<v Speaker 3>for a moment, because we know that the government is

0:13:33.280 --> 0:13:36.480
<v Speaker 3>a big holder of US treasuries. They've been defending the

0:13:36.559 --> 0:13:40.320
<v Speaker 3>currency lately, and I'm wondering whether there is a connection

0:13:40.480 --> 0:13:44.160
<v Speaker 3>there sell US treasuries to raise the funds necessary to

0:13:44.200 --> 0:13:45.960
<v Speaker 3>defend the currency. Is it a big factor?

0:13:46.559 --> 0:13:49.480
<v Speaker 14>So so fortunately, Doug, they do have sufficient reserves to

0:13:49.600 --> 0:13:51.960
<v Speaker 14>address the currency that way, so they I don't think

0:13:52.040 --> 0:13:54.360
<v Speaker 14>have to tap into the direction you're talking about, like

0:13:54.800 --> 0:13:59.360
<v Speaker 14>ultimately you know, liquidating more treasuries to raise the funds

0:13:59.400 --> 0:14:02.480
<v Speaker 14>to defend the currency. Yeah, as we know, China is

0:14:02.520 --> 0:14:05.199
<v Speaker 14>a kind of interesting system of how currency is managed, right.

0:14:05.200 --> 0:14:08.560
<v Speaker 14>It's it's a completely control currency on shore within the

0:14:08.559 --> 0:14:11.559
<v Speaker 14>offshore market the c n H. Yeah, it's traded a

0:14:11.559 --> 0:14:14.360
<v Speaker 14>lot by funds and hedge funds and people do that

0:14:14.440 --> 0:14:17.280
<v Speaker 14>and the banks ultimately, the Chinese banks can be very

0:14:18.640 --> 0:14:22.520
<v Speaker 14>effected there by the PBOC, meaning like what happened is

0:14:22.560 --> 0:14:25.480
<v Speaker 14>now right, they instructed the banks start selling dollars and

0:14:25.520 --> 0:14:28.640
<v Speaker 14>bring those back of bringing you on back on shore,

0:14:28.680 --> 0:14:30.400
<v Speaker 14>so to speak. So it strengthened on that way, you

0:14:30.520 --> 0:14:33.040
<v Speaker 14>on that way, and that's I think I had a

0:14:33.080 --> 0:14:36.080
<v Speaker 14>big impact immediately because it's not a very liquid currency

0:14:37.120 --> 0:14:40.240
<v Speaker 14>like unlike the end or any other major currency. Right,

0:14:40.280 --> 0:14:44.320
<v Speaker 14>So it depends a bit what goes from here. If

0:14:44.360 --> 0:14:46.560
<v Speaker 14>you go back to twenty sixteen, there was a huge

0:14:46.560 --> 0:14:49.320
<v Speaker 14>amount of capital outflow at that time out of China.

0:14:49.560 --> 0:14:51.640
<v Speaker 14>They stopped up with capital controls and kept it in

0:14:51.640 --> 0:14:53.960
<v Speaker 14>place for a long time, and that's still the place.

0:14:53.960 --> 0:14:55.840
<v Speaker 14>So I think they can manage it so far with

0:14:55.880 --> 0:14:57.880
<v Speaker 14>what there's buffer of reserves that they.

0:14:57.800 --> 0:14:59.960
<v Speaker 3>Have without selling you as treasure, without selling you.

0:15:00.400 --> 0:15:04.160
<v Speaker 2>Okay, Ben, this.

0:15:04.200 --> 0:15:06.560
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