WEBVTT - China's Plan To Circumvent US Chip Sanctions

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<v Speaker 1>This is Bloomberg Daybreak Asia, but it is Tuesday February

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<v Speaker 1>in Hong Kong, Monday February in New York and coming

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<v Speaker 1>up today, the world's biggest minor b HP has cut

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<v Speaker 1>its dividend after China's slowdown drove down b HPAs profit.

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<v Speaker 1>Top Chinese scientists sketch out plans to circumvent US chip

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<v Speaker 1>sanctions for the first time, and Hong Kong outlines a

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<v Speaker 1>plan to allow retail investors to trade crypto coins. Biden

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<v Speaker 1>surprise visit to Ukraine. China publishes a report on what

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<v Speaker 1>it says is the US plan to dominate global public opinion.

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<v Speaker 1>Turkey hit by another large quake. I'm at Baxter with

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<v Speaker 1>Global News. That's all straight ahead on Bloomberg Daybreak Asia,

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<v Speaker 1>the business news you need to start your day, and

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<v Speaker 1>just one fifteen minute podcast available on Apple, Spotify, the

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<v Speaker 1>Bloomberg Business App, and everywhere you get your podcasts. Good morning,

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<v Speaker 1>I'm Brian Curtis and I'm Dak Krisner. Here are the

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<v Speaker 1>stories were following today. Very interesting to take a look

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<v Speaker 1>at BHP group. Here the world's biggest minor. It is

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<v Speaker 1>slashing its dividend. Let's get the story from Bloomberg's Richard Salama,

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<v Speaker 1>BHP will pay out ninety cents per share. That's down

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<v Speaker 1>from last year's record of one dollar fifty. This comes

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<v Speaker 1>as BHP commodities like iron, ore and copper slumped during

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<v Speaker 1>the second half of the year. This drove a decline

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<v Speaker 1>in b HP's half year profit. Prices were impacted by

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<v Speaker 1>China's economic slowdown and hawk is policy from central banks.

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<v Speaker 1>The world's mining giants have also been hurt by cost

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<v Speaker 1>inflation on energy, labor, and other inputs. Even so, b

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<v Speaker 1>HbCO Mike Henry says he's positive about demand looking ahead,

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<v Speaker 1>Henry saying he's expecting strengthening activity in China to be

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<v Speaker 1>a major driver in Hong Kong. I'm Richard salamat the

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<v Speaker 1>Bloomberg day Break Asia. We go to China next, where

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<v Speaker 1>some of the country's top scientists have outlined a plan

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<v Speaker 1>to circumvent US sanctions on semiconductors. That's or from Bloomberg's

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<v Speaker 1>Anabel Drulers. Senior academics Lord Jun Way and Lee shun

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<v Speaker 1>Shin say Beijing should gather patents that govern the next

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<v Speaker 1>generation of chip making. The patents would run from Nobel

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<v Speaker 1>materials to new techniques. The scientists contributed their comments to

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<v Speaker 1>the Chinese Academy of Sciences. The article offers a rare

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<v Speaker 1>glimpse into how Beijing approaches hostilities from the U S

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<v Speaker 1>over semiconductors. It also hints at how Beijing might react

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<v Speaker 1>in the future. So far, Chinese officials have refrained from

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<v Speaker 1>discussing countermeasures to US actions, reportedly even in closed door

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<v Speaker 1>meetings in Hong Kong. I'm Annabel Rulers Bloomberg Daybreak Asia

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<v Speaker 1>Hong Kong is taking a major step toward its goal

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<v Speaker 1>of becoming a crypto hub. That story from Bloomberg's yvon Man.

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<v Speaker 1>Hong Kong has outlined a plan to let retail investors

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<v Speaker 1>trade larger digital tokens on exchanges licensed by the Securities

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<v Speaker 1>of Futures Commission. In a consultation paper, the regulators said

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<v Speaker 1>safeguards such as knowledge tests, risk profiles, and reasonable limits

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<v Speaker 1>on exposed will be put in place. A consultation period

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<v Speaker 1>on virtual asset trading regulation has begun and will end

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<v Speaker 1>on March thirty one. The objective is to allow retail

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<v Speaker 1>trading in the new licensing regime for crypto exchanges due

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<v Speaker 1>on June one. We hear Bitcoin and ether, the two

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<v Speaker 1>biggest digital assets by market value, are likely to be

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<v Speaker 1>listed by Hong Kong platforms. I mean on Man, Bloomberg,

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<v Speaker 1>Daybreak Asia. Well. In the U S. A federal regulator

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<v Speaker 1>has asked Tesla for more information about one of its

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<v Speaker 1>vehicles being involved in a fatal crash in the San

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<v Speaker 1>Francisco Bay area. We have more from Bloomberg Scott Car.

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<v Speaker 1>The U s National Highway Traffic Safety Administration reached out

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<v Speaker 1>to Tesla after the incident in Contra Costa County this weekend.

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<v Speaker 1>County fire officials say at Tesla hit one of its

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<v Speaker 1>trucks that was blocking lanes while responding to an earlier accident,

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<v Speaker 1>and it's not clear whether the driver, who was pronounced

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<v Speaker 1>dad of the scene was using the Tesla's autopilot feature.

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<v Speaker 1>The NHTSA or NITZA has spent the last eighteen months

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<v Speaker 1>in investigating how Tesla's autopilot system handles crash scenes. It

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<v Speaker 1>has two active investigations into possible autopilot defects. Last week,

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<v Speaker 1>Tesla recalled almost three hundred sixty three thousand cars that

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<v Speaker 1>have full self driving beta software installed. The company says

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<v Speaker 1>that its recall notice the feature could violate traffic laws

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<v Speaker 1>before drivers are able to intervene. I'm Scott Carr, Bloomberg

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<v Speaker 1>Daybreak Asia. From Home Depot to Walmart, The biggest US

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<v Speaker 1>retailers are about to grab the earning spotlight. The story

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<v Speaker 1>from Bloomberg, Susanna Palmer. The results this week will provide

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<v Speaker 1>investors with crucial insight into consumer demand, the path of

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<v Speaker 1>economic growth, and Corporate America's profitability. The group doesn't have

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<v Speaker 1>nearly the influence of big tech in terms of sway

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<v Speaker 1>over the broader market, but the companies will be closely watched,

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<v Speaker 1>as consumer discretionary shares are the year's top performing cohort

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<v Speaker 1>in the SMP five hundred index, this after getting battered

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<v Speaker 1>in twenty two on rising inflation and smolen inventories. Susanna Palmer,

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<v Speaker 1>Bloomberg Daybreak. Yeah, Bryan Curtis and Chrisoner Paul Allen coming

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<v Speaker 1>up shortly, and we'll get to our guest, Chuck Camello

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<v Speaker 1>in a few moments. From SX Financial Services, Doug, the

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<v Speaker 1>b HP story is kind of interesting and that it

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<v Speaker 1>might it might be a microcosm of what's happening with

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<v Speaker 1>the global economy. Dismal second half last year, profits down

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<v Speaker 1>thirty two. China was more or less closed, the central

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<v Speaker 1>banks were obviously quite aggressive, and commodity prices dropped. You know,

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<v Speaker 1>we still have a bear market in commodities down the

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<v Speaker 1>bloomberg of commodity index from last summer. But now China

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<v Speaker 1>has reopened and that changes everything. Uh, And it's just

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<v Speaker 1>it's just curious. We don't know how soon this will happen.

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<v Speaker 1>But does that restoke optimism and growth perhaps, But you

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<v Speaker 1>have to look at the inflation component of what BHP

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<v Speaker 1>is saying, they're dealing with rising cost and Brian I

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<v Speaker 1>was struck by what ed Yar Denny of yard Any

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<v Speaker 1>Research is saying he's got a fort chance of a

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<v Speaker 1>soft landing in the US. I was struck by that

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<v Speaker 1>are Denny saying that basically in this scenario, inflation moderates,

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<v Speaker 1>which at this point seems hard to believe. Treasury bond

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<v Speaker 1>yields remain below last year's peak. And get this, the

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<v Speaker 1>SNP five dred ends the year at a new high. Yeah,

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<v Speaker 1>and he's widely followed obviously, Doug Um. It's a real

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<v Speaker 1>conundrum here. Um. Even though growth looks a little better

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<v Speaker 1>based on the data we've seen of late, it looks

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<v Speaker 1>like it'll be interest rates higher for longer. There's no

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<v Speaker 1>denying that inflation is serving as very sticky, and as mentioned,

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<v Speaker 1>we'll put that to Chuck Camello. Coming up now, it's

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<v Speaker 1>time for Global News. US President Joe Biden's surprise visit

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<v Speaker 1>to Ukraine is in the hopes of rallying new pledges

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<v Speaker 1>of help from European allies for Ukraine. At Baxter has

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<v Speaker 1>Global News in the newsroom at San Francisco ed, Yeah,

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<v Speaker 1>that's a look forward, Brian. You're right, historic trip to

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<v Speaker 1>mark one year of Russian invasion and to meet with

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<v Speaker 1>President of Avlatimer's landscape. Keith stands and Ukraine stands, the

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<v Speaker 1>democracy stands, the Americans stands with you, and the world

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<v Speaker 1>stands with you, saying Ukraine has captured a part of

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<v Speaker 1>his heart, and he said Russia cannot be allowed to

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<v Speaker 1>even win try to win the war. Young town of

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<v Speaker 1>Russians are fleeing at tens of thousands, not wanting to

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<v Speaker 1>come back to Russia. Has Zelenski addressed the gathering, saying

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<v Speaker 1>that he extended words of gratitude personally to President Biden

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<v Speaker 1>and to his team to Congress and to all US people.

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<v Speaker 1>Biden promised an additional sixty million dollars in military aid,

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<v Speaker 1>and in Poland will meet with Eastern European leaders to

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<v Speaker 1>make sure they're all on the same page. Now, there

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<v Speaker 1>is a large list of comments and responses. Today. In

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<v Speaker 1>an interview with South China Morning Post, Lensky War in

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<v Speaker 1>China of becoming allies with Russia against Ukraine, saying it

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<v Speaker 1>would bring on a world war, and the e U

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<v Speaker 1>s Joseph Burrows says that China Counselor Wang Ye and

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<v Speaker 1>their meeting said Wang told him that China has no

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<v Speaker 1>lands to arm Russia and that it will convince the

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<v Speaker 1>world it is a neutral actor and wants to broker peace. Shinhwa, meanwhile,

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<v Speaker 1>is published a four thousand word piece criticizing the US

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<v Speaker 1>and everything from war policy to culture, and saying it

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<v Speaker 1>will write a plan for peace. The article called US

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<v Speaker 1>Hedgemony and its Perils. Wang's next stop is Russia. The

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<v Speaker 1>Kremlin says a meeting with President Vladim Raputin has not

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<v Speaker 1>been excluded. Now. This leads US Secretary of State Anthony

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<v Speaker 1>Blinkoln to repeat the warning about bringing lethal weapons in

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<v Speaker 1>to help Russia in the war. China understands what's uh,

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<v Speaker 1>what's at risk, where to proceed with providing material support

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<v Speaker 1>of that kind to to Russia and Blincoln says the

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<v Speaker 1>concerns are real and in responds China's Foreign Ministry spokesman

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<v Speaker 1>at Juan wam Band, saying that China won't accept any

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<v Speaker 1>finger pointing from the US over its relations with Russia.

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<v Speaker 1>Turkey has been hit by a new six point four

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<v Speaker 1>magnitude Earth Week today. It has killed three people injured

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<v Speaker 1>more than two hundred in the same area that was

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<v Speaker 1>devastated two weeks ago. USS Secretary of State Blanket in

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<v Speaker 1>Turkey surveying the damage there by helicopter. United States is

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<v Speaker 1>here to support you in your time of need, and

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<v Speaker 1>we will be by your side for as long as

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<v Speaker 1>it takes to recover and to rebuild, pledging another one

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<v Speaker 1>hundred million dollar aid package, and the Philippines and US

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<v Speaker 1>will discuss a joint coastguard patrols in the South China.

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<v Speaker 1>See writer's report says China's aggressive stance in the area

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<v Speaker 1>needs to be monitored. Global News powered by more than

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<v Speaker 1>journalists and analysts and over one hundred twenty countries in

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<v Speaker 1>San Francisco. I'm at Baxter and this is Bloomberg. This

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<v Speaker 1>is Bloomberg Daybreak Asia. I'm Brian Curtis along with Paul Allen,

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<v Speaker 1>and our guest is Chuck Cumello, President and CEO at

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<v Speaker 1>Essex Financial Services. Chuck, how do you see the balance

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<v Speaker 1>of risk shifting here? Where it looks like inflation will

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<v Speaker 1>stay stay sticky, rates will stay up for a while,

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<v Speaker 1>but then growth will will be stronger as well. Well, yeah,

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<v Speaker 1>thank you so much for having me. Um. Yeah, listen,

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<v Speaker 1>it's we're We're at a really interesting time and just

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<v Speaker 1>when the market was almost trying to convince itself that

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<v Speaker 1>thought that the Fed made pause or even cut I

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<v Speaker 1>think this month, which February, which you know is the

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<v Speaker 1>shortest month of the year, but it's certainly punching above

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<v Speaker 1>its weight in terms of economic and financial data that

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<v Speaker 1>we're getting this month. The data this month certainly puts

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<v Speaker 1>a lot of cold water on that argument, and I

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<v Speaker 1>think it will. And we've already seen the market react

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<v Speaker 1>to the employment number, c p I, p p I,

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<v Speaker 1>retail sales, etcetera. I think we're in for a more

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<v Speaker 1>volatile ride, and I think the market is finally waking up.

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<v Speaker 1>The rates are going to stay long higher for longer.

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<v Speaker 1>Maybe we get a pause, but I don't think it

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<v Speaker 1>cut anytime soon. We had some commentary from Muhammad al Arian,

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<v Speaker 1>chief economic advisor at Alians, is also a Bloomberg opinion columnist,

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<v Speaker 1>but he was saying that this two percent inflation target

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<v Speaker 1>for the FID just isn't realistic, that it's going to

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<v Speaker 1>crush the economy. That does that need to be revisited

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<v Speaker 1>in your view? Yeah, So I was reading something today

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<v Speaker 1>and it said three percent might be the new two

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<v Speaker 1>percent um And you know, getting getting from peak inflation

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<v Speaker 1>from where we were um to this, you know six

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<v Speaker 1>point for um, you know number that we're at right now,

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<v Speaker 1>give or take. Getting from that, you know that that

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<v Speaker 1>might be the more easiest move if you if you will,

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<v Speaker 1>not certainly pain free by any stretch, but getting from

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<v Speaker 1>six and change down to two, that's that's painful. And

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<v Speaker 1>I think the FED at some point, especially if you

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<v Speaker 1>start to see the impact to the jobs in employment

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<v Speaker 1>situations in the United States, I think they may need

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<v Speaker 1>to sort of revisit that and potentially again three is

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<v Speaker 1>the new two. You call it a win and you

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<v Speaker 1>move on. Yeah, it's one of those things where you

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<v Speaker 1>don't actually change the target, but you just kind of

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<v Speaker 1>quietly adjust to it. I suppose one thing I'm curious about,

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<v Speaker 1>Chuck that doesn't seem to fit for me is that

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<v Speaker 1>I understand that retail sales look buoyant partially because inventories

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<v Speaker 1>are high and retailers cut their prices. But they cut

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<v Speaker 1>their prices, then why did inflation pop up? So is

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<v Speaker 1>inflation not seasonal and sales are or what? Yeah, well

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<v Speaker 1>soon the inflation number, Well, two things. One the January

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<v Speaker 1>retail sales number. There could be there's a lot of

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<v Speaker 1>noise in that number, and I don't think you're going

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<v Speaker 1>to see February be anywhere near what January was due

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<v Speaker 1>to timing factors and um, you know, especially money that

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<v Speaker 1>people have not spent in December but then push things

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<v Speaker 1>into January. But inflation, you know, listen, it's the Fed

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<v Speaker 1>raising rates has certainly impacted anything that needs to be financed, cars, houses,

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<v Speaker 1>You see that. You see that across the economy, but

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<v Speaker 1>it hasn't really hurt services and wage inflation even when

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<v Speaker 1>this last number came down a little bit but still

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<v Speaker 1>persistently high. So you know, inflation, it's going to be

0:12:54.240 --> 0:12:56.040
<v Speaker 1>very sticky, and that's why the Fed is going to

0:12:56.080 --> 0:12:58.240
<v Speaker 1>have such a hard job of trying to drive it

0:12:58.280 --> 0:13:00.760
<v Speaker 1>down from here, Which goes back to the last point

0:13:00.760 --> 0:13:04.640
<v Speaker 1>about is two even realistic with given what the market

0:13:04.720 --> 0:13:06.480
<v Speaker 1>is dealing with, what the economy is dealing with, and

0:13:06.480 --> 0:13:09.320
<v Speaker 1>there certainly are enough factors at play that you can

0:13:09.400 --> 0:13:12.960
<v Speaker 1>make the argument that again two is not realistic. Inflation

0:13:13.040 --> 0:13:14.800
<v Speaker 1>is going to be with us longer, and the FED

0:13:14.920 --> 0:13:16.439
<v Speaker 1>got us into this and they're going to have to

0:13:16.480 --> 0:13:19.000
<v Speaker 1>get us out. And that's why you're seeing hearing more

0:13:19.040 --> 0:13:21.760
<v Speaker 1>hawkish tones coming out, and that's why the market is

0:13:21.760 --> 0:13:24.120
<v Speaker 1>going to react and has already started to react to this.

0:13:24.120 --> 0:13:25.680
<v Speaker 1>This you know, I don't we even call it a

0:13:25.679 --> 0:13:28.600
<v Speaker 1>new reality, but just the reality that rates are going

0:13:28.679 --> 0:13:30.439
<v Speaker 1>to be higher and we're going to have to the

0:13:30.480 --> 0:13:33.080
<v Speaker 1>market's going to have to adjust. Yeah, has the market

0:13:33.080 --> 0:13:34.880
<v Speaker 1>reacted that we got the SMP up six and a

0:13:34.960 --> 0:13:37.520
<v Speaker 1>quarter percent so far this year despite all of that

0:13:37.679 --> 0:13:41.000
<v Speaker 1>hawkish rhetoric. Is this a bit of a game of

0:13:41.080 --> 0:13:44.360
<v Speaker 1>chicken being played here? I think I think a little

0:13:44.360 --> 0:13:45.800
<v Speaker 1>bit of one, right, I mean, I think you've already

0:13:45.840 --> 0:13:48.400
<v Speaker 1>you've certainly seen a nice bounce right in the SMP.

0:13:48.520 --> 0:13:51.600
<v Speaker 1>I think it's six off its lows close Friday at

0:13:51.679 --> 0:13:54.160
<v Speaker 1>six and a quarter. Let's call it. Um. And and

0:13:54.240 --> 0:13:58.240
<v Speaker 1>there is again that optimism UM that started the year

0:13:58.360 --> 0:14:01.160
<v Speaker 1>off with a maybe we're going to get that pause

0:14:01.240 --> 0:14:03.800
<v Speaker 1>or a cut later in the year. Again, I think

0:14:03.880 --> 0:14:07.280
<v Speaker 1>you're gonna enter into a new volatile stretch here. And look,

0:14:07.320 --> 0:14:09.320
<v Speaker 1>we haven't even talked about the debt ceiling coming up

0:14:09.360 --> 0:14:11.680
<v Speaker 1>in June, which is you know, one of the biggest

0:14:11.679 --> 0:14:13.720
<v Speaker 1>things we're starting to hear from clients. So I think

0:14:13.720 --> 0:14:16.520
<v Speaker 1>again we're going to be in for a volatile stretch here. UM.

0:14:16.679 --> 0:14:19.600
<v Speaker 1>And I think coming off of Q four that was

0:14:19.720 --> 0:14:22.640
<v Speaker 1>so so ugly and it was a tremendous amount of

0:14:22.640 --> 0:14:26.120
<v Speaker 1>tax law selling, especially in Q four. You've seen this match,

0:14:26.240 --> 0:14:28.960
<v Speaker 1>You've seen this bounce, and I think there's always sort

0:14:28.960 --> 0:14:31.600
<v Speaker 1>of a natural optimism to a new year, and especially

0:14:31.600 --> 0:14:34.320
<v Speaker 1>after the midterm elections being over. Um. But you know,

0:14:34.360 --> 0:14:37.640
<v Speaker 1>we're running into the cold, hard phase of reality, which

0:14:37.680 --> 0:14:40.720
<v Speaker 1>is higher rates and an inflation air environment, and that

0:14:40.840 --> 0:14:43.280
<v Speaker 1>is a really hard wall for the market to climb. Yeah,

0:14:43.320 --> 0:14:46.960
<v Speaker 1>everything you outlined there is perhaps to wind down equities

0:14:47.000 --> 0:14:49.960
<v Speaker 1>a little I suppose or to rationalize a bit. You

0:14:50.040 --> 0:14:53.080
<v Speaker 1>like bonds here, So how how would you tinker with

0:14:53.120 --> 0:14:56.000
<v Speaker 1>your portfolio as you know, as it relates to this

0:14:56.120 --> 0:14:59.440
<v Speaker 1>latest news. You know, well, bonds of you have gotten

0:14:59.560 --> 0:15:02.080
<v Speaker 1>more into resting at these higher at these higher rates,

0:15:02.320 --> 0:15:05.480
<v Speaker 1>I mean with equities again, you have seen a nice

0:15:05.760 --> 0:15:08.840
<v Speaker 1>run up on some of the growth areas, So starting

0:15:08.880 --> 0:15:11.280
<v Speaker 1>to take advantage of that little pop and trim a

0:15:11.320 --> 0:15:13.480
<v Speaker 1>little bit there, especially if you haven't already done so

0:15:13.840 --> 0:15:16.920
<v Speaker 1>adding more to the value side of someone's portfolio. And

0:15:16.960 --> 0:15:20.800
<v Speaker 1>with fixed income, you know, we're we're up one call

0:15:20.840 --> 0:15:22.640
<v Speaker 1>it one at a quarter on the egg so far

0:15:22.720 --> 0:15:24.880
<v Speaker 1>this year. And I was looking at my screen today

0:15:24.920 --> 0:15:28.760
<v Speaker 1>and pretty much fixed income anywhere in on mutual founder

0:15:28.800 --> 0:15:30.720
<v Speaker 1>et f land is up anywhere from call at one

0:15:30.800 --> 0:15:34.680
<v Speaker 1>to three um, not including high yield. But the biggest

0:15:34.920 --> 0:15:36.880
<v Speaker 1>change there, quite honestly, is you don't have to get

0:15:36.920 --> 0:15:39.520
<v Speaker 1>to get too fancy and fixed income when treasury bills

0:15:39.520 --> 0:15:41.360
<v Speaker 1>are paying you know, four and a half five percent

0:15:41.480 --> 0:15:46.600
<v Speaker 1>and money markets are paying four percent. This is Bloomberg

0:15:46.640 --> 0:15:49.160
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