Speaker 1: This is Bloomberg Daybreak Asia for this Wednesday, February eighth
Speaker 1: in Hong Kong, Tuesday February seven in New York, and
Speaker 1: coming up today, US equities rally after fetchare J. Powell's.
Speaker 1: The remarks were less aggressive than feared by traders. Pallas's
Speaker 1: interest rates need to keep rising if a strong labor
Speaker 1: market persists, and Zoom will cut fifteen percent of its
Speaker 1: workers as the service adapts to slower growth. The US
Speaker 1: has China, refuses a call to discuss the balloon bounding
Speaker 1: Biden to address China and the US economy and state
Speaker 1: of the Union. Turkeeper claims emergency powers and the wake
Speaker 1: of the twin quakes. I'm at Baxter with Global News.
Speaker 1: The liv Golf series reveals some stunning financial news. Dan
Speaker 1: Schwartz been I'll have that story more coming up in
Speaker 1: Bloomberg Sports. That's all Straight Ahead on Bloomberg Daybreak Asia
Speaker 1: on Bloomberg eleven and three on New York, Bloomberg Washington,
Speaker 1: d C, Bloomberg one O six one, Boston, Bloomberg nine sixties,
Speaker 1: sent frances Go Syrius Exam one nineteen and around the
Speaker 1: world on Bloomberg Radio dot Com and via the Bloomberg
Speaker 1: Business app. Good morning, I'm Doug Prisoner and I'm Brian Curtiz.
Speaker 1: Here are the stories we're following today. The market seemingly
Speaker 1: a little bit out of step with exactly what j
Speaker 1: Pali said. He said that additional rate hikes will be
Speaker 1: needed to bring down inflation, and he said the Fed's
Speaker 1: key rate, the terminal rate, may need to peak above
Speaker 1: a level previously expected. Here's Pal speaking with David Rubinstein
Speaker 1: at the Economic Club of Washington. The labor market report
Speaker 1: for January, it kind of shows you why we think
Speaker 1: that this will be a process that takes a significant
Speaker 1: period of time. The labor markets extraordinarily strong. If we
Speaker 1: continue to get, for example, strong labor market reports or
Speaker 1: higher higher inflation reports, it may well be the case
Speaker 1: that we have to do more in race Hight likes
Speaker 1: more than this price. Then. Pal also said that we
Speaker 1: are seeing the early stages of disinflation. However, he acknowledged
Speaker 1: he's probably going to be a bumpy ride ahead. Pal
Speaker 1: said he will likely take until next year for the
Speaker 1: FED to reach its two percent inflation target. And before
Speaker 1: the Powell interview, the head of the Minneapolis Fed, Neil Cash,
Speaker 1: Cary was saying policymakers need to keep hiking rates. Here's
Speaker 1: cash Cary speaking on CNBC two. Were surprised by the
Speaker 1: big jobs number. It tells me that so far we're
Speaker 1: not seeing much of an imprint of our tightening to
Speaker 1: date on the labor market. There's some evidence that it's
Speaker 1: having some effect, but it's pretty muted so far. So
Speaker 1: I haven't seen anything yet to lower my rate path.
Speaker 1: Right now, I'm still at around five point four percent.
Speaker 1: If I had to pick a number today, I'll do
Speaker 1: where I was in December, alright, five point four and
Speaker 1: cash Cary went on to say no one should overreact
Speaker 1: to any singular report. He also said the underlying strength
Speaker 1: of the services sector he is still very robust. We
Speaker 1: were talking about the I s M Services Index coming
Speaker 1: in way above estimates US Friday. Cash Cary thinks that's
Speaker 1: where many FED officials are now focusing their attention. Brian
Speaker 1: to Corporate News, a company that benefited from pandemic air
Speaker 1: lockdowns is now slashing jobs. That story from Bloombridge Tom Busby.
Speaker 1: With so many more workers back at the office, there's
Speaker 1: not as much demand for video conferencing calls and now
Speaker 1: Zoom Video Communication says it's cutting thirteen hundred jobs that's
Speaker 1: about fift of its workforce because of slowing growth, and
Speaker 1: CEO Eric Yuan, who said in a blog post that
Speaker 1: he's accountable for the company's recent struggles, says they'll take
Speaker 1: a pay cut and forego his annual bonus. Shares of
Speaker 1: Zoom rose nearly ten percent in trading on Tuesday. Tom
Speaker 1: Busby Bloomberg Daybreak Asia. We are told at Meta Platforms
Speaker 1: is asking many of its managers and directors to transition
Speaker 1: to jobs as individual contributors or leave the company. We
Speaker 1: have more from Bloomberg's Charlie Pellett. Those sources say the
Speaker 1: process is known internally as a flattening. Higher level managers
Speaker 1: are sharing the directive with their subordinates incoming weeks, separate
Speaker 1: from the company's regular performance reviews that are currently underway. Meata,
Speaker 1: which owns Facebook and Instagram, fired thirtent of its workforce
Speaker 1: in November during its first major layoff, and sources say
Speaker 1: in the months since, staff of faced intense anxiety about
Speaker 1: the potential for future cuts. In New York, Charlie Pellett
Speaker 1: Bloomberg Daybreak Asia, Soft Bank posted a net loss of
Speaker 1: seven eighty three point four billion yen or five point
Speaker 1: nine billion dollars for the December quarter. Analysts had been
Speaker 1: projecting profit of more than two hundred five billion yen
Speaker 1: more from Bloomberg's David and Glaze. The key factor was
Speaker 1: the Vision Fund. It has reported losses for four straight quarters.
Speaker 1: The fund lost six hundred sixty billion yen on declining
Speaker 1: valuations for companies in its investment portfolio. Now, to make
Speaker 1: matters worse, the founder Masayoshi saw On skipped the earnings
Speaker 1: call for the first time one record first off bank.
Speaker 1: One of the keys to reigniting investment activity lies in
Speaker 1: a successful I p O for ARM, that's the chip
Speaker 1: design firm Sawn acquired back in. Saan says he wants
Speaker 1: to focus on that task and that's why he'd skipped
Speaker 1: the call. Analysts are skeptical. Saan says he still thinks
Speaker 1: ARM can become the largest I p O by a
Speaker 1: chip company ever. In Hong Kong. I'm David and Glass
Speaker 1: bloom brig Day Brick Asia coming up in a few moments.
Speaker 1: We will be chatting with Kin Pung, who is investment
Speaker 1: strategies that city Private Bank Asia Pacific with us right
Speaker 1: here in our studios in Hong Kong, Doug. I like
Speaker 1: that data point you brought out about the earnings that
Speaker 1: would seem to be a little bit positive for the bulls.
Speaker 1: Here's another interesting read that if you look at inflation
Speaker 1: year on year, it really doesn't tell you all that
Speaker 1: much because you know who cares really what was happening
Speaker 1: last year. The rolling three month core CPI is ump
Speaker 1: about three at an annualized rate, and that's almost a two.
Speaker 1: And remember what cash Cary had to say the lag
Speaker 1: effect here on the FED rate hikes that are already
Speaker 1: in the pipeline. A lot of this has not really
Speaker 1: impacted the labor market yet. Information tech, I know we've
Speaker 1: talked about it. It's been very hard hit. I think
Speaker 1: that the total number of job cuts in the information
Speaker 1: tech space since the beginning of the year right now
Speaker 1: is probably just under around seventy thousand. There will be
Speaker 1: more job losses, guarantee it. And we just cannot know,
Speaker 1: um what the future holds in terms of the data.
Speaker 1: And it was interesting to hear Pal talking about how
Speaker 1: he's basically responding to the data and we all should
Speaker 1: be doing that and not not placed too much hope
Speaker 1: in what we expect the future holds all right, it
Speaker 1: is time now for global news. The Pentagon says China
Speaker 1: has cut off communication regarding the balloon downing by US
Speaker 1: forces at Baxter has global news in the nine sixty
Speaker 1: News from San Francisco, and yeah, that's exactly right, Brian.
Speaker 1: The Pentagon saying that try has rebuffed all efforts by
Speaker 1: Defense Secretary Lloyd Austin, especially when he tried to set
Speaker 1: up a call with Defence Minister Wave Fun. The Pentagon
Speaker 1: says the call was made right after the shootdown, but
Speaker 1: in a statement now, it says the PCR has declined
Speaker 1: any requests. The US says it wants to maintain open
Speaker 1: lines of communication in his State of the Union addressed,
Speaker 1: and I President Joe Biden will of course have to
Speaker 1: address foreign relations, the war in Ukraine, which coincidentally broke
Speaker 1: out right before last year's speech, and then the international
Speaker 1: balloon incident with China. Republican Congressman Steve Sleey says that
Speaker 1: Republicans are watching with a very critical eye, saying the
Speaker 1: Bid administration acted much too late on the balloon. It
Speaker 1: was still flying on its path, so it was getting
Speaker 1: some kind of data from somewhere to nowhere to go?
Speaker 1: Are you telling me it wasn't also sending information back
Speaker 1: during that path? Should have never been allowed to complete
Speaker 1: its mission. It's never been allowed to start its mission.
Speaker 1: The Biden administration's past responses that it couldn't be shot
Speaker 1: down over land. We'll watched for tonight. He's also expected
Speaker 1: to to call for a minimum tax on billionaires and
Speaker 1: to quadruple the levy on stock buybacks. He's intending to
Speaker 1: walk the line addressing public concerns in the US and
Speaker 1: trying to install a feeling of optimism about the future.
Speaker 1: Congresswoman Deborah Ross, Democrat from North Carolina, on Bloomberg's Balance
Speaker 1: of Power Today, says the address will show the president
Speaker 1: is a dynamic fighter. We were in the middle of
Speaker 1: a global pandemic. We had an insurrection at the Capitol.
Speaker 1: I mean, when has that happened? Both of those things
Speaker 1: at the same time. But despite that, the Biden administration
Speaker 1: really fought back to get people back to work, back
Speaker 1: to school. She says, accomplishments and plans for the future.
Speaker 1: A Bloomberg coverage begins at eight thirty Wall Street Time
Speaker 1: on all Bloomberg platforms. We will have it for you,
Speaker 1: of course. On Daybreak Asia sounds of frantic searchers looking
Speaker 1: for possible survivors in the quake in Turkey. The latest
Speaker 1: death toll count now is over six thousand, with more
Speaker 1: than eleven thousand buildings damaged, with people still trapped in
Speaker 1: freezing temperatures. Thirteen point four million people live in the
Speaker 1: areas affected by the quakes, and Turkey has declared a
Speaker 1: three month state of emergency rules and although not disclosing
Speaker 1: any specific threat for the super Bowl, Homeland Security Secretary
Speaker 1: Alejandro Majorca says they prepare for and an imaginable scenario.
Speaker 1: We have our personnel from our countering weapons of mass
Speaker 1: destruction office, chemical and biological threats have depleted. The individuals
Speaker 1: have deployed uh their equipment to make sure that the
Speaker 1: air is save in secure. He says, no specific credible
Speaker 1: threat against the super Bowl, but they need to be
Speaker 1: prepared in every way. Global News powered by more than
Speaker 1: journalists and analysts and over one d twenty countries in
Speaker 1: San Francisco, I'm d Baxter and this is Bloomberg. This
Speaker 1: is Bloomberg Break Asia and Brian Curtis along with Rashad
Speaker 1: Salama and our guest is Kinpung, investment strategist at City
Speaker 1: Private Bank Asia Pacific. So can for the markets, the
Speaker 1: FED was your adversary last year. This year, it's not
Speaker 1: except that premise or rejected. I think that's acceptable. Um.
Speaker 1: We've seen Chairman Powell UM do some flip flops over
Speaker 1: the years. Right. Remember you know quantitative tightening was on autopilot.
Speaker 1: Remember inflation was transitory, and so so this is UM
Speaker 1: an opportunity for him to do so again. And I
Speaker 1: think by March the level of CPI will be below
Speaker 1: that of the fit funds, right, and that I think
Speaker 1: opens up a little window. UM. As we go through
Speaker 1: the second quarter, the level of his CPI will become
Speaker 1: significantly below that of the fit funds rate. So I
Speaker 1: think now that doesn't necessarily encourage him to cut rates,
Speaker 1: but I think it definitely opens up the room to
Speaker 1: pause again. Absolutely, And you know, you look at that
Speaker 1: job's reports to really throw the spanner in the works
Speaker 1: and just showing the ser strength of the US econing,
Speaker 1: which he acknowledged in that interview that he conducted that Tuesday.
Speaker 1: And the point being if we do get let's say
Speaker 1: we went fifty basis points next in March. We're not
Speaker 1: gonna feel that for a year because the transmission mechanisms
Speaker 1: and have got such a lag between the tight monetary
Speaker 1: policy and what we're seeing. That's right, Well, if he
Speaker 1: will fifty, I think we'll feel feel pretty immediately. Um
Speaker 1: But but I think I think, yeah, you're right that
Speaker 1: the type the amount of tiding that was done last year,
Speaker 1: it's not fully reflected in um in markets, in the
Speaker 1: econ economic data just yet. And also with regards to
Speaker 1: that payrolls reports, I think what the pandemic has done
Speaker 1: is to make a lot of these seasonal adjustments obsolete, right.
Speaker 1: Um So, so in the last month in January there
Speaker 1: was actually one have million job losses, but seasonal just
Speaker 1: been added three million, and so you know we're probably
Speaker 1: going to see some payback of that in February when
Speaker 1: season adjustment will subtract a million, and this is probably
Speaker 1: gonna be fewer unadjusted job gains. So in any case,
Speaker 1: I feel the five seventeen thousand was was was kind
Speaker 1: of absurdly strong and we shouldn't be taking that at
Speaker 1: its um you know, phase value. So you're actually pretty bullish,
Speaker 1: you like the China recovery. You like a bear market
Speaker 1: in the dollar to continue or to push forward, and
Speaker 1: you like investment grade bonds. Um, let me put a
Speaker 1: data point out there that Doug mentioned, which is kind
Speaker 1: of interesting that more than half of the companies in
Speaker 1: the SMP five reported and earnings have dropped. They've dropped
Speaker 1: two point eight percent though from a year earlier, and
Speaker 1: that's less than the three point three percent that was
Speaker 1: expected before the earning season began. It's by no means
Speaker 1: great because earnings are coming down, but uh and they're
Speaker 1: coming down at a time when rates are still going up.
Speaker 1: But it's not the big story that we thought it
Speaker 1: would be. Right. Um, So rewind to last October, the
Speaker 1: consensus for fourth quarter earnings was plus four something like that.
Speaker 1: So so basically the consensus number came down by seven
Speaker 1: percentage points before this earning season started. And so you know, basically,
Speaker 1: you know, before each earning season there's a few months
Speaker 1: of downward adjustments to earning the expectations so that the
Speaker 1: companies can actually beat by a little bit. The margin
Speaker 1: of beats is the smallest for since the pandemics in
Speaker 1: the initial pandemic, and uh far smaller than the average
Speaker 1: one average beats that we've seen over the past ten
Speaker 1: years or so. So so basically you know that there's
Speaker 1: it's it's losing some someone, but the bears have hung
Speaker 1: their hat on. You know, this is gonna be one
Speaker 1: of the biggest drops in earning. You listen to Mike
Speaker 1: Wilson and Morgan sound the biggest drop in earnings we've
Speaker 1: ever seen and that sort of thing. That's not actually
Speaker 1: what's happening. No, I wouldn't think it's gonna be the biggest. Uh.
Speaker 1: We're looking like sometime percent drop um, probably not carried
Speaker 1: over the full year um. But you know that's not
Speaker 1: being factored into consensus expectations yet, right. Consensus expectations basically
Speaker 1: looking for the media recovery in the first quarter, and
Speaker 1: I think that's two optimistic still. It's about forward guidance,
Speaker 1: and that has been really patchy in terms of positivity. Okay, okay,
Speaker 1: let's talk a little bit about some some of the
Speaker 1: moves out here in Asia. Interestingly, last week we had
Speaker 1: to sell off in in some Chinese stocks. We had
Speaker 1: the NaSTA Golden Dragon Index and also the Tech index
Speaker 1: here in Hong Kong and basically MSCI China moving down
Speaker 1: a little bit, so they were taking profits I suppose,
Speaker 1: or were they expressing some fear about the reopening Ken No,
Speaker 1: I think it's it's profit taking. I mean, you know,
Speaker 1: prior to that little correction, we're almost six up, you
Speaker 1: know when you're looking at MSCI China from the end
Speaker 1: of October and so so that's that's quite quite a
Speaker 1: lot to uh to take in. Um. I think the
Speaker 1: recovery has just begun, right, we're seeing you know, for example,
Speaker 1: after the Chinese New Year, the mobility indicators like road
Speaker 1: traffic and subway ridership are back to basically pre pandemic
Speaker 1: levels um and so so, so that momentum is still going.
Speaker 1: And another thing that is very important is that last
Speaker 1: year Chinese households accumulated some fifteen trillion woman buh. That's
Speaker 1: like that's two and a half trillion US dollars worth
Speaker 1: of new deposits. Right. Some of that money was supposed
Speaker 1: to go to property, but then people are afraid of
Speaker 1: incomplete projects. Some of that money came out of stocks
Speaker 1: and bonds, and a lot of that money was meant
Speaker 1: to be spent, but I couldn't, so all three of
Speaker 1: those things what happened this year? Right though there will
Speaker 1: be more spending, you've already seen some of that, um,
Speaker 1: and I think more influence to equity markets, and so
Speaker 1: we have not seen that yet. Again, Okay, they do
Speaker 1: have all that money. The thing is Chinese uh consumes
Speaker 1: our savers as well. Let's them forget that, the big
Speaker 1: time savers. Sure, but you know the thing is you
Speaker 1: mentioned households that you know, we've got a house. Perhaps
Speaker 1: there's been a fundamental shift in household confidence in residential
Speaker 1: real estate. I mean there's a declining population and then
Speaker 1: we've got a real estate infantry with a hundred twenty
Speaker 1: two million square meters available in the ten largest cities.
Speaker 1: I mean, these things are good to be played out
Speaker 1: in people's minds. They are aware of this and it
Speaker 1: has a wealth effect. Yes, certainly so, um, those who
Speaker 1: all have have had that a little bit hidden on
Speaker 1: the on the price. It wasn't dramatic because there were
Speaker 1: simply that that many transactions last year. UM. But now
Speaker 1: these how to digest these inventories are basically convincing buyers
Speaker 1: that they will be completed. I think that would be
Speaker 1: a first good step. UM. Now, that's uh, developer financing
Speaker 1: is back. I don't think that the incomplete projects is
Speaker 1: going to be as big a problem this year. And
Speaker 1: to be honest, you know, we thought that the real
Speaker 1: estate sector was perhaps over capacity, you know, before the
Speaker 1: pandemic hit um and and now that capacity has shrunk
Speaker 1: by perhaps right. So so there there's a little bit
Speaker 1: recovered to be done just to get back to something
Speaker 1: that that that would have been considered normal. We talk
Speaker 1: a lot about geopolitical tensions between the US and China.
Speaker 1: I was looking over the trade numbers for last year
Speaker 1: two record. Okay, it was pretty pretty astonishing, up close
Speaker 1: to seven billion dollars in total trade between the two countries.
Speaker 1: That's not adjusted for inflation, but but that's still a
Speaker 1: pretty big number at a time when relations are not
Speaker 1: all that good. Is that a good sign or does
Speaker 1: it mean that we moved down from here? It just
Speaker 1: means that divorces are very always difficult. Sorry, and then
Speaker 1: it's just it's it's kind of hard to figure out
Speaker 1: exactly which ties to keep, which ones do to sever,
Speaker 1: um and so so I think this is a testament
Speaker 1: that's um, well, you saw a little bit of increasing
Speaker 1: in US exports of China and quite a bit of
Speaker 1: increasing Chinese Chinese exports to the US. So basically that
Speaker 1: the the exports that China would have absorbed are not
Speaker 1: allowed to happen. And so so I think this is um,
Speaker 1: it's not really inconsistent with about geo political situation. UM,
Speaker 1: but I do think that um, it's a good thing.
Speaker 1: That's this divorce, this decoupling is uh is more difficult
Speaker 1: to achieve. Ken, what's your biggest concern that you get
Speaker 1: from clients and tell me how do you then responded
Speaker 1: and what is the strategy? Very very briefly, sure, So
Speaker 1: the concern with regards to the U S is that is,
Speaker 1: are we really getting into a recession? What if rates
Speaker 1: have to go much higher? Um? Well, I think I
Speaker 1: think that's that's a big, an important question. But I
Speaker 1: think we aside from payrolls, just about every other indicator
Speaker 1: is pointing that's the U S economy is weakening and
Speaker 1: the later um, this recession hits, uh, it'll probably be deeper. Right.
Speaker 1: So so so I think I think the um, uh,
Speaker 1: you know, I think that's that's the that's that's the
Speaker 1: first message we have is basically the FED needs to
Speaker 1: pause and UM, and that will be positive for the
Speaker 1: for the boom market. Final question in thirty seconds or so,
Speaker 1: we didn't get to investment grade bonds. You like them
Speaker 1: where and in what industry? Sure? I think this is
Speaker 1: basically we we like the in the investment grade space
Speaker 1: UM above above the triple beast right because in a
Speaker 1: in a potential recession, we're likely to see more downgrades
Speaker 1: UM and the potential for UM for short term right
Speaker 1: three year and under yields to fall is significant, and
Speaker 1: so we like that segment of the curve. This is
Speaker 1: Bloomberg Daybreak Asia, your morning brief on this story is
Speaker 1: making news from Hong Kong to Singapore and Wall Street.
Speaker 1: Look for us on your podcast feed every day on Apple, Spotify,
Speaker 1: and anywhere else you get your podcast. You can also
Speaker 1: listen live each day on Bloomberg eleven three oh in
Speaker 1: New York, Bloomberg ninety nine one in Washington, Bloomberg one
Speaker 1: oh six one in Boston, in Bloomberg nine sixty in
Speaker 1: San Francisco. Our flagship New York station is also available
Speaker 1: on your Amazon Alexa devices. Just say Alexa play Bloomberg
Speaker 1: eleven thirty plus Listen Coast to coast on the Bloomberg
Speaker 1: Business app, Sirius XM Channel one nineteen, the I Heart
Speaker 1: Radio app, and on Bloomberg dot Com. I'm Brian Curtis
Speaker 1: and I'm Doug Prisoner. Join us again tomorrow for all
Speaker 1: the news you need to start your day right here
Speaker 1: on Bloomberg Daybreak Asia