WEBVTT - US Inflation Rises, China's Confusing Apple Concerns

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Richard Salama.

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<v Speaker 3>And I'm Doug Prisner. Here are the stories we're following today.

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<v Speaker 2>Let's get back to that inflation report here, because underlying

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<v Speaker 2>CPI ran at a faster than expected monthly clip in August,

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<v Speaker 2>and according to of course the US Bureau of Labor

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<v Speaker 2>Statistics here and now, this does potentially leave the door

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<v Speaker 2>open for additional interest rate increases from the Federal Reserve.

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<v Speaker 2>This is what former Treasury sectorly Larry Summer's made of

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<v Speaker 2>it all.

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<v Speaker 1>My best guess is that inflation is going to be

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<v Speaker 1>a little strong, and that they're going to need to

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<v Speaker 1>move again sometime in this cycle.

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<v Speaker 4>I think it's conceivable. It's not what I predict, but

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<v Speaker 4>it's certainly possible that they'll have to move more than once.

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<v Speaker 4>And the market, I think is over discounting that possibility.

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<v Speaker 2>That is Larry Summers saying also that US stocks may

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<v Speaker 2>be priced a bit for perfection. Someone is thinking that

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<v Speaker 2>the American economy has a very narrow window in which

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<v Speaker 2>to achieve a soft landing.

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<v Speaker 3>We are hearing the soft bank owned ARM Holdings is

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<v Speaker 3>going to price its initial public offering at the top

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<v Speaker 3>end of its marketed range. ARM is selling American depositary shares.

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<v Speaker 3>They are priced at fifty one dollars each. The chip

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<v Speaker 3>designer had marketed about ninety five and a half million

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<v Speaker 3>shares in a range of between forty seven to fifty

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<v Speaker 3>one dollars. Now at the IPO price of fifty one,

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<v Speaker 3>ARM now valued at fifty four point five billion dollars.

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<v Speaker 3>That's according to calculations from Bloomberg News. By the way,

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<v Speaker 3>this is going to be the largest IPO of the year,

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<v Speaker 3>and it's being led by Barclays along with Goldman Sachs, JPMorgan, Chase,

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<v Speaker 3>and Mizuhou Financial. Arm shares are set to begin trading

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<v Speaker 3>on Thursday. This would be on the Nasdaq market under

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<v Speaker 3>the ticker symbol a r M Rashad.

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<v Speaker 2>All right, we have a city group saying it's preparing

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<v Speaker 2>for a wave of job cuts. This comes as the

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<v Speaker 2>chief executive, Jane Fraser, restructure as the Wall Street Giant

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<v Speaker 2>in an effort to reverse a year's long slump in

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<v Speaker 2>stock prices. Fraser addressed investors at the Barclays Financial Services Conference.

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<v Speaker 5>Today's announcement is indeed about putting that next step, big

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<v Speaker 5>next step in place and initiating it, which is to

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<v Speaker 5>not only put the organization model that best fits our

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<v Speaker 5>strategy in place, it's also about running the bank differently

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<v Speaker 5>and about driving clearer accountability for doing so.

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<v Speaker 2>That is Jane Fraser. City Group says it'll operate five

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<v Speaker 2>main businesses in the bank, will eliminate the three regional

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<v Speaker 2>chiefs to oversee operations in around about one hundred and

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<v Speaker 2>sixty countries around the world. City does not have firm

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<v Speaker 2>targets for how many employees will be affected.

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<v Speaker 3>Well more than twenty tech and civil society leaders appeared

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<v Speaker 3>in a closed door Senate meeting today. The aim here

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<v Speaker 3>to shape how artificial intelligence is being regulated now. This

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<v Speaker 3>meeting was organized by Senate Majority Leader Chuck Schumer. It's

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<v Speaker 3>part of his broader effort to get the Senate up

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<v Speaker 3>to speed on this rapidly involving technology. On hand was

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<v Speaker 3>the CEO of Tesla, Elon Musk. He told reporters that

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<v Speaker 3>the US needs to be proactive when it comes to AI.

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<v Speaker 6>I think probably of there being some sort of AI

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<v Speaker 6>regulatory agency that sends on its own, similar to the

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<v Speaker 6>FA or SEC is likely asport now. The reason that

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<v Speaker 6>I've been such a prettyle AI safety in advance of

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<v Speaker 6>sort of anything terrible happening is that I think the

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<v Speaker 6>consequences of AI going wrong are our sphere.

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<v Speaker 3>That is Elon Musk. He went on to say that

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<v Speaker 3>senators should focus their concerns on what Musk called deeper AI.

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<v Speaker 3>That's a type of artificial intelligence that essentially teaches computers

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<v Speaker 3>to process data in a way that imitates the human brain.

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<v Speaker 3>Now Ed, Baxter will have a little more on today's

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<v Speaker 3>Capitol Hill meeting throughout the program.

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<v Speaker 2>Rish but guide to China now, with Beijing concerns about

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<v Speaker 2>security problem with Apple's iPhone appearing to be causing a

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<v Speaker 2>confusion bloombergs yvon lann has.

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<v Speaker 7>One Beijing both pushed back on reports about iPhone restrictions,

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<v Speaker 7>but also raised concerns about security problems with the device.

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<v Speaker 7>The remarks left US investors unsure about Apple's status in

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<v Speaker 7>China just as a new iPhone is launching. China is

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<v Speaker 7>both the company's production base and its biggest international market.

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<v Speaker 7>We reported earlier that China had plans to expand a

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<v Speaker 7>ban on the use of iPhones among some state back

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<v Speaker 7>agencies and companies. If Beijing goes ahead with an iPhone ban,

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<v Speaker 7>it will be an unprecedented blockade on China's plans to

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<v Speaker 7>limit foreign technology use in a sensitive environment in Hong Kong.

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<v Speaker 7>I'm von Man Bloomberg Radio.

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<v Speaker 3>We go to Europe next to where the European Union

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<v Speaker 3>is launching an investigation into Chinese subsidies for electric vehicles.

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<v Speaker 3>European Commission President Ursula vonder Layan said global markets are

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<v Speaker 3>essentially flooded with cheap Chinese cars.

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<v Speaker 8>And their price is kept artificially low by huge state subsidies.

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<v Speaker 8>This is distorting our market and as we do not

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<v Speaker 8>accept this distortion from the inside in our market, we

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<v Speaker 8>do not accept this from the outside.

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<v Speaker 3>That is EC President Ursula vonder Layin. Now the EUS

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<v Speaker 3>probe is being opened despite concerns about retaliation from China,

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<v Speaker 3>and it's a sign of growing alarm over the ability

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<v Speaker 3>of European manufacturers to compete with China's auto industry. So

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<v Speaker 3>we have Google today reportedly laying off hundreds of its

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<v Speaker 3>global recruiting team. This according to The New York Times,

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<v Speaker 3>which says that Google has sought to trim expenses as

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<v Speaker 3>a way of paying for investments in artificial intelligence. At

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<v Speaker 3>one point, Google's Reture area recruiting group had more than

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<v Speaker 3>three thousand employees. It's already been hit hard by layoffs

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<v Speaker 3>this year. Today, if you're wandering Class A shares in Alphabet,

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<v Speaker 3>the parent of Google up about one percent. Global News

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<v Speaker 3>is next. Therey is the potential of an auto industry

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<v Speaker 3>workers strike at midnight tomorrow. Let's get to head Baxter

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<v Speaker 3>for Global News, Eddie.

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<v Speaker 9>Yeah, we're getting a mixed messages, Douglas, your right looks

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<v Speaker 9>as if the strike may be targeted a small number

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<v Speaker 9>of factories. You a president Shan Fayn finishing a news

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<v Speaker 9>conference saying that they're still seeking good sized payhikes.

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<v Speaker 10>We're making progress at each of the three negotiating tables.

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<v Speaker 10>We're still very far apart on our key priorities, from

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<v Speaker 10>job security to ending tiers, from cost of living allowance

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<v Speaker 10>to wage increases. We do not yet have offers on

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<v Speaker 10>the table that reflect a sacrifice and contributions our members

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<v Speaker 10>have made to these companies.

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<v Speaker 9>So Paine says new tactics.

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<v Speaker 10>To win, We're likely going to have to take action,

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<v Speaker 10>and just as we have approached our negotiations differently than

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<v Speaker 10>we have in the past, we are preparing to strike

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<v Speaker 10>these companies in a way they've never seen.

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<v Speaker 9>Before Fain says the plans for strike will be publicly

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<v Speaker 9>announced tomorrow night. If an agreement is not made in

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<v Speaker 9>the Interim House, Speaker Kevin McCarthy says he will use

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<v Speaker 9>subpoena power granted by his actions of opening an impeachment

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<v Speaker 9>inquiry into President Joe Biden.

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<v Speaker 10>We don't have.

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<v Speaker 3>Any of the credit card statements from all the credit

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<v Speaker 3>cards from this shell companies. We don't have the president's

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<v Speaker 3>bank statements.

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<v Speaker 8>We don't have hundred Biden's bank statements.

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<v Speaker 11>Providing information like that would answer the question and asked

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<v Speaker 11>what we've learned in the last couple of weeks, wouldn't

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<v Speaker 11>you want to know the.

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<v Speaker 9>Answer to yeah, McCarthy says he will get them. As

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<v Speaker 9>North Korea leader Kim Jong unn meets with President and

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<v Speaker 9>President of Vladimir Putin regarding munition transfers, the US is

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<v Speaker 9>saying it is ready to slap more sanctions on both.

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<v Speaker 9>State Department spokesman Matthew Miller when.

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<v Speaker 12>You see what looks to be increased cooperation and probably

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<v Speaker 12>military transfers. As we've said for some time, we have

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<v Speaker 12>reason to believe they were going to discuss military transfers.

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<v Speaker 12>That is quite troubling and would potentially be in violation

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<v Speaker 12>of multiple UN Security Council resolutions.

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<v Speaker 9>Yeah, Miller says there already sanctions in place. These would

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<v Speaker 9>be additional and just following up on our coverage on

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<v Speaker 9>the AI in the summit today in DC, trying to

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<v Speaker 9>keep up with the AI revolution well. Senate meeting today

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<v Speaker 9>with tech leaders metas Mark Zuckerberg, exus Eland Musk, former

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<v Speaker 9>Microsoft CEO Bill Gates, open Aichat, GPT CEO Sam Altman,

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<v Speaker 9>among others. Democratic leader in Political Reaction Richard Blumenthal says

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<v Speaker 9>that there are actually some really good information coming out.

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<v Speaker 13>We are under the cusp of a new industrial revolution

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<v Speaker 13>with enormous promise but a panoply of perils. And what

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<v Speaker 13>has impressed me most drammatically today is that there is

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<v Speaker 13>general acceptance of the need for some kind of regulation

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<v Speaker 13>to achieve the promise but avoid the risks and dangers.

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<v Speaker 9>Yeah, but not all the senators listening to the group

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<v Speaker 9>of tech CEOs regarding AI today are happy. Senator Elizabeth

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<v Speaker 9>Warren on Bloomberg.

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<v Speaker 6>They're sitting at.

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<v Speaker 12>A big table all by themselves.

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<v Speaker 6>All of the senators are to sit there and ask

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<v Speaker 6>no questions.

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<v Speaker 10>That's the setup.

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<v Speaker 9>By the way, we're told at Musk and Zuckerberg sat

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<v Speaker 9>at opposite ends of a long table. Yeah, there was

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<v Speaker 9>no cage there. Global newspower by more than twenty seven

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<v Speaker 9>hundred journalists and analysts and over one hundred twenty countries.

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<v Speaker 9>In San Francisco, I'm at Baxter and this is Bloomberg Now.

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<v Speaker 3>You can get the latest news whenever you want it.

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<v Speaker 3>With Bloomberg News Now, it's the top stories from our

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<v Speaker 3>Get Bloomberg News Now and the Bloomberg Business app, or

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<v Speaker 3>Daybreak Asia. And our guest is Christina Hooper. She is

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<v Speaker 3>the chief Global market Strategist at Invesco, joining us here

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<v Speaker 3>in New York in the Bloomberg Interactive Broker Studio. Nice

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<v Speaker 3>of you to stop by. It's good seeing you, Thanks

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<v Speaker 3>so much. How did you kind of read what we

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<v Speaker 3>learned today with a CPI print. I'm looking at the

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<v Speaker 3>way in which the market responded. It really did little

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<v Speaker 3>too kind of alter the expectation. It would seem that

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<v Speaker 3>the Fed is going to remain on hold next week.

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<v Speaker 3>Would you agree with that?

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<v Speaker 11>I definitely agree with that, but with one wrinkle. So

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<v Speaker 11>I'll say the market was bracing itself for a higher

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<v Speaker 11>headline CPI print because of oil prices. But and so

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<v Speaker 11>I think it was rather comfortable. We had a core

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<v Speaker 11>a touch higher than anticipated, but certainly within a range

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<v Speaker 11>of what I think is comfortable. And I've said that

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<v Speaker 11>this is very much a disinflationary narrative, but not every

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<v Speaker 11>data point is going to be perfect and fit in

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<v Speaker 11>with that narrative perfectly. The one fly in the ointment

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<v Speaker 11>could be Michigan inflation expectations on Friday. Now, if we

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<v Speaker 11>go back to June of twenty twenty two, recall the

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<v Speaker 11>FED had been messaging in advance of its meeting that

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<v Speaker 11>it would hike rates fifty basis points, and then we

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<v Speaker 11>got a one to two punch, We got in an

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<v Speaker 11>inflation print, and we got Michigan inflation expectations that were

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<v Speaker 11>j Powell even pointed to those two data points as

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<v Speaker 11>the reason the FED aired on the side of actually

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<v Speaker 11>doing seventy five basis points at that meeting. And so

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<v Speaker 11>I think that if we were to get some cost

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<v Speaker 11>for concern in Michigan inflation expectations, because we know that

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<v Speaker 11>consumer inflation expectations are so important to a number of

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<v Speaker 11>central banks, including the FED, then that might tip the scales,

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<v Speaker 11>but I think it's highly unlikely. My base case is

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<v Speaker 11>that the FED sits on its hands next week.

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<v Speaker 3>So the other thing that I have to ask about

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<v Speaker 3>in terms of FED policy the degree to which they

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<v Speaker 3>may be a little concerned about the dollar, not that

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<v Speaker 3>it needs to weaken from here. If anything, I think

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<v Speaker 3>that they would want to keep the dollar strong as

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<v Speaker 3>a way of preventing the economy from importing inflation. When

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<v Speaker 3>you consider what oil prices have been doing lately. I mean,

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<v Speaker 3>Brent now is just under ninety two. We've got WTI

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<v Speaker 3>just under eighty nine dollars a barrel. And to the

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<v Speaker 3>point we were kind of alluding to a moment ago,

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<v Speaker 3>energy seems to be the greatest risk now and measuring

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<v Speaker 3>where inflation may end up. Do you think the FED is,

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<v Speaker 3>even though they may remain on hold, let's say, for

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<v Speaker 3>the foreseeable future, they've got a talk tough, largely to

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<v Speaker 3>keep the dollar firm.

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<v Speaker 11>I don't know if the FED is that concerned, just

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<v Speaker 11>because it takes so long for higher energy prices to

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<v Speaker 11>make its way into core inflation, which is really what

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<v Speaker 11>the FED is laser focused on. So I'm not sure

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<v Speaker 11>that the FED is too worried about the US dollar.

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<v Speaker 11>I think the FED is going to come to the

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<v Speaker 11>end of its rate hike cycle when it feels comfortable

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<v Speaker 11>with that. Until then, though, we're going to hear hawkish

0:12:35.480 --> 0:12:39.240
<v Speaker 11>FED speak. I think next week, if the FED chooses

0:12:39.280 --> 0:12:42.800
<v Speaker 11>to sit on its hands, it will still sound hawkish.

0:12:42.840 --> 0:12:45.840
<v Speaker 11>It will reserve that right to hike rates in the future,

0:12:46.120 --> 0:12:49.640
<v Speaker 11>and that will really stop a lot of what could

0:12:49.640 --> 0:12:52.640
<v Speaker 11>be a weakening of the US dollar. So it'll take

0:12:52.679 --> 0:12:55.720
<v Speaker 11>time before we before that really starts. I think it

0:12:55.760 --> 0:13:00.920
<v Speaker 11>will take until markets are convinced definitively that the FED

0:13:01.000 --> 0:13:02.440
<v Speaker 11>has ended its rate hike cycle.

0:13:03.120 --> 0:13:06.079
<v Speaker 2>So Christina, you know we have, of course, this elevated

0:13:06.080 --> 0:13:09.600
<v Speaker 2>oil price. This takes time to actually feed into the

0:13:09.600 --> 0:13:13.560
<v Speaker 2>inflation numbers, especially where they are now. But also let's

0:13:13.559 --> 0:13:18.160
<v Speaker 2>not forget that later on Thursday anyway, we've got another

0:13:18.200 --> 0:13:22.160
<v Speaker 2>deliage of data, retail sales PPI, initial jobless claims as well.

0:13:22.280 --> 0:13:24.360
<v Speaker 2>You know, the data is endless, and it all just

0:13:24.400 --> 0:13:25.800
<v Speaker 2>seems to just muddy the waters.

0:13:26.800 --> 0:13:30.400
<v Speaker 11>Well, it certainly muddies the waters, but we're seeing a

0:13:30.440 --> 0:13:33.600
<v Speaker 11>clear picture when we step back, which is that the

0:13:33.679 --> 0:13:38.000
<v Speaker 11>disinflationary trend is very much underway and the US economy

0:13:38.440 --> 0:13:41.800
<v Speaker 11>is cooling. And those really are the two key takeaways

0:13:41.840 --> 0:13:44.160
<v Speaker 11>for the FED. And that's why I think the FED

0:13:44.200 --> 0:13:46.480
<v Speaker 11>is going to sit on its hands in September and

0:13:46.600 --> 0:13:49.760
<v Speaker 11>why I think it's unlikely the FED hikes rates again

0:13:49.920 --> 0:13:50.520
<v Speaker 11>this cycle.

0:13:50.840 --> 0:13:53.440
<v Speaker 3>So when you look at the treasury curve right now, yes,

0:13:53.480 --> 0:13:57.079
<v Speaker 3>we are still inverted. Does that necessarily I mean, it's

0:13:57.120 --> 0:13:59.920
<v Speaker 3>been stubborn and it's kind of implication here that we're

0:14:00.040 --> 0:14:02.160
<v Speaker 3>looking at a recession. Is that your bet, now, let's

0:14:02.160 --> 0:14:05.120
<v Speaker 3>say mid next year, that we're definitely going to see

0:14:05.120 --> 0:14:06.760
<v Speaker 3>some contraction in a meaningful way.

0:14:07.080 --> 0:14:09.559
<v Speaker 11>I don't think so. My view is that we're going

0:14:09.600 --> 0:14:11.960
<v Speaker 11>to see a bumpy landing. And by that, I mean,

0:14:13.120 --> 0:14:14.960
<v Speaker 11>let me take a step back and say, you know

0:14:15.040 --> 0:14:17.600
<v Speaker 11>that there's this school of thought beliefs that believes we're

0:14:17.600 --> 0:14:19.320
<v Speaker 11>going to get a soft landing. We're even hearing it

0:14:19.360 --> 0:14:23.560
<v Speaker 11>from giannet Yellen, and I understand the rationale behind it,

0:14:23.600 --> 0:14:27.200
<v Speaker 11>but I would say that a soft landing assumes there's

0:14:27.480 --> 0:14:30.640
<v Speaker 11>very little damage, and I think we will see some

0:14:30.720 --> 0:14:36.200
<v Speaker 11>significant damage before we see a recovery. We've seen a

0:14:36.360 --> 0:14:39.720
<v Speaker 11>you know, significant tightening and credit conditions. Things like that

0:14:39.840 --> 0:14:43.680
<v Speaker 11>don't happen without some kind of damage to the economy.

0:14:43.880 --> 0:14:47.840
<v Speaker 11>I think we'll avoid a recession, but will certainly feel

0:14:47.840 --> 0:14:49.200
<v Speaker 11>some pain, you.

0:14:49.160 --> 0:14:51.800
<v Speaker 2>Know, just thinking about that, and you know, when does

0:14:51.960 --> 0:14:56.520
<v Speaker 2>actually ultimately we see the whole bond market start to

0:14:56.600 --> 0:15:00.400
<v Speaker 2>price and perhaps beyond what we're looking at the moment

0:15:00.440 --> 0:15:04.800
<v Speaker 2>in terms of the longer end, and start to actually

0:15:04.880 --> 0:15:08.120
<v Speaker 2>properly rely I suppose uninverting as it were.

0:15:08.600 --> 0:15:12.520
<v Speaker 11>Well, I think that could start to happen soon. We've

0:15:12.520 --> 0:15:16.400
<v Speaker 11>seen a real stubborn pattern thus far, but that could

0:15:16.480 --> 0:15:20.960
<v Speaker 11>certainly start to happen soon. I think the real issue, though,

0:15:21.160 --> 0:15:25.720
<v Speaker 11>is that we do have a significantly long lag typically

0:15:26.040 --> 0:15:30.320
<v Speaker 11>between when monetary policy is enacted and when it shows

0:15:30.400 --> 0:15:32.840
<v Speaker 11>up in the economy. And so long as we have

0:15:33.840 --> 0:15:36.720
<v Speaker 11>you know, a fair level of policy uncertainty about when

0:15:36.720 --> 0:15:39.800
<v Speaker 11>the FED is going to high rates, we are unlikely

0:15:39.840 --> 0:15:41.760
<v Speaker 11>to see a lot of movement. I think as we

0:15:41.800 --> 0:15:45.960
<v Speaker 11>get closer to greater clarity, that's when we could see

0:15:46.160 --> 0:15:50.760
<v Speaker 11>an unwind begin. But I do believe both the bond

0:15:51.600 --> 0:15:55.320
<v Speaker 11>and the stock market will start to discount recovery. I

0:15:55.360 --> 0:15:59.800
<v Speaker 11>think that'll that will begin. The discounting process should happen soon.

0:16:00.080 --> 0:16:02.080
<v Speaker 11>I think we'll actually start to see a recovery in

0:16:02.080 --> 0:16:03.240
<v Speaker 11>the back half of twenty four.

0:16:03.440 --> 0:16:06.360
<v Speaker 3>Christine, I'd like to get your view on what's going

0:16:06.400 --> 0:16:08.560
<v Speaker 3>on in China right now in the degree to which

0:16:08.720 --> 0:16:10.960
<v Speaker 3>a weak economy there is really going to hold back

0:16:11.000 --> 0:16:13.960
<v Speaker 3>global growth in a significant way for the foreseeable future.

0:16:14.000 --> 0:16:15.200
<v Speaker 3>Is that a fair statement.

0:16:15.440 --> 0:16:18.320
<v Speaker 11>Well, I think you have to ask the question what's

0:16:18.480 --> 0:16:20.800
<v Speaker 11>come first, the chicken or the egg, because if we

0:16:20.840 --> 0:16:25.000
<v Speaker 11>look at the Chinese economy, yes, certainly there are headwinds

0:16:25.080 --> 0:16:29.640
<v Speaker 11>because the economy didn't get the kind of fiscal stimulus

0:16:29.720 --> 0:16:34.680
<v Speaker 11>we saw given out in Western developed countries during the pandemic.

0:16:35.080 --> 0:16:39.160
<v Speaker 11>So that has certainly held back the Chinese economy from

0:16:39.160 --> 0:16:41.760
<v Speaker 11>a robust reopening. But if we look at the data,

0:16:42.160 --> 0:16:45.440
<v Speaker 11>services is still fairly good. Where we've seen really the

0:16:45.520 --> 0:16:50.840
<v Speaker 11>pain is manufacturing, and that really reflects the global slowdown

0:16:51.240 --> 0:16:56.040
<v Speaker 11>that was caused by Western developed central banks. So the

0:16:56.240 --> 0:17:01.560
<v Speaker 11>Chinese economy in at least some respects reflecting that global

0:17:01.600 --> 0:17:05.800
<v Speaker 11>slowdown as opposed to contributing to it. Now we could

0:17:05.840 --> 0:17:09.359
<v Speaker 11>see going forward if we don't get the If China

0:17:09.400 --> 0:17:14.119
<v Speaker 11>doesn't get the adequate policy stimulus, it needs the targeted stimulus,

0:17:14.200 --> 0:17:17.520
<v Speaker 11>then that could be problematic. Thus far, though, I've liked

0:17:17.520 --> 0:17:19.800
<v Speaker 11>this slow drip and I think it could continue.

0:17:19.960 --> 0:17:22.880
<v Speaker 3>Oh, we'll see about that. It's a fresh perspective. I've

0:17:22.880 --> 0:17:25.040
<v Speaker 3>not heard that from anyone that do you like this

0:17:25.240 --> 0:17:27.119
<v Speaker 3>kind of slow rollout of stimulus.

0:17:27.359 --> 0:17:28.440
<v Speaker 11>I'll take what I can get.

0:17:28.280 --> 0:17:30.680
<v Speaker 3>All right, Christina, Always a pleasure. Thank you so much,

0:17:30.920 --> 0:17:33.879
<v Speaker 3>Christina Hooper there. She is the chief Global market strategist.

0:17:33.880 --> 0:17:37.919
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