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Speaker 1: This is Bloomberg Daybreak Asia for this Thursday, March twenty

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Speaker 1: third in Hong Kong, Wednesday March twenty second in New

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Speaker 1: York and coming up today, The Fed signals it's not

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Speaker 1: done raising interest rates despite the recent turmoil in the

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Speaker 1: banking industry. Tracery Secretary Janet Yellen says the US is

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Speaker 1: not considering providing blanket deposit insurance to stabilize the banking system.

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Speaker 1: Ten cent resumed slim growth given a jump in online

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Speaker 1: ad revenue. The US budget calls for eighteen percent increase

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Speaker 1: in funds for Indo China defense against China. China verbally

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Speaker 1: attacks ACCUS nuclear powered subdeal while furthering a deal with

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Speaker 1: Russia to develop neutron reactors. I'm at Baxter with Global News.

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Speaker 1: That's all straight ahead on Bloomberg Daybreak Asia, the business

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Speaker 1: news you need to start your day in just one

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Speaker 1: fifteen minute podcast available on Apples, Spotify, the Bloomberg Business

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Speaker 1: app and everywhere you get your podcasts. Good morning, I'm

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Speaker 1: Do Prisoner and I'm Brian Curtis. Here are the stories

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Speaker 1: we're following today. The Fed raising interest rates by twenty

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Speaker 1: five basis points for a second straight time, to a

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Speaker 1: range of four and three quarters to five percent. The

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Speaker 1: hike was in line with most economists and traders expectations,

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Speaker 1: and the action is a sign that the FED appears

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Speaker 1: confident the US economy is healthy enough to withstand the

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Speaker 1: collapse of three regional banks. FED Chair J Powell saying

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Speaker 1: that officials aren't prepared to raise rates higher if needed.

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Speaker 1: I think for now, though we see the likelihood of

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Speaker 1: credit tightening, we know that that can have an effect

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Speaker 1: on the macroeconomy, on demand, on labor market, on inflation,

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Speaker 1: and we're going to be watching to see what that is.

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Speaker 1: Pal said it's too soon to tell what the economic

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Speaker 1: impact of the recent banking turmoil is, but he emphasized

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Speaker 1: that the US banking system is sound and resilient, and

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Speaker 1: the FED is prepared to use all of its tools

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Speaker 1: to maintain stability except LEAFED policymakers projected that interest rates

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Speaker 1: would end at about five point one percent in twenty

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Speaker 1: twenty three. That's unchanged from their median estimate about the

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Speaker 1: last round of forecasts back in December. The dot plot,

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Speaker 1: along with today's rate hike, signals the FED is not

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Speaker 1: done in raising borrowing couts. So here comes their critique

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Speaker 1: now from Bloomberg opinion columnist and former New York Fed

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Speaker 1: President Bill Dudley, he thinks the American economy is in

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Speaker 1: a worse place than it was two weeks ago. Here's

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Speaker 1: Dudley speaking earlier with Bloomberg. Certainly has gone up, Certainly

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Speaker 1: has gone up a lot, and I think it's sort

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Speaker 1: of interesting that markets are not really fully focused on

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Speaker 1: that because the risk of a hard landing is higher

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Speaker 1: now because the Fed isn't going to really know what's

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Speaker 1: the appropriate policy to do until they get a lot

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Speaker 1: more information, and it's going to time for that information

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Speaker 1: to be received, and it's not gonna be very easy

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Speaker 1: to assess how are these banking was going to affect

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Speaker 1: credit conditions and how much is that are going to

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Speaker 1: affect economic growth. Well, if you look at the swaps

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Speaker 1: market right now, it's an indication that there is a

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Speaker 1: slightly greater than fifty percent probability that the Fed will

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Speaker 1: add another twenty five basis points to a tightening in May,

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Speaker 1: so one more rate hike. Perhaps. Expectations for cuts, though,

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Speaker 1: have deepened. The market is now suggesting that the effective

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Speaker 1: Fed funds rate will decline by December to around four

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Speaker 1: point one eight percent now today. When ask about that

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Speaker 1: FED share j Powell said cuts aren't something he's expecting

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Speaker 1: this year. And you know, it's interesting, Doug, that we

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Speaker 1: had the Treasury Secretary Janet Yellen speaking at the same

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Speaker 1: time that Powell was conducting his news briefing, and Yellen

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Speaker 1: said that regulators are not looking to provide blanket deposit

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Speaker 1: insurance to stabilize the banking system. It was in response

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Speaker 1: to a question from lawmakers about whether protections would be

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Speaker 1: provided to all US deposits. Here's Yellen speaking before a

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Speaker 1: Senate subcommittee. It's important to be clear shareholders and deadholders

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Speaker 1: of the filled banks are not being protected by the government,

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Speaker 1: and no losses from the resolution of these banks are

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Speaker 1: being borne by the taxpayer. Deposit protection is provided by

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Speaker 1: the Deposit Insurance Fund, which is funded by fees on

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Speaker 1: insured banks. Yellen said that the heads of the recently

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Speaker 1: failed American lenders should be held accountable for their actions earlier.

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Speaker 1: She said that the United States is prepared to take

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Speaker 1: further actions to protect depositors if smaller lenders are threatened.

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Speaker 1: Her staff is now studying ways to temporarily raise the

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Speaker 1: Federal insurance cap above two hundred and fifty thousand dollars

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Speaker 1: without congressional approval in the event that the banking crisis

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Speaker 1: grows well. Speaking of regional lenders, PacWest Bankcorp. Is shoring

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Speaker 1: up its liquidity now. This is in reaction to customers

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Speaker 1: pulling twenty percent of their deposits from the bank since

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Speaker 1: the beginning of the year. Pac West is now obtained

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Speaker 1: about one point four billion dollars from a financial facility

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Speaker 1: from the investment firm Atlas SP Partners. We got reaction

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Speaker 1: earlier from Bruce Richards. He is the CEO of Marathon

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Speaker 1: Asset Management. PacWest can go to the FED and go

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Speaker 1: to fillholme On Bank and borrow money and und'll be

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Speaker 1: had given the huge deposit outflow, But for assets to

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Speaker 1: defend fillholme On Bank will take That's where Atlas is

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Speaker 1: filled up void. They need more and more capital, and

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Speaker 1: what they really should be doing is raising equity capital,

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Speaker 1: and I don't believe they're able to raise the equitycapali

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Speaker 1: need to be recapitalized. Pac West, by the way, has

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Speaker 1: been one of those banks reeling since the collapse of

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Speaker 1: those three regional lenders that we've been talking about. That

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Speaker 1: began earlier in this month. Yes, it's been the sudden

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Speaker 1: surge and customer withdrawals that have led the bank into

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Speaker 1: this position. By the way, PacWest chairs so far this month,

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Speaker 1: Brian are down fifty eight percent. Well, there was some

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Speaker 1: other business going on as well. Ten cents US shares

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Speaker 1: rallying after the company said that revenue edged higher following

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Speaker 1: two quarters of contraction. Let's get that story from Bloomberg's

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Speaker 1: Eric Lamb. Revenue only gained one percents, but online advertising

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Speaker 1: sales did jump fifteen percents in the December quarter. That's

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Speaker 1: as the company's TikTok style video feature drew in marketers.

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Speaker 1: Revenue came in at twenty one billion dollars, helped in

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Speaker 1: part by a one time gain from the selling of

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Speaker 1: Matuan shares. The games were offset though by a weaker

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Speaker 1: showing in fintech, domestic games and the company's cloud business.

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Speaker 1: Still ten cents, top executives are upbeat, playing up prospects

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Speaker 1: for international gaming and AI this year, ten cents usadr

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Speaker 1: has gained almost two percents. In Hong Kong. I'm Eric

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Speaker 1: Lamb Bloomberg day Break Asia. I'm Brian Curtis along with

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Speaker 1: Doug Christener. Doug, as you mentioned, there's still some uncertainty.

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Speaker 1: Powell emphasizing that the banking system was sound and resilient.

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Speaker 1: Yet at the same time, the FED is doing a

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Speaker 1: thorough investigation of what happened at Silicon Valley Bank, and

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Speaker 1: he didn't want to say too much about that because

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Speaker 1: they don't know or they don't want to guess exactly

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Speaker 1: what that investigation will reveal. It's worth asking the question.

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Speaker 1: Does not sugg modest conflict. You're acting as though one

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Speaker 1: thing is true while admitting you don't know for sure.

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Speaker 1: Perhaps it may be a little too early to make

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Speaker 1: that call, though. But the other thing I think to

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Speaker 1: consider when we're talking about a considerable amount of uncertainty

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Speaker 1: lingering the question of how much the disruptions that we

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Speaker 1: have seen within the banking system so far will tighten

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Speaker 1: lending conditions and slow the economy and, by extension, Brian

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Speaker 1: really maybe bring the rate of inflation down. So, even

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Speaker 1: though the FED is kind of sticking to its guns

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Speaker 1: at this point and projecting another rate increase, maybe as

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Speaker 1: soon as May, I think that there are things happening

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Speaker 1: under the hood that really may be leading the market

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Speaker 1: to doubt that position and to consider the likeli or

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Speaker 1: the higher probability of rate cuts before the end of

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Speaker 1: the year. Yeah, I was thinking about that for sure,

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Speaker 1: in that if you have tightening credit conditions, as he said,

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Speaker 1: for both business and households, that is tightening over and

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Speaker 1: above the twenty five basis points they did today. So

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Speaker 1: what do we really get today? Was it a fifty?

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Speaker 1: I think that's just a fair point. Yeah, yeah, it's

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Speaker 1: it's a funny way of looking at things. And then

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Speaker 1: you also had the comments from Yelling, which sort of,

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Speaker 1: you know, offset a little bit. At the time that

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Speaker 1: those comments fed through, the market was in a relatively

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Speaker 1: stable place and then started heading lower. And we didn't

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Speaker 1: get any resolution on the First Republic story today and

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Speaker 1: Fitch today moving the credit rating on First Republic down

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Speaker 1: a notch to single B from double B. The stock

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Speaker 1: was off fifteen percent. Yeah, it's it's a very very

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Speaker 1: uncertain period. All right, It's time now for global news.

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Speaker 1: US Secretary of State Anthony Blincol says the State Department

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Speaker 1: needs its full request filled to find threats from China

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Speaker 1: and Russia. Let's get to the bottom of that and

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Speaker 1: get to ed Baxter in the San Francisco nine sixty

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Speaker 1: news Room ed Yeah, Brian talking Bud Jet Blanken in

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Speaker 1: front of the Senator Appropriations Committee, says the eleven percent

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Speaker 1: increase overall is needed to tackle the immediate acute threat

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Speaker 1: posed by Russia's autocracy and China. Long term, it will

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Speaker 1: strengthen our efforts to outcompete the PRC. President Biden is

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Speaker 1: firmly committed to advancing a free and open into a Pacific,

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Speaker 1: which is why this proposal asks for an eighteen percent

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Speaker 1: increase in our budget for that region over FY twenty three.

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Speaker 1: B Lincoln says the globe's democracies have galvanized around the

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Speaker 1: threat China poses to global freedom, and in particular the

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Speaker 1: threat to supply lethal weapons to Russia. I hope is

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Speaker 1: that China, having heard not just from US, but from

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Speaker 1: many countries, including countries with which it's trying to hurry

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Speaker 1: more favorable relations, that it heard them and heard us

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Speaker 1: and will not cross that line. Media response from Senator

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Speaker 1: Lindsey Graham to the budget increases, well, it's a tough sell,

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Speaker 1: directly saying I don't think the market will bear that.

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Speaker 1: Graham suggested separate direct funding for efforts to restrain China.

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Speaker 1: China's lamb based at the AUCUS effort to supply nuclear

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Speaker 1: powered subs to Australia. Beijing's ambassador the IAEA says it

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Speaker 1: will undercut efforts to stop the spread of weapons and

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Speaker 1: nuclear fuel globally. Meanwhile, during the sheepoutin summit, both countries

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Speaker 1: say they are deepening their cooperation on their commitment to

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Speaker 1: develop the so called fast neutron reactors. The US says

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Speaker 1: that could upset the global balance of nuclear weapons, and

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Speaker 1: the US and South Korea are planning their largest effort

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Speaker 1: live fire drill for June. During this global banking crisis,

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Speaker 1: finding solutions are more and more finding banking intertwined with

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Speaker 1: geopolitics and ultimately just plain old politics. Bloomberg's editor in

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Speaker 1: chief John Micklethwaite says a different pattern towards solutions. The

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Speaker 1: last time there was a big crisis, when banks stepped

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Speaker 1: in to take over things and move things around, it

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Speaker 1: was against the background of firstly, people saying this is

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Speaker 1: just a temporary measure, and secondly against the background where China,

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Speaker 1: the EU, and the US rule working together. Now you've

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Speaker 1: got regional trade blokes. Yeah, John says the essence is

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Speaker 1: demonstrated in US leadership now. I think a big reason

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Speaker 1: why Silicon Valley Bank was taken over because it was

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Speaker 1: seen as the main supporter to a strategically vital industry. Yeah,

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Speaker 1: John says, really opens the door to capitalism's new era.

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Speaker 1: And Florida Governor Rhonda Santis, so watching the polls grow

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Speaker 1: in strength for Donald Trump, as it has especially among Republicans,

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Speaker 1: has chosen now to start to fight back. And he selected, well,

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Speaker 1: he selected the Piers Morgan Show from the Sanctimonius or

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Speaker 1: meat Bull Rock. Well, I can't even he went off

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Speaker 1: meat Bull Rock. I can't. I don't know how to

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Speaker 1: spell the sanctimonius. I don't really know what it means.

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Speaker 1: But you know, I kind of like it's long, it's

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Speaker 1: got a lot of valve that means. So we go

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Speaker 1: with that. That's fine. You know, you can call me

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Speaker 1: and you can call me whatever you want. I mean,

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Speaker 1: just as long as you, you know, also call me

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Speaker 1: a winner. Huh. Global News powered by more than twenty

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Speaker 1: seven hundred journalists and listen over one hundred and twenty countries.

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Speaker 1: In San Francisco, I'm at Baxter, this is Bloomberg, this

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Speaker 1: is Bloomberg Day Breakasia. I'm Brian Curtis in Hong Kong,

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Speaker 1: and our guest for the next fifteen twenty minutes is

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Speaker 1: Sarah Ponzac, private bank Wealth Management, financial advisor at UBS. Sarah,

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Speaker 1: on one level, it's pretty simple. Inflation is too high

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Speaker 1: and the Fed raised interest rates for the ninth consecutive meeting.

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Speaker 1: But under the hood, well it's complicated. How do you

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Speaker 1: read those complications? You're absolutely right. You mentioned the word

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Speaker 1: uncertainty earlier in the show, and even though the Federal

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Speaker 1: Reserve did exactly what it was expected to do today,

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Speaker 1: all that really came out of the meeting is that

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Speaker 1: we have more uncertainty if we can even believe that

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Speaker 1: over the past couple of weeks, in the past year,

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Speaker 1: you know, the markets had opened the door for the

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Speaker 1: Federal Reserve to move forwards with the twenty five basis

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Speaker 1: point rate hike. So the Fed walked through. They took

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Speaker 1: that from the market and they went ahead and they

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Speaker 1: raised the target range to four point seven five to

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Speaker 1: five percent. And at the same time, if you look

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Speaker 1: at the dot plot of rate forecast for where rates

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Speaker 1: are going to end the end of twenty twenty three,

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Speaker 1: secondary the median estimate remained the same at just a

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Speaker 1: little bit above five percent. But what really became a

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Speaker 1: bit different is that one Powell noted that everything going

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Speaker 1: on in the banking sector can lead to more skirtness

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Speaker 1: lending standards and that could henceforth lead to tighter financial conditions.

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Speaker 1: But then he said, you know, we also don't yet

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Speaker 1: know the extent of this, and then he also added

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Speaker 1: to that that we could see the possibility of some

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Speaker 1: additional tightening its need be. So you have two forces,

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Speaker 1: you know, fighting with each other here, one inflation which

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Speaker 1: is still very elevated, and then too, everything going on

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Speaker 1: in the banking industry, which you know many do believe

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Speaker 1: as well as us over at EBS that could lead

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Speaker 1: to you tighter, tighter lending standards and could eventually lead

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Speaker 1: to a recession down the road. And we got another

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Speaker 1: reminder about how sticky inflation can be with the uk

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Speaker 1: CPI coming in with a gain of ten point four percent.

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Speaker 1: I mean, that was kind of a shocker to the

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Speaker 1: extent though that the banks themselves are tightening credit conditions

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Speaker 1: and how much will that help the Fed do its job.

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Speaker 1: It's almost like the new loan officers surveys will become

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Speaker 1: the new CPI, right. And if you actually look at

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Speaker 1: the FED latest Senior Loan Officer Opinion survey, we saw

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Speaker 1: that in at forty three point seven percent of banks

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Speaker 1: are tightening standards for small firms and forty four point

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Speaker 1: eight percent for large firms. So we've already seen a

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Speaker 1: tightening and lending stanzerds. And after the events of the

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Speaker 1: last few weeks, the very large expectation is that we

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Speaker 1: are going to see those numbers move even higher. And

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Speaker 1: that's why there was so much consternation and conjecturing that

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Speaker 1: the FED might pause this week, because the expectation was, Okay,

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Speaker 1: we're seeing everything going on in the banking industry, that

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Speaker 1: FED might be able to pause because, okay, well, maybe

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Speaker 1: we are going to see everything going on in the

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Speaker 1: banking industry lead to a recession and therefore lead to

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Speaker 1: you know, lower prices, lower inflation. But at this point

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Speaker 1: in time, that's not yet the case. You know, at

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Speaker 1: this point in time, what's really remarkable to me is

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Speaker 1: if you actually look at where the SMP five hundred

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Speaker 1: closed yesterday before today, or for you know, the trading

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Speaker 1: action during the Federal Reserve meetings, we actually saw the

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Speaker 1: SMP five hundred clothes where it was before everything occurred

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Speaker 1: in the banking industry, which just shows the resilience of

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Speaker 1: the markets. Yeah, it does. But I think you know,

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Speaker 1: the sign there in the last hour of trading gave

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Speaker 1: us an indication that equities could well head lower. Here.

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Speaker 1: Do you think this brings back into focus the October lows?

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Speaker 1: So I'm not going to put you a price target

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Speaker 1: on where this is going to bring us to. But

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Speaker 1: I do believe in our chief investment office believes that

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Speaker 1: we can't just go back to the point in time

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Speaker 1: when the majority people who are expecting a soft landing,

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Speaker 1: The implication and the expectations for a hard landing have

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Speaker 1: absolutely risen in the last couple of weeks. Didn't didn't

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Speaker 1: it say a lot? Here? Yeah, sorry to interrupt, But

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Speaker 1: when he was asked that question late in the in

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Speaker 1: the news conference, the pause that he gave and the

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Speaker 1: sort of raised eyebrow I think told the whole story.

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Speaker 1: He doesn't think a soft landing is as much in

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Speaker 1: the picture as it was before. No, I don't any

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Speaker 1: reasonable person, I don't think can believe you know that

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Speaker 1: a soft landing is as probable as it was just

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Speaker 1: a few weeks ago. You know, I know, we all

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Speaker 1: hear it all the time, that you know, the tightening

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Speaker 1: of monetary policy acts of long and variable lags, but

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Speaker 1: we started to see the beginnings of it. And when

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Speaker 1: you see something break in the banking industry, that will

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Speaker 1: likely lead to a tightening of lending standards. I mean

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Speaker 1: that just means when you think about how how the

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Speaker 1: economy in the US, but also the global economy operates.

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Speaker 1: Company in corporations, they need cash and lending, you know,

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Speaker 1: in order to increase their profits and and you know,

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Speaker 1: continue their operations and build upon, say what they've already built.

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Speaker 1: And if thanks starts to pull back on that, that

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Speaker 1: becomes a concern. Yeah, given what you used to do,

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Speaker 1: I wouldn't ask you this question in normal times. But

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Speaker 1: obviously you've got a new hat that you're wearing right now.

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Speaker 1: But was this a policy mistake? Will this prove to

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Speaker 1: be a policy mistake by the fit? You know, I

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Speaker 1: don't we always ask this question, and I don't know

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Speaker 1: if anyone can accurately give you a clear cut yes

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Speaker 1: or no answer, because let let's be real here, the

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Speaker 1: Federal Reserve has a very difficult job, and many will

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Speaker 1: say that, Okay, if the FED had raised interest rates

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Speaker 1: long before when they started, maybe we wouldn't be faced

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Speaker 1: with installation where it is today. But at that same time,

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Speaker 1: you know, I think what now really lends itself to

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Speaker 1: is we're all now realizing with the last decade of

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Speaker 1: extremely extremely easy monetary policy gave way to and that

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Speaker 1: was excessive lending and excessive borrowing. You know, essentially, corporations, consumers,

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Speaker 1: people could borrow money for free, and we're now seeing

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Speaker 1: the repercussions of that as we try to one why

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Speaker 1: that when when we're still dealing with you know, inflation

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Speaker 1: well above levels that anyone should be comfortable with. So

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Speaker 1: you're at the private bank dealing with wealthy individuals, what's

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Speaker 1: the question or the comment that you get most from clients? So,

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Speaker 1: you know, what was so interesting about last year was,

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Speaker 1: at least for our clients, was what happened in the

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Speaker 1: bond market. You know, our clients have been well trained

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Speaker 1: to understand that, you know, stocks are volatile, they can

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Speaker 1: drop in value. You know that that's expected. But what

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Speaker 1: we saw on the bond market last year was so

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Speaker 1: different from what at least the majority of clients have

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Speaker 1: been uc you know, those around in the seventies saw

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Speaker 1: what happened in the seventies, but we saw a historic

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Speaker 1: move in the bottom market. And now the question really

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Speaker 1: becomes it, okay, is the worst behind us in the

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Speaker 1: bond market. And we do believe that at this point

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Speaker 1: we've either seen peak rates or that peak rates are approaching,

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Speaker 1: so that it is beneficial for investors to be locking

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Speaker 1: in higher yield in the bond market fit. But at

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Speaker 1: the same time, you know, looking to high quality assets

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Speaker 1: in the fixed income market, you know, whether to be

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Speaker 1: on the government side or on the pulsit side looking

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Speaker 1: at investing grade. This is Bloomberg Daybreak Asia, your morning

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