WEBVTT - China Bans iPhone Use at Work, Yen Slump Continues

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<v Speaker 1>Good morning. I'm Brian Curtis and I'm Doug Krisner. Here

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<v Speaker 1>are the stories we're following today.

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<v Speaker 2>US service sector activity rising to a six month high

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<v Speaker 2>in August. It was boosted by a pickup in new

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<v Speaker 2>orders and hiring. We heard from ISM Services PMI chair

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<v Speaker 2>Anthony Navis.

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

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<v Speaker 3>We see usually a field waning in the summer months

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<v Speaker 3>as people are on vacation. There's not as much hiring

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<v Speaker 3>until September, which is typically the pivotal month of going

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<v Speaker 3>into the last quarter. And what we see now is

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<v Speaker 3>this is even better than what we've seen pre pandemic

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<v Speaker 3>levels at that August threshold.

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<v Speaker 2>Today's services reading put the pressure on US stocks, the

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<v Speaker 2>S and P five hundred closing below forty five hundred,

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<v Speaker 2>the Nasdaq one hundred falling about one percent.

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<v Speaker 1>We go to the Fed next and the latest Beige

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<v Speaker 1>Book survey on the economy. It shows modest growth now

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<v Speaker 1>in terms of the labor market, while the survey indicates

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<v Speaker 1>a bit of slowing not too surprising in July and August,

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<v Speaker 1>and at the same time, many businesses saying they expect

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<v Speaker 1>wage growth to ease broadly in the near term. So

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

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<v Speaker 1>Saint Louis Fedbank president Jim Bullard says the inflation fight

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<v Speaker 1>isn't over yet.

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<v Speaker 3>It's probably wise from a risk management perspective, and probably

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<v Speaker 3>necessary based on.

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<v Speaker 4>The data that we've gotten, that they keep that extra

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<v Speaker 4>rate hike in there.

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<v Speaker 1>That is Jim Bullard. Meantime, the head of the Boston FED,

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<v Speaker 1>Susan Collins, was saying more tightening may be needed and

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<v Speaker 1>policymakers must be patient as they assess the data.

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<v Speaker 5>Now.

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<v Speaker 1>The FED next gathers September nineteenth and the twentieth Brian Well.

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<v Speaker 2>Authorities in China and Japan are stepping up efforts to

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<v Speaker 2>defend their currencies against the surging US dollar. We've heard

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<v Speaker 2>from Bloomberg's Eddie vanderwaldt we've.

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<v Speaker 6>Seen the dollar rally something like four and a half

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<v Speaker 6>percent from the middle of July right and the dollar

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<v Speaker 6>straights really coming back. That will reverberate across markets. Means

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<v Speaker 6>that people are looking for some sort of haven. I

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<v Speaker 6>think at the moment, though, the driving falls behind the

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<v Speaker 6>narrative is that that we were starting to see the

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<v Speaker 6>risk of inflation coming back, you know, with oil prices

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<v Speaker 6>and so on, and that's feeding through into Asian currencies

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<v Speaker 6>in particular, and it's forced the Bank of Japan to

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<v Speaker 6>talk up the risks of you know, the potential for intervention,

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<v Speaker 6>and it's it's forced in China, you know, a lower

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<v Speaker 6>fixing than people had expected.

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<v Speaker 2>Bloomberg's Eddie vander waht the yen has slumped by nearly

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<v Speaker 2>eight percent versus the greenback since the middle of July,

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<v Speaker 2>and yue is down more than six percent since May.

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<v Speaker 2>Trading here for the offshore at seven thirty two oh

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<v Speaker 2>four and Doug that's getting pretty close to the monthly

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<v Speaker 2>low of about seven thirty four. The PBOC doesn't say

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

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

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<v Speaker 1>Exports and imports probably both fell in the month of August,

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<v Speaker 1>as China experienced a lot more in the way of

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<v Speaker 1>pressure on growth. Bloomberg's has more from Hong Kong.

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<v Speaker 7>Economists say exports likely fell nine point nine percent year

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<v Speaker 7>on year in the months. That would be a narrower

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<v Speaker 7>decline than the fourteen and a half percent drop in July.

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<v Speaker 7>Analysts say it's largely due to a lower base of

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<v Speaker 7>comparison from last year, when exports started to slow visibly. Meanwhile,

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<v Speaker 7>a steeper decline in imports is expected because of softening

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

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<v Speaker 7>across the board, weakness and trade would underline the need

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<v Speaker 7>for broader and more forceful policy support in Hong Kong

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<v Speaker 7>and joined one Bloomberg Radio Well.

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<v Speaker 2>Apple suffered its worst stock decline in a month, dropping

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<v Speaker 2>three point six percent in this latest session. It followed

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<v Speaker 2>a report that the Chinese government is barring staff from

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<v Speaker 2>using the company's iPhones at work. We get more here

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<v Speaker 2>from Bloomberg's ed La blow the.

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<v Speaker 8>Wall Street Journal reporting that some central agencies in China

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<v Speaker 8>have issued directives via chat rooms and in meetings that

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<v Speaker 8>they should replace their mobile device in the event it

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<v Speaker 8>is a foreign device, not just an Apple iPhone, but

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<v Speaker 8>a non domestic device. I would say remember that Bloomberg

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<v Speaker 8>reported in May of last year that Beijing offered a

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<v Speaker 8>two year deadline or term limit for state corporations and

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<v Speaker 8>indeed government agencies to swap out their foreign brand personal

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<v Speaker 8>computers for a domestic brand, so this is not necessarily

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<v Speaker 8>an unprecedented move.

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<v Speaker 2>That's bloomberg ed Ludlow. Apple's iPhones are among China's bestsellers

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<v Speaker 2>and are common in both the government and private sector.

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<v Speaker 2>And if you missed it, as we mentioned, Apple shares

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<v Speaker 2>down more than three and a half percent in New York.

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<v Speaker 1>Well state side of US lawmakers is saying Chinese chip

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<v Speaker 1>makers SMICK may have violated sanctions by supplying components to Huawei.

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<v Speaker 1>The story from Bloomberg's Baniau in Hong Kong.

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<v Speaker 9>US Congressman Michael McColl says SMIC Warren's investigation. This news

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<v Speaker 9>comes after s SMIC and Huawei recently built a seven

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<v Speaker 9>nanometer processor to power Huawei's latest smartphone. Existing rules require

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<v Speaker 9>any company that intends to supply Huawei with US technology

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<v Speaker 9>to get approval from Washington. It's unclear whether SMIC has

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<v Speaker 9>a US license to supply Huawei in Hong Kong. I'm

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<v Speaker 9>Bonnie Al Bloomberg Radio.

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<v Speaker 2>I'm Brian Curtis along with Doug Christner and Rashad Salama

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<v Speaker 2>will be joining us in a few moments, so Doug

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<v Speaker 2>in that service's data the price is paid component moving

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<v Speaker 2>up a couple of points there, so that wasn't too

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<v Speaker 2>pleasing to investors. If you put that together with the

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<v Speaker 2>higher oil price, all of a sudden you've got these

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<v Speaker 2>new concerns now about whether this will nudge the FED

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<v Speaker 2>off of hold So that's something we can talk about

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<v Speaker 2>with Steve Matthews coming up in a few moments, Bloomberg's

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<v Speaker 2>Economics Reporter.

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<v Speaker 1>The other thing you have to consider is whether or

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<v Speaker 1>not these higher rates are going to add more stress

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<v Speaker 1>to the financial system, and there was an interesting piece

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<v Speaker 1>from Bloomberg Intelligence indicating that US regional banks may need

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<v Speaker 1>to raise significant amount of additional debt to comply with

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<v Speaker 1>new regulatory requirements. We're talking about sixty three billion worth.

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<v Speaker 1>This would be new holding company debt on the part

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<v Speaker 1>of eighteen regional lenders, and this extra capital might not

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<v Speaker 1>be enough, in the words of bi to prevent future failures.

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<v Speaker 2>Yeah, it's very interesting, and it also brings me back

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<v Speaker 2>to that story you mentioned yesterday about the reduction in

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<v Speaker 2>the Fed's balance sheet by more than a trillion dollars.

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<v Speaker 2>That's also something we talked to to Steve about a

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<v Speaker 2>couple of other stories that we'll get to a little

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<v Speaker 2>bit later. Morgan Stanley is now returning to its parish

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<v Speaker 2>view on emerging markets, particularly em currencies, and of course

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<v Speaker 2>it's citing China. Another story. Sources say Great Wall Motor

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<v Speaker 2>is looking to sell at stake in Smult Energy Technologies

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<v Speaker 2>that's a battery maker, and its IPO might be delayed,

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<v Speaker 2>and that's part of the broader story, Doug, that China

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<v Speaker 2>is slowing IPOs to try to help its markets.

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<v Speaker 1>And you pointed out on our production call earlier, Brian,

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<v Speaker 1>that Oak Tree Capital Management co founder Howard Marx was

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<v Speaker 1>expecting more companies to default on their debt. That's interesting

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<v Speaker 1>as well.

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<v Speaker 2>Yeah, absolutely, time now for global news. Asian leaders have

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<v Speaker 2>expressed disappointment over the absence of President Joe Biden at

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<v Speaker 2>the summit. Let's get to head boxer in San Francisco

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<v Speaker 2>in the nine sixty newsroom ed.

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<v Speaker 10>Yeah, that officially will appear in the statement released after

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<v Speaker 10>the summit. Meanwhile, the US has sent Vice President Kamala

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<v Speaker 10>Harris saying economic growth in the region is paramount.

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<v Speaker 11>You have made it a priority for Asian to deliver

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<v Speaker 11>concrete results with a particular emphasis on economic growth, and

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<v Speaker 11>you have been a strong partner as we work to

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<v Speaker 11>restore ian Mar's.

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<v Speaker 10>Path to plagcy and Chinese primarily. Chang highlighted China's strong

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<v Speaker 10>ties with Southeast Asia during the meetings, saying asion has

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<v Speaker 10>challenged by isn't challenged by increasingly complicated geopolitical landscape. He

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<v Speaker 10>also saw some talk about the differences between China and

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<v Speaker 10>Japan on the release of the treated wastewater from Fukushima,

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<v Speaker 10>Japan's Prime Minister of Fumio Kishita saying the utmost attention

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<v Speaker 10>of safety is being paid, and Chinese President Lee saying

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<v Speaker 10>that Japan needs to consult more closely with neighbors regarding

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<v Speaker 10>safety and feelings in the region. It looks very much

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<v Speaker 10>as if US President Joe Biden is cleared ahead of

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<v Speaker 10>the G twenty and India tomorrow. White House spokesman Kareein

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<v Speaker 10>Jean Pierre here with the latest COVID test.

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<v Speaker 5>The President tested negative for COVID nineteen this morning, following

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<v Speaker 5>negative tests on Monday night and also yesterday. He is

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<v Speaker 5>not experiencing any symptoms, which of course is a good thing.

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<v Speaker 10>First, Lady Jill continues to recover from COVID in their

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<v Speaker 10>home in Delaware. A group of voters in Colorado is

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<v Speaker 10>suing to block Donald Trump from state ballots in twenty

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<v Speaker 10>twenty four because of his efforts to overturn the results

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<v Speaker 10>of the election in twenty twenty. They say it is

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<v Speaker 10>a constitutional issue. A federal judge has ruled that Donald

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<v Speaker 10>Trump is liable is liable for defeidning E Jean Carroll

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<v Speaker 10>while he was president. What this means is that on

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<v Speaker 10>damages will be decided only in the jury trial in January.

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<v Speaker 10>Mean while in Georgia, Judge McAfee has denied a request

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<v Speaker 10>to separate co defendants Kenneth Chesbro and Sidney Powell and

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<v Speaker 10>ordered them to stand trial together.

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

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<v Speaker 12>the severance from mister Chesboro or Powell is necessary to

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<v Speaker 12>achieve a fair determination of the guilty innocence for either

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<v Speaker 12>defendant in this case.

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<v Speaker 10>So the date sat. October twenty third. Justice Department is

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<v Speaker 10>planning to file charges against Hunter Biden Bloomberg's Nancy Lyons

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<v Speaker 10>as the update.

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<v Speaker 13>An indictment of Hunter Biden is expected by the end

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<v Speaker 13>of the month. That's according to documents filed in a

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<v Speaker 13>Delaware court by Special counsel David Weiss. Biden the son

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<v Speaker 13>of President Biden, had agreed in principle to plead guilty

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<v Speaker 13>to federal tax charges and enter a pre trial diversion

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<v Speaker 13>agreement related to a gun charge, but that plea deal

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<v Speaker 13>collapse back in July. Prosecutor have not specified what charges

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<v Speaker 13>they intend to file against the president's son. Nancy Lyons

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<v Speaker 13>Bloomberg Radio.

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<v Speaker 10>All right, thank you, Nancy. Global News powered by more

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<v Speaker 10>than twenty seven hundred journalists and list in over one

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

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<v Speaker 10>and this is Bloomberg.

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<v Speaker 2>This is Bloomberg Daybreak Asia, normally hosted out of Hong

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<v Speaker 2>Kong and New York, but today Los Angeles and San Francisco,

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<v Speaker 2>with our Doug Prisner there and Rashad Salama in Hong

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<v Speaker 2>Kong joining us now in the program. And our guest

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<v Speaker 2>is Steve Matthews, Bloomberg Economics reporter Steve O. Wise one.

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<v Speaker 2>I know that there are thousands of tiles in this

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<v Speaker 2>FED mosaic, but all of a sudden now, I mean,

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<v Speaker 2>even with the complexity, it seems like with the prices

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<v Speaker 2>paid component in the services data, with the oil price

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<v Speaker 2>ticking up, that it looks like the FED pause may

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<v Speaker 2>be threatened.

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<v Speaker 4>Is that the case, Well, the pause is definitely not

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<v Speaker 4>threatened for September. I think they have clearly signaled that

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<v Speaker 4>they're on pause this month. I think the real question

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<v Speaker 4>is what happens in November. And there's still a lot

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<v Speaker 4>of time to go. So, yes, you're going to get

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<v Speaker 4>some higher inflation figures with higher oil prices. Uh, you know,

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<v Speaker 4>and there is considerable worry, as you quoted Jim Bullard

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<v Speaker 4>of the formerly the Saint Louis FED earlier saying, you know,

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<v Speaker 4>they might pencil in one more rate hike, and that

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<v Speaker 4>seems to be very plausible. I mean, they had one

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<v Speaker 4>more hike in when they did the last set of

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<v Speaker 4>forecasts in June, and they may want to keep that

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<v Speaker 4>option open for November. And the rate rate markets have

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<v Speaker 4>suggested that there's a higher possibility of a hike in

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<v Speaker 4>November than there was even you know, in the last

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<v Speaker 4>few days, because you've just been getting really strong data,

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<v Speaker 4>including today's im services data which showed you know, the

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<v Speaker 4>services sectors looking pretty strong.

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<v Speaker 10>Yeah, but Steve, you know, with every bit of data,

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<v Speaker 10>you get something which contradicts it.

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<v Speaker 2>And as to a certain extent, the Fed base book

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<v Speaker 2>did that.

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<v Speaker 4>Yeah, you you are absolutely correct. I mean the base

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

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<v Speaker 4>if you look at economic surprise indexes, which measure is

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<v Speaker 4>the economic data the real data coming in, you know,

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

0:12:31.880 --> 0:12:35.360
<v Speaker 4>better than expectations. And you know, you have the Atlanta

0:12:35.400 --> 0:12:40.600
<v Speaker 4>Feds GDP tracker suggesting that you could get five percent

0:12:40.679 --> 0:12:43.120
<v Speaker 4>or more growth. You know, it's early in the quarter,

0:12:43.240 --> 0:12:46.760
<v Speaker 4>so it could could easily and almost certainly come down,

0:12:47.240 --> 0:12:50.880
<v Speaker 4>but you know, it's consistent with a very strong quarter.

0:12:51.320 --> 0:12:53.640
<v Speaker 4>And then the base book comes out and which is

0:12:53.720 --> 0:12:59.680
<v Speaker 4>basically just anecdotal reports from the twelve districts of the

0:12:59.720 --> 0:13:03.520
<v Speaker 4>Fed banks, and it's pretty downbeat. It's you know, the

0:13:04.160 --> 0:13:09.800
<v Speaker 4>growth is modest, and consumers are under pressure, and you know,

0:13:09.960 --> 0:13:15.640
<v Speaker 4>wages are headed lower, so all of the if it

0:13:15.679 --> 0:13:19.040
<v Speaker 4>was just the basebook, it would be very consistent with

0:13:19.120 --> 0:13:22.320
<v Speaker 4>a dubbish outcome and no more hikes. But the real

0:13:22.400 --> 0:13:23.920
<v Speaker 4>data is coming in stronger.

0:13:24.080 --> 0:13:26.920
<v Speaker 2>So if we see stronger news is good news now

0:13:27.040 --> 0:13:30.600
<v Speaker 2>bad news for markets, both the stock and bond markets.

0:13:31.120 --> 0:13:33.920
<v Speaker 4>I'm not sure it's that clear because I think what

0:13:34.480 --> 0:13:39.840
<v Speaker 4>in the end, what they're really targeting is inflation. There

0:13:39.920 --> 0:13:43.160
<v Speaker 4>is a belief among the FED leadership that it's going

0:13:43.240 --> 0:13:47.320
<v Speaker 4>to take below trend growth to get inflation back to

0:13:47.400 --> 0:13:51.800
<v Speaker 4>their two percent target. However, you know, that's just a

0:13:51.880 --> 0:13:56.280
<v Speaker 4>tactic if they if inflation comes down on its own,

0:13:56.600 --> 0:13:59.120
<v Speaker 4>And you know, there are a lot of economists who

0:13:59.160 --> 0:14:03.400
<v Speaker 4>believe that inflation was artificially lifted by COVID and the

0:14:03.440 --> 0:14:08.320
<v Speaker 4>responses to COVID and all the fiscal spending which is

0:14:08.360 --> 0:14:13.160
<v Speaker 4>all kind of winding down. You know, there's entirely a

0:14:13.240 --> 0:14:16.559
<v Speaker 4>possibility that maybe they don't need to go higher, maybe

0:14:16.600 --> 0:14:19.200
<v Speaker 4>they just keep at a high level for longer. So

0:14:20.000 --> 0:14:22.560
<v Speaker 4>I think there's a clear debate. And when you listen

0:14:22.600 --> 0:14:25.080
<v Speaker 4>to the Fed officials, you know, on the one hand,

0:14:25.080 --> 0:14:28.600
<v Speaker 4>you have people like Boston Goolsby and the Chicago and

0:14:28.680 --> 0:14:33.240
<v Speaker 4>Rafael Bostik of Atlanta, who are pretty clearly saying, not

0:14:33.320 --> 0:14:35.760
<v Speaker 4>go so fast, we don't necessarily need to do more.

0:14:36.120 --> 0:14:38.480
<v Speaker 4>And then there's an entire another element.

0:14:39.280 --> 0:14:41.760
<v Speaker 2>Yeah, there is that other element. But I was surprised

0:14:41.800 --> 0:14:44.040
<v Speaker 2>to see yesterday and we played the comments from Christopher

0:14:44.040 --> 0:14:47.080
<v Speaker 2>Waller quite a bit that he's crossed over to perhaps

0:14:47.120 --> 0:14:49.640
<v Speaker 2>pausing and assessing. Steve, thank you for joining the Steve

0:14:49.680 --> 0:14:55.480
<v Speaker 2>Matthews Bloomberg Economics Reporter. This is Bloomberg Daybreak Asia, your

0:14:55.480 --> 0:14:58.280
<v Speaker 2>morning brief on the story's making news from Hong Kong

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