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Speaker 1: This is Bloomberg Daybreak Asia for this Wednesday, April twelfth

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Speaker 1: in Hong Kong, Tuesday April eleventh in New York and

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Speaker 1: coming up today, markets brace for US inflation data and

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Speaker 1: whether the numbers support more FED rate hikes. The IMF

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Speaker 1: warns that turmoil in the banking sector could weigh on

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Speaker 1: the global economy, and China plans to require a security

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Speaker 1: review of AI services before they're allowed to operate. Hungary

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Speaker 1: defies EU does Russia deal. Poland Prime minister warns not

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Speaker 1: to let Ukraine support Wayne. New York DA sus Jim

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Speaker 1: Jordan to stop Trump case interference large US Philippine military drills.

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Speaker 1: I'm at Baxter with Global News. That's all straight ahead

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Speaker 1: on Bloomberg Daybreak Asia, the business news you need to

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Speaker 1: start your day in just one fifteen minute podcast available

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Speaker 1: on Apple, Spotify, the Bloomberg Business App, and everywhere you

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Speaker 1: get your podcasts. Good morning, I'm du Prisoner and I'm

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Speaker 1: Brian Curtis. Here are the stories we're following today. Two

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Speaker 1: FED officials offering differing views on the Central Bank's next move.

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Speaker 1: New York Fed President John Williams told Yahoo Finance that

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Speaker 1: officials will still have more work to do here on inflation,

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Speaker 1: and that's despite the uncertainty in the banking sector. Williams

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Speaker 1: said that the Fed's path will depend on incoming economic data,

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Speaker 1: but he suggested that one more interest rate hike this

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Speaker 1: year followed by a pause would be a reasonable starting place.

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Speaker 1: In the meantime, though, Chicago FED President Austin Gulsby called

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Speaker 1: for prudence and patients when assessing the economic impact of

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Speaker 1: these tighter credit conditions. Given how much uncertainty abounds when

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Speaker 1: these financial headwinds are going, I guess I think we

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Speaker 1: need to be cautious. We should gather further data, and

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Speaker 1: we should be extra careful about raising rates too aggressively

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Speaker 1: until we see how much work the headwinds are doing

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Speaker 1: for us in getting inflation down. Markets are pricing in

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Speaker 1: now a strong likelihood the FED will raise borrowing by

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Speaker 1: a quarter percentage point. Fed officials will discuss monetary policy

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Speaker 1: at the next meeting. May Second mentioned the CPI data

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Speaker 1: a little bit earlier eight to thirty am Wall Street time.

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Speaker 1: That will be Wednesday morning US, and we have a

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Speaker 1: preview from Bloomberg's Michael McKey. The FED is all about

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Speaker 1: inflation these days, which puts a lot of focus on

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Speaker 1: the consumer price Index. The problem for markets is it's

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Speaker 1: not likely to provide the kind of definitive rate clues

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Speaker 1: investors want. Headline CPI is forecast to be cut in half,

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Speaker 1: which will mean a big drop in the year over

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Speaker 1: year rate, but core, which gets more attention from the

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Speaker 1: Central Bank, isn't likely to budge and may actually rise

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Speaker 1: year over year. Since the Fed doesn't meet again until

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Speaker 1: May third, officials will have to look at all sorts

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Speaker 1: of other data to divine where inflation will be then,

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Speaker 1: Michael McKey Bloomberg day Break Asia. The International Monetary Fund

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Speaker 1: warned that it's too soon to sound the all clear

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Speaker 1: from the turmoil that has shaken the world financial system.

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Speaker 1: That's according to his statement in the semi annual Global

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Speaker 1: Financial Stability Report the IMF, saying that financial markets remain

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Speaker 1: fragile and stressed following bank collapses. The Stability Report was

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Speaker 1: released shortly after the IMF published an update to its

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Speaker 1: World Economic Outlook. In the outlook, the IMF trimmed its

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Speaker 1: projections for global growth. I AMF chief economist Pierre Olivier

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Speaker 1: gore Inshaw has warned of high uncertainty going forward. This

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Speaker 1: is reflecting basically the fact that we have advanced economies

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Speaker 1: are reopening or moving ahead, China reopening, and at the

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Speaker 1: same time we have the tightening of monetary policy is

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Speaker 1: that is weighing in, plus a little bit of financial

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Speaker 1: instability that could weigh down on bank lending points US.

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Speaker 1: So you put all of this in the mix, and

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Speaker 1: that's where you have our baseline. Gorenshaw says there's maybe

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Speaker 1: some lurking vulnerabilities still there in the financial system, and

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Speaker 1: he said it's very important for financial supervisors as well

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Speaker 1: as regulators and authorities to look carefully at these pockets

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Speaker 1: of vulnerability that might still exist. At the same time, today,

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Speaker 1: US Treasury Secretary Janet Yellen simply shrugged off the recent

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Speaker 1: turmoil that we've seen in the banking sector. She went

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Speaker 1: on to say the American economy is in a better

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Speaker 1: place than it was just six months ago. Here is

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Speaker 1: Yellen speaking during a press conference earlier today in Washington.

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Speaker 1: Prices of commodities like food and energy of stabilized supply

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Speaker 1: chain pressures continued to ease, and global growth projections remain

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Speaker 1: higher than they were in the fall. Treasury Secretary Yellen

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Speaker 1: there she went on to say she has yet to

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Speaker 1: see evidence at this stage anyway of a contraction in credit,

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Speaker 1: but she does say that does remain a risk. Yellen's

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Speaker 1: comments come despite last week's economic data, one data point

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Speaker 1: indicating the US lending contracted by the most on record

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Speaker 1: during the last two weeks of March, syndication of tighter

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Speaker 1: credit conditions in the wake of several high profile bank collapses,

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Speaker 1: and Yellen repeated the US banking system remains sound and

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Speaker 1: with strong capital and liquidity positions. Meantime, China is planning

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Speaker 1: to require a security review of generative AI services before

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Speaker 1: they're allowed to operate. We get that story from Bloomberg.

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Speaker 1: Yvon Man. China Cyberspace Administration said AI service providers must

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Speaker 1: ensure content is accurate and respects intellectual property. The content

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Speaker 1: must not involve discrimination or endanger security. AI operators must

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Speaker 1: also clearly label AI generated content. The review cast uncertainty

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Speaker 1: over some of the chat GPT like bots introduced by

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Speaker 1: China's big tech companies. Those firms include Ali Baba and Baidu.

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Speaker 1: After the announcement, Ali Baba shares gave up much of

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Speaker 1: their initial gains on Tuesday, and bay Do shares also

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Speaker 1: slid as much as seven percent in Hong Kong. I'm

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Speaker 1: Van Man Bloomberg Day Brick Asia, and those shares continued

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Speaker 1: to trundle a bit lower with their ADRs. In the

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Speaker 1: United States, I'm Brian Curtis along with Doug Chrisner, and

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Speaker 1: you gotta love a tussle in the exciting world of

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Speaker 1: high finance. But John Williams on one side saying rate

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Speaker 1: increases didn't cause the bank collapses, and then the IMF

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Speaker 1: begging to differ. That's what makes a market, right. I

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Speaker 1: think that's a fair point. You know, we talked about

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Speaker 1: the CPI print that we're expecting tomorrow. The other thing

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Speaker 1: that's going to be happening tomorrow Brian minutes from the

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Speaker 1: last FED meeting, and I think beyond that, arguably the

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Speaker 1: more critical data that we're going to get this week

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Speaker 1: bank earnings we'll have to wait until Friday, though. It's

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Speaker 1: JP Morgan Chase, along with City Group and Wells Fargo.

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Speaker 1: Particularly given a lot of the turmoil that we have

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Speaker 1: seen across the banking sector recently, the issue of forward

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Speaker 1: guidance I think is going to be very critical where

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Speaker 1: balance sheets are right now, liquidity issues very very important,

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Speaker 1: I think, yeah, And we had a pretty good day

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Speaker 1: for the financial spiders today, up nine tenths of a percent.

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Speaker 1: It was another slightly unusual day. I mean, it looked

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Speaker 1: like very weak performance broadly the SMP five hundred flatnel.

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Speaker 1: But we had another day of quite performance by industrials, materials,

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Speaker 1: energy shares, the cyclicals, and we had I think the

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Speaker 1: fifth day and six that we saw selling in tech.

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Speaker 1: So I think most of this is really just churn

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Speaker 1: as mentioned, and maybe mean reversion because tech got off

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Speaker 1: to such a big start this year. One of the

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Speaker 1: quick mention Buffett adding to his positions in Japanese trading houses.

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Speaker 1: Maybe a cheap way to play energy maybe, But at

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Speaker 1: the same time, I thought it was interesting too that

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Speaker 1: he's dialing back on Taiwan Semi. It was only over

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Speaker 1: the weekend the Taiwan Semi reported that fifteen percent drop

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Speaker 1: in revenue, But Buffett is highlighting a lot of geopolitical

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Speaker 1: risk in kind of getting out of Taiwan Semi. I

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Speaker 1: thought that was an interesting little takeaway. It may also

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Speaker 1: just have been some profit taking, but this add to

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Speaker 1: these Japanese trading houses which do feature a lot of

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Speaker 1: their profits from the energy has gained him four point

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Speaker 1: five billion dollars since twenty twenty when he moved on these.

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Speaker 1: So he tends to just always seem to get his

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Speaker 1: timing right now. That's why they call him the Oracle

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Speaker 1: of Omaha. Absolutely, yeah, his timing is impeccable. Mark Chandler

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Speaker 1: would join us in a few moments, Managing director at

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Speaker 1: Bannockburn Global. It's time for Global news. Hungary has defied

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Speaker 1: the EU by sealing economic deals with Moscow. It docks

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Speaker 1: it with Global News in the nine sixty Newsman San

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Speaker 1: Francisco head. Yeah, the geopolitical dynamics here are really strong, Brian.

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Speaker 1: These are energy deals made and a rare visit by

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Speaker 1: an EU member to Russia. It underscores it. Divide forming

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Speaker 1: over commitment to Ukraine. Quick response from Poland's Prime Minister Moroyatsk.

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Speaker 1: If we do not defend Ukraine, we risk a global conflict,

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Speaker 1: global crisis. Off difficult to imagine proportions and says Ukraine

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Speaker 1: is just the beginning, and this made more difficult today

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Speaker 1: as more and more information comes out of what is

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Speaker 1: supposed to be the league. US Pentagon emails Bloomberg's Nick

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Speaker 1: Wadhams on Bloomberg sound On says one and cage Ukraine

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Speaker 1: will run out of ammunition and materials, but also have

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Speaker 1: air defense problems. It seems to be we're really peeling

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Speaker 1: back the veneer a bit and getting into the real

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Speaker 1: nitty gritty of just how worried US officials are about

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Speaker 1: how Ukraine is going to be able to defend itself

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Speaker 1: against Russia, and that cautions that need to be authenticated.

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Speaker 1: But former US ambousnsador to Morocco Mark Ginsburg on Soundown

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Speaker 1: says it goes even further. This is an unmitigated disaster

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Speaker 1: for the US government, and it's not only a painful

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Speaker 1: week that is undermining US credibility, but it's also placing

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Speaker 1: at risk the very military effort the United States has

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Speaker 1: been engaged and to support Ukraine. Now, he says, there's

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Speaker 1: grave concern at the Pentagon. The Pentagon says it's going

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Speaker 1: to turn over every rock to get to the bottom

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Speaker 1: of it. Brazilian President Lula going to travel to China,

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Speaker 1: one stop in Shanghai at the Wildwi site. Lula says

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Speaker 1: he hopes for trade and peace. He calls it a

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Speaker 1: goodwill tour. In what of being described as the largest

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Speaker 1: combat exercise in decades across the South China see in Taiwan,

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Speaker 1: straight US and forces from Philippines are carrying on those exercises.

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Speaker 1: US Major General Eric Austin is leading the charge, approximately

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Speaker 1: seventeen thousand, six hundred participants in total, demonstrating our commitment

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Speaker 1: to each other and to our Mutual Defense treaty. And

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Speaker 1: this comes through right after China finish large scale exercises

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Speaker 1: of course in the Strait and surrounding Taiwan. Manhattan District

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Speaker 1: Attorney Alvin Bragg is suit House Judiciary Chairman Jim Jordan's

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Speaker 1: seeking to keep him from interfering in any way with

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Speaker 1: a case against Donald Trump. Jordan is subpoena a former

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Speaker 1: senior prosecutor to testify at the hearings. Bloomberg's Mario Parker

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Speaker 1: says it is a very risky move already where that

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Speaker 1: it was politically motivated, right, But at the same time,

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Speaker 1: Republicans Jim Jordan, Donald Trump's biggest allies, they're playing tough.

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Speaker 1: So what do you do in New York? You probably

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Speaker 1: have a tree fight, right. Bragg is asking for emergency

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Speaker 1: ordered to stop the subpoena. New York Governor Kathy says

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Speaker 1: New York will fight back against the forces trying to

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Speaker 1: prior back healthcare for reproductive rights. Speaking a Planned Parenthood

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Speaker 1: a Greater New York Digital news conference today, she pledge

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Speaker 1: your support and last year the attacks were on abortion procedures.

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Speaker 1: This year medication abortion. What's next contraception birth control? Governor

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Speaker 1: Hokel says a state will stockpile one hundred and fifty

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Speaker 1: thousand doses of the so called abortion pill and commit

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Speaker 1: another twenty million dollars to providers if the Texas court

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Speaker 1: ruling stands. Global News powered by more than twenty seven

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Speaker 1: hundred journalist and analysts in over one hundred and 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: This is Bloomberg, Gabriek Asia. I'm Brian Curtis here in

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Speaker 1: Hong Kong. Rashad Salonat is with this in Singapore, and

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Speaker 1: our guest is Mark Chandler, Managing director at Bannockburn Global Market.

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Speaker 1: Doesn't seem like there's a lot of fear in the

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Speaker 1: market at the moment over this CPI print. Everybody's waiting

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Speaker 1: on it. It seems like people are kind of used

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Speaker 1: to it in between five and six percent, and they

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Speaker 1: know the Fed is getting close to the end of

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Speaker 1: its tightening cycle. Or does it have the potential though

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Speaker 1: to rock markets. Yeah, thanks Brian, it's a good question.

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Speaker 1: I mean, everybody's been waiting for the CPI number, and

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Speaker 1: in this economic cycle, it's where the CPI, it's the

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Speaker 1: key release. But I think that might be like yesterday's story.

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Speaker 1: And here's why. I think that between the employment data

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Speaker 1: and the inflation data, the market knows the Fed would

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Speaker 1: like to raise interest rates further. You know, before the

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Speaker 1: financial stress hit, Powell was talking about higher for longer

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Speaker 1: and the market is tricing in five and three quarters

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Speaker 1: FED funds rate. So now I think that the focus

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Speaker 1: is really shifting. I think that someone said it in

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Speaker 1: one of your previous shows about the importance of Thursday

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Speaker 1: and Friday Federal Reserve data. On Thursday, after the markets closed,

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Speaker 1: the Federal Reserve tells us how much the banks are

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Speaker 1: borrowing from it, and we're focusing on it. Of course,

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Speaker 1: is the emergency borrowing from both the discount window and

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Speaker 1: the FED facilities. And secondly, on Friday we get the

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Speaker 1: numbers that tells us about the banks, about the bank

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Speaker 1: lending and bank deposits, And that's really the concern to

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Speaker 1: me is that C and I loans, So banks have

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Speaker 1: a lot of different types of loans. They were big

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Speaker 1: sellers of mortgage backed securities, which in effect reduces their

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Speaker 1: loan book. But the focus for the economy, I think

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Speaker 1: auto beyond the commercial and industry loans. They have fallen

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Speaker 1: in the past in the last two weeks of March

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Speaker 1: by a record amount and sounds small. It's only two

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Speaker 1: and a half percent of overall loans have fault have

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Speaker 1: been reduced. Typically in a recession we get to twenty

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Speaker 1: to twenty five percent, but this is a big move

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Speaker 1: for two weeks, and I suspect that when the FED

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Speaker 1: talks about economic data, this is really what they're talking about. Now, Mark,

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Speaker 1: that is something we comes to the second detail something

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Speaker 1: that Brian and I have been really talking about the

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Speaker 1: credit conditions, But I just want to zoom in on

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Speaker 1: the inflation side of it, and you know, with China

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Speaker 1: at the moment, with some of the most inflation even

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Speaker 1: deflation in some cases, this is something the FED surely

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Speaker 1: must be watching. Given that the idea was after reopening

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Speaker 1: we would see China exporting inflation, we could see going

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Speaker 1: reverting to exporting disinflation, and I know, you know, I

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Speaker 1: think a lot of people thought like that, and I'm

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Speaker 1: really suspicious. Here's why. You know, last year or two

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Speaker 1: years ago, people are telling us that the PPI in

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Speaker 1: China is somehow correly the USCPI, even though for China,

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Speaker 1: exports to the US is primarily consumer goods, and from

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Speaker 1: those consumer goods it gets to a port, say a

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Speaker 1: New Jersey port or Los Angeles port. By time I

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Speaker 1: buy as a consumer, there are so many middlemen as

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Speaker 1: we transport it marketed store. It ensure that I might

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Speaker 1: be looking at a price twice when it comes into

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Speaker 1: the into the US as secondly comes to CPI that

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Speaker 1: O reserve has been I think the Power especially has

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Speaker 1: been very good about pointing us in the direction of

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Speaker 1: services X housing, X shelter. These are these kind of

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Speaker 1: prices service goods, core service goods excluding food, energy, and shelter.

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Speaker 1: These are domestic, home grown issues. So I kind of

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Speaker 1: think that we think that China is going to hurt

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Speaker 1: us to help us. But in the US, I think

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Speaker 1: most of our challenges are really homegrown shelter costs, medical costs,

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Speaker 1: other services. These are what's rising. And you know, when

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Speaker 1: we look at the CPI, it's not just that last

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Speaker 1: year's high numbers drop off, but you look at what's happening.

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Speaker 1: And if you look at the first quarter and I

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Speaker 1: think the median forecast in the Bloomberg surveys for air

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Speaker 1: two tenths rides in the headline rate, that turns into

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Speaker 1: a four point four percent annualized rate in Q one.

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Speaker 1: In Q four was three point two percent. So inflation

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Speaker 1: is accelerating in the wrong direction, and tomorrow we might

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Speaker 1: see that core rate pick up. So the bias, I

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Speaker 1: think on the inflation fence point of view is it's

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Speaker 1: too high and they need to take more action. Yeah,

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Speaker 1: so are you estimating just one more or you think

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Speaker 1: more aggressive than that? Well, you know, when when the

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Speaker 1: financial stress hit, the issue is how much is that

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Speaker 1: financial tightening doing some of the fed's heavy lifting. And

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Speaker 1: of course the market triced it in like there was

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Speaker 1: going to be an OA trisis again and began pricing

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Speaker 1: in not only would be FED be done, but they'd

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Speaker 1: be cutting rates by a hundred basis points this year.

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Speaker 1: And so the pendulum has swung back a bit, and

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Speaker 1: the market now says the mayhike and that's it, and

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Speaker 1: I think there might be one after that. I just

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Speaker 1: I think that the economy is proving the self fairly resilient.

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Speaker 1: And you know, it's also like you take a look

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Speaker 1: at like the Atlanta Feds GDP tracker, and they're talking

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Speaker 1: about two point two percent. It doesn't sound like a lot,

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Speaker 1: but two point two percent from the fence point of view,

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Speaker 1: is above the speed limit. And the speed limit you

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Speaker 1: get from this the summary of economic projections with their

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Speaker 1: long term forecast day not an inflationary growth is seen

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Speaker 1: on one point seven percent, and here's gonna be another

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Speaker 1: quarter where the economy grows faster than that. So you're

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Speaker 1: in the yelling camp that everything's pretty rosy out there. No,

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Speaker 1: I mean, I think that we should be watching those

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Speaker 1: financial conditions and especially those loans. But I think that

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Speaker 1: right now, the federal reserves attitude, there's something like this,

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Speaker 1: interest rates are important to guide the overall economy. They

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Speaker 1: have other tools to address the financial stress, which does

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Speaker 1: seem to be easy. I mean, I was just looking

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Speaker 1: at the KBW Bank Index. It's up for the third

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Speaker 1: day in a road today one percent one point three

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Speaker 1: percent on most in the US. And that's like I

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Speaker 1: want to say, it's like eight or nine days out

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Speaker 1: of the last three weeks it's up, which is so

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Speaker 1: I think bank chers are recovering as the loans that's

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Speaker 1: the real issue now. Yeah, so month brings me nice

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Speaker 1: in to what we're going to talk about earlier and

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Speaker 1: what you also alluded to earlier too, and that is

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Speaker 1: how concerned are you about underlying issues of base liquidity? Yeah?

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Speaker 1: So base liquidity, it's like one of these measures like

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Speaker 1: real interest rates. Everybody has their own definition of it.

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Speaker 1: Is a concern to me that M two is actually contracting.

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Speaker 1: That's the broad measure of money supplies actually not just

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Speaker 1: growing slowly but actually fall it. So I'm worried that

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Speaker 1: we're aheaded through recession. But it sort of like one

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Speaker 1: of those Astop stables about about the fox from the scorpion.

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Speaker 1: Both sides have to do what they have to do.

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Speaker 1: The Federal Reserve, I think, slow to begin raising rates

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Speaker 1: in the cycle, slow to begin the papering, and so

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Speaker 1: I think that the risk is that it has to

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Speaker 1: overdo it this time on the tightening decide to demonstrate

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Speaker 1: its resolve. Yeah, yeah, it's an interesting point. Just finally,

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Speaker 1: maybe thirty seconds or so, do you like Warren Buffett's

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Speaker 1: move into Japan adding to his positions in those trading houses.

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Speaker 1: You know, it's very interesting because we're seeing this among

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Speaker 1: our clients as well. You know, when you look at

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Speaker 1: on a page Bloomberg has WCRSS, you can get the

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Speaker 1: OECDS measure of purchasing power parity, and typically the OECD

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Speaker 1: currencies don't move more than twenty percent away from the

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Speaker 1: fair value purchasing power parity by the OECDS model. But

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Speaker 1: as we sit here today, the euro is over fifty

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Speaker 1: percent undervalued, the yen is forty percent undervalue. So I

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Speaker 1: think for a dollar based investors buying those assets in

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Speaker 1: Japan or Europe, you get the currency even if it

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Speaker 1: takes a couple of years to normaliz, and that's a

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Speaker 1: good that's an interesting call. I even given that the

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Speaker 1: dollar has weekend since last October. Anyway, we've got to go, Mark,

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Speaker 1: Thanks so much. Mark Chandler, Managing director at Bannockburn Global.

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