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Speaker 1: Good morning. I'm Brian Curtis and I'm Doug Krisner. Here

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Speaker 1: are the stories we're following today.

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Speaker 2: US service sector activity rising to a six month high

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Speaker 2: in August. It was boosted by a pickup in new

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Speaker 2: orders and hiring. We heard from ISM Services PMI chair

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Speaker 2: Anthony Navis.

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Speaker 3: I think this is actually better than what we've seen historically.

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Speaker 3: We see usually a field waning in the summer months

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Speaker 3: as people are on vacation. There's not as much hiring

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Speaker 3: until September, which is typically the pivotal month of going

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Speaker 3: into the last quarter. And what we see now is

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Speaker 3: this is even better than what we've seen pre pandemic

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Speaker 3: levels at that August threshold.

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Speaker 2: Today's services reading put the pressure on US stocks, the

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Speaker 2: S and P five hundred closing below forty five hundred,

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Speaker 2: the Nasdaq one hundred falling about one percent.

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Speaker 1: We go to the Fed next and the latest Beige

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Speaker 1: Book survey on the economy. It shows modest growth now

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Speaker 1: in terms of the labor market, while the survey indicates

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Speaker 1: a bit of slowing not too surprising in July and August,

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Speaker 1: and at the same time, many businesses saying they expect

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Speaker 1: wage growth to ease broadly in the near term. So

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Speaker 1: what does this mean for the Fed's path. Well, Former

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Speaker 1: Saint Louis Fedbank president Jim Bullard says the inflation fight

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Speaker 1: isn't over yet.

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Speaker 3: It's probably wise from a risk management perspective, and probably

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Speaker 3: necessary based on.

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Speaker 4: The data that we've gotten, that they keep that extra

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Speaker 4: rate hike in there.

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Speaker 1: That is Jim Bullard. Meantime, the head of the Boston FED,

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Speaker 1: Susan Collins, was saying more tightening may be needed and

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Speaker 1: policymakers must be patient as they assess the data.

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Speaker 5: Now.

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Speaker 1: The FED next gathers September nineteenth and the twentieth Brian Well.

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Speaker 2: Authorities in China and Japan are stepping up efforts to

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Speaker 2: defend their currencies against the surging US dollar. We've heard

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Speaker 2: from Bloomberg's Eddie vanderwaldt we've.

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Speaker 6: Seen the dollar rally something like four and a half

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Speaker 6: percent from the middle of July right and the dollar

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Speaker 6: straights really coming back. That will reverberate across markets. Means

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Speaker 6: that people are looking for some sort of haven. I

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Speaker 6: think at the moment, though, the driving falls behind the

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Speaker 6: narrative is that that we were starting to see the

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Speaker 6: risk of inflation coming back, you know, with oil prices

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Speaker 6: and so on, and that's feeding through into Asian currencies

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Speaker 6: in particular, and it's forced the Bank of Japan to

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Speaker 6: talk up the risks of you know, the potential for intervention,

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Speaker 6: and it's it's forced in China, you know, a lower

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Speaker 6: fixing than people had expected.

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Speaker 2: Bloomberg's Eddie vander waht the yen has slumped by nearly

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Speaker 2: eight percent versus the greenback since the middle of July,

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Speaker 2: and yue is down more than six percent since May.

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Speaker 2: Trading here for the offshore at seven thirty two oh

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Speaker 2: four and Doug that's getting pretty close to the monthly

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Speaker 2: low of about seven thirty four. The PBOC doesn't say

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Speaker 2: too much, but you know that they're feeling it a bit.

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Speaker 1: Most definitely, we've moved to the Chinese trade data next.

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Speaker 1: Exports and imports probably both fell in the month of August,

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Speaker 1: as China experienced a lot more in the way of

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Speaker 1: pressure on growth. Bloomberg's has more from Hong Kong.

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Speaker 7: Economists say exports likely fell nine point nine percent year

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Speaker 7: on year in the months. That would be a narrower

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Speaker 7: decline than the fourteen and a half percent drop in July.

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Speaker 7: Analysts say it's largely due to a lower base of

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Speaker 7: comparison from last year, when exports started to slow visibly. Meanwhile,

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Speaker 7: a steeper decline in imports is expected because of softening

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Speaker 7: domestic demand, and that's likely being squeezed by the housing slump. Overall,

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Speaker 7: across the board, weakness and trade would underline the need

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Speaker 7: for broader and more forceful policy support in Hong Kong

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Speaker 7: and joined one Bloomberg Radio Well.

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Speaker 2: Apple suffered its worst stock decline in a month, dropping

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Speaker 2: three point six percent in this latest session. It followed

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Speaker 2: a report that the Chinese government is barring staff from

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Speaker 2: using the company's iPhones at work. We get more here

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Speaker 2: from Bloomberg's ed La blow the.

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Speaker 8: Wall Street Journal reporting that some central agencies in China

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Speaker 8: have issued directives via chat rooms and in meetings that

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Speaker 8: they should replace their mobile device in the event it

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Speaker 8: is a foreign device, not just an Apple iPhone, but

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Speaker 8: a non domestic device. I would say remember that Bloomberg

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Speaker 8: reported in May of last year that Beijing offered a

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Speaker 8: two year deadline or term limit for state corporations and

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Speaker 8: indeed government agencies to swap out their foreign brand personal

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Speaker 8: computers for a domestic brand, so this is not necessarily

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Speaker 8: an unprecedented move.

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Speaker 2: That's bloomberg ed Ludlow. Apple's iPhones are among China's bestsellers

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Speaker 2: and are common in both the government and private sector.

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Speaker 2: And if you missed it, as we mentioned, Apple shares

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Speaker 2: down more than three and a half percent in New York.

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Speaker 1: Well state side of US lawmakers is saying Chinese chip

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Speaker 1: makers SMICK may have violated sanctions by supplying components to Huawei.

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

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Speaker 9: US Congressman Michael McColl says SMIC Warren's investigation. This news

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Speaker 9: comes after s SMIC and Huawei recently built a seven

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Speaker 9: nanometer processor to power Huawei's latest smartphone. Existing rules require

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Speaker 9: any company that intends to supply Huawei with US technology

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Speaker 9: to get approval from Washington. It's unclear whether SMIC has

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Speaker 9: a US license to supply Huawei in Hong Kong. I'm

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Speaker 9: Bonnie Al Bloomberg Radio.

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Speaker 2: I'm Brian Curtis along with Doug Christner and Rashad Salama

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Speaker 2: will be joining us in a few moments, so Doug

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Speaker 2: in that service's data the price is paid component moving

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Speaker 2: up a couple of points there, so that wasn't too

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Speaker 2: pleasing to investors. If you put that together with the

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Speaker 2: higher oil price, all of a sudden you've got these

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Speaker 2: new concerns now about whether this will nudge the FED

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Speaker 2: off of hold So that's something we can talk about

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Speaker 2: with Steve Matthews coming up in a few moments, Bloomberg's

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Speaker 2: Economics Reporter.

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Speaker 1: The other thing you have to consider is whether or

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Speaker 1: not these higher rates are going to add more stress

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Speaker 1: to the financial system, and there was an interesting piece

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Speaker 1: from Bloomberg Intelligence indicating that US regional banks may need

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Speaker 1: to raise significant amount of additional debt to comply with

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Speaker 1: new regulatory requirements. We're talking about sixty three billion worth.

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Speaker 1: This would be new holding company debt on the part

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Speaker 1: of eighteen regional lenders, and this extra capital might not

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Speaker 1: be enough, in the words of bi to prevent future failures.

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Speaker 2: Yeah, it's very interesting, and it also brings me back

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Speaker 2: to that story you mentioned yesterday about the reduction in

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Speaker 2: the Fed's balance sheet by more than a trillion dollars.

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Speaker 2: That's also something we talked to to Steve about a

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Speaker 2: couple of other stories that we'll get to a little

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Speaker 2: bit later. Morgan Stanley is now returning to its parish

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Speaker 2: view on emerging markets, particularly em currencies, and of course

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Speaker 2: it's citing China. Another story. Sources say Great Wall Motor

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Speaker 2: is looking to sell at stake in Smult Energy Technologies

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Speaker 2: that's a battery maker, and its IPO might be delayed,

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Speaker 2: and that's part of the broader story, Doug, that China

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Speaker 2: is slowing IPOs to try to help its markets.

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Speaker 1: And you pointed out on our production call earlier, Brian,

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Speaker 1: that Oak Tree Capital Management co founder Howard Marx was

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Speaker 1: expecting more companies to default on their debt. That's interesting

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Speaker 1: as well.

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Speaker 2: Yeah, absolutely, time now for global news. Asian leaders have

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Speaker 2: expressed disappointment over the absence of President Joe Biden at

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Speaker 2: the summit. Let's get to head boxer in San Francisco

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Speaker 2: in the nine sixty newsroom ed.

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Speaker 10: Yeah, that officially will appear in the statement released after

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Speaker 10: the summit. Meanwhile, the US has sent Vice President Kamala

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Speaker 10: Harris saying economic growth in the region is paramount.

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Speaker 11: You have made it a priority for Asian to deliver

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Speaker 11: concrete results with a particular emphasis on economic growth, and

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Speaker 11: you have been a strong partner as we work to

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Speaker 11: restore ian Mar's.

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Speaker 10: Path to plagcy and Chinese primarily. Chang highlighted China's strong

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Speaker 10: ties with Southeast Asia during the meetings, saying asion has

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Speaker 10: challenged by isn't challenged by increasingly complicated geopolitical landscape. He

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Speaker 10: also saw some talk about the differences between China and

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Speaker 10: Japan on the release of the treated wastewater from Fukushima,

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Speaker 10: Japan's Prime Minister of Fumio Kishita saying the utmost attention

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Speaker 10: of safety is being paid, and Chinese President Lee saying

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Speaker 10: that Japan needs to consult more closely with neighbors regarding

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Speaker 10: safety and feelings in the region. It looks very much

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Speaker 10: as if US President Joe Biden is cleared ahead of

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Speaker 10: the G twenty and India tomorrow. White House spokesman Kareein

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Speaker 10: Jean Pierre here with the latest COVID test.

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Speaker 5: The President tested negative for COVID nineteen this morning, following

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Speaker 5: negative tests on Monday night and also yesterday. He is

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Speaker 5: not experiencing any symptoms, which of course is a good thing.

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Speaker 10: First, Lady Jill continues to recover from COVID in their

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Speaker 10: home in Delaware. A group of voters in Colorado is

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Speaker 10: suing to block Donald Trump from state ballots in twenty

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Speaker 10: twenty four because of his efforts to overturn the results

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Speaker 10: of the election in twenty twenty. They say it is

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Speaker 10: a constitutional issue. A federal judge has ruled that Donald

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Speaker 10: Trump is liable is liable for defeidning E Jean Carroll

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Speaker 10: while he was president. What this means is that on

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Speaker 10: damages will be decided only in the jury trial in January.

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Speaker 10: Mean while in Georgia, Judge McAfee has denied a request

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Speaker 10: to separate co defendants Kenneth Chesbro and Sidney Powell and

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Speaker 10: ordered them to stand trial together.

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Speaker 12: So, based on what's been presented today, I'm not finding

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Speaker 12: the severance from mister Chesboro or Powell is necessary to

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Speaker 12: achieve a fair determination of the guilty innocence for either

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Speaker 12: defendant in this case.

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Speaker 10: So the date sat. October twenty third. Justice Department is

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Speaker 10: planning to file charges against Hunter Biden Bloomberg's Nancy Lyons

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Speaker 10: as the update.

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Speaker 13: An indictment of Hunter Biden is expected by the end

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Speaker 13: of the month. That's according to documents filed in a

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Speaker 13: Delaware court by Special counsel David Weiss. Biden the son

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Speaker 13: of President Biden, had agreed in principle to plead guilty

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Speaker 13: to federal tax charges and enter a pre trial diversion

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Speaker 13: agreement related to a gun charge, but that plea deal

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Speaker 13: collapse back in July. Prosecutor have not specified what charges

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Speaker 13: they intend to file against the president's son. Nancy Lyons

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Speaker 13: Bloomberg Radio.

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Speaker 10: All right, thank you, Nancy. Global News powered by more

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Speaker 10: than twenty seven hundred journalists and list in over one

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Speaker 10: hundred and twenty countries. In San Francisco, I'm Had Baxter,

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Speaker 10: and this is Bloomberg.

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Speaker 2: This is Bloomberg Daybreak Asia, normally hosted out of Hong

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Speaker 2: Kong and New York, but today Los Angeles and San Francisco,

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Speaker 2: with our Doug Prisner there and Rashad Salama in Hong

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Speaker 2: Kong joining us now in the program. And our guest

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Speaker 2: is Steve Matthews, Bloomberg Economics reporter Steve O. Wise one.

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Speaker 2: I know that there are thousands of tiles in this

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Speaker 2: FED mosaic, but all of a sudden now, I mean,

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Speaker 2: even with the complexity, it seems like with the prices

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Speaker 2: paid component in the services data, with the oil price

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Speaker 2: ticking up, that it looks like the FED pause may

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Speaker 2: be threatened.

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Speaker 4: Is that the case, Well, the pause is definitely not

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Speaker 4: threatened for September. I think they have clearly signaled that

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Speaker 4: they're on pause this month. I think the real question

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Speaker 4: is what happens in November. And there's still a lot

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Speaker 4: of time to go. So, yes, you're going to get

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Speaker 4: some higher inflation figures with higher oil prices. Uh, you know,

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Speaker 4: and there is considerable worry, as you quoted Jim Bullard

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Speaker 4: of the formerly the Saint Louis FED earlier saying, you know,

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Speaker 4: they might pencil in one more rate hike, and that

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Speaker 4: seems to be very plausible. I mean, they had one

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Speaker 4: more hike in when they did the last set of

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Speaker 4: forecasts in June, and they may want to keep that

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Speaker 4: option open for November. And the rate rate markets have

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Speaker 4: suggested that there's a higher possibility of a hike in

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Speaker 4: November than there was even you know, in the last

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Speaker 4: few days, because you've just been getting really strong data,

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Speaker 4: including today's im services data which showed you know, the

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Speaker 4: services sectors looking pretty strong.

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Speaker 10: Yeah, but Steve, you know, with every bit of data,

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Speaker 10: you get something which contradicts it.

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Speaker 2: And as to a certain extent, the Fed base book

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Speaker 2: did that.

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Speaker 4: Yeah, you you are absolutely correct. I mean the base

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Speaker 4: book is kind of a puzzle because it's like, you know,

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Speaker 4: if you look at economic surprise indexes, which measure is

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Speaker 4: the economic data the real data coming in, you know,

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Speaker 4: higher or lower than expectations. It's coming in strong, way

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Speaker 4: better than expectations. And you know, you have the Atlanta

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Speaker 4: Feds GDP tracker suggesting that you could get five percent

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Speaker 4: or more growth. You know, it's early in the quarter,

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Speaker 4: so it could could easily and almost certainly come down,

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Speaker 4: but you know, it's consistent with a very strong quarter.

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Speaker 4: And then the base book comes out and which is

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Speaker 4: basically just anecdotal reports from the twelve districts of the

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Speaker 4: Fed banks, and it's pretty downbeat. It's you know, the

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Speaker 4: growth is modest, and consumers are under pressure, and you know,

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Speaker 4: wages are headed lower, so all of the if it

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Speaker 4: was just the basebook, it would be very consistent with

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Speaker 4: a dubbish outcome and no more hikes. But the real

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Speaker 4: data is coming in stronger.

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Speaker 2: So if we see stronger news is good news now

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Speaker 2: bad news for markets, both the stock and bond markets.

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Speaker 4: I'm not sure it's that clear because I think what

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Speaker 4: in the end, what they're really targeting is inflation. There

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Speaker 4: is a belief among the FED leadership that it's going

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Speaker 4: to take below trend growth to get inflation back to

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Speaker 4: their two percent target. However, you know, that's just a

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Speaker 4: tactic if they if inflation comes down on its own,

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Speaker 4: And you know, there are a lot of economists who

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Speaker 4: believe that inflation was artificially lifted by COVID and the

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Speaker 4: responses to COVID and all the fiscal spending which is

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Speaker 4: all kind of winding down. You know, there's entirely a

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Speaker 4: possibility that maybe they don't need to go higher, maybe

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Speaker 4: they just keep at a high level for longer. So

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Speaker 4: I think there's a clear debate. And when you listen

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Speaker 4: to the Fed officials, you know, on the one hand,

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Speaker 4: you have people like Boston Goolsby and the Chicago and

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Speaker 4: Rafael Bostik of Atlanta, who are pretty clearly saying, not

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Speaker 4: go so fast, we don't necessarily need to do more.

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Speaker 4: And then there's an entire another element.

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Speaker 2: Yeah, there is that other element. But I was surprised

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Speaker 2: to see yesterday and we played the comments from Christopher

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Speaker 2: Waller quite a bit that he's crossed over to perhaps

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Speaker 2: pausing and assessing. Steve, thank you for joining the Steve

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Speaker 2: Matthews Bloomberg Economics Reporter. This is Bloomberg Daybreak Asia, your

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Speaker 2: morning brief on the story's making news from Hong Kong

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