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Speaker 1: Good morning.

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Speaker 2: I'm Doug Prisner and I'm Brian Curtiz. Here are the

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Speaker 2: stories we're following today. Wall Street's biggest banks have passed

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Speaker 2: the fed's annual stress test.

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Speaker 3: As you heard, they're from Doug.

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Speaker 2: The test carried extra weight this year after the collapse

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Speaker 2: of three US banks. However, the FED said that the

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Speaker 2: twenty three largest US lenders have shown now that they

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Speaker 2: can withstand a severe global recession and turmoil in real

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Speaker 2: estate markets. Bloom Braks Alison Williams tells us what else

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Speaker 2: stands out.

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Speaker 4: I think the big news is, you know, sort of

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Speaker 4: the signals that we're getting for future capital ratios, and

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Speaker 4: really Bank of America looking very strong here, and definitely

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Speaker 4: City Group the less positive bank. So yes, the banks

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Speaker 4: all pass, But I think what investors really care about is,

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Speaker 4: you know, when these the results of this test and

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Speaker 4: the stressed losses that the bank's post in terms of

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Speaker 4: the change in their capital ratio determines their future capital requirement.

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Speaker 2: Passing scores on the stress test can give the banking

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Speaker 2: giants a green light to return billions of dollars to investors,

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Speaker 2: and the FED has said that banks can start announcing

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Speaker 2: their payout plans as of Friday. However, this year's results

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Speaker 2: may not quickly yield dividend and buy back announcements. Many

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Speaker 2: banks have warned that they will hold off until they

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Speaker 2: can get more clarity on new capital requirements that have

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Speaker 2: been in the works now for years.

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Speaker 1: Doud Well Central bankers gathered in central Portugal today and

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Speaker 1: for many the message was somewhat hawkish, saying the fight

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Speaker 1: against inflation has not done, it has a ways to go.

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Speaker 1: This comes as the global economy and inflation have so

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Speaker 1: far proved to be seemingly and surprisingly resilient to those

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Speaker 1: interest rate hikes. We heard today from Fetcher J. Powell

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Speaker 1: saying he was not going to take more rate hikes

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Speaker 1: off the table.

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Speaker 5: We're going to move the decisions a little bit, make

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Speaker 5: them a little bit with a little bit more time

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Speaker 5: in between them, in an effort to get more information

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Speaker 5: from the data, to see how much restraint is really

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Speaker 5: coming from these you know, through the pipeline from rate

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Speaker 5: hikes that we only made now in many cases six eight,

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Speaker 5: nine months ago. But I wouldn't take you know, moving

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Speaker 5: at consecutive meetings off the table at.

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Speaker 3: All, fed shir J. Powell.

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Speaker 1: There, we also heard today from the head of the

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Speaker 1: Bank of England, Governor Andrew Bailey, hinted that UK rates

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Speaker 1: may remain at peak levels for longer than traders currently expect.

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Speaker 1: Not to be left out, the ECB President Christine Leguard

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Speaker 1: suggested that a rate hike next month was a virtual certainty,

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Speaker 1: although she was less committal one it comes to what

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Speaker 1: the ECB may do at the meeting in September, Brian.

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Speaker 2: And can I say not to be left out, although

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Speaker 2: it is not quite as strong but the Bank of

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Speaker 2: Japan Governor kazu Uweida said that Japan's interest rates are

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Speaker 2: on hold because underlying inflation remains below two percent. Even so,

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Speaker 2: he suggested that it would be possible to start normalizing

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Speaker 2: monetary policies soon, although he said that it was price

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Speaker 2: gains next year could bring about a policy shift.

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Speaker 6: Stock prices have been rising Valley softly since spring.

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Speaker 7: This yeah.

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Speaker 6: Stock prices theoretically are affected by interstrates and investors' view

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Speaker 6: of the economy. We haven't changed interstrates, so probably investors

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Speaker 6: have become more optimistic about the future of economy.

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Speaker 2: About a third of economists surveyed by Bloomberg are forecasting

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Speaker 2: a policy change by the boj at its July meeting.

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Speaker 2: They expect the bank to cite a brighter inflation outlook

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Speaker 2: as a reason behind that shift.

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Speaker 1: We go to China next, where the government has enacted

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Speaker 1: a foreign relations law to target what it calls Western hegemony.

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Speaker 1: The story from Bloomberg's Joan Wong in Hong Kong.

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Speaker 8: The law strength since China's legal standing and taking retaliatory

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Speaker 8: measures against overseas actors. Chinese state media that it provides

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Speaker 8: a legal basis for heading back against sanctions impost by

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Speaker 8: the West. The law requires state agencies to strengthen coordination

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Speaker 8: between departments to enforce their retaliatory actions, and the State

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Speaker 8: Council has authorised to establish new institutions to help carry

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Speaker 8: out the law. To move a scene by experts as

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Speaker 8: a way to underscore President chi Jingpink's personal control over

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Speaker 8: China's foreign policy. In Hong Kong, joined Wong Bloomberg Day

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Speaker 8: Brick Asia.

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Speaker 2: Micron Technology has given an upbeat forecast for the current quarter.

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Speaker 2: It said sales would be as much as four point

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Speaker 2: one billion dollars. Analysts had been estimating about three point

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Speaker 2: eighty seven billion. It's a sign that the industry glut

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Speaker 2: may be easing. We heard from Dan Morgan at Snovs Trust.

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Speaker 9: They felt that you know their core markets, PC's laptop, smartphones,

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Speaker 9: the inventories are starting clear from customers. They expected a

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Speaker 9: secular rebound in terms of cloud. We know that's been

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Speaker 9: in kind of a secular downturm, but the long term

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Speaker 9: trend is still positive. Does show there is some light

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Speaker 9: at the end of the tunnel.

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Speaker 2: Micron's positive forecast comes even as it has fallen prey

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Speaker 2: to its geopolitical rivalry. That rivalry between China and the

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Speaker 2: United States. The Cybersecurity Administration of China has barred Micron's

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Speaker 2: chips from critical infrastructure, saying they're a national security risk.

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Speaker 2: It came after the regulator said that Micron's products had

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Speaker 2: failed to pass a cyber security review. Micron has warned

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Speaker 2: that about half of its sales are tied to China

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Speaker 2: clients and they may be affected by China's probe. Micron

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Speaker 2: shares were up though in late trading at the moment,

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Speaker 2: up about two and.

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Speaker 3: A half percent in late trading.

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Speaker 2: I'm Brian Curtis along with Doug Chrisner in New York,

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Speaker 2: so I guess to the central bankers. First, you might

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Speaker 2: resist this comment, but I'll say it's kind of a

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Speaker 2: last gasp offer by central banks to show that they're

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Speaker 2: still in control investors though, a kind of moving beyond

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Speaker 2: the rate hikes at their peril perhaps, But it just

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Speaker 2: seems that, you know, they're sort of assuming, at least

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Speaker 2: with the case of the Fed, that they're getting pretty

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Speaker 2: close to the eventual pause. Although I will say this

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Speaker 2: Pale sounded like two in a row now, whereas before

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Speaker 2: he kind of talked about how we might see a

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Speaker 2: couple more before the end of the year.

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Speaker 1: So the last dot plot I think indicates fifty basis

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Speaker 1: points in tightening for the remainder of this year, the

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Speaker 1: potential for it, right, And you and I were talking earlier, Brian,

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Speaker 1: about the degree to which, at least in the States,

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Speaker 1: the American economy has proved to be remarkably resilient. Even

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Speaker 1: though we've had what five hundred basis points in tightening

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Speaker 1: so far, we've seen some rolling recessions. Maybe maybe you

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Speaker 1: could put your finger on the housing market as one

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Speaker 1: example of that, but it looks like there I think

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Speaker 1: we were talking about ed Yard Denny's statement that there

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Speaker 1: is the period perhaps that we're dealing with now, which

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Speaker 1: is more about this kind of rolling expansion. So clearly

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Speaker 1: the economy is still strong.

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Speaker 3: Do you think it's two things.

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Speaker 2: One that there was a lot of money given out

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Speaker 2: to people and they saved quite a bit of it,

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Speaker 2: and that's not only individuals but also companies. And I

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Speaker 2: think what I said the other day, I can't remember

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Speaker 2: yesterday or the day before, that the long period of

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Speaker 2: low interest rates gave people and institutions companies a chance

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Speaker 2: to turn out what they owe over such a long

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Speaker 2: period that they're not that fussed or focused or in

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Speaker 2: fear of higher interest rates, and they are acting as

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Speaker 2: though it does raise their costs a little, but it's

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Speaker 2: not the end of the world.

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Speaker 1: I think that's a very good point, and I'm going

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Speaker 1: to pivot off of it in a very kind of

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Speaker 1: maybe an interesting way, I don't know. Richard ku coined

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Speaker 1: the phrase balance sheet recession, and I say that to

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Speaker 1: set the stage for this. This is in the China

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Speaker 1: Today column. When asset markets turned from boom to bust,

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Speaker 1: households and companies oftentime need to save to pay down debt.

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Speaker 1: That was one of the things I think that many

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Speaker 1: people see when you look at what happened to the

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Speaker 1: Lost decade in Japan, and that thinking now has kind

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Speaker 1: of creeped into the narrative when you look at what's

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Speaker 1: happening in China. We've seen perhaps certain asset markets in

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Speaker 1: China kind of collapse. I'm thinking of the housing market

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Speaker 1: in particular, and how we're seeing household and companies react

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Speaker 1: to that save to pay down debt, and that's going

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Speaker 1: to lead to a stall in the economy.

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Speaker 2: Yeah, it's not only that consumers and companies are reticent,

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Speaker 2: but it's also that the regulators and the policy makers

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Speaker 2: are reticent to provide a lot of stimulus to get

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Speaker 2: you out of it, because they don't want even more.

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Speaker 3: Debt piled up. Just a quick word on the.

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Speaker 2: Law on Foreign Relations because people would be curious, you know,

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Speaker 2: what are they doing here?

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Speaker 3: It basically just codifies.

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Speaker 2: The Communist Party's grip on foreign relations as though it

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Speaker 2: didn't already have it.

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Speaker 3: But this gives it more legal.

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Speaker 2: Standing, and it actually means that the institutions of government,

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Speaker 2: like the Ministry of Foreign Affairs and even the State

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Speaker 2: Council itself others now are required to implement the dictates

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Speaker 2: of she and the Communist Party. And it's not that

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Speaker 2: big of a change from the anti foreign sanctions law,

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Speaker 2: which had already passed a couple of years ago, but

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Speaker 2: it will scare some people.

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Speaker 1: Most definitely, and it's going to be very interesting. We've

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Speaker 1: also seen cases where Lockheed Martin and Raitheon have been

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Speaker 1: penalized right for selling arms to Taiwan. It's going to

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Speaker 1: be very interesting to see the strategy that Beijing uses

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Speaker 1: going forward and how and which sectors of the market,

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Speaker 1: the American market China starts to target.

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Speaker 2: Yeah, it's my very point that Raytheon and Lockheed Martin

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Speaker 2: and Mike Pompeio are already sanctioned by previous the previous law,

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Speaker 2: and it looks like it will continue. Now it's time

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Speaker 2: for Global News, all right, it is twelve and a

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Speaker 2: half minutes past the Let's get to Dan Schwartzman. Dan

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Speaker 2: is looking at more details emerging here as to the

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Speaker 2: intentions of the Wagner groups. You have Jenny Pregosion, what

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Speaker 2: he was up to, what he was trying to do.

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Speaker 2: Dan Schwartzman has more from New York.

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Speaker 10: Brian, keep getting that popcorn ready, because every day the

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Speaker 10: stories continue to take twists and turns. The latest is this.

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Speaker 10: Western officials are saying that wag Wagner Mercenary Group leader

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Speaker 10: Yevgeny Progosin was planning to capture Russia's military leadership during

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Speaker 10: his short lived mutiny last weekend. Sources say Progotionhon had

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Speaker 10: to speed up his plans as Russia's domestic intelligence agency

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Speaker 10: had learned of his plot. The Oligark had originally intended

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Speaker 10: to capture Defense Minister Stege Shoygu and the chief of

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Speaker 10: Russia's General Staff, Valeri Gerasimov, during their schedule visit to

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Speaker 10: the southern region that borders Ukraine. That plot, though, was foiled,

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Speaker 10: as a country's Federal Security Service or FSB, as are known,

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Speaker 10: found out about the plan two days in advance. Western

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Speaker 10: officials also say that Progotionin had conveyed his plot to

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Speaker 10: some senior military leaders, including the head of Aerospace Forces Cerovican.

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Speaker 10: Ukrainian President Vladimir Lenski says that elections scheduled to take

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Speaker 10: place next year will only occur if martial law is

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Speaker 10: lifted State Department. State Department deputy spokesman Vedant Patel explains.

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Speaker 11: We continue to stay in close touch with our Ukrainian partners.

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Speaker 11: It's also an opportunity to remind you that martial law

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Speaker 11: is only in place because Russia continues to wage a

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Speaker 11: full scale illegal war against Ukraine and its people.

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Speaker 10: Ukraine has been under Marshall law since Russia invaded back

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Speaker 10: in February of twenty twenty two. President Biden was in

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Speaker 10: Chicago today and veiling his economic policies that have been

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Speaker 10: now named Bidynamics, by announcing his three step plan to

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Speaker 10: grow the economy.

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Speaker 7: First making smart investments in America, second, educated and empowering

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Speaker 7: American workers to grow the middle class, and third promoting

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Speaker 7: competition to lower cost to help small businesses.

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Speaker 10: Biden in Chicago as the mayor of the city, Brandon Johnson,

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Speaker 10: urged residents to wear masks as the air quality in

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Speaker 10: the city had turned unhealthy levels due to the wildfires

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Speaker 10: in Canada. Of their cities, such as Detroit, Indianapolis, Cleveland, Buffalo,

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Speaker 10: and Pittsburgh are all experiencing.

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Speaker 3: Poor air quality.

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Speaker 10: While the air in the Midwest will be improving starting Thursday,

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Speaker 10: the mid Atlantic region is now expected to get worse

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Speaker 10: in places like Washington and Baltimore. Alerts have also been

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Speaker 10: issued in New York City, Long Island and New Jersey

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Speaker 10: as a smoke is drifting towards those areas. Jurors were

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Speaker 10: sworn in earlier today in the London courtroom as the

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Speaker 10: trial of two time Academy Award winner Kevin Spacey is

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Speaker 10: set to get underway with opening statements on Friday. The

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Speaker 10: sixty three year old is facing a dozen charges of

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Speaker 10: sexually assaulting for men between two thousand and one to

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Speaker 10: twenty thirteen. Spacey, at the time was living in England

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Speaker 10: and serving as the artistic director of the Old Vic

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Speaker 10: Theater in London. The trial is expected to last somewhere

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Speaker 10: around four weeks. Global News twenty four hours a day,

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Speaker 10: powered by more than twenty seven hundred journalists and analysts

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Speaker 10: in more than one hundred and twenty countries.

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Speaker 3: I'm Dan Schwartzman.

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Speaker 10: This is Bloomberg.

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Speaker 2: I'm Brian Curtis, along with Rashad Salama. We are here

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Speaker 2: in Hong Kong, and Kim Forest is our guest founder

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Speaker 2: and CIO.

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Speaker 3: Of Book Capital Partners.

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Speaker 2: Simple question, Kim, can we as investors look beyond the

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Speaker 2: fed now?

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Speaker 12: Well, listening to your last segment, I think that's a

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Speaker 12: resounding yes, at least the FED, you know, the Central

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Speaker 12: Bank of the US. The other ones are out, you know,

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Speaker 12: they're in a different category. They're still raising. But if

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Speaker 12: it's one, two, or even like craziness three more raises

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Speaker 12: that we have, I can't imagine that it can get

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Speaker 12: much high. You know that it's going to affect the

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Speaker 12: psychology of investors. We're already in the higher interest rate environment.

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Speaker 12: We have decided that we can tolerate owning stocks in

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Speaker 12: this environment. And more importantly, we've decided we're going to

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Speaker 12: buy more stocks than we did that. You know, we're

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Speaker 12: in the mood to buy more than we did at

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Speaker 12: the beginning of this year. As crazy as that sounds,

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Speaker 12: but it looks like the market wants to go higher

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Speaker 12: each and every day I sit behind my desk.

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Speaker 13: But certainly at the moment, kem. I mean, we are

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Speaker 13: looking at interest rates which are pretty returning to mean reversion,

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Speaker 13: if we could put it that way.

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Speaker 12: Oh golly, you're getting a sensitive subject for me. I

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Speaker 12: think mean reversion happens in like physical kind of models,

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Speaker 12: you know, like you throw a bowling ball out of

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Speaker 12: a window and it falls at a certain rate. I'm

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Speaker 12: not sure the economy works like that. I think that

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Speaker 12: people adjust to whatever era they're in and make decisions accordingly.

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Speaker 12: And I don't necessarily believe we ever get back to

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Speaker 12: that golden day of you know, five percent interest rates.

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Speaker 12: From here on out, it's going to fluctuate. This is

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Speaker 12: a system with many moving parts, and it's only gotten

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Speaker 12: more complex as the world has gotten joined together through globalism.

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Speaker 2: I don't want to get too far ahead of the

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Speaker 2: skis on this point that the economy and investors are

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Speaker 2: easilywithstanding higher interest rates. I mean, we talked about the

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Speaker 2: banks passing the stress test. They passed that test, but

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Speaker 2: they haven't passed the stock market test. The KBW Bank

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Speaker 2: index is down twenty two percent year to date. A

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Speaker 2: lot of the gains have been have been kind of

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Speaker 2: isolated in a smaller number of companies. That does appear

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Speaker 2: to be changing now, But does that continue. Can you

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Speaker 2: see a broadening out so that everybody sort of reaps

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Speaker 2: some of the games.

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Speaker 12: Well, I think you know you've put you've put your

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Speaker 12: finger right on the source spot of the US economy

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Speaker 12: and nuts banks. I don't know that anybody's super comfortable

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Speaker 12: owning a smaller bank because their balance sheets are a

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Speaker 12: little on the opaque side. If they do have commercial

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Speaker 12: real estate, how good is it and what is going

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Speaker 12: to happen to it? That's the big question here. But

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Speaker 12: I do think in other areas like industrials and even

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Speaker 12: consumer discretionary, I think people are going to get more

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Speaker 12: investors are going to get more comfortable owning those names,

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Speaker 12: looking at how strong the economy is and how it

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Speaker 12: is not slipping into recession nor does it look like

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Speaker 12: it's going to in the immediate future.

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Speaker 13: All right, well, Kim, you know what does this also

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Speaker 13: means for stocks at least is that we know and

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Speaker 13: the window dressing period at the end of the quarter,

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Speaker 13: and what do you expect? How does the next quarter begin?

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Speaker 12: Well, I'm pretty happy I called this week and next

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Speaker 12: week pre announcement season, you know, because every week has

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Speaker 12: to have its own name. And I'm being trying to

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Speaker 12: be funny there, but seriously, I've been looking for pre

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Speaker 12: announcements from companies and not seeing them. So I think

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Speaker 12: we're in pretty good shape going into this quarter. I

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Speaker 12: think most companies have set the bar low enough, and

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Speaker 12: kind of like Micron today, I expect companies that are

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Speaker 12: seeing strength for whatever reason. Maybe it's internal, you know,

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Speaker 12: they're capturing market share or just the sector that they're in.

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Speaker 12: I'm thinking that the much anticipated cutting of the S

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Speaker 12: and P five hundred estimate for this year is not

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Speaker 12: going to happen, and if that doesn't happen, investors are

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Speaker 12: going to pay attention and expand their horizons. Out out

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Speaker 12: of the seven names of AI.

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Speaker 2: Yeah, I mean, the earnings really matter. In the case

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Speaker 2: of Nvidia, I know people think in Vidia has gone

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Speaker 2: up every day and it's just gone crazy. It basically

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Speaker 2: went up a lot the day that it announced earnings.

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Speaker 2: It went from three hundred to four hundred. It's barely

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Speaker 2: moved since then, So people are discerning, They're waiting until

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Speaker 2: they see I mean, that day they raised the forecast

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Speaker 2: by fifty percent and it was a massive jump up

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Speaker 2: to more than eleven billion dollars in the next quarter.

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Speaker 2: So the earnings really do matter. And do you think

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Speaker 2: that the earnings will be good across the board or

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Speaker 2: it will basically be focused in some of these pure

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Speaker 2: play companies.

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Speaker 12: Well, especially in the case of AI, I think it

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Speaker 12: will be focused. Now, what I'm banking on is that

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Speaker 12: the tech space is going to expand as the need

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Speaker 12: for data expands and as the applications for AI expand,

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Speaker 12: need for data is going to expand, so that might

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Speaker 12: even mean censors out in the real world world. It

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Speaker 12: is just going to drive a whole bunch of capital

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Speaker 12: expenditures over many, many years. And I would say to

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Speaker 12: investors pace yourself. AI is going to always take longer,

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Speaker 12: or any new technology is always going to take longer

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Speaker 12: to get to its promised point of fruition than you

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Speaker 12: ever expect, but it will get there.

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Speaker 2: I'll save you a question for the next time. We

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Speaker 2: don't have time now, but will AI be bigger than

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Speaker 2: five G? Will it be bigger than the Internet of Things?

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Speaker 2: We got very excited over those things, and we'll save

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Speaker 2: that Kim, for the next time.

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Speaker 3: By the way, we love having you on the program.

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Speaker 2: Thank you, Kim Forrest, Founder and CIO of Booking Capital Partners.

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Speaker 2: This is Bloomberg Daybreak Asia, your morning brief on the

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