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Speaker 1: This is Bloomberg day Break Asia for this Thursday, February

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Speaker 1: twenty third in Hong Kong, Wednesday February twenty second in

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Speaker 1: New York. Coming up today, US stalks finished LUA after

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Speaker 1: the FED signaled interest rates will keep moving higher. After

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Speaker 1: the bell in. Nvidia gives a bullish outlook for revenue

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Speaker 1: as the company pushes further into AI computing chips. China

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Speaker 1: urges some state earned firms to let contracts expire with

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Speaker 1: their full biggest auditing firms. Putin says he's waiting for

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Speaker 1: Shi visit to stabilize the world. Biden says Putin has

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Speaker 1: made a big mistake by pulling back on nuclear treaty.

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Speaker 1: Hong Kong rearranges some COVID policies. I'm at Baxter with

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Speaker 1: Global News. That's all straight ahead on Bloomberg day Break Asia,

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Speaker 1: the business news you need to start your day in

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

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Speaker 1: Bloomberg Business App, and everywhere you get your podcasts. Good morning,

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Speaker 1: I'm Richard Salama and I'm Dad Prisoner. Here are the

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Speaker 1: stories we're following today. The FMC anticipated further rate hikes

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Speaker 1: to bring down inflation. Here now minutes from that FED

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Speaker 1: rate setting meeting show that nearly all participants agreed it

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Speaker 1: was appropriate to raise the cost of borrowing by twenty

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Speaker 1: five basis points. A few officials favored or could have

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Speaker 1: supported a larger move that Since the meeting, several data

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Speaker 1: points have suggested stronger underlying momentum and earlier we had

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Speaker 1: Louis FED President Jim Bullard saying the American economy is

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Speaker 1: proving more resilient than expected, telling CNBC the data has

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Speaker 1: caused many investors to reprice the FEDS rate path. I

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Speaker 1: think that markets have overpriced or recession in the second

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Speaker 1: half of twenty twenty two, and overpriced or recession in

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Speaker 1: the first half of twenty twenty three. Maybe they're overpriceding

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Speaker 1: the chances of recession in the second half twenty twenty three, Bullard,

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Speaker 1: saying that he still favors hiking the FED funds rate

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Speaker 1: above five percent as quickly as possible, also saying he

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Speaker 1: was encouraged about the prospects for quote disinflation, and he

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Speaker 1: did point to a shift by consumers to do more shopping. Woulmart,

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Speaker 1: we have a rally in shares of Nvidia in lay trading.

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Speaker 1: The stock is up more than eight and a half

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Speaker 1: percent after the leading chip maker gave a bullish forecast

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Speaker 1: for revenue in the current quarter. We have more from

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Speaker 1: Bloomberg's Charlie Pellet. It suggests that it's push into artificial

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Speaker 1: intelligence processors is helping offset weakening demand for personal computer chips.

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Speaker 1: Of a company who's parlayed its dominance of graphics processors

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Speaker 1: into a strong position in the growing market for AI hardware,

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Speaker 1: its chips excel at the kind of parallel processing that

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Speaker 1: allows computers to make sense of large amounts of data

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Speaker 1: and train software to make decisions. In New York. Charlie Pellet,

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Speaker 1: Bloomberg Daybreak Asia Let's ten to a big tech giant

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Speaker 1: which has some rather promising needs for anybody who's suffering

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Speaker 1: from diabetes. Buzby is a story. Apple says it's making

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Speaker 1: progress on a noninvasive continuous blood glucose monitor for the

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Speaker 1: Apple Watch device. The goal is to measure blood sugar

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Speaker 1: in the wearer's body without needing to prick the skin

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Speaker 1: for blood, instead using lasers that emit light just below

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Speaker 1: the skin, which reflects a glucose reading back to a

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Speaker 1: sensor in the watch. Now, the move could upend a

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Speaker 1: multi billion dollar industry in the US. We're in estimated

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Speaker 1: one in ten people as diabetes and typically rely on

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Speaker 1: a device that punctures the skin to get a blood sample.

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Speaker 1: Apple says the technology still a few years away. I'm

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Speaker 1: Tom buzzby Bloomberg Daybreak Asia. Authorities in China are urging

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Speaker 1: state owned firms to phase out using the four largest

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Speaker 1: international accounting firms. That story from Bloomberg's David inglis we

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Speaker 1: hear Chinese authorities are urging firms to let contracts with

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Speaker 1: the big four auditing firms expire. This late US call

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Speaker 1: points to concerns about data security. Firms were reportedly asked

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Speaker 1: to hire local Chinese or Hong Kong accountants instead, and

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Speaker 1: this comes even after Beijing reached this landmark deal to

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Speaker 1: allow you as audit inspections on hundreds of Chinese firms

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Speaker 1: listed in New York. It also serves as a reminder

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Speaker 1: that decoupling is still proceeding in very sensitive areas now.

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Speaker 1: China's move is also not without risk going forward. Shifting

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Speaker 1: to lesser known auditors will make it harder for state

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Speaker 1: on enterprises to attract capital from international investors. In Hong Kong.

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Speaker 1: I'm David ingless long mcday brick Asia. All right, Well,

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Speaker 1: let's stay in the APAC region as it were, and

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Speaker 1: shares of Qantas Airways well bouncing back. We've got at

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Speaker 1: the moment a rise of about one point one percent

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Speaker 1: in a declining market as the airline bounced back to

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Speaker 1: record half year profits. Let's get more now from Bloomberg's

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Speaker 1: Annabel Drulers. Quantas reported net income of one billion Australian

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Speaker 1: dollars or six hundred and eighty one million dollars for

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Speaker 1: the last six months of twenty twenty two. That compared

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Speaker 1: with a loss of four hundred and fifty six million

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Speaker 1: Australian dollars a year earlier, when COVID restrictions destroyed income.

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Speaker 1: Carrie As worldwide have suffered losses approaching two hundred billion

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Speaker 1: dollars over the past three years. Quantas's positive results reflect

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Speaker 1: the intensity of aviation's recovery from the pandemic. As travel

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Speaker 1: demand surges, analysts expect Quantas to post record earnings this

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Speaker 1: fiscal year. Separately, Quantas announced the stock buyback of as

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Speaker 1: much as five hundred million Australian dollars, adding to a

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Speaker 1: program announced in August in Hong Kong. I'm Annabel Ruler's

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Speaker 1: Bloombo Daybreak Asia. So we've been talking today about the

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Speaker 1: FED Minutes, and when you consider the FED, remember this,

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Speaker 1: the seat of FED Vice chair is going to be

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Speaker 1: vacated by Lale Brainer. She's leaving to become director of

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Speaker 1: the National Economic Council. Now we know the White House

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Speaker 1: has considered the name Austin Gulsby. He is currently the

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Speaker 1: head of the Chicago Fed. Well, now the Wall Street

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Speaker 1: Journal is reporting that President Biden is facing a bit

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Speaker 1: of resistance from Democrats who want him to nominate a

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Speaker 1: woman or a person of color. And the names Janice

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Speaker 1: Eberley and Karen dna and have been floated as possible

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Speaker 1: candidates to become FED Vice chair. We'll be talking more

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Speaker 1: about market action today to the FED Minutes when Ben

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Speaker 1: Emmons joins us. Right after we update Global News, Russian

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Speaker 1: President Putin says he's waiting for Chinese President Chiechin Ping

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Speaker 1: to visit at Baxter with Moore from the Bloomberg News

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Speaker 1: room at San Francisco, Eddie, Yeah, exactly right. Doug Putin

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Speaker 1: says the visit will help in stabilizing the international situation.

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Speaker 1: This after meeting with Counselor Wang Yee, President Putin says

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Speaker 1: the two are just cementing an old relationship. Russia China

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Speaker 1: relations developed like we planned in previous years. Of course,

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Speaker 1: we are waiting for the head of China People's republics

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Speaker 1: to visit Russia. So Angela Stent, senior fellow at the

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Speaker 1: Brookings Institution on Bloomberg's Balance of Power today, says Putin

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Speaker 1: has several asks. He'd like the weapons, but if he

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Speaker 1: can't get the weapons, he just wants more Chinese support

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Speaker 1: and probably also the Chinese may have been helping Russia

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Speaker 1: evade some of the sanctions, so I think economic assistants asked, says,

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Speaker 1: he continues to refer back to the Soviet era. He

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Speaker 1: has no checks or balances and looks to be ready

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Speaker 1: to just she says, pour more troops into the war

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Speaker 1: in Ukraine. And this meeting comes as US President Joe

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Speaker 1: Biden was in the air coming home back to the US.

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Speaker 1: Bloomberg's Amory Hordern and warsaw US as a Biden administration

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Speaker 1: feels the president has gotten what he wanted, pointing out

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Speaker 1: Putin's failures that while Pouchin wanted this finnlandinization of NATO.

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Speaker 1: What he got is the natoization of Finland and Sweden.

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Speaker 1: So this is something the president is really going to

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Speaker 1: walk away with, this idea that he was able to

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Speaker 1: keep NATO not just united, but also expanding on it.

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Speaker 1: And with Putin's pulling out from the Start Nuclear Agreement,

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Speaker 1: the US says it will be monitoring. President Biden, in

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Speaker 1: an exclusive interview with ABC, calls it a big mistake.

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Speaker 1: I think we're less safe we walk away from ent

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Speaker 1: control agreements that are very much in both parties interests,

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Speaker 1: in the world's interest. But I've not seen anything. We've

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Speaker 1: not seen anything at where there's a change in this

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Speaker 1: posture and what they're doing. The idea that somehow this

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Speaker 1: means they're thinking of using nuclear weapons international content baistic.

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Speaker 1: There's no evidence of that, and the US State Department

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Speaker 1: is saying today that it has fully ascertained that Russian

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Speaker 1: forces have committed horrendous war crimes. The Department's Ambassador at

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Speaker 1: Large for Global Criminal Justice, Beth Van Shak, says that

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Speaker 1: action needs to be taken now. Information indicating that members

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Speaker 1: of Russia's forces committed execution style killings of Ukrainian men,

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Speaker 1: women and children, tortured civilians in detention, including through beatings,

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Speaker 1: electrocutions and mock executions, raped women and girls, and alongside

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Speaker 1: other Russian officials deported hundreds of thousands of Ukrainian civilians,

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Speaker 1: convention children. Vanshak says the World Court needs to take action.

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Speaker 1: Hong Kong is extending its mandatory mask mandate in public

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Speaker 1: places for another fourteen days to March eighth. The region

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Speaker 1: is rapidly removing pandemic restrictions, but this one will remain

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Speaker 1: a while longer at All also says it will no

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Speaker 1: longer require secondary school students take daily COVID tests beginning

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Speaker 1: March first. Global News powered by more than twenty seven

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Speaker 1: hundred journalists and analysts and over one hundred twenty countries.

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Speaker 1: In San Francisco, I'm Ad Baxter, and this is Bloomberg

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Speaker 1: joining us here in New York as Ben Emmons. Ben

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Speaker 1: a senior portfolio manager at New Edge Wealth and an

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Speaker 1: expert on things in the fixed income space and bond markets.

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Speaker 1: Always good to see you, Ben, Thanks for being with us.

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Speaker 1: A lot having to do today with the Fed minutes,

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Speaker 1: but I think in what we read nothing is really surprising.

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Speaker 1: I think higher for longer seems to be the theme,

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Speaker 1: and a number of officials believe that insufficiently restrictive rates

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Speaker 1: could potentially cause the problem of no longer making progress

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Speaker 1: when it comes to fighting inflation. So if you look

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Speaker 1: at the market right now pricing in let's say another

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Speaker 1: seventy five basis points and tightening three more twenty five

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Speaker 1: bases point rate heights, is there the risk that they're

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Speaker 1: could be tightening beyond that. So I was listening to

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Speaker 1: Jim Ballard today, Duck, and so he's very strong on

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Speaker 1: reaching that rate five point three seven five three eights,

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Speaker 1: which is seventy five base points from here, you know, quicker,

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Speaker 1: but we have to reach that rate. So that's where

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Speaker 1: the market Kearney now is. They've really could really listened

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Speaker 1: to what he is saying Ballard. And then you remember

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Speaker 1: he was the one putting our projections even as high

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Speaker 1: as seven percent in the event that you do deal

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Speaker 1: with inflation that just doesn't really moderate enough or is

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Speaker 1: at risk to start increasing again. And you know, in

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Speaker 1: the minutes, there was a section at the very end

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Speaker 1: in the policy discussion where they did acknowledge that it's

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Speaker 1: going to take some time to get inflation to two percent.

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Speaker 1: There was a different language I've felt and what I've

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Speaker 1: read previously. So I think to your question, can the

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Speaker 1: time beyond that? Yes, it's possible, because Ballard, even in

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Speaker 1: his interview today in a different network, was saying indicating

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Speaker 1: like that's what it should do, should be sufficient, but

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Speaker 1: it could be you know, there could be more in

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Speaker 1: there if if it doesn't moderate, r if inflation isn't moderate. Yeah,

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Speaker 1: I mean, we've got at the moment some analysis from

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Speaker 1: the New York Fed discussing the inflation outlook based on

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Speaker 1: the Global Supply Chain Pressures Index and suggests that the

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Speaker 1: US inflation could actually fall without an economic slowdown. So

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Speaker 1: do we have to be looking at this argument between

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Speaker 1: hard and soft landing when there could be no landing?

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Speaker 1: True rational? You know? The mother again he said too.

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Speaker 1: That was I think a positive comment by him, that

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Speaker 1: we have actually just what they call dis inflation. It's

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Speaker 1: not like rapidly falling inflation. It's not deflation. It's not

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Speaker 1: like destructive decline in prices. It's just a gentle moderation

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Speaker 1: of this big shock of prices that we had last year.

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Speaker 1: It may take longer, but It doesn't therefore lead to

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Speaker 1: rapid rising unemployments. Yet the wretching uprates is enough to

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Speaker 1: get that inflation eat on the trajectory down to two

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Speaker 1: percent in a glide path. If that's the case, you're

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Speaker 1: you're not talking about soft or harland, and you're talking

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Speaker 1: about an economy that keeps cruising. So the head of

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Speaker 1: the New York Fed, John Williams speaking and indicating that

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Speaker 1: inflation will return to two percent over the next few

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Speaker 1: years years, I mean, so we're talking about maybe the

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Speaker 1: need to re examine the target. Is two percent a

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Speaker 1: little too aggressive, Maybe they should settle on three and

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Speaker 1: call it a day. Yeah, that's what's been said. But

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Speaker 1: that's unlikely to happen though. Now that was what Powell

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Speaker 1: was very specific about David Rubinstein, where he really indicated

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Speaker 1: that if you go that way to accepting that three

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Speaker 1: percent is the new norm, say, then inflation expectations will

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Speaker 1: adjust to three percent or higher, and you do deal

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Speaker 1: then in their world or you know, the monetary policy

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Speaker 1: thinking that that becomes an anchored inflation expectations story, and

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Speaker 1: that's not what they want to head to, you know, him,

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Speaker 1: Ballered Baller, all all of them have been coming out

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Speaker 1: saying we're not it's not enough to be a three percent,

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Speaker 1: it's got to be a two percent. But they acknowledging

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Speaker 1: as the Minute said, it will take some time, or

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Speaker 1: as Williamson has said, several years. It may Indeed, as

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Speaker 1: Willing said before, it may take a few years of

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Speaker 1: a rate that's restrictive that's much higher than we are

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Speaker 1: used to. One last point on this is that you

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Speaker 1: know the Bloomberg terminal, you can actually see how that

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Speaker 1: is priced in what they call overnight index swaps. The

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Speaker 1: price are really far out in the future thirty forty

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Speaker 1: fifty years of what the rate could be. That's now

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Speaker 1: something like three and a half to four percent range

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Speaker 1: that rate prior to the pandemic, when I attract that rate,

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Speaker 1: it was more like two two and a half percent.

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Speaker 1: So the market is definitely on board that this is

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Speaker 1: a fat policy, higher for longer, restrictive for longer. So

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Speaker 1: I mean, but the narrative has changed that this was

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Speaker 1: originally cost push inflation. But how far is it becoming

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Speaker 1: demand pull if so, that's a vicious circle ultimately, and

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Speaker 1: you can't but you can't stop it now, you can't

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Speaker 1: seperation and you know, the global situation plays a big role.

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Speaker 1: And here too again being set by Fat officials those

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Speaker 1: in the minutes, that the China reopening is a real

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Speaker 1: factor in this that could lead to that the Menpool inflation.

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Speaker 1: One of the things that was interesting during the Powell

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Speaker 1: press conference, he was asked a question about the debt ceiling,

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Speaker 1: and he was very blunt in saying, essentially, don't look

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Speaker 1: to the Fed to bail you out of a problem

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Speaker 1: that gets created by the unwillingness to reach some kind

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Speaker 1: of compromise that gets us to increase that we're getting

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Speaker 1: closer to that moment in time, and it's interesting that

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Speaker 1: the market appears to be as calm it as is

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Speaker 1: right now. Is there the risk that we see a

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Speaker 1: lot more a lot more in the way of volatility

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Speaker 1: and the bond market the closer we get to that

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Speaker 1: kind of day where there's a high risk that default

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Speaker 1: becomes something we have to talk about. Yeah. It was

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Speaker 1: announces out today by one these policy think tanks from

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Speaker 1: Partisan Policy Analysis that showed that the X date, the

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Speaker 1: day that the Treasury may run out of money, had

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Speaker 1: a huge amount of uncertainty around it, but meaning it

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Speaker 1: was actually pulled forward that it could be as early

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Speaker 1: as June July that that X date actually hits, and

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Speaker 1: you can tell from the T bill market that it

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Speaker 1: really starts to be priced in there now, and that

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Speaker 1: this consistent pricing, it's not like a brief kink in

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Speaker 1: that T bill curven and disappears. It's now a little

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Speaker 1: more persistent, and it's mixing itself with the fat expectations

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Speaker 1: that have been driven up now to this rate of

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Speaker 1: Ballard wants to see. So so, yes, there's a bit

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Speaker 1: of a friction collision idea there that if this becomes

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Speaker 1: protracted standoff, it is problematic. Not to keep harping on

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Speaker 1: the minutes, but it was twice mentioned in the Minutes

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Speaker 1: that that seating was a risk to the to the

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Speaker 1: near term outlook. All right, well, let's just have a

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Speaker 1: look at how it moves the needle for the dollar.

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Speaker 1: The dollars depreciation it stopped. In fact, it's it raised

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Speaker 1: the law that we've had so far this year. Where

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Speaker 1: does it go from here? That's the question, because it

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Speaker 1: has big implications for of course central banks in Asia.

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Speaker 1: Plus of course, you could also argue that ever since

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Speaker 1: it started declining, we've really good point to the euphoria

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Speaker 1: amongst stock part markets to participants here. But as it

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Speaker 1: turned to the upside again, we've seen that those wobbles

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Speaker 1: come back again. They did rason and you know, there's

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Speaker 1: two things happening there right It's one this repricing of

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Speaker 1: fat expectations, but it's also the Japanese yend that has weakened.

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Speaker 1: And since Uada has been now confirmed as the next

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Speaker 1: candidate and he does follow through more or less on

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Speaker 1: crude as policies, even though he probably will make some

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Speaker 1: change to it, but not immediately, it has weakened the end,

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Speaker 1: you know, and therefore a strengthened again. The daughter has

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Speaker 1: been big impact. And you can take this back from

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Speaker 1: October when you know the end strengthened so much on

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Speaker 1: anticipation of a change of Beauja that attributed the most

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Speaker 1: to dollar strength. We're just at the university strong out

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Speaker 1: of one thirty four at the moment, check that one

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Speaker 1: thirty five. Help me understand what's happening in the background

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Speaker 1: with the unwinding of the balance sheet and how this

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Speaker 1: is being reflected in the bond market. Right now, we

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Speaker 1: understand the story about the FED and adjusting short term

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Speaker 1: rates to try to influence inflation lower. Talk to me

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Speaker 1: a little bit about how that gets complicated when you're

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Speaker 1: trying to unwind a massive balance sheet. Yeah, and the

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Speaker 1: complication is in three ways. It's like it's one and

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Speaker 1: it's in the money markets where there's reverse repo facility

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Speaker 1: that the FED is put in place, remains really bloated,

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Speaker 1: and you know, if you get a drain of reserves

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Speaker 1: out of the system, it could put up upward pressure

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Speaker 1: on money market rates and could actually therefore so lead

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Speaker 1: to further you know, inflow into that reverse repo facility

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Speaker 1: that then again drains liquidity in the markets, and that

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Speaker 1: can could become like friction, can cause again like a tension.

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Speaker 1: It obviously is a out that people anticipate. This is

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Speaker 1: going to also add to interstate tight tightening overall, and

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Speaker 1: that's calculations by the FAT that that's some extent that's

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Speaker 1: also in FAT fund futures and the U curve. And unlastly,

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Speaker 1: it's about global liquidity. I think that um. You know,

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Speaker 1: in the fourth quarter, the Bank of Japan was heavily

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Speaker 1: intervening to try to ConTroll the yen and and the

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Speaker 1: UK of control. That added liquidity. Of course, we know

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Speaker 1: that the PBOC injected liquidity quite a bit over the

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Speaker 1: over the holidays for the reopening and lunar holiday, so

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Speaker 1: that that actually offset to a large extent the impact

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Speaker 1: that others FAT has had global aquidity. So that process

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Speaker 1: changing now too. You know, it looks like that that

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Speaker 1: there's liquidity injections by the PBOC and diminishing and the

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Speaker 1: BOJ that may not be so much of a liquidity

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Speaker 1: boost for the time being. So the FAT we're drawing

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Speaker 1: liquidity consistently now, and the means again saying they're not

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Speaker 1: going to stop with that. They don't see any reason.

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Speaker 1: There's all smooth working. Then, do you know at some

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Speaker 1: point we're going back to what we remember right in

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Speaker 1: twenty eighteen or whatever it was. You do get some

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Speaker 1: sort of tension market on the draw of recruiting. This

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Speaker 1: is Bloomberg day Break Asia. You're a morning brief on

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