Speaker 1: This is Bloomberg Daybreak Asia for this Friday, February sevent
Speaker 1: in Hong Kong, Thursday February in New York and coming
Speaker 1: up today, US producer prices rebound and a FETE official
Speaker 1: opens the door to a half point rate hike. Next month,
Speaker 1: China imposes sanctions on US companies as tensions flare between
Speaker 1: the two sides, and Tesla recalls cars after US authorities
Speaker 1: say the company's self driving technology could cause a crash.
Speaker 1: Biden says last three objects shot down her apparently civilian
Speaker 1: wants to talk with she. China says US can't have
Speaker 1: dialogue while sharpening attacks. China claims victory over COVID Georgia
Speaker 1: grand jury, sites perjury, and Trump election probe. I'm at
Speaker 1: Baxter with Global News. That's all straight Ahead on Bloomberg
Speaker 1: Daybreak Asia, the business news you need to start your day,
Speaker 1: and just one fifteen minute podcast available on Apple, Spotify,
Speaker 1: the Bloomberg Business app, and everywhere you get your podcast.
Speaker 1: Good morning, I'm Brian Curtis and I'm do Chrisner. Here
Speaker 1: are the stories we're following today. Let's get to the FED.
Speaker 1: Two of the FEDS most hawkish policymakers signaled they may
Speaker 1: favor returning to bigger interest rate hikes in the future.
Speaker 1: One was St. Louis FIT chief Jim Bullard. Bullard said
Speaker 1: he would not rule out supporting a half point right
Speaker 1: a rate hike in March, and he urged additional rate
Speaker 1: hikes to ensure that inflation returns to the FEDS two
Speaker 1: percent target over time. I think we can lock in
Speaker 1: this disinflationary trend by continuing to have policy rate increases
Speaker 1: during even though the real economies looks like it's gonna
Speaker 1: continue to grow and the labor market broadly across the
Speaker 1: country looks like a remain strong. Separately, Cleveland FED Chief
Speaker 1: Loretta Mesters said that she saw a compelling case for
Speaker 1: rolling out another half point hike earlier this month. She
Speaker 1: made the point and that that would have brought the
Speaker 1: top of the FEDS target range to five. Mester said
Speaker 1: the FED has to be prepared to increase rates if
Speaker 1: inflation remains stubbornly high and doug It's probably important to
Speaker 1: point out that neither Bullard nor Mester is a voting
Speaker 1: member this year. Good point. Let's take a closer look
Speaker 1: at that pp I dad to us producer prices rebounding
Speaker 1: in January by more than expected higher energy cost getting
Speaker 1: much of the blame. Overall, wholesale prices have generally been
Speaker 1: cooling in recent months. That said, we know inflation appears
Speaker 1: to be a little more sticky than many had anticipated.
Speaker 1: Here's Bloomberg's Michael McKee. I think that was the big
Speaker 1: takeaway from the numbers that we've gotten this week. People thought,
Speaker 1: given what we saw in November and December, that prices
Speaker 1: would come down very quickly. They're coming down, but not
Speaker 1: very quickly goods prices. Remember, the story was that goods
Speaker 1: prices were going away and services were the issue. One
Speaker 1: rise in goods prices in the pp I for final
Speaker 1: demand during the month of January, and services only up
Speaker 1: four tenths, so the opposite of what we were looking
Speaker 1: for Michael McKee. There Separately, we learned that weekly jobless
Speaker 1: claims were down last week, and that decline suggests the
Speaker 1: American and labor market does remain strong despite those higher
Speaker 1: interest rates. Brian, Yes, but then consider this Bank of
Speaker 1: America planning to hand out some pink slips. Let's get
Speaker 1: the story from Bloomberg's and Kates. Bank of America will
Speaker 1: cut jobs in its investment bank. According to Bloomberg, the
Speaker 1: number of reductions, which are still being discussed, could affect
Speaker 1: less than two hundred bankers globally. It as a sign
Speaker 1: the finance industry will continue to pare down headcounts to
Speaker 1: contain costs prior to any meaningful rebound and deal making activity.
Speaker 1: The size of the layoffs have varied among financial giants.
Speaker 1: City Group eliminated dozens of staffers last fall, while Goldman
Speaker 1: Sacks downsized by thirty positions in Washington and Kates Bloomberg
Speaker 1: Daybreak Asia. Tesla is in the news. The company is
Speaker 1: recalling more than three hundred sixty thousand full self drive
Speaker 1: US vehicles over some crash risk, but Elon Musk is
Speaker 1: objecting to the term recall. We have more from Bloomberg's
Speaker 1: Denise Pellegrini. This includes some model SS and Model XS,
Speaker 1: some to twenty three Model threes and some three Model wise,
Speaker 1: all equipped with full self driving beta software are pending installation,
Speaker 1: and National Highway Traffic Safety Administration officials say the system
Speaker 1: may allow the vehicles to act unsafe around intersections, including
Speaker 1: driving straight through intersections from a turnlane. The officials say
Speaker 1: Tesla did not concur with Nitza's concerns, but agreed to
Speaker 1: go forward with the recall out of an abundance of caution.
Speaker 1: Tesla is expected to issue an over the air software
Speaker 1: update by the middle of April. Denise Pellegrini Bloomberg Day Bracasia.
Speaker 1: China is said to be reviewing the recent deal between
Speaker 1: Ford and Cattle to ensure that no core technology is
Speaker 1: handed over to the US carmaker. That story from bloombergs
Speaker 1: Yvon Man. The agreement would see Cattle's battery technology license
Speaker 1: for use in Ford's new Evy battery plant in southwest Michigan,
Speaker 1: but China is said to be concerned given the sensitivity
Speaker 1: of the deal and its implications for US China relations.
Speaker 1: Sources say the findings will be presented to the country's
Speaker 1: top leadership, with the time frame for that is not
Speaker 1: yet known. Chinese officials will also check that individuals sanctioned
Speaker 1: by Beijing are not involved in the Ford Cattle project. Meantime,
Speaker 1: U S Senate Intelligence Chairman Mark Warner criticized Beijing scrutiny
Speaker 1: as quote ironic and hypocritical. In Hong Kong. I'm eva
Speaker 1: ma'am Bloomberg Day Break Asia. Until Bullard spoke, the market
Speaker 1: had actually kind of made its peace with this hot
Speaker 1: PPI data. And we see that because the spread between
Speaker 1: twos and tens had narrowed from nineties six basis points
Speaker 1: right after the report to seventy six. That's a huge
Speaker 1: move now about seventy eight as it's steepened or widened
Speaker 1: out a little bit. What that might indicate is that
Speaker 1: the market is mindful of inflation being there and interest
Speaker 1: rates being there, but also that maybe there's a little
Speaker 1: bit of a less chance of recession because of some
Speaker 1: of this data. I think that's right. If you look
Speaker 1: at the New York Fed Business Leaders survey, it showed
Speaker 1: that conditions are expected to improve over the next six months.
Speaker 1: So that's on the growth side, but we still have
Speaker 1: to very much focus on the inflation narrative here. A
Speaker 1: separate survey from the Philly Fed shows that businesses are
Speaker 1: expecting the price of their goods their own goods to
Speaker 1: rise next year at a rate of around four and
Speaker 1: a half percent. Now that is going to make the
Speaker 1: FEDS job even more difficult because it's clear, and I
Speaker 1: think Mike McKee alluded to this inflation we know, is
Speaker 1: very very sticky. We may have seen the peak, but
Speaker 1: it's not clear that we're going to see a meaningful
Speaker 1: decline in the rate of inflation. Certainly we're along ways
Speaker 1: away from that two percent target. Well, yeah, but let's
Speaker 1: not forget you remember we had pp I up between
Speaker 1: eleven and twelve percent year on year, and now it's
Speaker 1: it's up six percent year on year from this data.
Speaker 1: But admittedly worry so that goods prices rose as much
Speaker 1: as they did in that pp I report. Al Right,
Speaker 1: it's time now for Global news. US President Joe Biden
Speaker 1: is seeking to cool off tensions with China, saying he
Speaker 1: intends to talk with China's president shi Jinping. Head Baxter
Speaker 1: has Global News in the nine News room in San Francisco. Yeah,
Speaker 1: those are the major points, Brian. This is a speech
Speaker 1: to the nation, Biden says. Analysis to now is that
Speaker 1: the latest three objects shot down. These three objects were
Speaker 1: most likely balloons tied to private companies, recreation or research
Speaker 1: institutions studying whether or conducting other scientific research, and not spying.
Speaker 1: The president says there are not more balloons than in
Speaker 1: the past. About the tweaking of systems have allowed them
Speaker 1: to be detected. Now, he says he's taking steps to
Speaker 1: improve detection even further. We'll update the rules and regulations
Speaker 1: for launching and maintaining unmanned objects in the skies above
Speaker 1: the United States of America. And then more bluntly, make
Speaker 1: no mistake. If any object presents a three to the
Speaker 1: safety security American people, I will take it down, and
Speaker 1: says it points to a better need for communication. Our
Speaker 1: diplomats will be engaging further, and I will remain in
Speaker 1: communication with President she Now. Bloomberg's Joe Matthews says that
Speaker 1: may take some further diplomacy, whether the president gets a
Speaker 1: meeting with President she back on the calendar. It's probably
Speaker 1: going to take a little bit of time here. Speeches
Speaker 1: like today, though, addresses like today, the language he chose
Speaker 1: will help, and that we're looking specifically at one Chinese
Speaker 1: by balloon that was shot down, not necessarily a much
Speaker 1: more broad sort of surveillance effort that included these other
Speaker 1: unidentified objects now running alongside this. Today, China has announced
Speaker 1: trade and investment sanctions on Lockheed Martin and Raathon for
Speaker 1: selling weapons to Taiwan, but Bloomberg's U s national Security Team. Later,
Speaker 1: Nick Waddam says, it has a very strange dynamic. It's
Speaker 1: really interesting because I think it's actually bringing the heat
Speaker 1: down by announcing some largely symbolic measure. So you have
Speaker 1: China sanctioning Lockheed and raytheon. But these two US defense
Speaker 1: contractors don't do any business really in China anyhow, They've
Speaker 1: been sanctioned before. Meanwhile, whether the meeting between US Secretary
Speaker 1: of State Anthony B. Lincoln and China Forger Minister Wang
Speaker 1: Yi is still an open question, and China is questioning
Speaker 1: whether the US genuinely seeks to repair the damage done
Speaker 1: over the balloon dispute. Says it could jeopardize any further talk.
Speaker 1: Says the US cannot ask for communication and dialogue on
Speaker 1: one hand, while sharpening differences on the other. It says
Speaker 1: the balloon saga test US sincerity and capability to properly
Speaker 1: handle crises. Divisive decisive victory over COVID, that's what some
Speaker 1: of China's leadership is saying. They cite the declining death toll.
Speaker 1: It says adjustments to China's COVID policy since November have
Speaker 1: been totally right, and they say the public would agree
Speaker 1: the lack of data released outside China makes it hard
Speaker 1: for the Globe to verify any statements, and the Georgia
Speaker 1: Grand Jury investigating the election interference by Donald Trump and
Speaker 1: allies says it belies perjury or believes perjury was committed
Speaker 1: by one or more of the witnesses, and concluded there
Speaker 1: was no widespread election fraud as claimed by Trump. Global
Speaker 1: News powered by more than twenty seven hundred journalists and
Speaker 1: analysts over one twenty countries. In San Francisco, I'm at
Speaker 1: Baxter and this is Bloomberg. This is Bloomberg day Break Asia.
Speaker 1: I'm Brian Curtis along with Richard Salamat. We're here in
Speaker 1: Hong Kong, and we say good morning to Burns McKinney,
Speaker 1: our guest, senior portfolio manager at n f J Investment Group.
Speaker 1: Burns we asked this question a few times yesterday, but
Speaker 1: it's perhaps even more relevant today given the comments from
Speaker 1: Esther and Bullard might have fed Move fifty at the
Speaker 1: March meeting. It's it's always a possibility, but I think
Speaker 1: one of the things that investors have to you have
Speaker 1: to look at context and not just what is being said,
Speaker 1: but also who's speaking and Buller Buller Semester have always
Speaker 1: kind of been the hawks the FED, and you know,
Speaker 1: when you have a committee like that, someone's going to
Speaker 1: play bad cop. And you know, we've you know, we've
Speaker 1: been saying that if there's really any risk of a
Speaker 1: surprise coming out of the last meeting as well as
Speaker 1: post CPI report, is that that they would have someone
Speaker 1: come in and talk firm and you know, and hawkishly,
Speaker 1: just really to drive home the point that you know
Speaker 1: that even the POWE has been trying to make that
Speaker 1: that he believes the greatest policy here would be to
Speaker 1: repeat the stop and go policy you had in the
Speaker 1: nineteen seventies and announcing mission accomplished a bit prematurely. And
Speaker 1: you know what's been happening time and time again is that,
Speaker 1: you know, during his press conference Powell says these things,
Speaker 1: and the markets here what they want to and so
Speaker 1: you know, periodically you do have some of these FED
Speaker 1: presidents come in and actually, you know, again, just try
Speaker 1: to drive home that hawkish point. Bens, Is it possible?
Speaker 1: I mean, the thing is, everything looks a bit strange.
Speaker 1: We seem to be working off different paradigms in terms
Speaker 1: of the economy and the medicine may not be working
Speaker 1: in quite the traditional way. Is it possible that they
Speaker 1: could bring down inflation with that actually slowing down growth
Speaker 1: in a meaningful way. Yeah, the FED doesn't have a
Speaker 1: great track record for it, but it's absolutely possible. I
Speaker 1: think for starters, you know, you have to bear in
Speaker 1: mind the you know, the Phillips curve that the FED
Speaker 1: dustin to rely upon really hasn't been all that effectual
Speaker 1: for most of this really most of the century. And
Speaker 1: you know, I think that you know, as far as
Speaker 1: inflation coming down, I mean a lot of you know,
Speaker 1: some of the recent points just this week have been
Speaker 1: a little warmer than expected um, but the downtrend remains intact,
Speaker 1: and in many ways it seems that the FED is
Speaker 1: probably already done much of the hard work to get
Speaker 1: inflation down. I think the you know, really the biggest
Speaker 1: driver at all, you know, coming from a macro perspective,
Speaker 1: is there's a really strong correlation between the money supply
Speaker 1: growth M two and what inflation does about twelve to
Speaker 1: fifteen months down the road. And if you look at
Speaker 1: you know that you know, my supply growth peaked in
Speaker 1: early one, sure enough, you know, as just like clockwork.
Speaker 1: You saw inflation princes peak in about in the middle
Speaker 1: of twenty two. And if you look at what that
Speaker 1: money supply growth is doing now, you actually saw, you know,
Speaker 1: last month it actually plunged to the greatest degree we've
Speaker 1: seen since nineteen fifty nine. And so you know, you
Speaker 1: start looking forward in many ways suggests that you know,
Speaker 1: this is already baked in. I think that you know,
Speaker 1: it's clearly going to be coming down a lot more
Speaker 1: quickly than investors think later this year. It's like there's
Speaker 1: a delay in the lagged effect, almost the sort of
Speaker 1: point that the lag effect is tired, because you know,
Speaker 1: it doesn't seem to be having a huge impact. And
Speaker 1: as you say, that's alongside higher rates q T n
Speaker 1: M two dropping. Yeah, absolutely, And you know with now
Speaker 1: with respect to doing that without you know, you basically suggested,
Speaker 1: you know, being able to pull it off without you know,
Speaker 1: causing recession. Um, you know, it's also instructive to note
Speaker 1: that you know that that goes against the FEDS track record.
Speaker 1: I believe that you know, the last fourteen tightening cycles,
Speaker 1: eleven of those have led to recessions. So if you
Speaker 1: kind of I like to think of it in terms
Speaker 1: of a baseball player that's basically batting about two hundred,
Speaker 1: which is not really necessarily or you want to be
Speaker 1: if you're a betting man. Yeah, I mean, it does
Speaker 1: seem as though, you know, we could be returning to
Speaker 1: sort of a Freedman type economics here, looking Milton Freeman,
Speaker 1: we soon be talking about non accelerating of unemployment. But
Speaker 1: you know, they tend to overshoot rates tender overshoot on
Speaker 1: the upside and well under shoot on the downside. That
Speaker 1: that's the thing. Yeah, that and and that's that's that's
Speaker 1: what tends to happen. And you do have that that
Speaker 1: degree in every cycle. I mean, that's generally the reason
Speaker 1: why we do have an economic cycle is that most
Speaker 1: trends tend to overshoot. Now that said, I think that
Speaker 1: what investors really should be focused on is even if
Speaker 1: we do go into recession, how soon would that be
Speaker 1: and how deep would it be? And you know, in
Speaker 1: the near term. They're definitely are factors that are working
Speaker 1: in the you know, investors in the economy's favor, namely
Speaker 1: being that that um, you know, jobs remain tight. I mean,
Speaker 1: not only do you have record low unemployment, but you
Speaker 1: also have UM one point seven at one point eight
Speaker 1: job openings per filer for unemployment, isn't You've got consumers
Speaker 1: still sitting on a decent amount of cash as well,
Speaker 1: And so yeah, there's definitely a lot to actually support
Speaker 1: the economy, even if we do drift it into a
Speaker 1: recession um later this year early next year. This is
Speaker 1: Bloomberg Daybreak Asia, your morning brief on the stories making
Speaker 1: news from Hong Kong to Singapore and Wall Street. Look
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