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Speaker 1: Good morning.

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Speaker 2: I'm Doug Prisner and I'm Brian Curtiz. Here are the

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Speaker 2: stories we're following today. Well, the US labor market showed

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Speaker 2: some new signs of resilience today, private hiring surge, layoff slowed,

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Speaker 2: and filings for unemployment benefits stayed relatively low. Next, traders

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Speaker 2: will have their eyes on the US employment report for June.

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Speaker 2: We'll get those numbers tomorrow at eight thirty in the morning.

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Speaker 2: Wall Street Time Bloomberg's Michael McKee, how's a preview?

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Speaker 3: Economists aren't buying the ADP data showing almost half a

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Speaker 3: million jobs created in June, but traders are asking what

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Speaker 3: if a FED rate hike is all but priced in

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Speaker 3: for this month, and expectations are that labor market remains

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Speaker 3: tight enough to be an inflation problem even if the

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Speaker 3: ADP numbers are overstated. At their June meeting, FED officials

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Speaker 3: also lowered their unemployment forecast for the year, now, anticipating

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Speaker 3: the jobless rate will rise to four point one percent,

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Speaker 3: But the consensus is after going up in May, unemployment

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Speaker 3: likely fell again in June, which leaves the final question

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Speaker 3: what happened with wages? ADP and the market forecast is

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Speaker 3: that earning's growth slipped in June. That would be something

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Speaker 3: the FED is looking for. Michael McKee, Bloomberg Daybreak Agent.

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Speaker 1: Well, today's Fed speak played right off the economic news

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Speaker 1: of the day. We heard from the head of the

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Speaker 1: Dallas Fed, Lauri Logan, who was voicing her concern about

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Speaker 1: inflation still running too hot, and she said that more

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Speaker 1: rate hikes would likely be needed.

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Speaker 4: I remain concerned about whether inflation will return to target

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Speaker 4: in a sustainable and timely way, and I think more

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Speaker 4: restrictive monetary policy will be needed to achieve the fomc's

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Speaker 4: goals of stable prices and maximum employment.

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Speaker 1: That is the head of the Dallas Fed, Lori Logan.

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Speaker 1: She went on to say it's important for the FED

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Speaker 1: to follow through on the signal it's sent at the

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Speaker 1: June meeting. You might remember last month forecast from FED

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Speaker 1: officials showed they're expecting two more rate hikes this year.

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Speaker 1: Now markets have penciled in one for July, but the

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Speaker 1: market is a little split at this point on whether

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Speaker 1: the Fed will deliver another.

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Speaker 2: Brian Well, the US is said to haveverged Hong Kong

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Speaker 2: banks and institutions to curb exports to Russia. Bloomberg's Juan

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Speaker 2: Wong has the story From Hong Kong.

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Speaker 5: Three US Treasury officials reportedly visited Hong Kong and June.

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Speaker 5: The Nick reported the officials asked banks and regulators to

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Speaker 5: help identify US high tech items being shipped to Russia

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Speaker 5: via Hong Kong. They also asked the banks to strengthen

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Speaker 5: due diligence when dealing with transactions related to items on

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Speaker 5: the US export control list. Representatives who attended are said

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Speaker 5: to be from HSBC, Standard Chartered and the Hong Kong

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Speaker 5: Monetary Authority. Most of them declined to comment. The meetings

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Speaker 5: took place days before US Secretary of State Anthony Blincoln

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Speaker 5: visited China. That's when concern grew in Washington and Europe

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Speaker 5: over China's economic relationship with Russia and Hong Kong. And

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Speaker 5: Joan Wang Bloomberg day Brigaisia.

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Speaker 1: Officials that the European Union are said to be pushing

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Speaker 1: Beijing to narrow the scope of China's export control for

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Speaker 1: two key medals. We have more from Bloomberg Spanaou in

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Speaker 1: Hong Kong.

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Speaker 6: The EU wants to ensure that export restrictions are based

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Speaker 6: on security implications. And that the restrictions comply with WTO rules.

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Speaker 6: Earlier this week, China announced export curbs on two key

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Speaker 6: metals used in semiconductors and evs. The EU said it

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Speaker 6: is concerned that China is weaponizing critical materials. Chinese restrictions

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Speaker 6: came just days after the Dutch government published new controls.

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Speaker 6: Those controls will hinder Chinese companies access to chip making equipment.

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Speaker 6: The EU is now assessing the impact of the new

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Speaker 6: Chinese restrictions on industry and business. This would also include

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Speaker 6: what steps to take, if any, to counter the action

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Speaker 6: in Hong Kong. I'm bonni Al Bloomberg Daybreak Asia.

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Speaker 2: Banks including JP, Morgan Chase and Goldman Sachs Or lining

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Speaker 2: up around nine point four billion dollars of debt. It's

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Speaker 2: all to back gtcr's purchase of a majority stake in

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Speaker 2: World Pay. The story from Bloomberg's Charlie Pellett.

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Speaker 7: It'll be the largest buyout financing in over a year,

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Speaker 7: sources tell Bloomberg. The financing will include eight point four

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Speaker 7: billion of leverage loans and high yield bonds denominated primarily

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Speaker 7: in dollars but also in Euros. The private equity firm

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Speaker 7: GTCR agreed to purchase a fifty five percent stake in

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Speaker 7: payment processor world Pay, the Fidelity National Information Services unit

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Speaker 7: that handles card payments for global businesses, valuing the company

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Speaker 7: at eighteen point five billion dollars. FIS will retain a

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Speaker 7: forty five percent steak In New York, Charlie Pellett Bloomberg

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Speaker 7: Daybreak Asia.

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Speaker 2: I'm Brian Curtis, along with Doug Kriisnervishad Salama will join

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Speaker 2: us in a few moments. So looking over at Janet

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Speaker 2: Yellen's arrival here in China, Doug, she didn't say too much.

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Speaker 2: I was just looking through her Twitter feed and basically

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Speaker 2: just saying happy to be here. It's a good opportunity

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Speaker 2: to guard against miscommunication. Once she gets going, I think

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Speaker 2: it will like a lot of the oxygen out of

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Speaker 2: the newsflow. But we did have these other interesting announcements

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Speaker 2: John Kerry now China this month, and also this agreement

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Speaker 2: I heard you chatting about a few moments ago the

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Speaker 2: EV makers in China, including Tesla, to ditch the price war.

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Speaker 2: It's kind of interesting. You'd think that would be positive,

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Speaker 2: but almost all of these EV makers sold down pretty

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Speaker 2: aggressively here two four six percent. I don't think it's

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Speaker 2: connected to that agreement. It may just be some of

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Speaker 2: the weakness that the weakness and growth was seeing in China.

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Speaker 2: But it is kind of interesting.

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Speaker 1: It is, and some analysts were saying that the price

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Speaker 1: were initiated by Tesla was a part of the slow

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Speaker 1: growth story that we had in EV sales so far

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Speaker 1: this year. Many of the major brands, and I'm going

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Speaker 1: to throw on that list byd Neo x punk Jeli,

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Speaker 1: they have struggled, I think a little bit, at least

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Speaker 1: they did initially when Tesla decided to come in and

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Speaker 1: be a little bit more aggressive in terms of getting

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Speaker 1: sales volume up in China.

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Speaker 2: Yeah, so that'll settle down now, I suppose. And it

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Speaker 2: seemed to be pushed by the Chinese side rather than

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Speaker 2: say Tesla. Tuzzl was the only foreign automaker that was

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Speaker 2: part of that deal. So that's something we can take

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Speaker 2: a closer look at a little bit later. The action

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Speaker 2: on Wall Street shows you that in terms of the

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Speaker 2: jobs report tomorrow, investors don't want too strong or too weak.

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Speaker 2: They'd be happy with something right in the middle, close

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Speaker 2: to expectations. Thank you very much.

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Speaker 1: Let's move on Yeah, there was an enormous volatility, as

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Speaker 1: we said earlier in the bond market today, at one

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Speaker 1: point the two year was at five twelve sixteen year

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Speaker 1: high that faded. We ended sub five percent in New

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Speaker 1: York trading. But you're absolutely right. I think it's fair

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Speaker 1: to say we're looking at a twenty five basis point

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Speaker 1: rate hike from the Fed later this month, growing possibility

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Speaker 1: that we're going to see one, perhaps two rate hikes

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Speaker 1: before the end of the year.

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Speaker 2: And we've got a funk in the equity markets, as

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Speaker 2: you mentioned, basically everything down the markets on Wall Street,

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Speaker 2: also in Europe. The future is for Asia today looks

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Speaker 2: like we're entering into a period or maybe there's a

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Speaker 2: little bit of give back, and we'll wait and see

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Speaker 2: what happens with the jobs report. Now it's time for

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Speaker 2: Global News. NATO's Secretary General Jen Stoltenberg saying that it's

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Speaker 2: possible for an agreement next week on Sweden's admission to

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Speaker 2: NATO at Baxter has Global News in the nine sixty

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Speaker 2: newsroom in San Francisco.

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Speaker 8: Yeah, you're right, Brian, possible maybe the operative word here.

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Speaker 8: After meeting with foreign ministers from Sweden to Turkey, today.

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Speaker 8: Stoltberg says a meeting is set for Monday.

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Speaker 9: Today we reaffirmed that Sweden's membership is within reach and

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Speaker 9: that gratification of Sweden's membership does not mean the end

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Speaker 9: of cooperation with Turkeia. Far from it, as Finland's continuing

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Speaker 9: engagement here today shows.

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Speaker 8: Now there's someone in Lithuania next week, a meeting involving

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Speaker 8: Turkey's President recept Aradawan and Sweden's Prime Minister of Christensen.

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Speaker 9: We still have some more work to do and we

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Speaker 9: are working on that. Now. We have the meeting today,

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Speaker 9: we will work over the weekend and then I will

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Speaker 9: meet with the Prime under President on Monday.

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Speaker 8: So not a sure thing, but definite progress. US President

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Speaker 8: Joe Biden has agreed to send cluster munitions to Ukraine.

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Speaker 8: This fulfills a key request from President Vladimir Zelenski. This

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Speaker 8: will be part of a dual purpose improved conventional munitions

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Speaker 8: plan to be announced officially tomorrow. Meanwhile, a rare deadly

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Speaker 8: attack on civilians in western Ukraine today four people did.

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Speaker 8: President Zelenski, in a conversation with ABC's Martha Radditz, says

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Speaker 8: even more hardware is needed right now.

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Speaker 10: At sixteen sixteen, or any other equipment that you do

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Speaker 10: need will give us an opportunity to move faster, to

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Speaker 10: save more lives, to stand out a drown for a

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Speaker 10: longer time.

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Speaker 8: Zelenski, through a translator, says he's very grateful, of course,

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Speaker 8: for all the aid the US and NATO have provided

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Speaker 8: so far. Bill Arusen President Alexander Lukashenko says the head

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Speaker 8: of the Wagner Group, Gefgheny Presotion, is still in Russia

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Speaker 8: with some of his fighters. He says Saint Petersburg this morning,

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Speaker 8: but could have gone to Moscow. His status and mission

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Speaker 8: are not disclosed. China's President Shi Shinping has told the

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Speaker 8: military command that oversees the Taiwan Strait to strengthen its

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Speaker 8: drills and boost its capacity to win wars. CCTV reporting

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Speaker 8: she instructed the army to break new ground for theater

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Speaker 8: command development and war preparedness. The Gateway Tunnel, which will

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Speaker 8: connect New York City to New Jersey, has the final

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Speaker 8: green light today. Senator Chuck Schumer in New York said

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Speaker 8: six point eighty eight billion dollars.

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Speaker 1: This is the largest ever transportation grant by the federal

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Speaker 1: government and the largest ever single transportation grant to New

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Speaker 1: York Gateway.

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Speaker 8: Will serve hundreds of thousands of people a year. Marjorie

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Speaker 8: Taylor Green has been kicked out of the Freedom Caucus

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Speaker 8: the official state it says for some of the things

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Speaker 8: she has done. But tensions really heated up last week

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Speaker 8: after she blew up a fellow member, Lauren Bobert, calling

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Speaker 8: her a little well, a little b word. How to

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Speaker 8: lose friends and not influence people. Global news power by

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Speaker 8: more than twenty seven hundred journalists and analysts and over

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Speaker 8: one hundred twenty countries. In San Francisco, I'm Ed Baxter

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Speaker 8: in this is Bloomberg.

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Speaker 2: I'm Brian Curtis, along with Rashad Salamat here in Hong Kong.

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Speaker 2: Our guest is David Goodlaw, CEO and chief investment strategist

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Speaker 2: at main Stay Capital Management. David yields up. It seemed

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Speaker 2: to have a little bit of shock power here seeing

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Speaker 2: the two year yield hit five percent and the tenure

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Speaker 2: hitting four percent. Your thoughts on the action today, Yeah,

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Speaker 2: we've had.

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Speaker 11: Such a good in Good morning, Brian. We've had such

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Speaker 11: a good first half for US stocks, and stocks had

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Speaker 11: actually been almost seemed like they were getting complacent to

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Speaker 11: the rise and rates that we've had over the last

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Speaker 11: couple of months. But today with that ADP number almost

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Speaker 11: half a million jobs, I think it's just reminded to investors,

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Speaker 11: reminded the markets that the Fed and Jerome Powell have

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Speaker 11: a long way to go to break the back of labor,

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Speaker 11: which is what they're trying to do to ensure that

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Speaker 11: they can get down to their two percent target, and

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Speaker 11: we've seen labor just continue to remain very, very strong,

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Speaker 11: even after more than a year of rate hikes in

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Speaker 11: the US.

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Speaker 12: David, the thing is is a recession the price worth

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Speaker 12: paying well. On the other hand, is a recession after

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Speaker 12: years and years of our life support from various bodies,

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Speaker 12: including the FED, something that the economy really does need.

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Speaker 11: Well. With the yield curve in version that we've had

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Speaker 11: for so long now and so steep. Every time we've

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Speaker 11: had a yield curve inversion, not even the steep since

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Speaker 11: nineteen eighty one, we've had a recession to follow. But

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Speaker 11: that recession keeps moving down. As I've said, the recession

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Speaker 11: that is always six months away, and now many are

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Speaker 11: moving it into the first quarter of twenty twenty four.

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Speaker 11: So you know that recession threat is still there. But

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Speaker 11: if we look at it the economic data that's command. Look,

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Speaker 11: you know the jobs report today alone, and we're going

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Speaker 11: to get non farm payrolls tomorrow. But we've had jobless

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Speaker 11: claims down, we've had consumers set of it up, we

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Speaker 11: have housing recovering, we have a resilient economy in the

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Speaker 11: face of this five hundred point five hundred basis point

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Speaker 11: increase in the FED funds rate. So it is I

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Speaker 11: think it's thought by many that the Fed will raise

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Speaker 11: rates until they break something, and what that will be

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Speaker 11: is that recession. But right now we've had a very

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Speaker 11: resilient economy in the face of it.

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Speaker 2: Yeah, it felt like we were kind of setting aside

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Speaker 2: Fed fears for a while and then this happens. It

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Speaker 2: kind of shows you, I think that while the rallies

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Speaker 2: that we've seen in the equity markets have kind of

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Speaker 2: been built on well, yeah, interest rates are up, but

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Speaker 2: look how well the economy is doing. And now you

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Speaker 2: also have this other fear of well, if he's doing

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Speaker 2: that well, it's going to stoke a lot more action

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Speaker 2: from the Fed. So, I mean, could you even see

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Speaker 2: six percent coming into the picture now for the terminal rate.

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Speaker 11: Yeah, unfortunately, there's a lot higher probability of that. And

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Speaker 11: you know, in all fairness, I'm the one that has

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Speaker 11: said on your show that the FED has gone far

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Speaker 11: enough already, and I still think they've gone far enough

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Speaker 11: because we know it takes three to eighteen months to

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Speaker 11: feel the full impact of monetary policy on the economy.

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Speaker 11: And you know, I believe that next week we'll see

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Speaker 11: headline CPI in the US with a three handle and

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Speaker 11: maybe a low three handle.

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Speaker 7: Yeah.

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Speaker 11: Core has been sticky, of course, but yeah, it's the

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Speaker 11: concern that the economy is resilient. The FED is going

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Speaker 11: to have to raise more, especially when we're talking about

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Speaker 11: labor to get unemployment where they wanted to be where

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Speaker 11: they think it needs to be. To achieve a two

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Speaker 11: percent inflation target that that lasts one or two percent,

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Speaker 11: that last one and a half percent, that's that's going

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Speaker 11: to be very tough. And I think that's the fear

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Speaker 11: that they go far enough that they do break something.

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Speaker 12: So what does that mean in terms of allocations?

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Speaker 11: David, Well, there it's really for this year. What's worked

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Speaker 11: out very well in stocks, obviously is the mega cap stocks,

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Speaker 11: which have been largely unaffected, you know, versus smaller companies

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Speaker 11: that depend more on debt that mean more interest rates.

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Speaker 11: These large companies just continue to deliver good earnings as well.

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Speaker 11: The mega cap stocks that magnificent seven, Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, Meta.

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Speaker 11: We've had today, Apple and Microsoft both positive in the

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Speaker 11: face of what we had going on in market action today.

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Speaker 11: On the other end of that barbell, if you will,

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Speaker 11: is ultra short term bonds that are providing these high yields.

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Speaker 11: You know, even though the long duration bonds are suffering

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Speaker 11: and you know, are suffering over the past couple of months,

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Speaker 11: we look at the short term where we're just looking

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Speaker 11: at that current yield for total return, and you've got

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Speaker 11: a pretty good combination. There also some foreign markets we like.

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Speaker 2: Yeah, there has been a little bit of a push

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Speaker 2: into cyclicals and value. That didn't happen today. It was

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Speaker 2: a little bit of a rough day. Energy down to

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Speaker 2: and a half percent, industrials down three quarters of a percent.

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Speaker 2: But that's also that's also a way to sort of

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Speaker 2: get away from the Magnificent seven, right, I mean, are

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Speaker 2: there some areas there you.

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Speaker 11: Like it is, But the concern is if we are

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Speaker 11: if we still think of recession is in the cards.

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Speaker 11: How much how much of them move into cyclical do

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Speaker 11: you want to make now at this point? So you

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Speaker 11: have to pick your points very carefully. And there's some

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Speaker 11: areas that you know, we'll stand up better over the

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Speaker 11: coming months than others. But what has worked the best,

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Speaker 11: and I think we'll continue to make cap stocks will

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Speaker 11: continue to do well. In June we saw a resurgence

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Speaker 11: in small cap stocks doing quite a bit better. But

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Speaker 11: it's going to be I think, very tricky here in

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Speaker 11: the second half of the year, even though we think

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Speaker 11: the market holds up well with a correction and then

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Speaker 11: looking toward that shallow recession in twenty twenty four.

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Speaker 12: So is it time to get into emerging market assets

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Speaker 12: here as well? And I'm saying that with China included,

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Speaker 12: and just to add a little bit of another question

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Speaker 12: on top of that, which is what would make China

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Speaker 12: investable and attractive?

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Speaker 11: Yeah, China's tough right now. You know, we've had to

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Speaker 11: talk about Janet Yellen's trip there. What's to be accomplished.

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Speaker 11: It's good that they're communicating, but you know, there's probably

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Speaker 11: relations between China and the US are arguably at the

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Speaker 11: worst ever, and there seems to be trouble making improvement there.

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Speaker 11: And as we talk about de risking our global supply chains,

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Speaker 11: China looks at that as decoupling. So you know, we

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Speaker 11: have more of these trade type wars going on with

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Speaker 11: export bands and so forth. It's just not a good

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Speaker 11: environment right now. In addition to the internal problems that

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Speaker 11: China has. We like Japan and the other Asia markets

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Speaker 11: probably better than China alone right now.

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Speaker 2: Yeah, I seem to remember that you had liked Japan.

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Speaker 2: It's run a lot. At what point do you start

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Speaker 2: to worry about a lot of the gains.

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Speaker 11: Are in Well, that's a good question. You know, we're

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Speaker 11: it's run all the way back to the high that

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Speaker 11: it was at when I was at Stanford University three

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Speaker 11: decades ago. It's been a long time in coming back

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Speaker 11: showing my age there. But the you know, Japan's just

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Speaker 11: got a lot going for it. The yen has been

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Speaker 11: weak relative to the dollars, so a hedged instrument has

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Speaker 11: worked well, has added to the return. Foreign investment in

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Speaker 11: Japan has brought in thirty nine billion in the last

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Speaker 11: three months. Three hundred and seventy companies have announced share

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Speaker 11: buybacks totally another thirty two billion. There's just and there's

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Speaker 11: just huge divergence in monetary policy that continues. Their short

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Speaker 11: term rate is still negative point one percent, with the

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Speaker 11: Fed and the ECB and other central banks hiking aggressively

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Speaker 11: over the past year.

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