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Speaker 1: This is Bloomberg Daybreak Asia for this Friday, February sevent

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Speaker 1: in Hong Kong, Thursday February in New York and coming

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Speaker 1: up today, US producer prices rebound and a FETE official

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Speaker 1: opens the door to a half point rate hike. Next month,

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Speaker 1: China imposes sanctions on US companies as tensions flare between

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Speaker 1: the two sides, and Tesla recalls cars after US authorities

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Speaker 1: say the company's self driving technology could cause a crash.

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Speaker 1: Biden says last three objects shot down her apparently civilian

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Speaker 1: wants to talk with she. China says US can't have

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Speaker 1: dialogue while sharpening attacks. China claims victory over COVID Georgia

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Speaker 1: grand jury, sites perjury, and Trump election probe. I'm at

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Speaker 1: Baxter with Global News. That's all straight Ahead on Bloomberg

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Speaker 1: Daybreak Asia, the business news you need to start your day,

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Speaker 1: and just one fifteen minute podcast available on Apple, Spotify,

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Speaker 1: the Bloomberg Business app, and everywhere you get your podcast.

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Speaker 1: Good morning, I'm Brian Curtis and I'm do Chrisner. Here

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Speaker 1: are the stories we're following today. Let's get to the FED.

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Speaker 1: Two of the FEDS most hawkish policymakers signaled they may

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Speaker 1: favor returning to bigger interest rate hikes in the future.

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Speaker 1: One was St. Louis FIT chief Jim Bullard. Bullard said

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Speaker 1: he would not rule out supporting a half point right

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Speaker 1: a rate hike in March, and he urged additional rate

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Speaker 1: hikes to ensure that inflation returns to the FEDS two

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Speaker 1: percent target over time. I think we can lock in

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Speaker 1: this disinflationary trend by continuing to have policy rate increases

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Speaker 1: during even though the real economies looks like it's gonna

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Speaker 1: continue to grow and the labor market broadly across the

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Speaker 1: country looks like a remain strong. Separately, Cleveland FED Chief

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Speaker 1: Loretta Mesters said that she saw a compelling case for

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Speaker 1: rolling out another half point hike earlier this month. She

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Speaker 1: made the point and that that would have brought the

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Speaker 1: top of the FEDS target range to five. Mester said

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Speaker 1: the FED has to be prepared to increase rates if

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Speaker 1: inflation remains stubbornly high and doug It's probably important to

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Speaker 1: point out that neither Bullard nor Mester is a voting

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Speaker 1: member this year. Good point. Let's take a closer look

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Speaker 1: at that pp I dad to us producer prices rebounding

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Speaker 1: in January by more than expected higher energy cost getting

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Speaker 1: much of the blame. Overall, wholesale prices have generally been

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Speaker 1: cooling in recent months. That said, we know inflation appears

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Speaker 1: to be a little more sticky than many had anticipated.

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Speaker 1: Here's Bloomberg's Michael McKee. I think that was the big

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Speaker 1: takeaway from the numbers that we've gotten this week. People thought,

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Speaker 1: given what we saw in November and December, that prices

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Speaker 1: would come down very quickly. They're coming down, but not

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Speaker 1: very quickly goods prices. Remember, the story was that goods

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Speaker 1: prices were going away and services were the issue. One

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Speaker 1: rise in goods prices in the pp I for final

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Speaker 1: demand during the month of January, and services only up

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Speaker 1: four tenths, so the opposite of what we were looking

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Speaker 1: for Michael McKee. There Separately, we learned that weekly jobless

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Speaker 1: claims were down last week, and that decline suggests the

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Speaker 1: American and labor market does remain strong despite those higher

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Speaker 1: interest rates. Brian, Yes, but then consider this Bank of

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Speaker 1: America planning to hand out some pink slips. Let's get

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Speaker 1: the story from Bloomberg's and Kates. Bank of America will

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Speaker 1: cut jobs in its investment bank. According to Bloomberg, the

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Speaker 1: number of reductions, which are still being discussed, could affect

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Speaker 1: less than two hundred bankers globally. It as a sign

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Speaker 1: the finance industry will continue to pare down headcounts to

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Speaker 1: contain costs prior to any meaningful rebound and deal making activity.

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Speaker 1: The size of the layoffs have varied among financial giants.

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Speaker 1: City Group eliminated dozens of staffers last fall, while Goldman

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Speaker 1: Sacks downsized by thirty positions in Washington and Kates Bloomberg

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Speaker 1: Daybreak Asia. Tesla is in the news. The company is

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Speaker 1: recalling more than three hundred sixty thousand full self drive

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Speaker 1: US vehicles over some crash risk, but Elon Musk is

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Speaker 1: objecting to the term recall. We have more from Bloomberg's

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Speaker 1: Denise Pellegrini. This includes some model SS and Model XS,

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Speaker 1: some to twenty three Model threes and some three Model wise,

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Speaker 1: all equipped with full self driving beta software are pending installation,

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Speaker 1: and National Highway Traffic Safety Administration officials say the system

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Speaker 1: may allow the vehicles to act unsafe around intersections, including

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Speaker 1: driving straight through intersections from a turnlane. The officials say

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Speaker 1: Tesla did not concur with Nitza's concerns, but agreed to

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Speaker 1: go forward with the recall out of an abundance of caution.

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Speaker 1: Tesla is expected to issue an over the air software

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Speaker 1: update by the middle of April. Denise Pellegrini Bloomberg Day Bracasia.

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Speaker 1: China is said to be reviewing the recent deal between

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Speaker 1: Ford and Cattle to ensure that no core technology is

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Speaker 1: handed over to the US carmaker. That story from bloombergs

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Speaker 1: Yvon Man. The agreement would see Cattle's battery technology license

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Speaker 1: for use in Ford's new Evy battery plant in southwest Michigan,

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Speaker 1: but China is said to be concerned given the sensitivity

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Speaker 1: of the deal and its implications for US China relations.

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Speaker 1: Sources say the findings will be presented to the country's

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Speaker 1: top leadership, with the time frame for that is not

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Speaker 1: yet known. Chinese officials will also check that individuals sanctioned

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Speaker 1: by Beijing are not involved in the Ford Cattle project. Meantime,

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Speaker 1: U S Senate Intelligence Chairman Mark Warner criticized Beijing scrutiny

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Speaker 1: as quote ironic and hypocritical. In Hong Kong. I'm eva

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Speaker 1: ma'am Bloomberg Day Break Asia. Until Bullard spoke, the market

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Speaker 1: had actually kind of made its peace with this hot

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Speaker 1: PPI data. And we see that because the spread between

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Speaker 1: twos and tens had narrowed from nineties six basis points

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Speaker 1: right after the report to seventy six. That's a huge

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Speaker 1: move now about seventy eight as it's steepened or widened

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Speaker 1: out a little bit. What that might indicate is that

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Speaker 1: the market is mindful of inflation being there and interest

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Speaker 1: rates being there, but also that maybe there's a little

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Speaker 1: bit of a less chance of recession because of some

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Speaker 1: of this data. I think that's right. If you look

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Speaker 1: at the New York Fed Business Leaders survey, it showed

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Speaker 1: that conditions are expected to improve over the next six months.

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Speaker 1: So that's on the growth side, but we still have

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Speaker 1: to very much focus on the inflation narrative here. A

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Speaker 1: separate survey from the Philly Fed shows that businesses are

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Speaker 1: expecting the price of their goods their own goods to

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Speaker 1: rise next year at a rate of around four and

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Speaker 1: a half percent. Now that is going to make the

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Speaker 1: FEDS job even more difficult because it's clear, and I

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Speaker 1: think Mike McKee alluded to this inflation we know, is

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Speaker 1: very very sticky. We may have seen the peak, but

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Speaker 1: it's not clear that we're going to see a meaningful

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Speaker 1: decline in the rate of inflation. Certainly we're along ways

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Speaker 1: away from that two percent target. Well, yeah, but let's

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Speaker 1: not forget you remember we had pp I up between

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Speaker 1: eleven and twelve percent year on year, and now it's

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Speaker 1: it's up six percent year on year from this data.

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Speaker 1: But admittedly worry so that goods prices rose as much

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Speaker 1: as they did in that pp I report. Al Right,

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Speaker 1: it's time now for Global news. US President Joe Biden

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Speaker 1: is seeking to cool off tensions with China, saying he

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Speaker 1: intends to talk with China's president shi Jinping. Head Baxter

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Speaker 1: has Global News in the nine News room in San Francisco. Yeah,

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Speaker 1: those are the major points, Brian. This is a speech

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Speaker 1: to the nation, Biden says. Analysis to now is that

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Speaker 1: the latest three objects shot down. These three objects were

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Speaker 1: most likely balloons tied to private companies, recreation or research

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Speaker 1: institutions studying whether or conducting other scientific research, and not spying.

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Speaker 1: The president says there are not more balloons than in

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Speaker 1: the past. About the tweaking of systems have allowed them

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Speaker 1: to be detected. Now, he says he's taking steps to

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Speaker 1: improve detection even further. We'll update the rules and regulations

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Speaker 1: for launching and maintaining unmanned objects in the skies above

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Speaker 1: the United States of America. And then more bluntly, make

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Speaker 1: no mistake. If any object presents a three to the

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Speaker 1: safety security American people, I will take it down, and

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Speaker 1: says it points to a better need for communication. Our

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Speaker 1: diplomats will be engaging further, and I will remain in

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Speaker 1: communication with President she Now. Bloomberg's Joe Matthews says that

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Speaker 1: may take some further diplomacy, whether the president gets a

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Speaker 1: meeting with President she back on the calendar. It's probably

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Speaker 1: going to take a little bit of time here. Speeches

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Speaker 1: like today, though, addresses like today, the language he chose

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Speaker 1: will help, and that we're looking specifically at one Chinese

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Speaker 1: by balloon that was shot down, not necessarily a much

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Speaker 1: more broad sort of surveillance effort that included these other

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Speaker 1: unidentified objects now running alongside this. Today, China has announced

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Speaker 1: trade and investment sanctions on Lockheed Martin and Raathon for

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Speaker 1: selling weapons to Taiwan, but Bloomberg's U s national Security Team. Later,

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Speaker 1: Nick Waddam says, it has a very strange dynamic. It's

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Speaker 1: really interesting because I think it's actually bringing the heat

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Speaker 1: down by announcing some largely symbolic measure. So you have

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Speaker 1: China sanctioning Lockheed and raytheon. But these two US defense

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Speaker 1: contractors don't do any business really in China anyhow, They've

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Speaker 1: been sanctioned before. Meanwhile, whether the meeting between US Secretary

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Speaker 1: of State Anthony B. Lincoln and China Forger Minister Wang

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Speaker 1: Yi is still an open question, and China is questioning

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Speaker 1: whether the US genuinely seeks to repair the damage done

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Speaker 1: over the balloon dispute. Says it could jeopardize any further talk.

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Speaker 1: Says the US cannot ask for communication and dialogue on

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Speaker 1: one hand, while sharpening differences on the other. It says

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Speaker 1: the balloon saga test US sincerity and capability to properly

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Speaker 1: handle crises. Divisive decisive victory over COVID, that's what some

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Speaker 1: of China's leadership is saying. They cite the declining death toll.

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Speaker 1: It says adjustments to China's COVID policy since November have

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Speaker 1: been totally right, and they say the public would agree

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Speaker 1: the lack of data released outside China makes it hard

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Speaker 1: for the Globe to verify any statements, and the Georgia

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Speaker 1: Grand Jury investigating the election interference by Donald Trump and

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Speaker 1: allies says it belies perjury or believes perjury was committed

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Speaker 1: by one or more of the witnesses, and concluded there

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Speaker 1: was no widespread election fraud as claimed by Trump. Global

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Speaker 1: News powered by more than twenty seven hundred journalists and

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Speaker 1: analysts over one twenty countries. In San Francisco, I'm at

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Speaker 1: Baxter and this is Bloomberg. This is Bloomberg day Break Asia.

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Speaker 1: I'm Brian Curtis along with Richard Salamat. We're here in

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Speaker 1: Hong Kong, and we say good morning to Burns McKinney,

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Speaker 1: our guest, senior portfolio manager at n f J Investment Group.

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Speaker 1: Burns we asked this question a few times yesterday, but

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Speaker 1: it's perhaps even more relevant today given the comments from

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Speaker 1: Esther and Bullard might have fed Move fifty at the

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Speaker 1: March meeting. It's it's always a possibility, but I think

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Speaker 1: one of the things that investors have to you have

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Speaker 1: to look at context and not just what is being said,

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Speaker 1: but also who's speaking and Buller Buller Semester have always

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Speaker 1: kind of been the hawks the FED, and you know,

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Speaker 1: when you have a committee like that, someone's going to

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Speaker 1: play bad cop. And you know, we've you know, we've

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Speaker 1: been saying that if there's really any risk of a

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Speaker 1: surprise coming out of the last meeting as well as

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Speaker 1: post CPI report, is that that they would have someone

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Speaker 1: come in and talk firm and you know, and hawkishly,

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Speaker 1: just really to drive home the point that you know

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Speaker 1: that even the POWE has been trying to make that

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Speaker 1: that he believes the greatest policy here would be to

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Speaker 1: repeat the stop and go policy you had in the

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Speaker 1: nineteen seventies and announcing mission accomplished a bit prematurely. And

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Speaker 1: you know what's been happening time and time again is that,

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Speaker 1: you know, during his press conference Powell says these things,

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Speaker 1: and the markets here what they want to and so

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Speaker 1: you know, periodically you do have some of these FED

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Speaker 1: presidents come in and actually, you know, again, just try

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Speaker 1: to drive home that hawkish point. Bens, Is it possible?

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Speaker 1: I mean, the thing is, everything looks a bit strange.

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Speaker 1: We seem to be working off different paradigms in terms

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Speaker 1: of the economy and the medicine may not be working

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Speaker 1: in quite the traditional way. Is it possible that they

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Speaker 1: could bring down inflation with that actually slowing down growth

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Speaker 1: in a meaningful way. Yeah, the FED doesn't have a

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Speaker 1: great track record for it, but it's absolutely possible. I

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Speaker 1: think for starters, you know, you have to bear in

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Speaker 1: mind the you know, the Phillips curve that the FED

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Speaker 1: dustin to rely upon really hasn't been all that effectual

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Speaker 1: for most of this really most of the century. And

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Speaker 1: you know, I think that you know, as far as

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Speaker 1: inflation coming down, I mean a lot of you know,

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Speaker 1: some of the recent points just this week have been

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Speaker 1: a little warmer than expected um, but the downtrend remains intact,

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Speaker 1: and in many ways it seems that the FED is

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Speaker 1: probably already done much of the hard work to get

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Speaker 1: inflation down. I think the you know, really the biggest

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Speaker 1: driver at all, you know, coming from a macro perspective,

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Speaker 1: is there's a really strong correlation between the money supply

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Speaker 1: growth M two and what inflation does about twelve to

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Speaker 1: fifteen months down the road. And if you look at

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Speaker 1: you know that you know, my supply growth peaked in

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Speaker 1: early one, sure enough, you know, as just like clockwork.

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Speaker 1: You saw inflation princes peak in about in the middle

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Speaker 1: of twenty two. And if you look at what that

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Speaker 1: money supply growth is doing now, you actually saw, you know,

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Speaker 1: last month it actually plunged to the greatest degree we've

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Speaker 1: seen since nineteen fifty nine. And so you know, you

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Speaker 1: start looking forward in many ways suggests that you know,

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Speaker 1: this is already baked in. I think that you know,

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Speaker 1: it's clearly going to be coming down a lot more

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Speaker 1: quickly than investors think later this year. It's like there's

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Speaker 1: a delay in the lagged effect, almost the sort of

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Speaker 1: point that the lag effect is tired, because you know,

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Speaker 1: it doesn't seem to be having a huge impact. And

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Speaker 1: as you say, that's alongside higher rates q T n

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Speaker 1: M two dropping. Yeah, absolutely, And you know with now

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Speaker 1: with respect to doing that without you know, you basically suggested,

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Speaker 1: you know, being able to pull it off without you know,

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Speaker 1: causing recession. Um, you know, it's also instructive to note

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Speaker 1: that you know that that goes against the FEDS track record.

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Speaker 1: I believe that you know, the last fourteen tightening cycles,

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Speaker 1: eleven of those have led to recessions. So if you

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Speaker 1: kind of I like to think of it in terms

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Speaker 1: of a baseball player that's basically batting about two hundred,

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Speaker 1: which is not really necessarily or you want to be

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Speaker 1: if you're a betting man. Yeah, I mean, it does

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Speaker 1: seem as though, you know, we could be returning to

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Speaker 1: sort of a Freedman type economics here, looking Milton Freeman,

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Speaker 1: we soon be talking about non accelerating of unemployment. But

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Speaker 1: you know, they tend to overshoot rates tender overshoot on

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Speaker 1: the upside and well under shoot on the downside. That

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Speaker 1: that's the thing. Yeah, that and and that's that's that's

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Speaker 1: what tends to happen. And you do have that that

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Speaker 1: degree in every cycle. I mean, that's generally the reason

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Speaker 1: why we do have an economic cycle is that most

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Speaker 1: trends tend to overshoot. Now that said, I think that

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Speaker 1: what investors really should be focused on is even if

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Speaker 1: we do go into recession, how soon would that be

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Speaker 1: and how deep would it be? And you know, in

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Speaker 1: the near term. They're definitely are factors that are working

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Speaker 1: in the you know, investors in the economy's favor, namely

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Speaker 1: being that that um, you know, jobs remain tight. I mean,

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Speaker 1: not only do you have record low unemployment, but you

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Speaker 1: also have UM one point seven at one point eight

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Speaker 1: job openings per filer for unemployment, isn't You've got consumers

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Speaker 1: still sitting on a decent amount of cash as well,

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Speaker 1: And so yeah, there's definitely a lot to actually support

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Speaker 1: the economy, even if we do drift it into a

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Speaker 1: recession um later this year early next year. This is

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Speaker 1: Bloomberg Daybreak Asia, your morning brief on the stories making

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