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Speaker 1: Good morning.

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

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Speaker 2: stories we're following today. The en has jumped against its

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Speaker 2: peers after a report said the Bank of Japan would

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Speaker 2: discuss tolerating higher bond yields. The story from Bloomberg's Bonnie.

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Speaker 3: Ol The Nikki reported the BOJ is considering letting long

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Speaker 3: term rates rise above its zero point five percent cap

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Speaker 3: in its youth curve control policy. The yen rose as

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Speaker 3: much as two percent against the euro and about one

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Speaker 3: percent against the dollar before easing. Markets have been speculating

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Speaker 3: on the timing of changes to the YCC program. It

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Speaker 3: might be seen as the beginning of a monetary tightening

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Speaker 3: campaign by the BOJ. That said, Bloomberg Economics expects the

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Speaker 3: BOJ to stand pad at today's meeting, and we'll hold

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Speaker 3: through the first half of twenty twenty four. In Hong Kong.

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Speaker 3: I'm Bonnie Ol Bloomberg Day Break Asia.

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Speaker 1: Next we go to the European Central Bank Today. The

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Speaker 1: ECB has expected hiked its key rate by twenty five

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Speaker 1: basis points. You know, this is the ninth straight increase

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Speaker 1: since last July. So the key deposit rate is now

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Speaker 1: at three point seven five percent. All of this comes

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Speaker 1: as ECB officials have flagged at their hiking campaign may

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Speaker 1: be close to ending. President Christine Legard said the ECB

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Speaker 1: would have an open mind as to what to do next,

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Speaker 1: and it will follow a data dependent approach.

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Speaker 4: Our future decisions will ensure that the key ECB interest

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Speaker 4: rates will be set at sufficiently restrictive levels for as

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Speaker 4: long as necessary to achieve a timely return of inflation

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Speaker 4: to our two percent medium term target.

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Speaker 1: Now, as Madame Leguard spoke, money markets began looking at

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Speaker 1: Betts for the September meeting. Right now, odds of another

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Speaker 1: rate hike only about forty percent. Earlier that had been

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Speaker 1: fifty percent. Madame Leguard may be offering some more clues

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Speaker 1: on her thinking when she gives a speech at the

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Speaker 1: fed's annual retreat in Jackson Hall. That will happen Brian.

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Speaker 1: Late August well.

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Speaker 2: The chip maker Intel saying that sales in the current

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Speaker 2: quarter will be as much as thirteen point nine billion dollars.

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Speaker 2: Analysts we're estimating thirteen point three billion. The outlook suggests

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Speaker 2: that Intel has turned a corner after a sluggish demand

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Speaker 2: for PC chips earlier we heard from Angeline Zino at

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Speaker 2: CFRA Research.

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Speaker 5: So it does look like that kind of inventory overhang

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Speaker 5: that we've seen over the last four or five quarters

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Speaker 5: at least is starting to stabilize here, and you know,

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Speaker 5: clearly on the guidance side of things, it also does

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Speaker 5: indicate that we are going to see more momentum going

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Speaker 5: into the second half of the year. So all good

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Speaker 5: signs for Intel, at least from a cyclical perspective.

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Speaker 2: Intel also reported second quarter revenue that fell fifteen percent

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Speaker 2: to twelve point nine billion dollars, but that did beat

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Speaker 2: analyst estimates of about twelve billion. Client computing and data

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Speaker 2: center sales both beat analyst expectations, and the shares really

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Speaker 2: popped in the after hours DOUG currently up seven point

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Speaker 2: nine percent.

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Speaker 1: Well top US regulators have unveiled plans for their most

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Speaker 1: comprehensive overhaul of banking rules in years. More from Bloombergs

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Speaker 1: and Kates.

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Speaker 6: The Feeder Reserve, the FDIC, and the Office of the

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Speaker 6: Controller of the Currency would boost the amount of capital

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Speaker 6: that banks with at least one hundred billion dollars in

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Speaker 6: assets must hold by an average of sixteen percent. The

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Speaker 6: biggest banks face a nineteen percent increase to thicken their

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Speaker 6: financial cushions to absorb unexpected losses. The reforms are part

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Speaker 6: of an international overhaul that began more than a decade

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Speaker 6: ago in response to the two thousand and eight financial crisis.

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Speaker 6: The package isn't likely to be implemented for years, with companies,

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Speaker 6: consumer advocates, and others to weigh in on the proposal

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Speaker 6: over the next four months. In Washington and Kates Bloomberg

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Speaker 6: day Break.

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Speaker 2: Asia, China's top housing official has stepped up the pressure

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Speaker 2: on regulators and lenders to try to revive the property sector.

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Speaker 2: Bloomberg's Joan Wong has that story from.

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Speaker 7: Hong Kong, Housing Minister Niehong has called for home buyers

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Speaker 7: who've paid off previous mortgages to be considered first time

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Speaker 7: purchasers up until now. Buyers who have a mortgage history

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Speaker 7: but don't currently own a property are subject to higher

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Speaker 7: down payment rules. Home sales resumed declines in June, following

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Speaker 7: a brief rebound earlier this year. Earlier this month's financial

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Speaker 7: regulators did step up the pressure on banks to east

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Speaker 7: terms for property companies. Now. Ni is also calling for

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Speaker 7: further measures, such as tax and fee relief for housing

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Speaker 7: upgrades and replacement in Hong Kong. I'm Joanne Wong, Bloomberg

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Speaker 7: Day Brigasia Doug.

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Speaker 2: The move in the end was huge today, although it

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Speaker 2: did ease back. As we noted, Krishna guhad Evercore said

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Speaker 2: that obviously any change in this would have to be

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Speaker 2: really carefully managed, otherwise it could have a big impact

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Speaker 2: on markets. But Evercore also said that they believe that

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Speaker 2: this process has already been over discounted on what might happen,

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Speaker 2: and we noted at the end of our story that

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Speaker 2: Bloomberg Economics is expecting no change today and maintaining this

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Speaker 2: policy through next year or into next year.

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Speaker 1: Well, I was looking at a note from Alan Ruskin

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Speaker 1: over at Deutsche Bank, and he was saying that a

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Speaker 1: hawk policy tweak even rhetorically by the Bank of Japan

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Speaker 1: would likely be seen as an early step, a very

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Speaker 1: early step toward pulling short term rates in Japan into

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Speaker 1: positive terrain. I think the policy rate is what negative

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Speaker 1: ten basis points, and if that were to occur, it

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Speaker 1: would undoubtedly offer even more support to the Japanese end.

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Speaker 2: Well, it's another one of these adjustments that you have

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Speaker 2: to look at how much has already been discounted versus

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Speaker 2: the imagine total impact and you know it's probably somewhere

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Speaker 2: in there and it makes it difficult. But we'll of

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Speaker 2: course be watching that very closely today. Interesting the moves

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Speaker 2: in China. We had reported this a week ago, and

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Speaker 2: so you know, kudos to the reporters on that story

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Speaker 2: a week ago because we heard from the Housing Minister

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Speaker 2: just looking at making it a little bit easier for

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Speaker 2: people to acquire properties that otherwise had some restrictions.

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Speaker 1: Interesting that Goldman Sachs was saying today that each hedge

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Speaker 1: fund clients net purchased Chinese stocks at the fastest pace

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Speaker 1: in nine months on two day. And obviously, Brian, as

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Speaker 1: you know, this is going to be connected to a

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Speaker 1: lot of the policy support that we've been talking about

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Speaker 1: as a result of what's been coming out of the

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Speaker 1: Politburo meeting.

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Speaker 2: Yeah, and that's a big, big thing because the hedge

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Speaker 2: funds have been short the currency and short stocks for

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Speaker 2: a period of time. We've got Peter Sheer coming up

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Speaker 2: head of Macro's strategy at Academy Securities. He's great on

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Speaker 2: the bond market, done on rates generally, so he'll be

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Speaker 2: a fantastic guest to have on the program. That's all

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Speaker 2: dead ahead. Now it's time for global news. US Senate

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Speaker 2: is on a path to pass a military and a

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Speaker 2: package of sorts to counter China and Ukraine. Along the way,

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Speaker 2: let's get to Ed Baxter. He'll sort through all that

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Speaker 2: and bring you some pearls of wisdom.

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Speaker 8: Ed Yo, I don't know about the wisdom part. I

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Speaker 8: can start it through it, Brian thanks. Senate Appropriations Committee

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Speaker 8: is backed Communitions buill to counter China's military build up

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Speaker 8: as well as in Ukraine. So both things now. This

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Speaker 8: is the Pentagon's request to enter into a multi year

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Speaker 8: contract with Lockheed Martin and RTX Corporation. French President of

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Speaker 8: Maniu Macron says France is trying to position itself as

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Speaker 8: buffer between superpowers when it comes to the South Pacific.

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Speaker 8: He says the sovereignty of many states is threatened by

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Speaker 8: new imperialisms and power dynamics. Both China and the US

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Speaker 8: have sought to build influence in the region of Macron

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Speaker 8: wants Paris to act as a balance force. Even though

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Speaker 8: the month isn't through you and climate scientists say they'll

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Speaker 8: certainly go down as the warmest July on record. Secretary

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Speaker 8: General Antonio guteris using the strongest words yet.

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Speaker 9: Climate change is here, It is terrifying, and it is

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Speaker 9: just the beginning. The era of global warming has ended

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Speaker 9: the era of global boiling as it arrived.

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Speaker 8: And US President Joe Biden, at an event today with

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Speaker 8: Phoenix mayor, said heat is the number one weather related

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Speaker 8: killer in the United States.

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Speaker 1: There used to be a lot of time when I

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Speaker 1: first got here, a lot of people said, oh, it's

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Speaker 1: not a problem.

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Speaker 7: Well, I don't know anybody.

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Speaker 1: I shouldn't say that to anybody who honestly believes climate

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Speaker 1: change is not a serious problem.

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Speaker 8: Phoenix, by the way, top one hundred and ten degrees

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Speaker 8: today for the twenty seventh consecutive day, with the heat

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Speaker 8: expected last end of the weekend. Court official in Washington,

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Speaker 8: DC says there will be no Trump indictment today, although

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Speaker 8: his legal team is indicating it could come at any time.

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Speaker 8: This would involve charges related to the twenty twenty election results. Now,

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Speaker 8: Bloomberg Balance of Power co host Joe Matthews says, timing, well,

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Speaker 8: it's totally up to the Special prosecutor.

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Speaker 10: And one thing we do know is that the Special

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Speaker 10: Council can do this anytime he wants. A lot of

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Speaker 10: questions today about whether he's waiting for Congress to get

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Speaker 10: out of town. And we suspect that Jack Smith will

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Speaker 10: do this when he's good and ready.

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Speaker 8: Now, we also know there was a meeting today between

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Speaker 8: Trump attorneys and the Special Council Justice Department officials, declining

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Speaker 8: to comment and following now and this is the separate

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Speaker 8: indictment that's already dropped. A second Trump employee has been charged,

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Speaker 8: Carlos Dylara, who's a maintenance worker at mar A Lago.

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Speaker 8: North Korea showcased its nuclear weapons and its military parade

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Speaker 8: marking the Korean War armistice. Delegations from China and Russia

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Speaker 8: were present. Satellite imagery of preparations indicated the event included ICBMs,

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Speaker 8: designed to deliver nuclear warheads to the US mainland. So far,

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Speaker 8: there has been no mention of the event in its

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Speaker 8: official media. Global News powered by more than twenty seven

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Speaker 8: hundred journalists and analysts in over one hundred and twenty countries.

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Speaker 8: In San Francisco, I'm Ed Baxter, and this is Bloomberg.

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Speaker 2: This is Bloomberg Daybreak Asia. I'm Brian Curtis. In Hong Kong,

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Speaker 2: along with Rashad, so I'm not in London. Our guest

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Speaker 2: is Peter Shecher, head of macro strategy at Academy Securities. Well,

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Speaker 2: a lot to talk about, and I like it that

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Speaker 2: you've got David Bowie in your notes, So I think

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Speaker 2: this is going to go very well. Let's talk first

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Speaker 2: about the yen and the big move today and the

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Speaker 2: hints that the boj will do what we've always thought

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Speaker 2: they were going to do at some point. Your thoughts

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Speaker 2: on that.

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Speaker 11: Yeah, it's not very often that the markets have been

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Speaker 11: taken by surprise lately, but I think we are all

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Speaker 11: in this mode that, Okay, the Fed's kind of done,

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Speaker 11: maybe completely done, hiking the ECB actually sound a little

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Speaker 11: bit more dubbish than people were expecting. Markets were rallying,

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Speaker 11: we were all looking at Meta and all of a sudden,

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Speaker 11: the boj talked about changing the rumors came out that

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Speaker 11: they changed their yell cre control allowed the tenure to

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Speaker 11: go to fifty BIPs, and that sent everything spiraling because

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Speaker 11: I think that's been such a huge driver of US rates,

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Speaker 11: global rates, as Japanese buying of foreign debt, and that

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Speaker 11: could change if this really occurs.

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Speaker 12: Peter it's strange. I mean, it is history about to

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Speaker 12: repeat itself because ever since the start of the modern

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Speaker 12: boj we're talking about the BOJ Act in nineteen ninety eight,

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Speaker 12: there've only been two occasions when the Center Bank has

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Speaker 12: shifted to policy tightening. Once was in August two thousand,

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Speaker 12: the other was in July two thousand and six. And

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Speaker 12: guess what both of them happened after the FED finished

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Speaker 12: a series of rate hikes.

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Speaker 7: Spooky.

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Speaker 11: Yeah, And it's almost like there's a coordinated effort, right, Okay,

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Speaker 11: maybe globally you can't handle everyone hiking or tightening at

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Speaker 11: the same time. So now's Japan's turn to take the

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Speaker 11: mantle and run with this, which would be really interesting

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Speaker 11: if true. But again, there's no reason for Japanese yields

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Speaker 11: to stay as well as they are. I think you

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Speaker 11: will get more and more Japanese domestic buyers of JGB.

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Speaker 11: So what's started with the end today in terms of

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Speaker 11: strength could well continue, and I think that's going to

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Speaker 11: be a trend. I'm not sure why stocks reacted as

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Speaker 11: negatively as they did in the US saying that could

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Speaker 11: reverse itself, but I do think higher yields is probably

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Speaker 11: here to stay a little bit, and yen strength is

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Speaker 11: a new thing.

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Speaker 2: Yeah, And let's face it, I mean US doocs may

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Speaker 2: have just used it as an excuse to pull back

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Speaker 2: a little bit after some pretty solid gains. But I

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Speaker 2: mean we had the yield curve control adjusted from twenty

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Speaker 2: five basis points to fifty, and what they were suggesting

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Speaker 2: in the Nick story was just to a certain degree

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Speaker 2: a move from that. The end really strengthened back after

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Speaker 2: that call in December, but then gave most of it

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Speaker 2: back and we went back into the one forties on

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Speaker 2: dollar yen. So it's not like this is totally.

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Speaker 11: New, you know. I think maybe it was the timing

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Speaker 11: of this that really everyone had just got so comfortable

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Speaker 11: with Powell. It was just after the ECB presser, where

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Speaker 11: again Madame Leguard came out as relatively dubbish. So the

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Speaker 11: timing I think had something to do. People have been

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Speaker 11: positioned aggressively. I think people have been buying into this rally.

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Speaker 11: People have been buying into that central banks are down

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Speaker 11: the tightening, So I think it was probably more the

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Speaker 11: shock value. My gut feel is you want to fade

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Speaker 11: this move, at least in stocks and US dollar yields,

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Speaker 11: I think in I do like the end though, because

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Speaker 11: it probably is a shift in mentality and it should

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Speaker 11: be supportive to the end.

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Speaker 12: Just sort of bring something up here as well. And

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Speaker 12: you know, we look at what's what happened just about

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Speaker 12: what six weeks ago, you know, still and I'm talking

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Speaker 12: about the ECB here they were projecting your pick up

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Speaker 12: in a second quarter, growth and solidity for the second

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Speaker 12: half of the year, and then you know it didn't

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Speaker 12: look unreasonable. Composite pmis in the euro Zone were reasonable,

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Speaker 12: and then after two months of day to the pictures

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Speaker 12: entirely different, pmis collapsing, the nascent recovery, especially for Germany

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Speaker 12: looking more like a blip, and.

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Speaker 8: They raised rates.

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Speaker 12: Now this reminds me of tell me, Louise, there's no

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Speaker 12: stopping them.

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Speaker 11: Well, you know, I think I can talk more about

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Speaker 11: the FED. I think they are still making up for

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Speaker 11: mistakes that were made in twenty twenty one when everything

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Speaker 11: was transitory, transitory, transitory, and it turned out not to

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Speaker 11: be transitory at all. And I think that's one of

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Speaker 11: the big things all these central banks are facing is

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Speaker 11: they missed it. They missed the inflation so badly that

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Speaker 11: they've been over correcting, and now I think we're sitting

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Speaker 11: here in the US a little bit and now obviously

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Speaker 11: within Europe saying have we gone too far? I think

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Speaker 11: they've gone too far. I think they are supposed to

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Speaker 11: allow the economy to play out. See what impact has

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Speaker 11: already gone on from the global rates. You're starting to

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Speaker 11: see a lot of the COVID stimulus prestricted in the US,

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Speaker 11: but probably across the globe diminished. I think they're supposed

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Speaker 11: to be much more dubbish, see how this plays out.

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Speaker 11: And that's been the since and that's why I think

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Speaker 11: Japan today was so surprising, because they kind of went

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Speaker 11: the other way.

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Speaker 2: Oh we get a lot of pop culture into this,

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Speaker 2: so with the Thelma and Louise and David Bowie and

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Speaker 2: the changes. But let's talk a little bit about the

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Speaker 2: better economic data in the US. I wonder whether or

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Speaker 2: not that emboldens the FED to maybe not worry too

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Speaker 2: much about the lagged effect and to stay strong on inflation.

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Speaker 2: I heard Jan Hatzias at Goldman Sachs talking earlier on

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Speaker 2: a rival network, and he thinks the FED is done,

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Speaker 2: that they're not going to hike again.

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Speaker 11: What do you think so I think they are actually

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Speaker 11: truly data dependent, and I think data dependency has been

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Speaker 11: a word that gets way overused or a phrase this

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Speaker 11: gets way overused. They weren't really data dependent for the

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Speaker 11: last year and a half. They were looking for data

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Speaker 11: that justified hiking. And the message I'm taking away from

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Speaker 11: Powell recently in the said is they are really going

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Speaker 11: to look the preponderance of data over the next two months.

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Speaker 11: It's going to include inflation data, jobs data, and it's

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Speaker 11: going to have to send a really strong signal either

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Speaker 11: one way or the other for them to do something.

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Speaker 11: So I think they're really on and that kind of

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Speaker 11: brought back to David Bowie and she changes. Is My

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Speaker 11: view is we're going to see a leadership change in

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Speaker 11: the US and it's going to go from the quote

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Speaker 11: unquote magnificent seven to a broader based rally.

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Speaker 12: Where will that come from.

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Speaker 11: I think it's really going to come from money that's

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Speaker 11: on the sidelines that's starting to feel well, if the

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Speaker 11: Fed's almost done, if the ECB is almost done, the

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Speaker 11: data continues to come in, Okay, I've got to put

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Speaker 11: this money to work. And you can either close your

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Speaker 11: eyes and buy something that's already up to one hundred

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Speaker 11: two hundred percent this year, or we can buy something

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Speaker 11: that's up three or five percent. So I think the

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Speaker 11: money is going to flood into those things that people

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Speaker 11: are generally underweight or still short. And that's the next

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Speaker 11: stage of this rally. Isn't going to be the big

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Speaker 11: megacaps continuing to drive it. It's going to be everything

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Speaker 11: else running up. And I think you're going to see

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Speaker 11: a lot of the laggers, including commercial real estate, to

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Speaker 11: be honest, really outperform over the next month or so.

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Speaker 2: We've we've really already seen it. I mean we've been

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Speaker 2: squawking about that a lot in this program about Industrials

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Speaker 2: have moved a lot, of transports have moved a lot.

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Speaker 2: Even banking now has been moving a lot. And I

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Speaker 2: note that in terms of earnings, the financial sector and

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Speaker 2: the industrial sector are actually raising their earnings now, So

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Speaker 2: that means that earnings have trost and they're actually raising

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Speaker 2: rather than just reporting earnings that are less bad than expected.

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Speaker 2: So what you're saying is a process that is unfolding.

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Speaker 2: I think for many the question is would that continue

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Speaker 2: if we drifted toward recession. But it seems like the

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Speaker 2: data is suggesting now that's not happening.

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Speaker 11: Yeah, And so about two weeks ago I was taking

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Speaker 11: some of that risk off the table. We'd had a

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Speaker 11: good run on commercial real estate on the laggards, and

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Speaker 11: it felt time to take some chips off the table.

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Speaker 11: But given the FEDS messaging, given the current data, I

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Speaker 11: think it's really hard to bet coming into August that

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Speaker 11: we're going to see this slowdown. So I think you

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Speaker 11: want to own those things that people are underweight and

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Speaker 11: talking to clients, I still think that's where people are

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Speaker 11: going to be much more comfortable putting their next dollar in.

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Speaker 11: Is the things that seem a little bit cheap, smaller

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Speaker 11: pe ratios than the quote unquote magnificent seven.

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Speaker 12: All right, well, okay, Peter, The thing is what are

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Speaker 12: the dangers that lie ahead? Because you know they could

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Speaker 12: be overtightening, but at the same time hasn't. Now, you know,

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Speaker 12: the conversation tilted towards not how far rates will go,

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Speaker 12: but how long they'll stay at those levels. And I

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Speaker 12: just want to just ask you, do you think that

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Speaker 12: this is normalization and they don't need to perhaps cut

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Speaker 12: in the future for any and meaningful way as they wait,

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Speaker 12: perhaps with the next downturn.

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Speaker 11: Yeah, so I don't think they have to cut any

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Speaker 11: time in the future. I think they will wait until

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Speaker 11: at least December January, even if the data is week.

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Speaker 11: My biggest fear is obviously now all of a sudden,

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Speaker 11: bullishness has become a consensus view, and as a contrarian,

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Speaker 11: I always kind of, you know, hate to be on

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Speaker 11: the consensus side of you. So maybe I'm a little

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Speaker 11: bit more aggressive with the laggers. But also August tends

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Speaker 11: to be a time where consensus can win. Whether it's

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Speaker 11: people are on vacation or whatever's going on. It's hard

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Speaker 11: to fight the trend in August. So that's why I

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Speaker 11: think we could see some good news in August. But

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Speaker 11: as we near September, I think people are going to

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Speaker 11: start focused on Hey, recession risk is probably still real.

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Speaker 11: Everyone got squeezed out of the recession trades. But I

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Speaker 11: think we kind of have this two to three week

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Speaker 11: window where everyone's gonna be a little bit more calm,

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Speaker 11: assuming that boj doesn't do anything, you know, to really

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Speaker 11: shock us, and then after that we can start thinking

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Speaker 11: about the promise, is the recession coming? What's happening in

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Speaker 11: the US with student loan, debt, repayments, et cetera, deglobalization,

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Speaker 11: the function between US and China. There's a lot of

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Speaker 11: risks out there. I think they're just gonna be ignored

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Speaker 11: for the next two to three weeks.

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