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Speaker 1: This is Bloomberg Daybreak Asia for this Thursday, April sixth

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Speaker 1: in Hong Kong, Wednesday April fifth in New York. Coming

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Speaker 1: up today, some weaker than expected US economic data aggravates

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Speaker 1: fear of recession. The regional lender Western Alliance tries to

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Speaker 1: soothe worries about its deposit balance, and Saudi Arabia hikes

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Speaker 1: oil prices to Asia. President Si Ngwen says it's more

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Speaker 1: important now than ever to protect democracy in the world.

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Speaker 1: Meeting with Kevin McCarthy, who assures US bonds President mccron

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Speaker 1: and Beijing with President she saying China can have a

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Speaker 1: role in Ukraine. I'm at Baxter with Global News. That's

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Speaker 1: all straight ahead on Bloomberg Daybreak Asia, the business news

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

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

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

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Speaker 1: Quinn and I'm Doug Prisoner. Here are the story as

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Speaker 1: we're following today. Cleveland FED President Laretta Mester saying FED

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Speaker 1: officials will need to hike interest rates a little bit

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Speaker 1: higher and then hold them there for some time. Mester

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Speaker 1: said this will be necessary for the FED to make

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Speaker 1: sure inflation is on a sustainable downward path. We're going

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Speaker 1: to be sort of calibrating in order to see that

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Speaker 1: inflation is going to move down in my own fork,

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Speaker 1: as I said, it will take some time to get

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Speaker 1: inflation back now, but I you know, I think we're

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Speaker 1: going to make some appreciable progress this year, and then

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Speaker 1: continue to make progress next year and then hit two

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Speaker 1: percent in twenty twenty five. Mester estimates that a closely

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Speaker 1: watch gage of inflation will reach three and three quarters

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Speaker 1: percent by the end of twenty twenty three. Now Master

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Speaker 1: does not vote on monetary policy decisions this year, but

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Speaker 1: she said she's open to adjusting her outlook on policy

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Speaker 1: based on how the US economy evolves. The regional bank

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Speaker 1: Western Alliance is trying to soothe worries over its deposit balance.

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Speaker 1: That story from Bloomberg's and Kates Wall Street has been

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Speaker 1: focused on the metric after a run on deposits contributed

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Speaker 1: to the collapse of three lenders in March and a

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Speaker 1: regulatory filing. Western Alliance reported an eleven percent decline and

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Speaker 1: deposits in the first quarter, but balances have increased so

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Speaker 1: far this month, cutting the drop this year to nine percent.

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Speaker 1: That disclosure ease concerns after Western Alliance updated the bank's

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Speaker 1: financial status without including the deposit figure. Strategists at true

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Speaker 1: As Securities say the deposit situation is better than feared.

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Speaker 1: In Washington and Kate's Bloomberg Daybreak, Asia, UBS chairman column

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Speaker 1: Kellaher said the integration of Credit Suis will take three

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Speaker 1: to four years, excluding the windown of the investment bank.

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Speaker 1: This comes after UBS agreed to Baya, it's long standing

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Speaker 1: rival for three billions who was Frank's, and an historic

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Speaker 1: transaction last month. The government broker emergency deal was aimed

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Speaker 1: at putting an end to a crisis of confidence at

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Speaker 1: Credit Suis. Here's Kelliher speaking at UBS's annual general meeting.

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Speaker 1: This transaction is the first merger of two global systemically

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Speaker 1: important banks. This is not in any way an easy

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Speaker 1: deal to do and brings the significant execution risk. In

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Speaker 1: a separate presentation, UBS Vice chairman Lucas Gaviller said that

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Speaker 1: the Credit Suiss brand will continue to exist in Switzerland

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Speaker 1: for the foreseeable future. He added that the bank will

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Speaker 1: consider all options for Credit suizas local business. In other news,

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Speaker 1: the Swiss government said that credit suezas top executives will

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Speaker 1: have outstanding bonuses canceled or cut by up to half.

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Speaker 1: It's a result of state aid being provided by the

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Speaker 1: Swiss Central Bank last month to help shore up the

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Speaker 1: bank's liquidity. And a warning today from the International Monetary Fund,

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Speaker 1: the IMF says growing mistrust between Washington and Beijing may

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Speaker 1: put global GDP at risk. That story from Bloomberg's Joan Wong.

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Speaker 1: The IMF warned that US China tensions could lead to

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Speaker 1: foreign direct investment and other capital being channeled toward aligned

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Speaker 1: blocks of countries. This was set in an extrat release

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Speaker 1: from the IMFs upcoming World Economic Outlook. One scenario and

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Speaker 1: modeled included a world splintered into US and China centered camps,

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Speaker 1: with some countries, including India and Indonesia non aligned. The

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Speaker 1: IMF said this could result in global output falling by

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Speaker 1: one percent in five years and two percent long term,

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Speaker 1: and risk would be particularly high for some emerging and

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Speaker 1: developing nations. A separate IMF analysis warnant their rising tensions

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Speaker 1: could lead to cross border outflows that would threatened financial stability.

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Speaker 1: Both full IMF reports are scheduled to be released next

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Speaker 1: Tuesday during the IMF's Spring meetings in Washington. In Hong Kong,

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Speaker 1: Joan Wang Bloomberg Day Brigasia, Saudi Arabia is hiking official

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Speaker 1: selling prices for all of its oil sales to Asian customers.

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Speaker 1: In Maine, state owned Saudi Aramco raised its selling price

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Speaker 1: for flagship Arab Light crude to Asia by thirty cents

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Speaker 1: of barrel. The hike comes days after the Kingdom led

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Speaker 1: a surprise OPEC plus production cut. Traders who were surveyed

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Speaker 1: before the OPEC plus decision had expected Arab Light prices

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Speaker 1: to fall by forty three cents. Amaryl, One analyst at UBS,

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Speaker 1: says the new prices showed that Saudis are still expecting

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Speaker 1: strong Asian demand for crude. Aramco currently sells about sixty

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Speaker 1: percent of its crew shipments to Asia, China, Japan, South

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Speaker 1: Korea and India. The biggest fers mentioned a moment ago

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Speaker 1: the week economic data here that we had in the

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Speaker 1: US not only the service sector PMI, but the ADP

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Speaker 1: figure on private payrolls. Now. At one point today, the

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Speaker 1: yield on the ten year treasury was around one hundred

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Speaker 1: and fifty basis points below the yield on the three

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Speaker 1: months t build. That's the widest that we've seen in

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Speaker 1: decades historically. This is a pretty reliable indicator that the

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Speaker 1: economy is headed for a severe slowdown now. Right now,

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Speaker 1: the swaps market is showing Bett's favoring a pause in

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Speaker 1: FED tightening rather than another twenty five basis point increase

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Speaker 1: at the May FOEMC. Let's check Global News next here

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Speaker 1: on Daybreak Asia, Taiwan's president saying when has received assurances

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Speaker 1: from US House Speaker Kevin McCarthy, the ties between the

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Speaker 1: two have never been stronger at Baxter with more from

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Speaker 1: the Bloomberg newsroom in San Francisco, Eddie, Yeah, exactly right, Doug.

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Speaker 1: Presidents I saying very strongly talking about the importance of

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Speaker 1: freedom and democracy in today's world, we must the game

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Speaker 1: ourselves in the world where democracy is understood and the

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Speaker 1: urgency of keeping the beacon of freedom shining cannot be

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Speaker 1: understated and stresses strength. President Reagan said it best. Freedom

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Speaker 1: is never more than one generation away from extinction. It

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Speaker 1: must be fought for and defended constantly, really by each generation. Now,

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Speaker 1: McCarthy saying, the US will honor its obligations and with

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Speaker 1: Bloomberg's Emory Hordern exclusively said dialogue internationally is extraordinarily important.

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Speaker 1: If we want to make sure that we foster democracy

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Speaker 1: and peace and make sure we don't get into any

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Speaker 1: type of conflict. People need to sit down. And what

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Speaker 1: China needs to understand is they can't dictate who speaker

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Speaker 1: the House can need with baby before or friend. For

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Speaker 1: the same moment that mccrone's sitting out with Presidency, I

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Speaker 1: think that's great. I would sit down with President now again,

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Speaker 1: McCarthy speaking with Bloomberg's Ann Marie Hordern. Now, Anne Marie

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Speaker 1: has been covering this all day, and she says, truly historic.

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Speaker 1: It is the first time I've seen a Taiwanese leader

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Speaker 1: sit down with the Speaker of the House, who is

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Speaker 1: the third highest ranking government official on US soil. Now,

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Speaker 1: China has already responded to this meeting, Bloomberg Joe Matthews

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Speaker 1: saying China has already sent warships into the north of

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Speaker 1: the Taiwan Street, Taiwan's Ministry of Defense reporting spotting fourteen

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Speaker 1: Chinese military aircraft three navy vessels in the area over

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Speaker 1: the past twenty four hours, and at US Secretary of

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Speaker 1: State Anthony blinkin caution in China not to overreact private

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Speaker 1: their unofficial, but they've been going on for years and

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Speaker 1: President Say and her predecessors have done the same thing. Now.

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Speaker 1: McCarthy mentioned meeting with presidents. President She China's president that

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Speaker 1: that in reference to France President Amalia mccran being in

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Speaker 1: Beijing as we speak. Now. Mccron is saying China can

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Speaker 1: play a role in Ukraine and that he opposes any

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Speaker 1: moves to decouple from the world's second largest economy. He

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Speaker 1: says he will push Europe to take a more moderate

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Speaker 1: stance toward Beijing and New Zealand Prime Minister Justina ardur

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Speaker 1: And has exited her role as prime minister. You can

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Speaker 1: be anxious, sensitive, kind and wear your heart on your sleeve.

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Speaker 1: You can be a mother or not. You can be

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Speaker 1: an ex Mormon or not. You can be a nude,

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Speaker 1: a crier, a hugger. You can be all of these things.

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Speaker 1: And not only can you be here, you can lead

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Speaker 1: just like me. Global news power by more than twenty

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Speaker 1: seven hundred journalist and analysts and over one hundred and

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Speaker 1: twenty countries. In San Francisco, I'm Ad Baxter, and this

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Speaker 1: is Bloomberg. All right, Eddie, thank you day bray Kje.

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Speaker 1: I'm Doug Prisner along with Vannie Quinn in the Bloomberg

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Speaker 1: Interactive Broker studio in New York. I want to take

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Speaker 1: a closer look now at today price section with our

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Speaker 1: own Mike Reagan, who is Bloomberg Market Senior Editor. He

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Speaker 1: is on the line from here in New York. Mike,

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Speaker 1: it's always a pleasure. I was noting a moment ago.

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Speaker 1: If you look at what the swaps market is indicating

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Speaker 1: right now, the bet seemed to favor a FED pause

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Speaker 1: rather than more tightening in May, and even with that,

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Speaker 1: there was weakness in pockets of the equity market. How

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Speaker 1: do you explain this? Well, but I think, for one thing,

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Speaker 1: you have to look at just what a blockbuster first

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Speaker 1: quarter was, you know, Matt Stack one hundred up twenty percent,

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Speaker 1: SMP up seven percent. So you know, now that we

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Speaker 1: turned the calendar into a fresh quarter this week, I

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Speaker 1: think some of the motivation that that really caused that rally,

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Speaker 1: especially towards the end of the quarter when people were

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Speaker 1: say rebalancing into target allocation, you know, sixty forty type

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Speaker 1: of portfolios or just simply window dressing to say, hey,

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Speaker 1: I bought the winners this quarter to my investors and

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Speaker 1: my fund. That motivation, you know, it's hard to quantify

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Speaker 1: exactly how much that helped towards the end of the quarter,

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Speaker 1: but to what extent it did, that motivation's dried up.

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Speaker 1: So now today we're sort of left looking staring at

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Speaker 1: the data points. And while it's true the Fed may pause,

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Speaker 1: I think, you know, the signal from the ECO data

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Speaker 1: is that these rate hikes are starting to bite. You know,

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Speaker 1: the ISM number was well below estimates at fifty one

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Speaker 1: point two, and the new orders and employment component of

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Speaker 1: that survey we're fairly weak. Two. Also, the ADP jobs

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Speaker 1: number one hundred and forty five thousand private sector jobs added,

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Speaker 1: that's way down from the previous month, uh, way below

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Speaker 1: the estimates. Two with sixty five thousand below the estimates.

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Speaker 1: So a pause, I think, you know, would be welcome

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Speaker 1: by the equity market, but we're I think we're still

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Speaker 1: waiting to see, well, how how much effect will the

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Speaker 1: rate hikes we've seen already continue to pack the economy,

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Speaker 1: Because as Chairman Powell say repeatedly and famously, you know,

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Speaker 1: there are variable and lagging effects to monetary policy. So

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Speaker 1: I feel like the market is kind of waiting for

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Speaker 1: more shoes to drop as far as where this monetary

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Speaker 1: tightening is going to slow the economy and to what degree.

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Speaker 1: So that's kind of the theme of the day, though.

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Speaker 1: I think, you know, the big stories that we're in

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Speaker 1: a new quarter now, and you know, fun investors, fund

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Speaker 1: managers have a fresh sheet to work with, and that

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Speaker 1: motivation that might have had them buying at the end

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Speaker 1: of the quarter is no longer there. Does that imply

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Speaker 1: like that the equity market is not yet pricing in

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Speaker 1: any kind of recession. I mean, this is the body

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Speaker 1: of the debate that everyone has all day. I mean,

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Speaker 1: I think the argument that it has is that, look,

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Speaker 1: we were down twenty percent last year in the SP

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Speaker 1: five hundred, even though we did have two percent economic growth.

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Speaker 1: So how much of a whether it be a soft

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Speaker 1: landing or a shallow recession, was priced in by that um?

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Speaker 1: And is the equity market seeing through the week spell

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Speaker 1: that's about to hit us um? I think it would

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Speaker 1: be unusual historically for the market to sort of just

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Speaker 1: rally through a real contraction in growth. But at the

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Speaker 1: same time, you know, we really we went into unchartered

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Speaker 1: waters when the pandemic hit. And while you know, lights

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Speaker 1: back to normal and we've kind of learned to live

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Speaker 1: with the virus, I feel like the financial markets really

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Speaker 1: haven't normalized yet. So it's hard to really say. And

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Speaker 1: I think most investors you talked to UM and strategists,

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Speaker 1: especially the sell side strategists, are very bearish. If they

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Speaker 1: are buying stocks, they're looking at quality UM, which ironically

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Speaker 1: is these naz BAC one hundred companies, the top tier

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Speaker 1: of them, your Apple, Microsoft, that sort of stock uh

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Speaker 1: these days. UM. So it's interesting, interestingly, those were the

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Speaker 1: stocks that had the biggest drag on the market today,

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Speaker 1: which sort of leads me to back to that notion

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Speaker 1: that well, we got that first quarter out of the

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Speaker 1: way and the rebouncing and window dressing that goes along

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Speaker 1: with that, and now it's a fresh sheet of paper

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Speaker 1: for this quarter and kind of the markets back to

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Speaker 1: season to approach. And to that point, I mean, I'm

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Speaker 1: looking at using the WI function on the Bloomberg terminal,

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Speaker 1: a little bit of defensiveness in the rotation into things

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Speaker 1: like utilities and healthcare kind of defensive pockets of the

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Speaker 1: market and out of things that are more economically sensitive,

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Speaker 1: whether it's consumer discretionary or industrials. So yes, we're keeping

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Speaker 1: money to working the equity trade, but maybe positioning ourselves

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Speaker 1: a little more defensively. Yeah, I think that's absolutely right, Doug.

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Speaker 1: And you know, the sort of the definition of what's

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Speaker 1: defensive has changed a little bit. Your Microsofts and Apple

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Speaker 1: are now considered very defensive. But they all did so

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Speaker 1: well in the first quarter that I think, you know,

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Speaker 1: you're right that maybe some classical defensive positioning in the

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Speaker 1: healthcare Uh. You know, Jane Jay had a big rally,

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Speaker 1: but they had news about their their cancer settlement as well,

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Speaker 1: so um, you know, a little bit of a mixed

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Speaker 1: message there. But you know, I think ultimately it all

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Speaker 1: comes down to the job market, right, and the job

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Speaker 1: market had for so long looked bulletproof regardless of inflation,

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Speaker 1: regardless of FED rate hikes. Now we're starting, I think

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Speaker 1: people are starting to question that a little bit. With

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Speaker 1: the week ADP number yesterday, we saw the job openings

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Speaker 1: the Jolts report come down back below ten millions. I mean,

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Speaker 1: still historically a huge number of job openings, but well

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Speaker 1: off of those highs that we saw of over eleven millions.

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Speaker 1: So I think a little bit of nervous nervousness ahead

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Speaker 1: of the payrolls report on Friday, you know, that's expected

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Speaker 1: to show a dip down to about two hundred and

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Speaker 1: thirty five thousand jobs from over three hundred thousand the

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Speaker 1: previous months. So I think where the labor market goes

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Speaker 1: will will really dictate where the equity market goes. If

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Speaker 1: in fact these numbers that we're seeing, uh, there's Carrie

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Speaker 1: through to that, and we do see more sort of

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Speaker 1: weakness in the labor market that has been so red

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Speaker 1: hot throughout all of this. Real quick, Mike, if you

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Speaker 1: can buying Bowski recommending buying the dip and financials anybody

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Speaker 1: else doing that. There's certainly uh, people, you know, whatever

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Speaker 1: you see this type of dift in regional banks. There's

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Speaker 1: there's definitely the contrarians saying there's got to be some

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Speaker 1: bargains there. There's a lot of sort of m and

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Speaker 1: a speculation, speculation heating up that some of the weaker

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Speaker 1: regional banks might get um U taken over by larger banks.

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Speaker 1: And that there will be a little bit more leeway

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Speaker 1: for UH from the government to allow the real big

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Speaker 1: banks to get even bigger with some takeovers. So certain

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Speaker 1: there certainly is a pocket of investors that are take

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Speaker 1: a hard look at financials. Yeah, baby, starting the nibble.

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Speaker 1: Then again, that Western Alliance back shares today down twelve percent.

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Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on the

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Speaker 1: stories making news from Hong Kong to Singapore and wool Street.

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