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Speaker 1: Good morning.

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Speaker 2: I'm Richard Saloman and I'm Doug Krisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 3: Then we're starting with China, where the largest banks are

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Speaker 3: indeed preparing to cut interest rates on existing mortgages and

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Speaker 3: deposit in an effort to shore up what has been

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Speaker 3: of late a sluggish economy. Bloomberg Joan Wong has details.

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Speaker 1: Sources say the reductions will only affect loans on first homes.

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Speaker 1: Public data shown more than ninety percent of China's outstanding

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Speaker 1: mortgages or for first homes as of July twenty twenty one,

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Speaker 1: while last year that figure is eighty percent. According to

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Speaker 1: the Housing Ministry, the moves are part of a targeted

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Speaker 1: pushed by Beijing to super consumer spending and drive more

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Speaker 1: funds into the socker market. Beijing also hopes to alleviate

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Speaker 1: pressure on lenders profit margins in Hong Kong and join Wan.

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Speaker 2: Bloomberg day Brigaisia, which takes us to China's property crisis.

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Speaker 2: Chinese developer Country Garden has proposed a grace period of

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Speaker 2: forty calendar days for a maturing yuan bond. That story

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Speaker 2: from Bloomberg.

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Speaker 4: Banaiau bondholders are set to vault on the grace period

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Speaker 4: proposal at the end of this month. The bond would

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Speaker 4: otherwise come doe on September fourth. The news comes as

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Speaker 4: it seeks to win creditor supports to stretch payment into

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Speaker 4: twenty twenty six. The season's warning signs from credit markets

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Speaker 4: are adding to broader concerns about the world's second largest economy.

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Speaker 4: If the grace period is granted, it could help country

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Speaker 4: gardens steer away from going into a default in Hong Kong.

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Speaker 4: I'm Bonnie al Bloomberg Daybreak Asia, all.

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Speaker 3: Right, moving to comment sectary Gina Raymondo's trip to Beijing,

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Speaker 3: saying that American business people are telling her China's becoming

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Speaker 3: increasingly uninvestible. Raymondo highlighting many challenges, including ongoing fines and

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Speaker 3: ambiguity over China's new anti espionage law. This is all

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Speaker 3: adding to a lot of existing issues such as intellectual

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Speaker 3: property theft and competing with subsidized Chinese firms. We did

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Speaker 3: have reaction from Max Baucus, the former US ambassador to China,

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Speaker 3: taking issue with Raymondo's comments.

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Speaker 5: I think and a lot of businesses know that if

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Speaker 5: they're smart, if they maintain their business relationships in China.

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Speaker 5: They could probably work out a deal. Now, It's true

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Speaker 5: that it's the climate in China makes it more difficult

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Speaker 5: for US, but I would not say uninvestable. I would

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Speaker 5: just say it's a big risks are greater.

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Speaker 3: That's in Max Bocus from the US Ambassador to China separate.

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Speaker 3: The UK Foreign Secretary James Cleverly is due to arrive

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Speaker 3: in China Wednesday. Cleverly wantes to reset ties between the

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Speaker 3: two countries. He is the most senior British diplomatic visitor

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Speaker 3: in six years.

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Speaker 2: Gray Scale Investments want a key legal fight, and it's

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Speaker 2: pushed to launch the first bitcoin exchange ETF. Here is

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Speaker 2: Bloomberg's Allison Versprill an Apella.

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Speaker 6: Panel of three judges in Washington. They overturned a decision

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Speaker 6: by the US Securities and Exchange Commission to block Greyscale's

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Speaker 6: application to conververt it's bitcoin trust into an exchange trade

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Speaker 6: fund that is back directly by the token. So basically,

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Speaker 6: what the judges said here was that gray Scale presented

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Speaker 6: substantial evidence that its product was similar to bitcoin futures ETFs,

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Speaker 6: which have already been approved by the SEC. They said

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Speaker 6: the SEC's decision to deny the grayscale bitcoin ETF while

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Speaker 6: approving those futures ETFs was arbitrar and precious that the

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Speaker 6: regulator failed to explain, you know, it's different treatment of

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Speaker 6: the similar.

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Speaker 2: Products, that is Bloomberg's Allison Verspriel. By the way, the

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Speaker 2: SEC could appeal this decision, the one that we had

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Speaker 2: today from that judge or the court. I should say

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Speaker 2: bitcoin as much as eight point three percent higher in

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Speaker 2: the US session today.

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Speaker 3: Rashad all right, well, let's have a look at regulator

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Speaker 3: and the regulations. I should say with you as regulators,

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Speaker 3: one thing to hit more banks with new requirements to

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Speaker 3: prepare better for potential failures. And Kates has the details.

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Speaker 7: The FDIC and the Federal Reserve are proposing that banks

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Speaker 7: with as little as one hundred billion dollars in assets

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Speaker 7: be required to issue enough long term debt to cover

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Speaker 7: capital losses and times of severe stress, with the bandates

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Speaker 7: to be phased in over three years. The rapid failure

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Speaker 7: Silicon Valley Bank and Signature Bank in March spotlighted hurdles

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Speaker 7: and oversight for mid sized lenders. The new plan would

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Speaker 7: bring regulations more in line with the scrutiny of Wall

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Speaker 7: Street's largest banks in Washington and Kate's Bloomberg Daybreak Asia.

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Speaker 2: Well, the day's economic news here in the States argued

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Speaker 2: for an end to FED tightening. US consumer confidence fell

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Speaker 2: by the most in two years. This is from the

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Speaker 2: Conference Board. The group's index that are reading of one

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Speaker 2: oh six one this month, that is August, down from

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Speaker 2: one to fourteen in July. Now, the decline in sentiment,

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Speaker 2: I think it's fair to say reflects not only souring

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Speaker 2: views on the labor market, but higher borrowing cost and

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Speaker 2: lingering worries of inflation. Now, the current conditions index from

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Speaker 2: the Conference Board also fell to its lowest level since

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Speaker 2: the month of November. So on top of that, you've

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Speaker 2: got the number now of US job openings at a

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Speaker 2: near two year low. So then you look at the

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Speaker 2: swaps market to get a sense of what the market

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Speaker 2: is betting on when it comes to to the Fed.

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Speaker 2: Fewer bets for a FED rate hike this year and

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Speaker 2: a greater chance of a pivot in FED policy sometime

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Speaker 2: during the first half of twenty four. We'll talk more

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Speaker 2: about markets coming up here on DBA. Right now we

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Speaker 2: go to Global News. Vladimir Putin will venture out of

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Speaker 2: Russia for the first time in months. Dan Schwartzman's here

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Speaker 2: in the Bloomberg newsroom. Danny, Yeah, that's right, Doug.

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Speaker 8: He will be taking his first trip since an arrest

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Speaker 8: warrant was issued for alleged war crimes by the International

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Speaker 8: Criminal Court. He's going to be traveling to China in

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Speaker 8: October for the Belton Wrote form after accepting an invite

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Speaker 8: from Shijinping. Putin hasn't been out of Russia since the

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Speaker 8: warrant was issued in March, except to visit occupied areas

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Speaker 8: of Ukraine. President Biden tounting Medicare's first ever price negotiations

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Speaker 8: for prescription drugs that was authorized under the Inflation Reduction Act.

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Speaker 8: Ten widely used drugs have been named as the first

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Speaker 8: to be negotiated for, with the government looking to gain

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Speaker 8: lower prices. If drug companies do refuse to negotiate, they're

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Speaker 8: going to be taxed heavily. Republican zo have not been

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Speaker 8: on board with Biden's plan, say drug companies may not

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Speaker 8: invest as heavily into new drugs if they can't maximize

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Speaker 8: profits after they spend billions of dollars on research and development.

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Speaker 8: The forecast for Hurricane Dalia continues to get worse. Winds

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Speaker 8: are now expected to reach one hundred and twenty five

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Speaker 8: miles per hour when it hits Florida tomorrow. Currently, Idalia

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Speaker 8: is building strength strengthen the Gulf of Mexico, with winds

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Speaker 8: topping ninety miles per hour right now. The hurricane is

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Speaker 8: expected it at Florida, somewhere above tamp and Clearwater and

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Speaker 8: maybe a bit south of Tallahassee. President Biden talking about

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Speaker 8: the hurricane while hosting Costa Rican President Rodrigo Chavez at

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Speaker 8: the White House.

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Speaker 9: And we're worried about the surge, the ocean surge. We

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Speaker 9: don't know exactly hour to hour we're watching this, but

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Speaker 9: I told the governor to end the mayor and the

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Speaker 9: raisons that are likely to be hit first, that we're

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Speaker 9: there as long as it takes. We're going to make

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Speaker 9: sure they have everything they need.

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Speaker 8: So far, seven hundred and ninety four flights in and

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Speaker 8: out of Tampa have been canceled between today and tomorrow.

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Speaker 8: The victim in yesterday shooting at the University of North

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Speaker 8: Carolina at Chapel Hill has now been identified Ziji Yen,

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Speaker 8: an associate professor in the Department of Applied Physical Sciences

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Speaker 8: in the College of Arts and Science was shot and

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Speaker 8: killed by graduate student Tylee Chi. Yen was listed as cheese.

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Speaker 8: Academic advisor Judge Sherry Morrell outlining the charges against Haylee Chi.

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Speaker 10: Sir, You're also charged with first degree murder, which is

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Speaker 10: a Class A felony and carries a maximum punishment of

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Speaker 10: death and a minimum punishment of life without parole.

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Speaker 8: Classes and events have been canceled on campus till Thursday.

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Speaker 8: The field slightly thinning for the Republican nomination for president

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Speaker 8: Miami mayor Francis Suarez dropping out. Suarez suspended his bid

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Speaker 8: after failing to get on the stage for the first

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Speaker 8: debate last week. The forty five year old was the

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Speaker 8: only Latino candidate in the field, but he was pulling

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Speaker 8: at a meager point two percent Global News twenty four

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Speaker 8: hours a day, powered by more than twenty seven hundred

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Speaker 8: journalists and analysts in more than one hundred and twenty countries.

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Speaker 8: I'm Dan Schwartzman. This is Bloomberg.

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Speaker 2: Let's get to our guest. Katie Kaminsky is with US

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Speaker 2: Katie as chief research Strategist. She's also a portfolio manager

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Speaker 2: at alpha simplex. She joins us from Cambridge, Massachusetts. Katie,

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Speaker 2: thanks for being with us. Are you making the bet

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Speaker 2: that the FED is not only through with it's a

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Speaker 2: interest rate to tightening, but that we're going to get

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Speaker 2: right cut sometime after the first half of let's say

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Speaker 2: twenty four.

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Speaker 11: We're actually kind of in the opposite position. That's why

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Speaker 11: I'm glad you asked that, because we on the technical

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Speaker 11: side have been saying that rates are going to be

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Speaker 11: higher for longer, and we've been the only one saying

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Speaker 11: that for quite some time. So today was rough to

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Speaker 11: be honest.

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Speaker 3: Yeah, So where do we go from here? I mean,

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Speaker 3: what does the the you know, what does the landscape

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Speaker 3: look like in your view of the next couple of years.

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Speaker 11: Well, that's this is why I'm so glad you asked,

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Speaker 11: because we've been seeing more of the longer view that

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Speaker 11: inflation is stickier and that we're actually going to have

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Speaker 11: to wait a little longer for inflation to come down.

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Speaker 11: And I feel like everyone is very much ready for

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Speaker 11: rate cuts faster than we can get them, and they

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Speaker 11: keep pushing them out, and so a day like today

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Speaker 11: it comes out and yes, I do agree, this is

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Speaker 11: an indication that we might be done, but that doesn't

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Speaker 11: mean that inflation is over, and I think that's where

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Speaker 11: there still might be room to have higher rates for

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Speaker 11: a little bit longer than people would still like. What

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Speaker 11: we're talking about positive for equities today.

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Speaker 2: Though we have definitely positive day for equities on the

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Speaker 2: back of those lower yields. So if what you're saying

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Speaker 2: plays out, what's the future look like for the equity market.

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Speaker 11: Well, that's the tricky one. The equity market is sort

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Speaker 11: of trying to peter through get the soft landing where

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Speaker 11: we might have some slightly tougher economic data which may

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Speaker 11: pause the FED. But the truth is the Fed's mandate

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Speaker 11: and they were very clear, is to get inflation down

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Speaker 11: to two percent. So if we're not at two percent,

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Speaker 11: does tougher economic data, does that cause us to wait

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Speaker 11: and tolerate inflation? That's not a good sign for bonds.

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Speaker 11: It might mean that equities enjoy a little bit of

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Speaker 11: positive movement from inflation from a nominal sense, if we

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Speaker 11: can kind of waver through this. So that's where it's

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Speaker 11: a little tricky, is that it's not an obvious negative

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Speaker 11: right away for equities. It just means there's less tightening

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Speaker 11: and hence everybody is happier like what you saw today.

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Speaker 3: Yes, but Katie, the problem here is I mean, and

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Speaker 3: surely this is blindingly obvious. If you've got interest rates

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Speaker 3: on hold because the data is weak, and the data

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Speaker 3: becomes weak really across the board, well, company earnings are

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Speaker 3: going to get hit.

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Speaker 11: That's true. I mean, this is why it's so hard

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Speaker 11: right now. Nobody knows what the playbook is. There's the

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Speaker 11: right and there's the left, and both sides say, you know,

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Speaker 11: if we go too far one direction, it could go

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Speaker 11: in a bad direction. Right, And so I think it

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Speaker 11: feels a little bit like a type rope walk where

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Speaker 11: we're trying to figure out can we have enough tightening

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Speaker 11: so that we can get through this and get inflation

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Speaker 11: down enough without damaging the economy, but then have the

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Speaker 11: equity market still be good enough to invest in and

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Speaker 11: have companies have decent earnings. I mean, that's a tricky place.

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Speaker 11: That's definitely not an easy place to invest.

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Speaker 2: And one of the things I think that the American

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Speaker 2: economy has been benefiting from the fact that China has

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Speaker 2: been essentially exporting deflation. That has certainly helped to some

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Speaker 2: extent I'd like you to weigh in on the China

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Speaker 2: story as you understand it right now, how dire is

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Speaker 2: that situation.

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Speaker 11: Well, I'm glad you asked that, because this month has

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Speaker 11: really felt different recently, it has really felt like the

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Speaker 11: China story, although very disappointing, has felt somewhat decoupled from

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Speaker 11: the US and this month in particular, as you've seen

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Speaker 11: a very difficult August, you've started to see people comment

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Speaker 11: more and more about how there may be some spillover

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Speaker 11: of challenges in China into the US economy. And I

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Speaker 11: think that's where we need to start asking those questions

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Speaker 11: and wondering if some of the challenges there will actually

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Speaker 11: percolate into companies and into demand for the US as well.

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Speaker 11: And I think people have kind of separated those two

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Speaker 11: and that's starting to come up in a lot of

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Speaker 11: questions right now for many different investors.

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Speaker 3: So, Katy, do you have any exposure there? And also

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Speaker 3: perhaps would you or is it for you something which

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Speaker 3: is we've just been talking about uninvestable.

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Speaker 11: Yes, So we've seen what's been interesting for us in

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Speaker 11: terms of China. It's been definitely short signals in the

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Speaker 11: Chinese yuan has been an interesting trade this year, we've

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Speaker 11: seen a relative positioning of the say the A fifty

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Speaker 11: versus some of the US disease has worked well as

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Speaker 11: a relative positioning this year as well. So there has

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Speaker 11: definitely been a lot of opportunities for active investment with

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Speaker 11: this divergence in terms of monetary policy, and also just

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Speaker 11: how conditions have changed have been so different across the globe,

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Speaker 11: So there's definitely been opportunities this year to trade the

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Speaker 11: China versus outside of China narrative.

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Speaker 2: So I want to shift to artificial intelligence. Before you

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Speaker 2: joined Alpha Simplex in twenty eighteen, you were a visiting

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Speaker 2: scientist at the MIT Laboratory for Financial Engineering. It seems

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Speaker 2: to be a safe bet that markets are going to

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Speaker 2: become increasingly reliant on AI, beyond what we already see.

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Speaker 2: When it comes to algorithmic and program trading, both are

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Speaker 2: widely used, and I'm wondering how much longer it's going

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Speaker 2: to take before we get something much more advanced and

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Speaker 2: when trading will essentially be taken out of human hands.

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Speaker 11: This year has indicated it's the hot topic. I mean,

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Speaker 11: AI is so hot this year, and just look at

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Speaker 11: how everybody is so focused on how AI has the

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Speaker 11: potential to change financial markets, to change the outlook of

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Speaker 11: the future. And if you look at indices that are

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Speaker 11: more exposed to AI and other investments, there's been a

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Speaker 11: massive divergence in terms of where that is. And I

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Speaker 11: think that is something that's going to continue, just like

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Speaker 11: some of the big themes we've seen in the past.

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Speaker 11: And I think we don't know because you know, with

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Speaker 11: new technology it's always about, you know, continuing to see it,

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Speaker 11: innovate and follow it. So I think it's going to

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Speaker 11: be exciting and I think there's not just buzz, it's

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Speaker 11: going to be reality.

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Speaker 2: Reality. Katie, we'll leave it there. Thank you so much.

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Speaker 2: Katie Kaminski from Alpha Simplex Group. Joining us here on DBA.

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