WEBVTT - Fed Minutes, March CPI and Mixed Messages

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Thursday, April thirteenth

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<v Speaker 1>in Hong Kong, Wednesday April twelfth in New York and

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<v Speaker 1>coming up today. The FED is projecting a mild recession

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<v Speaker 1>beginning later this year. FED President of Thomas Barkin says

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<v Speaker 1>more work needs to be done to team prices, but

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<v Speaker 1>Mary Daley says more rate hikes may not be needed.

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<v Speaker 1>US shares in lvmh shit a record after the company

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<v Speaker 1>reported better than expected quarterly results. Mccron says he still

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<v Speaker 1>supports the China Taiwan status quo. Houghton personally ordered the

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<v Speaker 1>arrest of the Wall Street Journal reporter Brazil's Lula travels

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<v Speaker 1>to China. I'm d Baxter with Global News. That's all

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<v Speaker 1>straight ahead on Bloomberg Daybreak Asia, the business news you

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<v Speaker 1>need to start your day, and just one fifteen minute

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<v Speaker 1>podcast available on Apples, Spotify, the Bloomberg Business app and

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<v Speaker 1>everywhere you get your podcasts. Good Morning, I'm Dead Prisoner

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<v Speaker 1>and I'm Bryan Curtiz Hero the stories we're following today.

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<v Speaker 1>We start out with minutes of the last FED meeting.

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<v Speaker 1>All committee members agreed to a twenty five basis point

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<v Speaker 1>rate hike last month. For more, here's Bloomberg's Michael McKee.

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<v Speaker 1>Although the banking system remained quite strong and resilient, that's

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<v Speaker 1>a quote. Banks were likely to tighten credit conditions, and

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<v Speaker 1>that would weigh on growth, on hiring, and on inflation.

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<v Speaker 1>The problem where policymakers was quote the extent of these

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<v Speaker 1>effects was uncertain. Participants saw risks to the economy to

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<v Speaker 1>the downside, and they saw the risks of inflation waited

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<v Speaker 1>to the upside. Given that uncertainty and the stickiness of inflation,

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<v Speaker 1>all participates ultimately decided they should raise the target range

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<v Speaker 1>by a quarter percentage point. The minute show that the

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<v Speaker 1>FED is now projecting a mild recession starting later this year.

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<v Speaker 1>So we know the next meeting is in early May,

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<v Speaker 1>and not all members even now are sending the same

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<v Speaker 1>message regarding future rate hikes. Today we heard from the

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<v Speaker 1>head of the Richmond FED, Tom Barkin. He was policymakers

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<v Speaker 1>still have more work to do detain prices. His remarks

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<v Speaker 1>came even after that CPI print showed inflation did remain

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<v Speaker 1>well above the Fed's too pretent target. Here is Barkin

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<v Speaker 1>speaking earlier on CNBC. It was pretty much as expected.

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<v Speaker 1>You know, I put particular focus on the core, which

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<v Speaker 1>is still running a little over five percent year every year.

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<v Speaker 1>And you know, we had some good news on energy,

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<v Speaker 1>but there's still more to do, I think, to getting

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<v Speaker 1>core inflation back down to where we'd like it to be.

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<v Speaker 1>Tom Barkin there, the head of the Richmond FED. He

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<v Speaker 1>went on to say he does see signs of cooling demand.

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<v Speaker 1>Even so, he does remain wary of declaring victory on

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<v Speaker 1>inflation too soon. Meantime, San Francisco FED President Mary Daly

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<v Speaker 1>says more FED rate hikes may not be needed. There

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<v Speaker 1>are good reasons to think the policy may have to

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<v Speaker 1>tighten more to bring inflation down, but there are also

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<v Speaker 1>good reasons to think that the economy may continue to

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<v Speaker 1>slow even without additional policy adjustments. Daily highlighted the effects

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<v Speaker 1>of the FED having considerably ratchet it uprates over the

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<v Speaker 1>past year, and she said at this point, inflation still

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<v Speaker 1>has a way to come down to the feds two

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<v Speaker 1>percent goal. Well, Warren Buffett is expecting more US banks

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<v Speaker 1>will likely fail. Even so, he is saying depositors should

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<v Speaker 1>feel confident that they won't lose any of their funds.

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<v Speaker 1>Buffett went on to say, today troubled banks aren't. If

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<v Speaker 1>you look at the stocks, they aren't valuable investments, or

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<v Speaker 1>at least value investments, because shareholders are likely to be

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<v Speaker 1>wiped out even if the government does move to protect depositors.

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<v Speaker 1>Here's Buffett in an interview with CNBC. The owners of

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<v Speaker 1>banks may have lost a hell of a lot of money.

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<v Speaker 1>The people who bought the deat of the holding company

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<v Speaker 1>may they may lose a lot of money. People they

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<v Speaker 1>can lose a lot of money, but the depositors aren't going.

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<v Speaker 1>So you don't need to turn a dumb decision by

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<v Speaker 1>managers into a panicking the whole citizenry of the United

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<v Speaker 1>States about something they don't need to be panicked about.

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<v Speaker 1>Berkshire Hathaway chairman and CEO Warren Buffett, Brian and something

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<v Speaker 1>you highlighted a day or two ago, we had confirmed

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<v Speaker 1>in that interview from Warren Buffett about his sales of TSMC,

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<v Speaker 1>and I'm swinging this around to Asia because that's the

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<v Speaker 1>focus of the program. Obviously, what he basically said was

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<v Speaker 1>he didn't reevaluate the business, the management, or anything of

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<v Speaker 1>that sort. It was specifically because of the geopolitical tensions

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<v Speaker 1>between China and Taiwan, and that may give comfort to

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<v Speaker 1>some holders of TSMC stock who thought maybe it was

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<v Speaker 1>more about direction or management, But no, it was more

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<v Speaker 1>about the geopolitical tensions. They haven't gone away. But if

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<v Speaker 1>you think that that simmers and doesn't cause a big problem,

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<v Speaker 1>then you're perhaps a little encouraged. Meantime, the US shares

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<v Speaker 1>of LVMH had a record high after the retailer reported

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<v Speaker 1>better first quarter results than expected. We get the story

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<v Speaker 1>from Bloomberg's David Englas. Sales jumped as Chinese shop resplurged

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<v Speaker 1>after emerging from a length he shut down. Revenue at

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<v Speaker 1>the group's biggest unit, which sells fashion and leather goods,

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<v Speaker 1>roast eighteen percent. That's almost twice the gain that analysts

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<v Speaker 1>were expecting. Let's CFO said that a company is extremely

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<v Speaker 1>optimistic for China. In twenty twenty three, sales jumped in

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<v Speaker 1>other countries as well. Japan saw a thirty four percent increase.

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<v Speaker 1>Shares of LVMH have rebounded by more than twenty percent

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<v Speaker 1>so far this year. After the slump in Chinese demand

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<v Speaker 1>began to recede. Lvmhs US shares closed up three point

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<v Speaker 1>four percent in Hong Kong I'm David Inglis bloom Brick

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<v Speaker 1>Day Break, Asia, Doug. Let's go back to the minutes

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<v Speaker 1>to the FED. It was interesting that, you know, they

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<v Speaker 1>mentioned that the banking crisis actually said that, you know,

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<v Speaker 1>the full effects of that, that that caused them to

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<v Speaker 1>lower their estimates on the terminal rate. And if we

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<v Speaker 1>can add to that, it's probably important to say that

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<v Speaker 1>the full effects of the cutback in bank lending probably

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<v Speaker 1>haven't been felt yet. I mean, the crisis may have

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<v Speaker 1>kind of stabilized, but the effects of the crisis haven't.

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<v Speaker 1>I think that's right, Brian. And if you remember what

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<v Speaker 1>FED cher J. Powell had to say after the last

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<v Speaker 1>decision that the effects of the banking crisis and what

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<v Speaker 1>is likely to be a contraction and credit could result

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<v Speaker 1>in the equivalent of a maybe twenty five or fifty

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<v Speaker 1>basis point rate hike, right, And I thought it was

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<v Speaker 1>very interesting the timing of the meeting coincided so closely

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<v Speaker 1>with the banking crisis, that before the banking crisis unfolded,

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<v Speaker 1>and we know this from the minutes, that some FED

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<v Speaker 1>officials were anticipating a fifty basis point rate hike in March,

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<v Speaker 1>but all of that changed given the stress in the

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<v Speaker 1>banking system. Yeah, and I don't know if this is right,

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<v Speaker 1>but we're hearing more from policymakers that the stock market

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<v Speaker 1>seems to be priced for a soft landing, not for

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<v Speaker 1>the mild recession that we got from the FED, whereas

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<v Speaker 1>maybe the bond market is not. So that's something. One

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<v Speaker 1>of our guests coming up is Anne Milletti, head of

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<v Speaker 1>active equity at all Spring Global Investments, and so we'll

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<v Speaker 1>be talking about that. This is Bloomberg and it's time

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<v Speaker 1>for global news. French President Emmanuel Macron is trying to

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<v Speaker 1>clarify his stance on Taiwan, China and the US because

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<v Speaker 1>they were quite interesting. Let's get to head backs to

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<v Speaker 1>He's got the details on that in the San Francisco newsroom.

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<v Speaker 1>D Yeah, Brian boy, you're right at you talk about

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<v Speaker 1>a tight rope and he can't escape it either. Macron

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<v Speaker 1>is in the Netherlands today today, flanked by Dutch Prime

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<v Speaker 1>Minister Mark Ruta, overshadowed by his remarks last week, as

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<v Speaker 1>you say, regarding being dragged along by the US, and

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<v Speaker 1>has visited to China and with relations with Taiwan. Not

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<v Speaker 1>today he confirmed he's in favor of the status quo

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<v Speaker 1>regarding Taiwan and China, but also said that strategic autonomy

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<v Speaker 1>and quotes is not merely a concept, but it is

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<v Speaker 1>becoming a reality in a must. French cabinet officials are

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<v Speaker 1>working to clarify the statements as well. Bloomberg's Maria Todayo

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<v Speaker 1>has spoken with France Finance Minister Bruno Lemaire. Overall, what

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<v Speaker 1>the French President has said it is right and it

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<v Speaker 1>has been our position for years, this idea that the

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<v Speaker 1>European Union obviously has a close relationship with the United States.

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<v Speaker 1>He told me this is our best friend across the world.

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<v Speaker 1>We spoke with President Biden before the trip, but the

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<v Speaker 1>French president has always made it clear that the European

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<v Speaker 1>Union needs to have its own policy when it comes

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<v Speaker 1>to defense, with the economy and trade, and Maria says

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<v Speaker 1>more official statements on that are due soon. Bloomberg Is

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<v Speaker 1>exclusively reported today that Vladimir Putin personally ordered the arrest

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<v Speaker 1>of Wall Street Journal reporter Evan Gershkovitch. Bloomberg's national security

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<v Speaker 1>reporter Nick Waddum says this is a game changer. I mean,

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<v Speaker 1>this isn't something that's happened since the Cold War, and

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<v Speaker 1>it's essentially sent a messive chill through the journalist community there. Obviously,

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<v Speaker 1>there are very very few foreign reporters in Russia anymore.

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<v Speaker 1>Nick says most reporters have packed up and left. South

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<v Speaker 1>Korea's National Security Director Kem Taijo is saying that after

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<v Speaker 1>consultations with the US, he leaves a considerable number in

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<v Speaker 1>quotes of the leaked intelligence documents were fabricated. He says

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<v Speaker 1>there's no indication the US conducted eavesdropping with malicious intent.

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<v Speaker 1>Brazil's Lula in China today, arriving meanwhile to me with

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<v Speaker 1>President Jumping the end of the week. Lula has stated

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<v Speaker 1>that he wants to talk piece plans for Ukraine to

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<v Speaker 1>say he has reservations about China's peace plan and wants

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<v Speaker 1>to talk. US Environmental Protection Agency has announced the strictest

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<v Speaker 1>ever rules on pollution from cars and trucks. Director Michael

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<v Speaker 1>Reagan says the phase out of internal combustion engines will

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<v Speaker 1>mean two thirds of all small vehicle sales and almost

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<v Speaker 1>half will be electric by twenty thirty two. Reductions in

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<v Speaker 1>greenhouse gas emissions mean cleaner air and less pollution. It

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<v Speaker 1>means less sickness, and it means healthier Americans and will

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<v Speaker 1>ensure he says, the US as leader in this kind

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<v Speaker 1>of green energy globally. And the cigarette maker Jewel, has

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<v Speaker 1>been ordered to pay hundred and sixty two million dollars

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<v Speaker 1>to multiple states who claim the products were addictive and

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<v Speaker 1>harmful when it intentionally targeted teams and young adults. New

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<v Speaker 1>York Attorney General Latitia James. This is the largest multi

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<v Speaker 1>state settlement with Jewel and includes the most stringent restrictions

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<v Speaker 1>on the company's marketing and sales to protect and to

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<v Speaker 1>prevent minors from vaping. New York, California, Massachusetts, New Mexico, Colorado, Illinois, Washington,

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<v Speaker 1>DC parties in the suit. Global News powered by more

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<v Speaker 1>than twenty seven hundred journalists and analysts and over one

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<v Speaker 1>hundred and twenty countries. In San Francisco, I'm at Baxter

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<v Speaker 1>and this is bloomberg ed. Thanks very much, Sean Bryan Curtis,

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<v Speaker 1>along with Rishads Salamat, and our guest is Anne Milletti,

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<v Speaker 1>head of Active Equity at all Spring Global Investments. And

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<v Speaker 1>I wonder whether or not we're at a little bit

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<v Speaker 1>of an inflection point here for the FED and I

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<v Speaker 1>can kind of tell this story through the ECB. Francois Villroy,

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<v Speaker 1>a council member there, says the ECB's work is almost done.

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<v Speaker 1>That's our lead in our story on the comments, and

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<v Speaker 1>I think a lot of people would put the FED

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<v Speaker 1>in that picture as well. However, you have one of

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<v Speaker 1>the other ECB members, Robert Holtzmann, who told the press

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<v Speaker 1>that a fourth consecutive fifty basis point increase in May

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<v Speaker 1>is still warranted. Is that possible with the FED in

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<v Speaker 1>that inflation is proving stickier than some thought. I do

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<v Speaker 1>think it is possible that we see another twenty five

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<v Speaker 1>I prefer we didn't get it, but I do think

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<v Speaker 1>that the FED is so focused ultra focused on inflation,

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<v Speaker 1>and the data that we got probably wasn't enough information

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<v Speaker 1>to prove that the inflation there is behind them. You know,

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<v Speaker 1>I think the difference between the FED and the companies

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<v Speaker 1>that our investment teams speak to is that they are

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<v Speaker 1>all focused on data. But the FED tends to be

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<v Speaker 1>focused on the data that's in the past, where as

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<v Speaker 1>you know, company management teams are built on managing their

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<v Speaker 1>business looking into the future, and so you know we're

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<v Speaker 1>going to hear a lot more about that as companies

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<v Speaker 1>are reporting and what their expectations are coming forward. We

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<v Speaker 1>already saw some cracks in the system obviously, maybe maybe

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<v Speaker 1>you could call them bigger than cracks with you know,

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<v Speaker 1>SVB and some of the issues that we saw with

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<v Speaker 1>the regional banks here in the US. But I prefer

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<v Speaker 1>that we saw a pause and see where we get to.

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<v Speaker 1>I think there are signs that we are headed into

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<v Speaker 1>a pretty big flowdown as it is, but I'm not

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<v Speaker 1>sure that we're going to get that. Yeah. The thing

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<v Speaker 1>here also is that you mentioned that you know, looking

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<v Speaker 1>in the past, So in some ways are company statements

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<v Speaker 1>as important as the data way getting right now? And

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<v Speaker 1>you know, as you say, in the past, but you know,

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<v Speaker 1>when the next set of inflation numbers coming, we get

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<v Speaker 1>properly the these reflecting base effects. I do think what

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<v Speaker 1>is important, especially when you're listening to management teams and

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<v Speaker 1>these calls that we're having again, is not so much

0:13:12.600 --> 0:13:16.840
<v Speaker 1>what they're reporting on what happened, but what they're talking about,

0:13:16.920 --> 0:13:20.679
<v Speaker 1>what they're seeing currently and what they're planning for. And

0:13:20.720 --> 0:13:23.280
<v Speaker 1>so many companies are just talking about the plans for

0:13:23.320 --> 0:13:27.480
<v Speaker 1>the next quarter, and that's what our investment teams are

0:13:27.520 --> 0:13:30.599
<v Speaker 1>listening to what are the plans? What are the expectations

0:13:30.600 --> 0:13:36.320
<v Speaker 1>for spending? That tells you a lot about their expectations

0:13:36.360 --> 0:13:40.560
<v Speaker 1>for the economy. Are they pulling back on spending? Are

0:13:40.600 --> 0:13:44.400
<v Speaker 1>they pushing forward? Is it not changing? That tells you

0:13:44.440 --> 0:13:46.319
<v Speaker 1>a lot about their plan. It also tells you a

0:13:46.360 --> 0:13:49.000
<v Speaker 1>lot about like what's their cash you know, what's their

0:13:49.000 --> 0:13:53.920
<v Speaker 1>free cash flow? What's their ability to spend? It begs

0:13:53.920 --> 0:13:56.360
<v Speaker 1>the question and if you think that the earnings are

0:13:56.400 --> 0:13:59.640
<v Speaker 1>important for where the stocks are at the moment, whereas

0:13:59.679 --> 0:14:02.360
<v Speaker 1>the DA is important for the Fed and its job

0:14:02.440 --> 0:14:05.760
<v Speaker 1>on combating inflation, and that begs the question of whether

0:14:05.840 --> 0:14:07.960
<v Speaker 1>or not the stock market is slightly out of sync

0:14:08.440 --> 0:14:11.280
<v Speaker 1>that maybe, as I said earlier with Doug, that the

0:14:11.440 --> 0:14:15.000
<v Speaker 1>stock market is pricing in a soft dish landing and

0:14:15.120 --> 0:14:20.120
<v Speaker 1>not a mild recession. I do think there is. I

0:14:20.200 --> 0:14:22.560
<v Speaker 1>do think you're right about that. When I look at

0:14:22.560 --> 0:14:24.920
<v Speaker 1>the market. What's interesting about the market, And if you

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<v Speaker 1>just kind of look at first quarter performance and you

0:14:28.800 --> 0:14:33.360
<v Speaker 1>break it out between you know, growth and value, small

0:14:33.400 --> 0:14:37.200
<v Speaker 1>cap and large cap, you do see some differences. Right,

0:14:37.240 --> 0:14:42.000
<v Speaker 1>So it isn't that the tide lifted all ships and

0:14:42.560 --> 0:14:46.720
<v Speaker 1>you had big outperformance across the board. The performance has

0:14:46.760 --> 0:14:50.560
<v Speaker 1>been pretty narrow in what has outperformed and what hasn't.

0:14:51.040 --> 0:14:55.160
<v Speaker 1>You see large cap growth outperformed. You had about fourteen

0:14:55.480 --> 0:14:59.320
<v Speaker 1>fourteen and a half percent around that for the first quarter.

0:15:00.080 --> 0:15:04.280
<v Speaker 1>Small cap value down for the quarter, and so you

0:15:04.360 --> 0:15:06.400
<v Speaker 1>kind of looked at that and you say, what are

0:15:06.640 --> 0:15:10.440
<v Speaker 1>you know? What's driving that? Likelywood's drive in a lot

0:15:10.480 --> 0:15:15.160
<v Speaker 1>of that is the fact that you know, you had

0:15:15.400 --> 0:15:19.760
<v Speaker 1>interest rates, which we're going up, you know, at the

0:15:19.800 --> 0:15:23.560
<v Speaker 1>tail end of last year, compressing multiples for growth stocks,

0:15:24.040 --> 0:15:26.840
<v Speaker 1>doing a little bit of the reverse. As the projection

0:15:27.000 --> 0:15:30.480
<v Speaker 1>is now that interest rates will come down, the markets

0:15:30.520 --> 0:15:34.840
<v Speaker 1>pricing that in the growth stock. This is Bloomberg Daybreak Asia,

0:15:34.880 --> 0:15:37.440
<v Speaker 1>your morning brief on the story's making news from Hong

0:15:37.520 --> 0:15:40.280
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0:15:40.320 --> 0:15:44.560
<v Speaker 1>your podcast feed every day on Apple, Spotify and anywhere

0:15:44.560 --> 0:15:47.440
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<v Speaker 1>each day on Bloomberg eleven three zero in New York,

0:15:50.240 --> 0:15:53.560
<v Speaker 1>Bloomberg ninety nine one in Washington, Bloomberg one oh six

0:15:53.640 --> 0:15:57.440
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0:15:57.720 --> 0:16:00.680
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<v Speaker 1>dot Com. I'm Brian Curtis and I'm Doug Prisoner. Join

0:16:17.400 --> 0:16:19.640
<v Speaker 1>us again tomorrow for all the news unique to start

0:16:19.680 --> 0:16:24.480
<v Speaker 1>your day right here on Bloomberg Daybreak Asia