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Speaker 1: This is Bloomberg Day Break Asia for this Monday, April

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Speaker 1: seventeenth in Hong Kong, Sunday April sixteenth in New York,

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Speaker 1: and coming up.

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Speaker 2: Today, Treasury Secretary Yellen says US banks may pull back

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Speaker 2: on issuing credit.

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Speaker 1: Chinese ev maker Xpun will shave cost dramatically by the

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Speaker 1: end of twenty twenty four.

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Speaker 2: And Mark is set to buy the biotech company Prometheus

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Speaker 2: Bioscience is for nearly eleven billion dollars.

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Speaker 3: China high on the G seven agenda in Japan, Russia's

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Speaker 3: president and China's Defense minister meet house. Hearings on the

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Speaker 3: intelligence leagues could come as early as this week. I'm

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Speaker 3: at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg day Break Asia, the

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Speaker 4: business news you need to start your day in just

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Speaker 4: one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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Speaker 4: Business App, and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Brian Curtiz.

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

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Speaker 1: Treasury Secretary Jenny Yellen says US banks may pull back

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Speaker 1: on credit after the recent stress in the banking system.

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Speaker 1: The comments coming in an interview on CNN.

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Speaker 5: Banks are likely to become somewhat more cautious in this environment,

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Speaker 5: and that does tend to lead to somewhat greater restriction

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Speaker 5: in credit. That could be a substitute for further pricing,

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Speaker 5: further interest rate hikes that the Fed needs to make.

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Speaker 1: So if that seems like a little bit of a

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Speaker 1: walk back for Miss Yellen, she did come out and

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Speaker 1: say that what she's seeing in the banking sector is

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Speaker 1: not enough to significantly change her economic forecast. She said

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Speaker 1: she's optimistic the US can avoid recession and a meaningful

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Speaker 1: jump in unemployment as the economy cools and inflation slows.

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Speaker 2: Well in the US. On Monday, House Speaker Kevin McCarthy

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Speaker 2: is expected to address the US debt limit. He's expected

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Speaker 2: to do so in a speech at the New York

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Speaker 2: Stock Exchange. We are told McCarthy will unveil a plan

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Speaker 2: to suspend the US debt ceiling for a year in

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Speaker 2: return for spending concessions. Now, the current standoff between the

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Speaker 2: GOP and Democrats is threatening a US payment's default this summer.

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Speaker 2: Needless to say, such an event would send shockwaves through

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Speaker 2: the global economy. Earlier today, ECB President Christine Leguard said

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Speaker 2: she's got confidence in the US and doesn't foresee default.

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Speaker 2: Here's Leguard speaking on CBS Face the Nation.

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Speaker 6: If it did happen, it would have very, very negative impact,

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Speaker 6: not just for this country where confidence would be challenged,

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Speaker 6: but around the world. Let's face it, this is the

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Speaker 6: largest economy, it's a major leader in economic growth around

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Speaker 6: the world. It cannot let that happen.

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Speaker 2: ECB President Christine Leguard speaking on CBS Face the Nation.

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Speaker 2: Earlier here on Bloomberg Radio.

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Speaker 1: In some corp st news, Mercan Company will buy the

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Speaker 1: biotech firm Prometheus Biosciences for about ten point eight billion dollars.

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Speaker 1: We get that story from Bloomberg Susanna Palmer.

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Speaker 7: Buying Prometheus Biosciences will help MERK boost its research pipeline

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Speaker 7: and strengthen its portfolio of autoimmune drugs. This as Merk's

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Speaker 7: best selling cancer drug, key Trudea, loses patent protection. A

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Speaker 7: MERK unit will acquire all outstanding shares of Prometheus at

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Speaker 7: two hundred dollars each in cash, a seventy five percent

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Speaker 7: premium to Prometheus's closing price on Friday. The transaction is

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Speaker 7: one of the largest pharma deals in recent years. Susanna

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Speaker 7: Palmer Bloomberg day Break Asia.

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Speaker 2: The Chinese ev maker x Pong is planning to shave

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Speaker 2: its cost dramatically by the end of twenty twenty four.

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Speaker 2: That story from Bloomberg zvon Men x.

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Speaker 8: Onun plays to cut twenty five percent off the cost

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Speaker 8: of its power trade and say fifty percent on intelligent

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Speaker 8: driving features by the end of next year. The two

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Speaker 8: areas currently account for more than half of the cost

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Speaker 8: of building x punk EV's that's according to the company's

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Speaker 8: co president Brian Goo. Tesla cut prices earlier this year,

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Speaker 8: and that has put more pressure on carmakers in the

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Speaker 8: world's largest EV market. Xpun hopes these new cuts and

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Speaker 8: costs will propel the company towards profitability. Disappointing sales last

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Speaker 8: year forced the automaker to push back its timeline for

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Speaker 8: profitability to twenty twenty five. X pund will introduce a

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Speaker 8: new mid sized suv set to rival Tesla's Model Y

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Speaker 8: at the Shanghai Auto Show tomorrow in Hong Kong. I'm

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Speaker 8: von Mann Bloomberg day Break Asia.

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Speaker 1: PBOC governor E Gung says China has largely ended foreign

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Speaker 1: exchange intervention. Bloomberg's Joan Wong has that story from Hong Kong.

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Speaker 9: Ye says sooner or later markets defeat central banks. He

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Speaker 9: said the PBOC now operates what he calls a managed

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Speaker 9: floating regime, but the central bank governor said the PBOC

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Speaker 9: still reserves the right to intervene in the market, and

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Speaker 9: a speech at the Peterson Institute in Washington, y said

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Speaker 9: China does not have a date for letting the yuan

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Speaker 9: trade freely. He said, at the moment, the basic policy

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Speaker 9: is simply to make it easier for people to use

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Speaker 9: the currency. The US Treasury often criticizes China for a

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Speaker 9: lack of transparency and how the country manages its exchange rate.

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Speaker 9: The US Treasury often criticizes China for a lack of

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Speaker 9: transparency and how the country manages this exchange rate. Is

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Speaker 9: not clear if these latest comments from the PBOC governor

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Speaker 9: changed that calculation. In Hong Kong, Joan Wong, Bloomberg Day Brigasia.

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Speaker 1: I'm Brian Curtis along with Doug Christner, Doug Yields really

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Speaker 1: popped on Friday, particularly at the short end of the curve,

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Speaker 1: which kind of indicates what the market expects. The fed

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Speaker 1: will do. And it's funny because the retail sales data

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Speaker 1: was pretty weak. However, if you strip out cars in gasoline,

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Speaker 1: the number was better than expected and rates moved up

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Speaker 1: on that, but still it was pretty negative. Then the

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Speaker 1: consumer sentiment was pretty positive. So I don't know that

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Speaker 1: we learned all that much on Friday.

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Speaker 2: Yeah, but I would point out as part of that

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Speaker 2: University of Michigan data Brian uncertainty over short run inflation expectations,

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Speaker 2: they were notably elevated in the year ahead. The expectation

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Speaker 2: from the University of Michigan is that we could see

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Speaker 2: a rate maybe as high as four point six percent.

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Speaker 2: That was the April reading, and if you look at

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Speaker 2: where things were in March three six so that's a

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Speaker 2: big move up. And I also want to point out

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Speaker 2: the fact that in terms of the data, there was

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Speaker 2: a bit of an upside surprise in the March industrial

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Speaker 2: production number that may not really be accurate in terms

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Speaker 2: of some of the contraction that we've seen overall in

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Speaker 2: US manufacturing, which makes this week's PMI data on Friday

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Speaker 2: all the more important.

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Speaker 1: Yeah, we keep moving forward to data and then really

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Speaker 1: not doing much off.

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Speaker 10: Of the data.

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Speaker 1: Although I guess you have to say that yields really

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Speaker 1: did pop on Friday, so that was a big move

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Speaker 1: the two you yield up thirteen basis points to four

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Speaker 1: points zero nine percent, and the dollar moved. But we

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Speaker 1: just didn't get a lot of expression, I suppose in

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Speaker 1: the stock market.

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Speaker 4: So that's what's let me.

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Speaker 1: We'll get a closer look on the Asian markets coming

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Speaker 1: up a little bit later this morning. Now it's time

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Speaker 1: for global news. Tensions with China are high on the

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Speaker 1: agenda at the G seven meetings in Japan, and Baxter

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Speaker 1: has global news from the nine to sixty newsroom in

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Speaker 1: San Francisco.

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Speaker 2: Yeah right, Brian.

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Speaker 3: Japan now holds a rotating presidency in Asia, sure to

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Speaker 3: come in a greater focus. Taiwan in particular holds special

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Speaker 3: interest in the wake of President Sayang Wen's meeting with

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Speaker 3: Housepeaker Kevin McCarthy and the ensuing Chinese military drills. Also

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Speaker 3: in the mixed France President Maliam mccron's meeting with President

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Speaker 3: Shi Jimping. Now Joseph Borel, the EU's foreign policy chief,

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Speaker 3: is sought to downplay any differences in the block going

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Speaker 3: into the meetings. Russian President Vladimir Putin has met with

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Speaker 3: China's new Defense Minister, General Lee Shangfu, who is visiting

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Speaker 3: Russia on his first official foreign trip. Lee on Russian

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Speaker 3: TV says a TIES surpassed some military political alliances of

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Speaker 3: the Cold War era, and Putin praised the TIES and

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Speaker 3: highlighted the exchange of intelligence as well as the joint

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Speaker 3: military maneuvers. Now, speaking of intelligence, the chair of the

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Speaker 3: US Intelligence Committee in the House, Mike Turner on CBS

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Speaker 3: has heard here on Bloomberg Today, said his committee expects

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Speaker 3: hearings as early as this week into the leak documents.

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Speaker 11: Through life patterns, there were clearly signals that he might

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Speaker 11: be a likely leaker of information in the future. And

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Speaker 11: then also the access that he was having to this

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Speaker 11: information should have been cut off. He should have never

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Speaker 11: been having access to this level of classified information that

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Speaker 11: could hurt the United.

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Speaker 3: State, and he says the system needs to be refined.

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Speaker 3: Senator Lindsey Graham agrees, I was.

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Speaker 12: The Captain and major. I would be surprised if I

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Speaker 12: had that kind of information. Yes, the system failed.

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Speaker 3: Graham on ABC's This Week is heard on Bloomberg.

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Speaker 1: And very damaging.

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Speaker 12: There's information about Masad supposedly helping the protesters. There's information

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Speaker 12: about the air defense capability of Ukraine, and everybody in

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Speaker 12: the regions really worried, because who wants to share information

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Speaker 12: with the United States If you're going to read about

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Speaker 12: it in the paper.

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Speaker 3: He says people should be fired. Graham's in the Middle

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Speaker 3: East and it's met with Saudi Crown Prince in a

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Speaker 3: reversal of his position after journalist Kamal Koshogi was killed

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Speaker 3: and when they said the US should never do business there.

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Speaker 12: Saudi Arabia purchased thirty six billion dollars worth of seven

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Speaker 12: eighty seven Boying jets made in Charleston, South Carolina. They

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Speaker 12: picked the Boeing seven eighty seven over the airbus. I

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Speaker 12: came over here to say thanks to Saudi Arabia. Well.

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Speaker 3: Today Graham is in Israel, where Prime Minister Benjamin Nett

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Speaker 3: Yahoo's defending his effort to weaken the judiciary system.

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Speaker 10: There is an issue. It's a real issue. It affects

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Speaker 10: many democracies. Sooner or later it's affected Israel because of

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Speaker 10: the imbalance of the three branches of government. We're trying

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Speaker 10: to bring it back in balance. But I think trying

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Speaker 10: to bring it back into balance requires, at least for me,

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Speaker 10: as prime minister of a democratic, fiercely a robustly democratic

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Speaker 10: country called Israel, to try to do it in his

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Speaker 10: blood an agreement as possible.

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Speaker 3: And who on NBC has heard on Bloomberg says he

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Speaker 3: paused a plan to take a closer look, and Japan's

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Speaker 3: Prime minister says he's getting back on the campaign trail,

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Speaker 3: calling the FUMIOCAC to calling off, the setting off and

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Speaker 3: an explosive at an event he attended on Saturday unforgivable.

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Speaker 3: He says it strikes the core of democracy. Global newspowered

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Speaker 3: by more than twenty seven hundred journalists and and listen

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Speaker 3: over one hundred and twenty countries in San Francisco, I'm

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Speaker 3: Ed Baxter, and this is Bloomberg.

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Speaker 1: I'm Brian Curtis along with Rashad Salamat, and this is

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Speaker 1: Bloomberg Daybreak Asia. We are here in Hong Kong welcoming

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Speaker 1: our guest Jason Schenker, president of Prestige Economics, to take

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Speaker 1: a closer look at markets well the culmination of the

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Speaker 1: data last week, Jason seems to be putting a little

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Speaker 1: bit more upward pressure now on yields and the dollar,

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Speaker 1: and that may be a little bit of a change

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Speaker 1: of thinking and that the FED was getting ever closer

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Speaker 1: to ending its interest rate hiking regime. Do you see

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Speaker 1: one more? Two more? How do you see the Fed

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Speaker 1: moving here?

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Speaker 10: In the shorter term?

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Speaker 13: I think the Fed is going to remain data dependent,

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Speaker 13: as they often have, and I think part of the

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Speaker 13: reason we saw the rising yields at the end of

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Speaker 13: the week was early in the week the imf S

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Speaker 13: World Economic Outlook Report, which came out and really told

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Speaker 13: a story of two kinds of inflation, where we're seeing

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Speaker 13: headline inflation going down but core CPI plateauing, and that's

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Speaker 13: the actual word they use within their report, looking across

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Speaker 13: especially advanced economies, that core inflation we saw not only

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Speaker 13: plateau in the US last week, but we saw that

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Speaker 13: core CPI accelerate year on year from five point five

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Speaker 13: to five point six percent. And I think that's the

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Speaker 13: Fed's biggest concern right now is can they push inflation

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Speaker 13: through the stick? Can they get it to really go

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Speaker 13: back down? Because PPI inflation's moving the right way, Core PPI,

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Speaker 13: goods PPI, total CPI, you could argue, is moving in

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Speaker 13: the right direction. But that core CPI number, that's the

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Speaker 13: sticky bit, and that's why they're probably going to raise

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Speaker 13: in May. June looks more likely, and then we'll have

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Speaker 13: to see do we actually see things moving in the

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Speaker 13: right direction, because if core CPI does begin to decelerate,

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Speaker 13: there's a chance we end up at the end of

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Speaker 13: the year between three and four percent for core CPI.

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Speaker 13: But I mean, that's what the Fed's looking for, I think, really,

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Speaker 13: but that might take a couple more rate hikes.

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Speaker 14: Looking at this though, I mean, when we're in rates

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Speaker 14: to where they are right now, that's you know, you

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Speaker 14: look back thirty forty years, which is normalizing in essence,

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Speaker 14: aren't we here justin And you know, on top of that,

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Speaker 14: we've got other challenges ahead which are going to be

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Speaker 14: a bit more medium to long term decombonization, deglobalization. On

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Speaker 14: top of that, of course, aging populations, and this is

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Speaker 14: all adding to perhaps the structure of inflation becoming perhaps

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Speaker 14: a little bit more aggressive.

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Speaker 13: I don't think that's necessarily the case that we're there

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Speaker 13: seeing inflation remain permanently high, especially because there's the opportunity

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Speaker 13: with a base effect. Part of the reason that headline

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Speaker 13: CPI is down or PPI goods PPI right right now?

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Speaker 13: Year on year two percent back in June last year

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Speaker 13: was seventeen point nine percent, right, So we're seeing some

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Speaker 13: of these numbers really come down fast. That core number.

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Speaker 13: I think housing has a lot to do with why

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Speaker 13: that's sticky. But there is an opportunity for things to

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Speaker 13: move lower, partially because of that base effect. But this

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Speaker 13: is why the Fed wants to keep the interest rates

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Speaker 13: going up and remain in a tightening position, because they

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Speaker 13: want the opportunity for us to really get back down

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Speaker 13: towards that two percent target, which is critical given our

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Speaker 13: record level of government debt and consumer debt.

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Speaker 1: So I guess the other side of the equation is

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Speaker 1: how strong is growth? Does that help consumers and businesses

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Speaker 1: handle stickier levels of inflation. I mean, the worst thing

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Speaker 1: would be if growth falls off quickly and you have

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Speaker 1: inflation stay high. How do you see the next six

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Speaker 1: months from a growth perspective.

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Speaker 13: I think there's a few different things here. One is,

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Speaker 13: if we're looking at those line items at GDP, I'm

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Speaker 13: concerned about the investment line item. That's where we're looking

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Speaker 13: at businesses making investments. Think about equipment, think about structures.

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Speaker 13: Also residential investment. This week we're going to get US

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Speaker 13: housing data out likely to be a little bit weaker,

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Speaker 13: so that's also a line item of GDP that could

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Speaker 13: be way down, So we could see an investment recession,

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Speaker 13: something we've been expecting for this year. Earnings could also

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Speaker 13: come under pressure. Why cap X is up, we see

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Speaker 13: labor costs are up, we see op xes up, right,

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Speaker 13: so everything is higher, and so companies might really see

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Speaker 13: some of their earnings come into that position where they're

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Speaker 13: under pressure. At the same time, though, if you look

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Speaker 13: at the Jolts data out last week, or rather two

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Speaker 13: weeks ago, you would see that in the US there's

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Speaker 13: still about nine point nine million open jobs. Well, there

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Speaker 13: were seven million open before COVID, so we're still up

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Speaker 13: quite a lot. And if you look at where we

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Speaker 13: were before the two thousand and one recession or before

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Speaker 13: the Great Recession, it was a lot closer to five

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Speaker 13: million p jobs. We have nine point nine million open jobs,

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Speaker 13: and seventy percent of the US economy is people buying stuff,

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Speaker 13: So we might skirt an overall recession because there's so

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Speaker 13: many jobs and people are making good money. But the

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Speaker 13: investment side, the earning side, that's the question.

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Speaker 14: So what do you I mean is the earning season

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Speaker 14: is very much in its nascence, even the big banks

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Speaker 14: doing rather well. It's going to be really important what

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Speaker 14: they say about the outlook too, isn't it.

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Speaker 4: Yeah?

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Speaker 13: I think so. And actually I'm a bit more concerned,

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Speaker 13: i'd say, about Q two Q three earnings, especially because

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Speaker 13: we see again the interest rates. It's just the FED

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Speaker 13: is tightening up a little bit more, a little bit more.

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Speaker 13: So I'm a little bit more concerned about the earnings

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Speaker 13: for the next two quarters, not so much about the

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Speaker 13: earnings for Q one. But I do think there's going

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Speaker 13: to be a lot of pressure op ex capex there

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Speaker 13: up companies are having trouble there. That's where we're seeing

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Speaker 13: some of these big layoffs, especially on the tech side.

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Speaker 13: But there's still a lot of open jobs in many industries,

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Speaker 13: and even in manufacturing where the pmis have been weak,

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Speaker 13: there's a backlog that's been there for a long time,

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Speaker 13: and that could keep some of those business is with

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Speaker 13: pretty good shipments and earnings, even though we see new

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Speaker 13: orders falling off.

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Speaker 1: So what do you do with your money here? Given

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Speaker 1: all that we've talked about.

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Speaker 13: You know, there's a few different ways you could play it,

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Speaker 13: and I think we're looking always at fundamentals. I think

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Speaker 13: the most important thing here if we're looking beyond the

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Speaker 13: next couple of years, is the fact that right now

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Speaker 13: we look at that rent inflation's really high, but we

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Speaker 13: know there's not much construction. We also know that rental

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Speaker 13: vacancies are the lowest since the early eighties. I'd be

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Speaker 13: looking still at housing as an opportunity, looking twenty four

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Speaker 13: to thirty six months out where we may be in

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Speaker 13: a severe shortage situation.

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Speaker 14: Jason, let me look at elsewhere in the Marcus give

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Speaker 14: us a sense of way. You see the dollar gave

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Speaker 14: from here because of recent weakness, and that recent weakness warranted.

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Speaker 13: I think we are going to see maybe a little

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Speaker 13: bit more weakness later in the year. I think it

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Speaker 13: could go up a little bit more here. In the

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Speaker 13: short terms, we see the FED, we begin pricing you

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Speaker 13: maybe a June rate hike. But when we get later

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Speaker 13: in the year, we see earnings under pressure, We see

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Speaker 13: the FED, the questions about when is the FED cut.

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Speaker 13: We're pretty close to the end for FED tightening, so

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Speaker 13: it's tough to make a really big upside case for

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Speaker 13: the greenback here, but it's a lot easier to make

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Speaker 13: a downside case later in the year. Obviously, we've seen

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Speaker 13: precious metals, especially gold, prices have been on a real

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Speaker 13: tear as there's high uncertainty geopolitical uncertainty as well as

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Speaker 13: economic as well as banking. So I do think there

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Speaker 13: are a few areas people are looking for a flight

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Speaker 13: to quality, and we're going to probably continue to see

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Speaker 13: some of that in the short term.

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Speaker 1: So it's very complicated. It's not like very easy to

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Speaker 1: really figure out what to do with money. There was

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Speaker 1: a piece on the Terminal late last week about how

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Speaker 1: maybe shorting retail was a good hedge against a buoyant

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Speaker 1: equity market, at least one that hasn't fallen much. But

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Speaker 1: if you look at XRT, I have to say it

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Speaker 1: really started falling when the FED started hiking. So you

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Speaker 1: almost wonder whether the reverse might be true and that

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Speaker 1: you could maybe get some gains here once the Fed

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Speaker 1: actually starts cutting. Admittedly not right around the corner, but

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Speaker 1: you should be coming.

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Speaker 13: I'm a little bit less concerned maybe about retail. I

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Speaker 13: am concerned, like Manny about what is in store for

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Speaker 13: commercial real estate, especially office space. I am concerned we're

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Speaker 13: going to see probably further downward pressure there over the

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Speaker 13: next couple of years. But on the res side, there's

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Speaker 13: just not enough supply, and I'm always looking for a

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Speaker 13: supply demand imbalance. Speaking of which, if you look at

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Speaker 13: oil prices right you've seen OPEC making this additional cut

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Speaker 13: begins May one. We're going into the summer driving season.

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Speaker 13: There's nine point nine million open jobs. We still have

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Speaker 13: record right now, record labor force participation, sorry, record labor

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Speaker 13: force numbers. The participation rate is up. We've got record

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Speaker 13: non farm payrolls in the US, So people have jobs,

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Speaker 13: people are making money, they're making more money than they've

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Speaker 13: ever made before, and there's still nine point nine million

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Speaker 13: open jobs and they're going to be driving this summer.

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Speaker 13: So I think there might some upside oil prices in

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Speaker 13: summer as well.

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