WEBVTT - US Feels Heat From China EV Push

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<v Speaker 1>This is Bloomberg day Break Asia for this Monday, June

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<v Speaker 1>nineteenth in Hong Kong, Sunday June eighteenth in New York

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<v Speaker 1>and coming up today.

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<v Speaker 2>The US feels the heat from China's push on electric vehicles.

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<v Speaker 1>Intel will build a new manufacturing plant in Israel to

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<v Speaker 1>diversify more production outside of Asia.

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<v Speaker 2>Perelli will discuss the move by the Italian government to

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<v Speaker 2>strip Sinochem's influence on Perelli's board.

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<v Speaker 3>B Lincoln and Sheen meet Possible With Shichimpeg still up

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<v Speaker 3>in the air, William Barr says the case against Trump

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<v Speaker 3>is strong and that the former president is a fundamentally

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<v Speaker 3>flawed person. Kishaa pulling down. I'm at Baxter with Global News.

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<v Speaker 4>That's all straight ahead on Bloomberg Daybreak Asia, the business

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<v Speaker 4>news you need to start your day in just one

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<v Speaker 4>fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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<v Speaker 4>and everywhere you get your podcasts.

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<v Speaker 1>Good morning, I'm Brian Curtiz.

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<v Speaker 2>And I'm Doug Krisner. Here are the stories we're following today.

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<v Speaker 1>Transportation Secretary Pete Boodaget says the US must take steps

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<v Speaker 1>to cut into China's advantage in batteries that are used

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<v Speaker 1>to power electric vehicles. Is Bridget. Speaking in Japan at

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<v Speaker 1>the G seven Transport Ministers meeting, he said the US

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<v Speaker 1>needs to do more.

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<v Speaker 5>Refining capacity on many of the key raw materials needed

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<v Speaker 5>for EV battery components. It's very concentrated in China, and

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<v Speaker 5>that is something that's addressable. It's not a matter of geology,

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<v Speaker 5>it's a matter of capacity, and we need to make

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<v Speaker 5>sure both in terms of what we're building up domestically

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<v Speaker 5>in the United States and our relationships with friends and

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<v Speaker 5>trading partners that were positioning ourselves to have an economically sensible,

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<v Speaker 5>environmentally sensible, and geopolitically stable approach to how we are

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<v Speaker 5>going to get these vitally important elements in our economy

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<v Speaker 5>that are only going to grow in importance.

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<v Speaker 1>Meantime, Ford share Bill Ford Junior told CNNA and the

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<v Speaker 1>US is not quite ready to compete with China in

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<v Speaker 1>the production of electric vehicles, and he said his company

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<v Speaker 1>is taking an all hands on deck approach to prepare.

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<v Speaker 1>This includes Ford building a battery plant in Michigan. Bloomberg

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<v Speaker 1>NEIF says Chinese firms now account for more than half

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<v Speaker 1>of the EV battery market and it says that those

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<v Speaker 1>firms satisfy as much as ninety percent of demand for

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<v Speaker 1>some battery materials.

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<v Speaker 2>Intel is building a new manufacturing plant in Israel, as

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<v Speaker 2>the chip maker continues to diversify out of East Asia.

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<v Speaker 2>We have more from Bloomberg's Thannis Pellegrini.

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<v Speaker 6>Intel has agreed in principle to build a chip plant

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<v Speaker 6>outside Tel Aviv that could be up and running within

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<v Speaker 6>four years. Prime Minister Nuttnya, who calls a twenty five

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<v Speaker 6>billion dollar deal the largest foreign investment in Israel, but

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<v Speaker 6>we're also hearing that number may include a previously announced

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<v Speaker 6>ten billion dollar investment. Intel may qualify for a big

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<v Speaker 6>grant for the plant, and it's all part of Intel's

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<v Speaker 6>push to diversify beyond Asia and restore technological leadership after

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<v Speaker 6>gains by rivals in video in Taiwan Semi. Intel is

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<v Speaker 6>also expanding in Poland and Ireland. Denise Pelgriny Bloomberg day Breakasia.

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<v Speaker 1>Boeing says it's preparing to accelerate production of the seven

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<v Speaker 1>thirty seven jets soon. That's according to Standal, who heads

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<v Speaker 1>Boeing's commercial airplane business. It comes as the planmaker said

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<v Speaker 1>it's making some progress and addressing a production defect in

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<v Speaker 1>the tail of the seven eighty seven Dreamliner jet. Boeing

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<v Speaker 1>said that this supplier defect has has slowed deliveries and

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<v Speaker 1>will impact second quarter results, but the company hopes that

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<v Speaker 1>hiking output of its seven thirty seven jet will ultimately

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<v Speaker 1>boost revenue. Standeel declined to say whether the plan twenty

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<v Speaker 1>three percent uptick would happen by the end of this

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<v Speaker 1>month or in the third quarter.

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<v Speaker 2>This is going to be the first opportunity for markets

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<v Speaker 2>in Asia to react to some hawkish remarks last Friday

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<v Speaker 2>from FED Governor Chris Waller, he said it's not clear

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<v Speaker 2>the US banking strains will lead to significantly tighter lending

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<v Speaker 2>conditions in the States, and he pushed back on the

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<v Speaker 2>argument from some critics that the FED should consider recent

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<v Speaker 2>bank troubles when deciding monetary policy.

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<v Speaker 7>The Fed's job is to use monetary policy to achieve

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<v Speaker 7>its dual mandate, and right now that means raising rates

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<v Speaker 7>to fight inflation. It is the job of bank leaders

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<v Speaker 7>to deal with interest rate risk. I do not support

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<v Speaker 7>altering the stance of monetary policy over worries of ineffectual

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<v Speaker 7>management at a few banks.

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<v Speaker 2>That is FED Governor Chris Waller. He went on to

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<v Speaker 2>say the FED has a separate range of targeted tools

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<v Speaker 2>to address financial stability, and he said tighter credit conditions

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<v Speaker 2>so far are a continuation of some prior trends. Meantime,

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<v Speaker 2>Waller went on to say more policy tightening will likely

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<v Speaker 2>be required by the FED. He said core inflation prices

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<v Speaker 2>are not moving and that Brian, he said, is a

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<v Speaker 2>concerning trend.

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<v Speaker 8>Well.

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<v Speaker 1>Italian tire maker Pirelli is moving ahead on a plan

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<v Speaker 1>by the Italian government to limit Sinokem's influence on Pirelli.

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<v Speaker 1>Let's get the story from Bloomberg's Joan Wong In Hong Kong.

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<v Speaker 9>Parelli has called a board meeting to account for the

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<v Speaker 9>government's new measures on Friday. Italy used as gold empower

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<v Speaker 9>rights to strip Sinocamp's access to strategically important data. Sinocam

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<v Speaker 9>owns more than a third of Pirelli and as a

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<v Speaker 9>tire maker's biggest shareholder. The government has cited concern about

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<v Speaker 9>data collected by sensors and the company's tires. It said

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<v Speaker 9>that the data could feed into artificial intelligence models, making

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<v Speaker 9>it critical to national security. In Hong Kong, Joan Wong

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<v Speaker 9>Bloomberg Day Brigasia.

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<v Speaker 1>I'm Brian Curtis along with Rashad Salama and Doug Christner. So, Doug,

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<v Speaker 1>one of the things I'm interested in probing with guests

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<v Speaker 1>on the program today is what's the big driver at

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<v Speaker 1>the moment? Is it really still the FED, given that

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<v Speaker 1>the FED is sort of close to the ending of

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<v Speaker 1>its campaign. Is it more of the economy?

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<v Speaker 4>Is it?

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<v Speaker 1>Is it the impact on earnings or maybe even something else.

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<v Speaker 4>I like China.

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<v Speaker 1>So we've got David Kotok coming up in a few

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<v Speaker 1>moments and we can chat with him over that.

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<v Speaker 2>Yeah, when it comes to China, Brian Bloomberg Economics is

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<v Speaker 2>saying that more stimulus is needed to put the recovery

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<v Speaker 2>back on track. We were talking earlier about the high

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<v Speaker 2>probability that China's big commercial banks will almost certainly cut

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<v Speaker 2>their prime lending rates this week. And when it comes

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<v Speaker 2>to EVS, I know we've been talking a lot about

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<v Speaker 2>that today. Last week China did launch that green cars

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<v Speaker 2>going Rural sales campaign. And now when you're looking at

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<v Speaker 2>the issue of infrastructure spending in China, I think we

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<v Speaker 2>have to address the issue of charging infrastructure.

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<v Speaker 1>Yeah, it's interesting that the lead has been taken there

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<v Speaker 1>by Tesla, and that seems to be holding sway even

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<v Speaker 1>in China. Whether or not that stays is an interesting question.

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<v Speaker 1>And in terms of this stimulus, so I think we're

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<v Speaker 1>still waiting to see whether they lean more on broad

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<v Speaker 1>stimulus or targeted to me. And we still don't have

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<v Speaker 1>all the details of what may be coming, and it'll

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<v Speaker 1>be interesting to see how important the economy is on

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<v Speaker 1>whether or not China's behavior on.

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<v Speaker 10>The global stage changes.

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<v Speaker 1>I think, as Ed mentioned in our news, it'll be

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<v Speaker 1>really important to see whether Anthony blink and visiting China

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<v Speaker 1>actually gets a meeting with Shijinping, or whether or not

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<v Speaker 1>that is somehow withheld because China still disapproves of US outlooks.

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<v Speaker 2>Yeah, for the moment. I mean, if you look at

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<v Speaker 2>the fact that the conversation between Blinkin and Chin Yung,

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<v Speaker 2>his Chinese counterpart, those talks lasted seven and a half hours,

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<v Speaker 2>much longer than planned. So maybe that's going to inject

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<v Speaker 2>a little bit of positivity in markets today.

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<v Speaker 1>Yeah, I think most investors would hope. So now it's

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<v Speaker 1>time for global news. Both the US and China say

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<v Speaker 1>the first meeting between the two foreign secretaries was candid

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<v Speaker 1>at Baxter has Global News from the nine to sixty

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<v Speaker 1>newsroom in San Francisco.

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<v Speaker 3>Yeah, thank you, just following what you guys have set

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<v Speaker 3>up for me. Secretary of State Blincoln meetings with Foreign

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<v Speaker 3>Minister Chan Goong. The meeting lasted seven and a half hours.

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<v Speaker 3>Bloomberg's Ian Marlow and Beijing says more meetings to come.

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<v Speaker 11>We're looking to see how he's received by the Chinese side,

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<v Speaker 11>whether there will be any fireworks their fiery rhetoric.

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<v Speaker 12>In some of these meetings.

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<v Speaker 11>Here there's meetings with Chin Kong, the Chinese foreign minister today,

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<v Speaker 11>and there's the possibility of a meeting with Shi Jimping.

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<v Speaker 10>Potentially.

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<v Speaker 4>Yeah.

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<v Speaker 3>Now, the US readout said quote, the Secretary emphasized the

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<v Speaker 3>importance of diplomacy and maintaining open channels of communication across

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<v Speaker 3>the full range of issues to reduce the risk of

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<v Speaker 3>misperception and miscalculation. Secretary raised a number of issues of

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<v Speaker 3>concern now. China has, of course emphasized the Taiwan issue.

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<v Speaker 3>Blincoln has more meetings today, including one with Huangi, the

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<v Speaker 3>Communist Party's top foreign affairs official. As Ian mentioned it

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<v Speaker 3>is left to be seen now whether he'll meet with

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<v Speaker 3>President Xi jimping political re action inside the US today

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<v Speaker 3>as presidential Canada. Chris Christi on CBS has heard here

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<v Speaker 3>on Bloomberg, said he thinks it's too late for this

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<v Speaker 3>approach that is going on right now, and talking about

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<v Speaker 3>President Biden, he.

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<v Speaker 8>Has made mistakes in terms of not being tougher against

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<v Speaker 8>China on the stealing of her intellectual property, letting spy

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<v Speaker 8>balloons fly over our country unharrassed. Whatever he's doing today

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<v Speaker 8>is a day late and a dollar short.

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<v Speaker 3>Well, we'll see now. Christy is of course running against

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<v Speaker 3>Donald Trump for president and doesn't mince any words on him.

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<v Speaker 3>He says, as a former federal prosecutor, the case against

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<v Speaker 3>Trump is very strong.

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<v Speaker 8>We would not be here if Donald Trump had simply

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<v Speaker 8>returned the documents the dozens of times the government asked

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<v Speaker 8>him to return them, the times that the grand Jury

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<v Speaker 8>served a subpoena for them.

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<v Speaker 3>And also on CBS has heard here on Bloomberg, former

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<v Speaker 3>Attorney General William Barr says the case looks very solid.

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<v Speaker 3>Barr says this one is different.

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<v Speaker 13>Yes, he's been the victim of unfair witch hunts in

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<v Speaker 13>the pat asked, but that doesn't obviate the fact that

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<v Speaker 13>he's also a fundamentally flawed person who engages in reckless conduct,

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<v Speaker 13>and that leads to situations, calamitous situations like this.

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<v Speaker 3>Yeah, and what Trump has said is inconsistent.

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<v Speaker 4>Well, it's very.

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<v Speaker 13>Strong because a lot of the evidence comes from his

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<v Speaker 13>own lawyers, and furthermore, there's evidence of him saying things

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<v Speaker 13>that are completely incompatible with any idea that this was

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<v Speaker 13>an innocent document dispute.

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<v Speaker 3>Barr says, so far, the Trump arguments just don't hold up.

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<v Speaker 13>They're not even now arguing that it's purely private. What

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<v Speaker 13>they're saying is the president just has sweeping discretion to

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<v Speaker 13>say they are even though they squarely don't fall within

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<v Speaker 13>the definition. It's an absurd argument.

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<v Speaker 3>Yeah, But of course there are Trump defenders, one being

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<v Speaker 3>Republican Congressman Jim Jordan, who says the documents were declassified.

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<v Speaker 11>I go on the president's word, and he said he did,

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<v Speaker 11>and the Supreme Court said, that's what count.

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<v Speaker 3>Jordan says, if Trump said it, it is so. Support

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<v Speaker 3>for Japanese Prime Minister Fumio Kishita's cabinet dropped twelve percentage

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<v Speaker 3>points to thirty three percent of Paul take in Bamanat

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<v Speaker 3>yesterday and the day before, disapproval rose twelve points to

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<v Speaker 3>fifty eight percent. Global News powered by more than twenty

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<v Speaker 3>seven hundred journalists and analysts and over one hundred twenty

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<v Speaker 3>countries in San Francisco. I'm Ed Baxter, and this is Bloomberg.

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<v Speaker 1>This is Bloomberg Daybreak Asia. I'm Brian Curtis with Rashad

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<v Speaker 1>Salomat in Hong Kong, and our guests on the show

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<v Speaker 1>this morning is David Kotok, cio and chairman of Cumberland Advisors.

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<v Speaker 1>So I wanted to put the question to you about

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<v Speaker 1>what the biggest market driver is and sort of do

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<v Speaker 1>it in this way, David, is the FED slipping in

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<v Speaker 1>its importance as a market driver given that it's somewhere

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<v Speaker 1>close to or at its interest rate hiking campaign?

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<v Speaker 4>Yeah?

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<v Speaker 14>Well, Brian, thank you, and thank you Rashad. It's nice

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<v Speaker 14>to be with you. The question is indeterminate today. With

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<v Speaker 14>Waller's very strong comments which were quoted in your opening.

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<v Speaker 14>Chris Waller essentially said we're not done yet until we're

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<v Speaker 14>satisfied we're going to hit a two percent target, and

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<v Speaker 14>he's very clear focused on the PCE index, that price index,

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<v Speaker 14>and Waller is a powerful voice among the Board of Governors.

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<v Speaker 14>So I would say the FED is still the key

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<v Speaker 14>driver for US markets, and the outlook for interest rates

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<v Speaker 14>and the yield curve is still a wide band of uncertainty.

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<v Speaker 14>And we still have the US Treasury accessing markets for

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<v Speaker 14>hundreds of billions in new issuance to make up for

0:12:53.240 --> 0:12:56.079
<v Speaker 14>the debt ceiling political fight.

0:12:56.559 --> 0:12:59.360
<v Speaker 10>So that's ahead of US. I put number one is

0:12:59.400 --> 0:12:59.760
<v Speaker 10>the FED.

0:12:59.800 --> 0:13:03.319
<v Speaker 14>I like what you've been reporting about seven hour meetings

0:13:03.920 --> 0:13:08.680
<v Speaker 14>in China. It would be nice to see positive things

0:13:08.880 --> 0:13:12.000
<v Speaker 14>break out in the US China relationships.

0:13:12.000 --> 0:13:13.080
<v Speaker 10>Sorry, Chris Christy.

0:13:13.160 --> 0:13:15.880
<v Speaker 14>It's better to have a good outcome later than not

0:13:16.000 --> 0:13:17.000
<v Speaker 14>to have it at all.

0:13:17.679 --> 0:13:19.640
<v Speaker 10>But I would say FED number one.

0:13:19.720 --> 0:13:24.160
<v Speaker 12>Geopolitics number two a true I mean, it's amazing how

0:13:24.240 --> 0:13:28.280
<v Speaker 12>geopojects has become the alpha, almost the alpha for markets

0:13:28.360 --> 0:13:28.679
<v Speaker 12>right now.

0:13:28.760 --> 0:13:30.240
<v Speaker 10>So how has that?

0:13:30.960 --> 0:13:33.480
<v Speaker 12>You know, surely you know we got the dot plots,

0:13:33.480 --> 0:13:36.120
<v Speaker 12>How did you interpret those? How close is the Federal

0:13:36.120 --> 0:13:39.199
<v Speaker 12>Reserve for actually finishing up here? And when they start that,

0:13:39.320 --> 0:13:42.520
<v Speaker 12>you know, really perhaps not doing anything about cutting but

0:13:42.760 --> 0:13:45.040
<v Speaker 12>really using these interest rates of these sort of levels

0:13:45.080 --> 0:13:47.480
<v Speaker 12>has been the old normal becoming the new normal.

0:13:48.640 --> 0:13:53.920
<v Speaker 14>Well, Rich, you identified the dilemma for the investor in

0:13:53.960 --> 0:13:56.120
<v Speaker 14>the United States. You look at the dot plots to

0:13:56.240 --> 0:13:59.839
<v Speaker 14>send you a message. What is the real value of

0:13:59.840 --> 0:14:03.240
<v Speaker 14>the dot plots? Well, to give you the sentiment. The

0:14:03.280 --> 0:14:06.440
<v Speaker 14>sentiment said, nobody wanted to cut between now and the

0:14:06.520 --> 0:14:08.960
<v Speaker 14>end of the year. And they were all over the place,

0:14:09.440 --> 0:14:12.800
<v Speaker 14>and we had to speculate about which dot goes with

0:14:12.880 --> 0:14:16.800
<v Speaker 14>which person. That's a shame, and there's not much we

0:14:16.880 --> 0:14:23.120
<v Speaker 14>can do about it. But without knowing which dot is

0:14:23.240 --> 0:14:27.080
<v Speaker 14>Bullered and which dot is Waller, we have to do

0:14:27.120 --> 0:14:30.960
<v Speaker 14>this guesswork. So I don't put a lot of effort

0:14:31.440 --> 0:14:35.600
<v Speaker 14>into the dot plots. I think it's important that key

0:14:35.680 --> 0:14:41.200
<v Speaker 14>governors and their statements and their influence in that meeting

0:14:41.800 --> 0:14:45.440
<v Speaker 14>is identified, and Chris Waller is certainly one of them.

0:14:46.240 --> 0:14:49.360
<v Speaker 1>You know, given that the Fed has been hiking interest

0:14:49.400 --> 0:14:52.280
<v Speaker 1>rates rather steadily and the market has still performed pretty

0:14:52.320 --> 0:14:54.560
<v Speaker 1>well over the last six months, I would have thought

0:14:54.600 --> 0:14:57.240
<v Speaker 1>that you might think that what's more important than whether

0:14:57.280 --> 0:14:59.760
<v Speaker 1>or not we get one, two or three more spread

0:14:59.760 --> 0:15:03.000
<v Speaker 1>out over some time here would be the impact of

0:15:03.040 --> 0:15:06.760
<v Speaker 1>the previous hikes on the economy and on companies because

0:15:06.760 --> 0:15:10.360
<v Speaker 1>it seems like companies are handling five percent interest rates

0:15:10.640 --> 0:15:13.520
<v Speaker 1>reasonably well, and the economy too.

0:15:16.200 --> 0:15:21.920
<v Speaker 14>It would we have never had this fast arise from

0:15:22.040 --> 0:15:26.640
<v Speaker 14>zero to five percent, so we don't have guidance for

0:15:26.920 --> 0:15:32.400
<v Speaker 14>the so called long and variable lags between monetary policy

0:15:32.440 --> 0:15:36.400
<v Speaker 14>action today and what happens with real growth and to

0:15:36.640 --> 0:15:41.640
<v Speaker 14>inflation tomorrow. This is a new place for the FED,

0:15:42.360 --> 0:15:47.880
<v Speaker 14>and so I would say that they realize they need

0:15:47.920 --> 0:15:52.560
<v Speaker 14>to allow time, which is why the pace of accelerating

0:15:53.320 --> 0:15:58.240
<v Speaker 14>rate hikes has flattened out to some trajectory of between

0:15:58.400 --> 0:16:01.120
<v Speaker 14>five and six percent for the rest of the year.

0:16:02.760 --> 0:16:04.360
<v Speaker 10>Markets wanted to pivot.

0:16:04.800 --> 0:16:08.400
<v Speaker 14>They wanted the FED to not only stop raising rates,

0:16:08.440 --> 0:16:12.520
<v Speaker 14>but within a few months start to lower them, and

0:16:12.680 --> 0:16:17.600
<v Speaker 14>markets have been disappointed and essentially pushing out the pivot.

0:16:18.360 --> 0:16:22.960
<v Speaker 14>Push out the pivot, and I believe markets are going

0:16:23.040 --> 0:16:27.080
<v Speaker 14>to find that this FED is very determined to get

0:16:27.240 --> 0:16:31.600
<v Speaker 14>close to its target. The other side of that is

0:16:31.760 --> 0:16:35.840
<v Speaker 14>there's still liquidity in the system, and the FED, with

0:16:36.600 --> 0:16:42.480
<v Speaker 14>their the way in which they prevented a banking system

0:16:42.760 --> 0:16:51.160
<v Speaker 14>contagion spirallling downward with signature and SVB First Republic, what

0:16:51.240 --> 0:16:55.760
<v Speaker 14>they did was not permit contagion.

0:16:55.240 --> 0:16:56.880
<v Speaker 10>In the US banking system.

0:16:57.240 --> 0:17:00.760
<v Speaker 14>So we had three banks, big shock, hundreds of billions

0:17:01.320 --> 0:17:06.640
<v Speaker 14>and no contagion. Depositors got scared, businesses got scared, investors

0:17:06.680 --> 0:17:07.920
<v Speaker 14>got scared.

0:17:08.240 --> 0:17:09.400
<v Speaker 10>But they didn't lose.

0:17:10.440 --> 0:17:13.040
<v Speaker 14>The people who lost were the shareholders and the debt

0:17:13.080 --> 0:17:18.000
<v Speaker 14>holders in those institutions. And so that's a very powerful

0:17:18.240 --> 0:17:24.679
<v Speaker 14>positive and it is offsetting the fear that took place

0:17:24.800 --> 0:17:28.320
<v Speaker 14>during that sequential bank failure period.

0:17:28.800 --> 0:17:32.680
<v Speaker 12>Fifty anniversary for Comblan Advisors, the S and P fifty

0:17:32.760 --> 0:17:34.600
<v Speaker 12>years ago was on one hundred and eight and the

0:17:34.760 --> 0:17:37.520
<v Speaker 12>ten years yielding seven point four percent very quickly.

0:17:37.680 --> 0:17:41.080
<v Speaker 10>Your thoughts, David, Oh well, thank you very much. Rich.

0:17:41.200 --> 0:17:43.879
<v Speaker 14>The next fifty years are going to be very interesting.

0:17:44.280 --> 0:17:47.560
<v Speaker 14>I intend to start on them tomorrow morning, and I

0:17:47.600 --> 0:17:51.200
<v Speaker 14>hope we can discuss them in good health all of us.

0:17:51.240 --> 0:17:52.560
<v Speaker 10>Thank you for the good wishes.

0:17:54.800 --> 0:17:57.639
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