WEBVTT - Daybreak Asia: January 19, 2023

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Thursday, January nineteenth

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<v Speaker 1>in Hong Kong, Wednesday, January eighteen in New York and

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<v Speaker 1>coming up this hour, U s dooks fall after week

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<v Speaker 1>economic data and with prominent fedhawks repeating calls for more radikes.

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<v Speaker 1>Microsoft and Amazon begin a round of job cuts to

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<v Speaker 1>offset slowing sales, and the US and China pledge to

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<v Speaker 1>talk more to avoid worsening tensions. She Jim Penn calls

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<v Speaker 1>for more effort and COVID fight while saying the dawn

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<v Speaker 1>is ahead. China's censors about a wipe away gloomy emotions

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<v Speaker 1>fighting in Ukraine's Dome Boss described as ferocious. I'med Baxter

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<v Speaker 1>with Lobal news and injured top seed raffiadell is ousted

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<v Speaker 1>at the Australian Open on Dan Schwartz been I'll have

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<v Speaker 1>that story more coming up in Bloomberg Sports. That's all

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<v Speaker 1>straight ahead on Bloomberg Daybreak Asia on Bloomberg eleven and

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<v Speaker 1>three on New York, Bloomberg on Washington, d C, bloom

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<v Speaker 1>one of those SIGs one Boston Bloomberg nine sixties and

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<v Speaker 1>Francisco Sirius x M one nineteen and around the World

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<v Speaker 1>on Bloomberg Radio dot com and via the Bloomberg Business App.

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<v Speaker 1>Good morning, I'm Dad Prisoner and I'm Brian Curtis. Here

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<v Speaker 1>are the stories we're following today. So let's talk a

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<v Speaker 1>little bit about what we had in market action today.

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<v Speaker 1>We had a lot of weakness in the equity market today.

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<v Speaker 1>Some weak economic news seemed to confirm this idea that

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<v Speaker 1>things are slowing down, and it calls into question the

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<v Speaker 1>outlook not only for growth, but for earnings as well.

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<v Speaker 1>Retail sales below forecast. We also had a separate report

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<v Speaker 1>indicating the production of business equipment slumped, and then if

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<v Speaker 1>you look at the inflation story, producer prices down again.

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<v Speaker 1>In the month of December, we were off about a

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<v Speaker 1>half of one percent. And what I thought, curious, Brian,

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<v Speaker 1>is the Fed's own survey I'm talking here about the

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<v Speaker 1>Beige Book indicates moderating US price growth. So the conventional

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<v Speaker 1>wisdom seems to be if you look at the data

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<v Speaker 1>in and of itself, Hey, the Feds got room to

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<v Speaker 1>down shift um policy and at least in terms of

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<v Speaker 1>interest rate story that would normally be a positive for

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<v Speaker 1>risk access today that's not what we saw. Yeah, I

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<v Speaker 1>think it's very much a battle now between the Fed

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<v Speaker 1>and the markets. They have very different views and and

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<v Speaker 1>the FED has made it's it's point very clear, and

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<v Speaker 1>I think the market is now realizing this that they're

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<v Speaker 1>going to stay aggressive. Jim Bullard talking about getting up

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<v Speaker 1>to five and a quarter to five and a half

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<v Speaker 1>percent by the end of the year, and Cleveland Fed

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<v Speaker 1>President Lurettemester also saying a good ways to go. And

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<v Speaker 1>even if you look at the softer approach from Patrick

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<v Speaker 1>Harker and also Lori Logan calling for twenty five basis

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<v Speaker 1>point cuts, think about it. If they go a hundred

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<v Speaker 1>basis points, that's four meetings, that's six months of raising

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<v Speaker 1>interest rates into a weakening economy. Well, the other thing

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<v Speaker 1>we have to remember is that in the background we

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<v Speaker 1>have the unwind of the balance sheet happening. I think

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<v Speaker 1>we were ust under nine trillion dollars back in April,

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<v Speaker 1>So in that ninth month period, the FED has effectively

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<v Speaker 1>retired about five hundred billion dollars worth of money that

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<v Speaker 1>was put into the system during the pandemic. That's been

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<v Speaker 1>essentially eradicated at this point. Look what happened to the

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<v Speaker 1>yield curve today? We were down big across the curve.

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<v Speaker 1>A tenure that was down seventeen basis points, massive move.

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<v Speaker 1>We're trading right now in the tenure at four A

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<v Speaker 1>check that three thirty six, a two year at four

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<v Speaker 1>zero eight, So in that case a loss of about

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<v Speaker 1>eight basis points alone, and then speaks to that go

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<v Speaker 1>aheads to that that contention that the market and the

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<v Speaker 1>Fed are in very different places. But I think that

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<v Speaker 1>the Fed may suspect that things are slowing, and I

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<v Speaker 1>think that maybe we can expect a little bit of moderation.

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<v Speaker 1>But the one thing I think that we can agree

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<v Speaker 1>on is the Fed does not want the market to

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<v Speaker 1>take away that message and run with it. So that

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<v Speaker 1>accounts for the weakness that they think we had today

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<v Speaker 1>and risk assets with a down down about one eight percent.

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<v Speaker 1>So at the top of the news, and we'll get

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<v Speaker 1>to this in a few moments. The meeting between US

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<v Speaker 1>Treasury Secretary Janet Yellen and China's vice primarily or her

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<v Speaker 1>that seems to have a good news angle to it,

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<v Speaker 1>and also the China reopening that could also spur the

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<v Speaker 1>global economy and change that that situation for the FED

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<v Speaker 1>as well. I'm Brian Curtis along with Vonnie Quinn, and

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<v Speaker 1>we will take a look at some of the top

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<v Speaker 1>stories here. Let's start off with this one. Microsoft and

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<v Speaker 1>Amazon cutting a total of twenty eight thousand jobs today,

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<v Speaker 1>both companies saying that the painful measures are necessary to

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<v Speaker 1>offset slowing sales and possible recession. Let's get more from

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<v Speaker 1>Bloomberg's Ed Ludlow. I think there's kind of this unraveling

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<v Speaker 1>of pandemic era demand. You know, there's not quite semis,

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<v Speaker 1>but you know, Microsoft CEO such An Adela basically said

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<v Speaker 1>that the technology industry is entering this period where there

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<v Speaker 1>is a normalization demand, and so the industry needs to

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<v Speaker 1>react to that and kind of be a bit leaner.

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<v Speaker 1>You know. The similarity of Amazon is that they're kind

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<v Speaker 1>of unwinding what was basically pandemic era bloating, right. They

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<v Speaker 1>invested heavily in fulfillment centers and staffing to handle what

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<v Speaker 1>was a shock to the system in terms of demand.

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<v Speaker 1>At Ludlow, Microsoft says it's still plans to hire people

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<v Speaker 1>in strategic competitive areas such as artificial intelligence. In the meantime,

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<v Speaker 1>Amazon said that it would continue investing meaningfully in growth

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<v Speaker 1>areas as well, They include groceries, Amazon's business to business

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<v Speaker 1>sales program, services for third party sellers, and healthcare. Meanwhile, Bryan,

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<v Speaker 1>there's been a flurry of diplomatic activity with US Treasury

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<v Speaker 1>Secretary John at Yellen under Chinese counterparts planning to hold

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<v Speaker 1>key meetings. Let's get more from Bloomberg's Denise Pelagreni. Planning

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<v Speaker 1>is underway for a series of high level diplomatic meetings.

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<v Speaker 1>It's all part of an effort to ramp up face

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<v Speaker 1>to face engagement and improved ties. And Yellen will be

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<v Speaker 1>meeting with her Chinese counterparts in Beijing and in Washington

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<v Speaker 1>as part of this. The announcement coming after a meeting

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<v Speaker 1>in Zurich today between Yellen and China's Vice Premier Lieu.

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<v Speaker 1>And this would be Yellen's first trip to China's Jerry

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<v Speaker 1>secretary and would likely come after a visit plan for

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<v Speaker 1>early this year by Secretary of State Anthony B. Lincoln.

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<v Speaker 1>The used team indicating concern about US trade and technology policies,

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<v Speaker 1>and both sides are calling today's meeting constructive. Denise Pellegrini

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<v Speaker 1>Bloomberg day Break Asia Time for Global News. China's President

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<v Speaker 1>Shi Jinping is calling for more efforts in fighting COVID,

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<v Speaker 1>while at the same time saying that the dawn is

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<v Speaker 1>just ahead and batched it with Global News in the

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<v Speaker 1>nine six news room. And I guess it's a fair

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<v Speaker 1>question Brian to ask, can you have it both ways,

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<v Speaker 1>because they seem divergent paths. In a rare video speech

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<v Speaker 1>addressing citizens directly President, she says he's especially worried about

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<v Speaker 1>epidemic control in rural areas, especially with a lunar New

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<v Speaker 1>Year holidays approaching. Now. She says the fight against COVID

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<v Speaker 1>is in a new stage and the dawn is just ahead.

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<v Speaker 1>So some foreign institutions have opposite views. Their Affinity, for example,

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<v Speaker 1>says there is one longer, more severe COVID wave ahead

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<v Speaker 1>and China's sensors are vowing to wipe away gloomy emotions

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<v Speaker 1>over the holiday. That is their statement, gloomy emotions. Cyberspace

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<v Speaker 1>Administration says it will increase the rectification of epidemic related

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<v Speaker 1>online rumors, focusing on rumor mongering behaviors in such areas

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<v Speaker 1>as the economy and people's livelihoods. Maderna CEO Stefan Bazzell,

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<v Speaker 1>by the way, says he is not overly concerned about

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<v Speaker 1>a global impact from any variant that may come out

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<v Speaker 1>of China. Even with the lack of current data, our

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<v Speaker 1>team believe that the risk is not high that there

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<v Speaker 1>is a CV and mutense coming out of China. It's

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<v Speaker 1>possible because it's it's a large number of people, but

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<v Speaker 1>we don't think there is is high because the very

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<v Speaker 1>resistance to VOUS affecting people. Van Sella Davos on Bloomberg

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<v Speaker 1>says that that day's, especially in the United States, level

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<v Speaker 1>of vaccination any variants should not be severe. He says

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<v Speaker 1>that is subject to change, though Van sell says the

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<v Speaker 1>globe needs to plan ahead for future pandemics by bill

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<v Speaker 1>manufacturing hubs in every continent. The U s Department of

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<v Speaker 1>Justice says it has broken up cryptocurrency money laundering operation.

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<v Speaker 1>Assistant Attorney General Lisa Monico says Hong Kong based Blazazzo

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<v Speaker 1>was in operating iter nationally fits Lato facilitated the transmission

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<v Speaker 1>of hundreds of millions of dollars in illicit funds, fueling

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<v Speaker 1>darknet marketplaces and laundering the proceeds of ransomware attacks, yeah,

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<v Speaker 1>Monico says. Blazzo says that Antonio Legamotiv is a Russian

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<v Speaker 1>national living in China who was arrested in Miami. Monico

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<v Speaker 1>says the arrest puts a major net in international crypto fraud.

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<v Speaker 1>Fighting in Ukraine's Dombus region is ferocious today. Ukraine's President

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<v Speaker 1>Vladimer Zelenski says there is desperate need for the promised

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<v Speaker 1>tanks and air defense systems now to be delivered. It

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<v Speaker 1>supplies a wisdom. Tanks must out peace. Another invasionble Russian

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<v Speaker 1>tags there's a reason security and peace in Ukraine muscle

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<v Speaker 1>out peace Russ's text on security and peace in all

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<v Speaker 1>the converce. Zelinski says the security of other nations as

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<v Speaker 1>at risk, as well as his own and Biden administration.

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<v Speaker 1>It's considering Striker armored vehicles and it's next package of aid.

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<v Speaker 1>The new package of schedule to be revealed Friday in

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<v Speaker 1>San Francisco. I'm Ad Baxter. This is Bloomberg. I'm Brian Curtis,

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<v Speaker 1>along with Vonnie Quinn, and our guest is Nancy Dowd,

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<v Speaker 1>private wealth advisor at amery Prise Financial. Nancy, thanks very

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<v Speaker 1>much for joining us. Doug and I were just discussing

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<v Speaker 1>about the possibility we have this new mindset here that

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<v Speaker 1>that bad news is is bad news now. And prior

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<v Speaker 1>to this, we've we've had equity prices moving up because

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<v Speaker 1>whatever bad news seemed like it would get the Fed

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<v Speaker 1>to take a softer approach. But everyone knows now that

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<v Speaker 1>that's not what the Fed has in mind for this year.

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<v Speaker 1>So when we see bad news, it's an indicator to

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<v Speaker 1>sell and maybe good news as an indicator to sell

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<v Speaker 1>as well. Yeah, I mean the bad news has been

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<v Speaker 1>there all along, and the Fed has been very consistent. Um.

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<v Speaker 1>I think it was lovely that we had some optimism

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<v Speaker 1>at the beginning of the year, uh, with the inflation

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<v Speaker 1>number being down to six percent, but the reality is

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<v Speaker 1>it is still higher year over year and we're still

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<v Speaker 1>not there yet as far as looking inflation so to speak. Uh.

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<v Speaker 1>And the said goal is to get to five percent,

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<v Speaker 1>north of five percent as of today. Actually they were

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<v Speaker 1>staying five percent before, but now it's north of five

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<v Speaker 1>percent in the ten year treasury before they will pull

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<v Speaker 1>back on raising rates. So I fully expect the Feds

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<v Speaker 1>to raise rates again in January and in February, and

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<v Speaker 1>I think the first part of the year is going

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<v Speaker 1>to still be quite plumpy. Maybe not quite as volatile

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<v Speaker 1>as it was all of last year, but I think

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<v Speaker 1>that we're still we're still not quite there or not

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<v Speaker 1>where we want to be yet. How much of your portfolio,

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<v Speaker 1>what percentage of your portfolio should you this year having bonds? Well,

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<v Speaker 1>I think that varies with every investor and their risks,

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<v Speaker 1>tolerance and profile. Sure, but generally we talked about a

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<v Speaker 1>sixty portfolio. Does that change this year because bonds are

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<v Speaker 1>becoming more attractive, Well, bonds are certainly getting more attractive,

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<v Speaker 1>and cash investments are getting more attractive, which is very,

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<v Speaker 1>very good to us in this environment. So there's very

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<v Speaker 1>nice opportunities in the fixed income market. Um, But if

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<v Speaker 1>you're a moderate investor yet, it's still at about thirty five. Yeah,

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<v Speaker 1>I'm interested in in this lag that we've been talking about.

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<v Speaker 1>So I think the point I made at the beginning

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<v Speaker 1>and your point that we can have six six rough

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<v Speaker 1>months here actually are are pretty consistent. The point is

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<v Speaker 1>that I wonder whether the market is coming to the

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<v Speaker 1>grips here that we're not going to see the other

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<v Speaker 1>side of this anytime soon, and therefore some of the

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<v Speaker 1>buying we saw in the first two weeks of January

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<v Speaker 1>may be misplaced. Well, absolutely, you know, like I said,

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<v Speaker 1>there was misplaced optimism. Um. And and it's a good thing,

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<v Speaker 1>you know, that's not such a bad thing, because when

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<v Speaker 1>it's doom and gloom all the time, then it just

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<v Speaker 1>virals downwards even further. Um. But I don't think we

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<v Speaker 1>are finished with this yet. And uh, we can expect

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<v Speaker 1>more interest rate hikes. The corporate earnings reports show the

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<v Speaker 1>beginning of a decline in profit margins, which is certainly expected.

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<v Speaker 1>I mean, at some point inflation and higher costs and

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<v Speaker 1>and uh and higher interest rates are going to take

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<v Speaker 1>a toll on corporate profits and we're just beginning to

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<v Speaker 1>see it. The job market is still pretty tight, um,

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<v Speaker 1>although we're seeing some layoffs. The reports and the data

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<v Speaker 1>is landing and until those reports come out, we will

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<v Speaker 1>not see the subsiding of um action on the pit part.

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<v Speaker 1>So now saying what parts of the market are you

0:13:04.360 --> 0:13:09.080
<v Speaker 1>looking specifically as in terms of opportunity right now? Well,

0:13:09.080 --> 0:13:11.840
<v Speaker 1>as I said, um, the good news of all of

0:13:11.880 --> 0:13:14.320
<v Speaker 1>this is that there are nice opportunities in the fixed

0:13:14.360 --> 0:13:18.200
<v Speaker 1>income market where there was virtually none uh. And cash

0:13:18.280 --> 0:13:21.360
<v Speaker 1>was certainly worthless. Uh, you know, as far as an

0:13:21.600 --> 0:13:25.960
<v Speaker 1>earn interest rates. But now there's a nice opportunity with

0:13:26.120 --> 0:13:29.880
<v Speaker 1>cash and fixed income investments. UM, as long as you're

0:13:30.000 --> 0:13:33.280
<v Speaker 1>very careful, as long as you're very careful about credit quality,

0:13:33.640 --> 0:13:37.160
<v Speaker 1>which is going to become more and more important. UM.

0:13:37.280 --> 0:13:40.360
<v Speaker 1>But and also watch the duration, but much more small

0:13:40.440 --> 0:13:45.880
<v Speaker 1>focused on credit quality and the other opportunity. I'm sorry, no,

0:13:46.000 --> 0:13:49.520
<v Speaker 1>you go ahead. But the other opportunity in the equity

0:13:49.559 --> 0:13:52.160
<v Speaker 1>markets will certainly be in the energy and industrial sector

0:13:52.440 --> 0:13:57.160
<v Speaker 1>because out of anything, of all, corporate profits are starting

0:13:57.200 --> 0:13:59.400
<v Speaker 1>to show a decline, but those are the two sectors

0:13:59.400 --> 0:14:04.439
<v Speaker 1>that are still showing us increasing. Do you think, though, Nancy,

0:14:04.520 --> 0:14:07.080
<v Speaker 1>that another option would be Asia? And I say this

0:14:07.160 --> 0:14:09.360
<v Speaker 1>because if we do have the FED raising interest rates

0:14:09.360 --> 0:14:12.640
<v Speaker 1>for the next six months, as the economy is, you know,

0:14:12.720 --> 0:14:17.360
<v Speaker 1>grinding down, some money will find its way to China,

0:14:17.440 --> 0:14:20.880
<v Speaker 1>where they're in a hurry to try to restoke growth,

0:14:21.120 --> 0:14:24.600
<v Speaker 1>and equity markets have been running pretty positive here. Do

0:14:24.680 --> 0:14:28.840
<v Speaker 1>you see that shift happening? Well, I think if you're

0:14:28.920 --> 0:14:32.920
<v Speaker 1>very speculative, that may happen. But I'm in the business

0:14:33.000 --> 0:14:36.760
<v Speaker 1>of meeting clients long term goals, so that would be

0:14:36.800 --> 0:14:40.320
<v Speaker 1>a little too speculative on our part to do. UM.

0:14:40.640 --> 0:14:43.520
<v Speaker 1>I think that would fixed income being very attractive here

0:14:43.520 --> 0:14:46.520
<v Speaker 1>in the US. Why would wait, wait, sorry, China is

0:14:46.560 --> 0:14:50.680
<v Speaker 1>the second biggest China's the second biggest economy in the world,

0:14:50.840 --> 0:14:53.960
<v Speaker 1>so obviously there are opportunities there. Are you saying that

0:14:54.160 --> 0:14:59.680
<v Speaker 1>any investments in China is purely speculative? Not long, that's

0:14:59.680 --> 0:15:02.000
<v Speaker 1>not what saying. I'm just saying that it is more

0:15:02.040 --> 0:15:04.960
<v Speaker 1>speculative than in pounds than not to mention the strength

0:15:05.000 --> 0:15:08.240
<v Speaker 1>of the dollars still that's still a factor, although it's

0:15:08.280 --> 0:15:12.200
<v Speaker 1>showing some signs of weakening. Um. I think the dollar,

0:15:12.320 --> 0:15:13.920
<v Speaker 1>the strength of the dollar is there is a big

0:15:13.960 --> 0:15:19.160
<v Speaker 1>factor in any outside the US investing. Nancy, it's been

0:15:19.160 --> 0:15:21.960
<v Speaker 1>a tough couple of years. What kinds of returns are

0:15:22.000 --> 0:15:27.920
<v Speaker 1>you targeting now? What has become the normal? There's nothing

0:15:28.000 --> 0:15:31.200
<v Speaker 1>that was ever normal? Well, eight percent was considered sort

0:15:31.240 --> 0:15:35.240
<v Speaker 1>of reasonable, right, eight percent a year? Um? Well, I

0:15:35.280 --> 0:15:38.640
<v Speaker 1>think it depends on a eight percent used to be

0:15:39.040 --> 0:15:44.000
<v Speaker 1>an acceptable return. Um. However, with inflation being at six percent,

0:15:44.280 --> 0:15:46.800
<v Speaker 1>that's not really a very good return. So it really

0:15:46.840 --> 0:15:51.080
<v Speaker 1>all have to do with cost of living and purchasing power. Um.

0:15:51.120 --> 0:15:53.640
<v Speaker 1>So we had a great year in one, but not

0:15:53.720 --> 0:15:56.520
<v Speaker 1>such a great year in twenty two, and that's very,

0:15:56.600 --> 0:16:00.400
<v Speaker 1>very normal in stock markets or in the markets in general.

0:16:01.120 --> 0:16:03.520
<v Speaker 1>We're always going to see up or down and it's

0:16:03.560 --> 0:16:06.440
<v Speaker 1>never the same, and these are things that have to

0:16:06.440 --> 0:16:10.560
<v Speaker 1>be built into every portfolio. So time frame is certainly

0:16:10.640 --> 0:16:13.680
<v Speaker 1>always the biggest consideration, how long do we in it for?

0:16:14.480 --> 0:16:18.400
<v Speaker 1>And then the not so solid consideration that it's harder

0:16:18.440 --> 0:16:21.240
<v Speaker 1>to predict, and that's how much appetite for risk do

0:16:21.320 --> 0:16:24.920
<v Speaker 1>we have, and that varies by each individual. With that

0:16:24.960 --> 0:16:27.280
<v Speaker 1>in mind, let's talk a little bit about Japan. Uh,

0:16:27.320 --> 0:16:30.760
<v Speaker 1>And I fully understand your comments on China. You could

0:16:30.800 --> 0:16:32.960
<v Speaker 1>have pushed back at me and say, look, with the

0:16:33.040 --> 0:16:37.240
<v Speaker 1>inconsistency of policy there, I do consider it speculative. But anyway,

0:16:37.240 --> 0:16:40.440
<v Speaker 1>that was an interesting exchange. But on Japan, so we

0:16:40.520 --> 0:16:43.720
<v Speaker 1>had the b O J in a sense surprise traders

0:16:43.800 --> 0:16:46.800
<v Speaker 1>but not economists, and the end is almost back to

0:16:46.800 --> 0:16:49.360
<v Speaker 1>where it was before. So it's hard to get a

0:16:49.440 --> 0:16:53.920
<v Speaker 1>read on this. Your take, Yeah, I mean there's certainly

0:16:54.160 --> 0:16:57.640
<v Speaker 1>a lot of tensions. Just going back to your previous comments,

0:16:57.680 --> 0:17:00.960
<v Speaker 1>in addition to UH, you know, try them being expeculative.

0:17:01.080 --> 0:17:03.240
<v Speaker 1>There's there's a whole lot of tensions between the events

0:17:03.280 --> 0:17:06.320
<v Speaker 1>in China right now, and there's there's a lot of

0:17:06.320 --> 0:17:11.480
<v Speaker 1>geopolitical risk in my opinion, so um, but it's it's

0:17:11.520 --> 0:17:16.240
<v Speaker 1>really the whole Asia market in my opinion. Uh, we're

0:17:16.280 --> 0:17:20.639
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