WEBVTT - IMF Warning and Divergent Fed Speak

0:00:02.279 --> 0:00:05.800
<v Speaker 1>This is Bloomberg Daybreak Asia for this Wednesday, April twelfth

0:00:05.840 --> 0:00:09.079
<v Speaker 1>in Hong Kong, Tuesday April eleventh in New York and

0:00:09.240 --> 0:00:12.360
<v Speaker 1>coming up today, markets brace for US inflation data and

0:00:12.480 --> 0:00:15.760
<v Speaker 1>whether the numbers support more FED rate hikes. The IMF

0:00:15.800 --> 0:00:18.680
<v Speaker 1>warns that turmoil in the banking sector could weigh on

0:00:18.760 --> 0:00:22.320
<v Speaker 1>the global economy, and China plans to require a security

0:00:22.400 --> 0:00:26.479
<v Speaker 1>review of AI services before they're allowed to operate. Hungary

0:00:26.520 --> 0:00:30.240
<v Speaker 1>defies EU does Russia deal. Poland Prime minister warns not

0:00:30.280 --> 0:00:33.840
<v Speaker 1>to let Ukraine support Wayne. New York DA sus Jim

0:00:33.920 --> 0:00:38.120
<v Speaker 1>Jordan to stop Trump case interference large US Philippine military drills.

0:00:38.360 --> 0:00:45.280
<v Speaker 1>I'm at Baxter with Global News. That's all straight ahead

0:00:45.320 --> 0:00:48.720
<v Speaker 1>on Bloomberg Daybreak Asia, the business news you need to

0:00:48.760 --> 0:00:52.400
<v Speaker 1>start your day in just one fifteen minute podcast available

0:00:52.440 --> 0:00:56.200
<v Speaker 1>on Apple, Spotify, the Bloomberg Business App, and everywhere you

0:00:56.240 --> 0:01:02.360
<v Speaker 1>get your podcasts. Good morning, I'm du Prisoner and I'm

0:01:02.360 --> 0:01:05.399
<v Speaker 1>Brian Curtis. Here are the stories we're following today. Two

0:01:05.480 --> 0:01:09.600
<v Speaker 1>FED officials offering differing views on the Central Bank's next move.

0:01:09.880 --> 0:01:12.800
<v Speaker 1>New York Fed President John Williams told Yahoo Finance that

0:01:13.120 --> 0:01:16.360
<v Speaker 1>officials will still have more work to do here on inflation,

0:01:16.600 --> 0:01:19.840
<v Speaker 1>and that's despite the uncertainty in the banking sector. Williams

0:01:19.840 --> 0:01:23.520
<v Speaker 1>said that the Fed's path will depend on incoming economic data,

0:01:23.640 --> 0:01:26.080
<v Speaker 1>but he suggested that one more interest rate hike this

0:01:26.160 --> 0:01:30.199
<v Speaker 1>year followed by a pause would be a reasonable starting place.

0:01:30.520 --> 0:01:34.319
<v Speaker 1>In the meantime, though, Chicago FED President Austin Gulsby called

0:01:34.400 --> 0:01:38.760
<v Speaker 1>for prudence and patients when assessing the economic impact of

0:01:38.800 --> 0:01:43.000
<v Speaker 1>these tighter credit conditions. Given how much uncertainty abounds when

0:01:43.040 --> 0:01:46.360
<v Speaker 1>these financial headwinds are going, I guess I think we

0:01:46.440 --> 0:01:49.800
<v Speaker 1>need to be cautious. We should gather further data, and

0:01:49.840 --> 0:01:53.720
<v Speaker 1>we should be extra careful about raising rates too aggressively

0:01:54.200 --> 0:01:57.560
<v Speaker 1>until we see how much work the headwinds are doing

0:01:57.640 --> 0:02:01.160
<v Speaker 1>for us in getting inflation down. Markets are pricing in

0:02:01.240 --> 0:02:04.080
<v Speaker 1>now a strong likelihood the FED will raise borrowing by

0:02:04.120 --> 0:02:07.920
<v Speaker 1>a quarter percentage point. Fed officials will discuss monetary policy

0:02:07.920 --> 0:02:11.200
<v Speaker 1>at the next meeting. May Second mentioned the CPI data

0:02:11.240 --> 0:02:14.080
<v Speaker 1>a little bit earlier eight to thirty am Wall Street time.

0:02:14.200 --> 0:02:17.080
<v Speaker 1>That will be Wednesday morning US, and we have a

0:02:17.080 --> 0:02:20.120
<v Speaker 1>preview from Bloomberg's Michael McKey. The FED is all about

0:02:20.160 --> 0:02:22.640
<v Speaker 1>inflation these days, which puts a lot of focus on

0:02:22.680 --> 0:02:25.800
<v Speaker 1>the consumer price Index. The problem for markets is it's

0:02:25.840 --> 0:02:28.640
<v Speaker 1>not likely to provide the kind of definitive rate clues

0:02:28.720 --> 0:02:32.200
<v Speaker 1>investors want. Headline CPI is forecast to be cut in half,

0:02:32.280 --> 0:02:34.200
<v Speaker 1>which will mean a big drop in the year over

0:02:34.320 --> 0:02:37.240
<v Speaker 1>year rate, but core, which gets more attention from the

0:02:37.280 --> 0:02:40.560
<v Speaker 1>Central Bank, isn't likely to budge and may actually rise

0:02:40.800 --> 0:02:43.600
<v Speaker 1>year over year. Since the Fed doesn't meet again until

0:02:43.680 --> 0:02:45.920
<v Speaker 1>May third, officials will have to look at all sorts

0:02:45.960 --> 0:02:49.120
<v Speaker 1>of other data to divine where inflation will be then,

0:02:49.400 --> 0:02:54.120
<v Speaker 1>Michael McKey Bloomberg day Break Asia. The International Monetary Fund

0:02:54.240 --> 0:02:56.640
<v Speaker 1>warned that it's too soon to sound the all clear

0:02:56.720 --> 0:02:59.320
<v Speaker 1>from the turmoil that has shaken the world financial system.

0:02:59.639 --> 0:03:02.520
<v Speaker 1>That's according to his statement in the semi annual Global

0:03:02.560 --> 0:03:06.959
<v Speaker 1>Financial Stability Report the IMF, saying that financial markets remain

0:03:07.120 --> 0:03:11.840
<v Speaker 1>fragile and stressed following bank collapses. The Stability Report was

0:03:11.880 --> 0:03:14.720
<v Speaker 1>released shortly after the IMF published an update to its

0:03:14.720 --> 0:03:18.040
<v Speaker 1>World Economic Outlook. In the outlook, the IMF trimmed its

0:03:18.040 --> 0:03:22.000
<v Speaker 1>projections for global growth. I AMF chief economist Pierre Olivier

0:03:22.080 --> 0:03:26.120
<v Speaker 1>gore Inshaw has warned of high uncertainty going forward. This

0:03:26.160 --> 0:03:30.120
<v Speaker 1>is reflecting basically the fact that we have advanced economies

0:03:30.120 --> 0:03:33.240
<v Speaker 1>are reopening or moving ahead, China reopening, and at the

0:03:33.280 --> 0:03:36.080
<v Speaker 1>same time we have the tightening of monetary policy is

0:03:36.120 --> 0:03:38.960
<v Speaker 1>that is weighing in, plus a little bit of financial

0:03:38.960 --> 0:03:42.440
<v Speaker 1>instability that could weigh down on bank lending points US.

0:03:42.480 --> 0:03:43.800
<v Speaker 1>So you put all of this in the mix, and

0:03:43.920 --> 0:03:47.560
<v Speaker 1>that's where you have our baseline. Gorenshaw says there's maybe

0:03:47.600 --> 0:03:51.520
<v Speaker 1>some lurking vulnerabilities still there in the financial system, and

0:03:51.560 --> 0:03:54.440
<v Speaker 1>he said it's very important for financial supervisors as well

0:03:54.480 --> 0:03:58.000
<v Speaker 1>as regulators and authorities to look carefully at these pockets

0:03:58.000 --> 0:04:01.360
<v Speaker 1>of vulnerability that might still exist. At the same time, today,

0:04:01.440 --> 0:04:05.160
<v Speaker 1>US Treasury Secretary Janet Yellen simply shrugged off the recent

0:04:05.160 --> 0:04:07.480
<v Speaker 1>turmoil that we've seen in the banking sector. She went

0:04:07.520 --> 0:04:09.960
<v Speaker 1>on to say the American economy is in a better

0:04:10.000 --> 0:04:13.560
<v Speaker 1>place than it was just six months ago. Here is

0:04:13.640 --> 0:04:17.080
<v Speaker 1>Yellen speaking during a press conference earlier today in Washington.

0:04:17.600 --> 0:04:22.479
<v Speaker 1>Prices of commodities like food and energy of stabilized supply

0:04:22.640 --> 0:04:27.680
<v Speaker 1>chain pressures continued to ease, and global growth projections remain

0:04:27.880 --> 0:04:31.000
<v Speaker 1>higher than they were in the fall. Treasury Secretary Yellen

0:04:31.080 --> 0:04:32.760
<v Speaker 1>there she went on to say she has yet to

0:04:32.800 --> 0:04:36.200
<v Speaker 1>see evidence at this stage anyway of a contraction in credit,

0:04:36.279 --> 0:04:39.480
<v Speaker 1>but she does say that does remain a risk. Yellen's

0:04:39.480 --> 0:04:43.720
<v Speaker 1>comments come despite last week's economic data, one data point

0:04:43.800 --> 0:04:47.360
<v Speaker 1>indicating the US lending contracted by the most on record

0:04:47.480 --> 0:04:51.279
<v Speaker 1>during the last two weeks of March, syndication of tighter

0:04:51.320 --> 0:04:55.760
<v Speaker 1>credit conditions in the wake of several high profile bank collapses,

0:04:56.160 --> 0:05:00.720
<v Speaker 1>and Yellen repeated the US banking system remains sound and

0:05:01.000 --> 0:05:05.960
<v Speaker 1>with strong capital and liquidity positions. Meantime, China is planning

0:05:05.960 --> 0:05:09.880
<v Speaker 1>to require a security review of generative AI services before

0:05:09.920 --> 0:05:12.840
<v Speaker 1>they're allowed to operate. We get that story from Bloomberg.

0:05:12.960 --> 0:05:18.000
<v Speaker 1>Yvon Man. China Cyberspace Administration said AI service providers must

0:05:18.080 --> 0:05:22.560
<v Speaker 1>ensure content is accurate and respects intellectual property. The content

0:05:22.640 --> 0:05:27.320
<v Speaker 1>must not involve discrimination or endanger security. AI operators must

0:05:27.320 --> 0:05:32.160
<v Speaker 1>also clearly label AI generated content. The review cast uncertainty

0:05:32.279 --> 0:05:35.400
<v Speaker 1>over some of the chat GPT like bots introduced by

0:05:35.480 --> 0:05:39.400
<v Speaker 1>China's big tech companies. Those firms include Ali Baba and Baidu.

0:05:39.920 --> 0:05:42.599
<v Speaker 1>After the announcement, Ali Baba shares gave up much of

0:05:42.640 --> 0:05:45.919
<v Speaker 1>their initial gains on Tuesday, and bay Do shares also

0:05:46.000 --> 0:05:49.240
<v Speaker 1>slid as much as seven percent in Hong Kong. I'm

0:05:49.360 --> 0:05:53.120
<v Speaker 1>Van Man Bloomberg Day Brick Asia, and those shares continued

0:05:53.160 --> 0:05:55.760
<v Speaker 1>to trundle a bit lower with their ADRs. In the

0:05:55.880 --> 0:05:59.800
<v Speaker 1>United States, I'm Brian Curtis along with Doug Chrisner, and

0:06:00.240 --> 0:06:03.280
<v Speaker 1>you gotta love a tussle in the exciting world of

0:06:03.680 --> 0:06:07.080
<v Speaker 1>high finance. But John Williams on one side saying rate

0:06:07.120 --> 0:06:10.440
<v Speaker 1>increases didn't cause the bank collapses, and then the IMF

0:06:10.520 --> 0:06:14.080
<v Speaker 1>begging to differ. That's what makes a market, right. I

0:06:14.080 --> 0:06:16.360
<v Speaker 1>think that's a fair point. You know, we talked about

0:06:16.360 --> 0:06:18.720
<v Speaker 1>the CPI print that we're expecting tomorrow. The other thing

0:06:18.720 --> 0:06:20.840
<v Speaker 1>that's going to be happening tomorrow Brian minutes from the

0:06:20.920 --> 0:06:24.159
<v Speaker 1>last FED meeting, and I think beyond that, arguably the

0:06:24.200 --> 0:06:26.200
<v Speaker 1>more critical data that we're going to get this week

0:06:26.480 --> 0:06:29.240
<v Speaker 1>bank earnings we'll have to wait until Friday, though. It's

0:06:29.320 --> 0:06:31.880
<v Speaker 1>JP Morgan Chase, along with City Group and Wells Fargo.

0:06:32.320 --> 0:06:35.160
<v Speaker 1>Particularly given a lot of the turmoil that we have

0:06:35.200 --> 0:06:39.240
<v Speaker 1>seen across the banking sector recently, the issue of forward

0:06:39.279 --> 0:06:41.720
<v Speaker 1>guidance I think is going to be very critical where

0:06:41.760 --> 0:06:45.440
<v Speaker 1>balance sheets are right now, liquidity issues very very important,

0:06:45.480 --> 0:06:47.600
<v Speaker 1>I think, yeah, And we had a pretty good day

0:06:47.680 --> 0:06:51.000
<v Speaker 1>for the financial spiders today, up nine tenths of a percent.

0:06:51.080 --> 0:06:53.679
<v Speaker 1>It was another slightly unusual day. I mean, it looked

0:06:53.680 --> 0:06:57.640
<v Speaker 1>like very weak performance broadly the SMP five hundred flatnel.

0:06:57.680 --> 0:07:02.120
<v Speaker 1>But we had another day of quite performance by industrials, materials,

0:07:02.240 --> 0:07:05.599
<v Speaker 1>energy shares, the cyclicals, and we had I think the

0:07:05.640 --> 0:07:07.680
<v Speaker 1>fifth day and six that we saw selling in tech.

0:07:07.760 --> 0:07:09.960
<v Speaker 1>So I think most of this is really just churn

0:07:10.080 --> 0:07:13.440
<v Speaker 1>as mentioned, and maybe mean reversion because tech got off

0:07:13.440 --> 0:07:15.880
<v Speaker 1>to such a big start this year. One of the

0:07:15.960 --> 0:07:19.960
<v Speaker 1>quick mention Buffett adding to his positions in Japanese trading houses.

0:07:20.320 --> 0:07:23.200
<v Speaker 1>Maybe a cheap way to play energy maybe, But at

0:07:23.200 --> 0:07:25.120
<v Speaker 1>the same time, I thought it was interesting too that

0:07:25.160 --> 0:07:28.800
<v Speaker 1>he's dialing back on Taiwan Semi. It was only over

0:07:28.840 --> 0:07:32.080
<v Speaker 1>the weekend the Taiwan Semi reported that fifteen percent drop

0:07:32.200 --> 0:07:36.720
<v Speaker 1>in revenue, But Buffett is highlighting a lot of geopolitical

0:07:36.800 --> 0:07:39.400
<v Speaker 1>risk in kind of getting out of Taiwan Semi. I

0:07:39.440 --> 0:07:42.920
<v Speaker 1>thought that was an interesting little takeaway. It may also

0:07:43.040 --> 0:07:46.800
<v Speaker 1>just have been some profit taking, but this add to

0:07:47.160 --> 0:07:51.240
<v Speaker 1>these Japanese trading houses which do feature a lot of

0:07:51.240 --> 0:07:54.320
<v Speaker 1>their profits from the energy has gained him four point

0:07:54.360 --> 0:07:57.120
<v Speaker 1>five billion dollars since twenty twenty when he moved on these.

0:07:57.160 --> 0:08:00.400
<v Speaker 1>So he tends to just always seem to get his

0:08:00.800 --> 0:08:03.080
<v Speaker 1>timing right now. That's why they call him the Oracle

0:08:03.120 --> 0:08:07.400
<v Speaker 1>of Omaha. Absolutely, yeah, his timing is impeccable. Mark Chandler

0:08:07.400 --> 0:08:09.480
<v Speaker 1>would join us in a few moments, Managing director at

0:08:09.560 --> 0:08:16.160
<v Speaker 1>Bannockburn Global. It's time for Global news. Hungary has defied

0:08:16.200 --> 0:08:19.880
<v Speaker 1>the EU by sealing economic deals with Moscow. It docks

0:08:19.960 --> 0:08:22.040
<v Speaker 1>it with Global News in the nine sixty Newsman San

0:08:22.080 --> 0:08:27.640
<v Speaker 1>Francisco head. Yeah, the geopolitical dynamics here are really strong, Brian.

0:08:27.680 --> 0:08:29.880
<v Speaker 1>These are energy deals made and a rare visit by

0:08:29.880 --> 0:08:33.120
<v Speaker 1>an EU member to Russia. It underscores it. Divide forming

0:08:33.120 --> 0:08:37.559
<v Speaker 1>over commitment to Ukraine. Quick response from Poland's Prime Minister Moroyatsk.

0:08:37.600 --> 0:08:42.719
<v Speaker 1>If we do not defend Ukraine, we risk a global conflict,

0:08:42.880 --> 0:08:49.000
<v Speaker 1>global crisis. Off difficult to imagine proportions and says Ukraine

0:08:49.080 --> 0:08:51.760
<v Speaker 1>is just the beginning, and this made more difficult today

0:08:51.760 --> 0:08:54.160
<v Speaker 1>as more and more information comes out of what is

0:08:54.160 --> 0:08:57.600
<v Speaker 1>supposed to be the league. US Pentagon emails Bloomberg's Nick

0:08:57.640 --> 0:09:00.720
<v Speaker 1>Wadhams on Bloomberg sound On says one and cage Ukraine

0:09:00.720 --> 0:09:04.320
<v Speaker 1>will run out of ammunition and materials, but also have

0:09:04.720 --> 0:09:08.000
<v Speaker 1>air defense problems. It seems to be we're really peeling

0:09:08.080 --> 0:09:10.360
<v Speaker 1>back the veneer a bit and getting into the real

0:09:10.480 --> 0:09:14.920
<v Speaker 1>nitty gritty of just how worried US officials are about

0:09:14.960 --> 0:09:16.920
<v Speaker 1>how Ukraine is going to be able to defend itself

0:09:16.960 --> 0:09:19.920
<v Speaker 1>against Russia, and that cautions that need to be authenticated.

0:09:19.920 --> 0:09:22.920
<v Speaker 1>But former US ambousnsador to Morocco Mark Ginsburg on Soundown

0:09:22.960 --> 0:09:26.319
<v Speaker 1>says it goes even further. This is an unmitigated disaster

0:09:26.600 --> 0:09:30.440
<v Speaker 1>for the US government, and it's not only a painful

0:09:32.080 --> 0:09:36.520
<v Speaker 1>week that is undermining US credibility, but it's also placing

0:09:36.559 --> 0:09:39.400
<v Speaker 1>at risk the very military effort the United States has

0:09:39.400 --> 0:09:42.800
<v Speaker 1>been engaged and to support Ukraine. Now, he says, there's

0:09:42.840 --> 0:09:45.120
<v Speaker 1>grave concern at the Pentagon. The Pentagon says it's going

0:09:45.160 --> 0:09:46.880
<v Speaker 1>to turn over every rock to get to the bottom

0:09:46.920 --> 0:09:49.800
<v Speaker 1>of it. Brazilian President Lula going to travel to China,

0:09:49.880 --> 0:09:52.920
<v Speaker 1>one stop in Shanghai at the Wildwi site. Lula says

0:09:52.920 --> 0:09:55.520
<v Speaker 1>he hopes for trade and peace. He calls it a

0:09:55.559 --> 0:09:58.840
<v Speaker 1>goodwill tour. In what of being described as the largest

0:09:58.920 --> 0:10:03.000
<v Speaker 1>combat exercise in decades across the South China see in Taiwan,

0:10:03.080 --> 0:10:06.960
<v Speaker 1>straight US and forces from Philippines are carrying on those exercises.

0:10:07.360 --> 0:10:12.920
<v Speaker 1>US Major General Eric Austin is leading the charge, approximately

0:10:12.920 --> 0:10:17.360
<v Speaker 1>seventeen thousand, six hundred participants in total, demonstrating our commitment

0:10:17.400 --> 0:10:20.160
<v Speaker 1>to each other and to our Mutual Defense treaty. And

0:10:20.320 --> 0:10:23.920
<v Speaker 1>this comes through right after China finish large scale exercises

0:10:23.920 --> 0:10:27.839
<v Speaker 1>of course in the Strait and surrounding Taiwan. Manhattan District

0:10:27.840 --> 0:10:31.320
<v Speaker 1>Attorney Alvin Bragg is suit House Judiciary Chairman Jim Jordan's

0:10:31.320 --> 0:10:34.400
<v Speaker 1>seeking to keep him from interfering in any way with

0:10:34.480 --> 0:10:37.480
<v Speaker 1>a case against Donald Trump. Jordan is subpoena a former

0:10:37.640 --> 0:10:41.360
<v Speaker 1>senior prosecutor to testify at the hearings. Bloomberg's Mario Parker

0:10:41.400 --> 0:10:44.520
<v Speaker 1>says it is a very risky move already where that

0:10:44.600 --> 0:10:47.679
<v Speaker 1>it was politically motivated, right, But at the same time,

0:10:47.840 --> 0:10:51.920
<v Speaker 1>Republicans Jim Jordan, Donald Trump's biggest allies, they're playing tough.

0:10:52.240 --> 0:10:54.680
<v Speaker 1>So what do you do in New York? You probably

0:10:54.679 --> 0:10:57.240
<v Speaker 1>have a tree fight, right. Bragg is asking for emergency

0:10:57.400 --> 0:11:00.680
<v Speaker 1>ordered to stop the subpoena. New York Governor Kathy says

0:11:00.720 --> 0:11:03.200
<v Speaker 1>New York will fight back against the forces trying to

0:11:03.520 --> 0:11:07.559
<v Speaker 1>prior back healthcare for reproductive rights. Speaking a Planned Parenthood

0:11:07.600 --> 0:11:10.600
<v Speaker 1>a Greater New York Digital news conference today, she pledge

0:11:10.640 --> 0:11:14.680
<v Speaker 1>your support and last year the attacks were on abortion procedures.

0:11:15.280 --> 0:11:21.360
<v Speaker 1>This year medication abortion. What's next contraception birth control? Governor

0:11:21.400 --> 0:11:23.880
<v Speaker 1>Hokel says a state will stockpile one hundred and fifty

0:11:23.880 --> 0:11:26.880
<v Speaker 1>thousand doses of the so called abortion pill and commit

0:11:26.920 --> 0:11:29.880
<v Speaker 1>another twenty million dollars to providers if the Texas court

0:11:29.960 --> 0:11:32.880
<v Speaker 1>ruling stands. Global News powered by more than twenty seven

0:11:33.000 --> 0:11:35.920
<v Speaker 1>hundred journalist and analysts in over one hundred and twenty countries.

0:11:36.160 --> 0:11:39.400
<v Speaker 1>In San Francisco, I'm Ad Baxter, and this is Bloomberg.

0:11:39.679 --> 0:11:42.360
<v Speaker 1>This is Bloomberg, Gabriek Asia. I'm Brian Curtis here in

0:11:42.440 --> 0:11:45.839
<v Speaker 1>Hong Kong. Rashad Salonat is with this in Singapore, and

0:11:45.920 --> 0:11:50.640
<v Speaker 1>our guest is Mark Chandler, Managing director at Bannockburn Global Market.

0:11:50.679 --> 0:11:52.320
<v Speaker 1>Doesn't seem like there's a lot of fear in the

0:11:52.360 --> 0:11:56.120
<v Speaker 1>market at the moment over this CPI print. Everybody's waiting

0:11:56.160 --> 0:11:59.440
<v Speaker 1>on it. It seems like people are kind of used

0:11:59.440 --> 0:12:02.240
<v Speaker 1>to it in between five and six percent, and they

0:12:02.240 --> 0:12:04.560
<v Speaker 1>know the Fed is getting close to the end of

0:12:04.559 --> 0:12:07.840
<v Speaker 1>its tightening cycle. Or does it have the potential though

0:12:07.880 --> 0:12:11.880
<v Speaker 1>to rock markets. Yeah, thanks Brian, it's a good question.

0:12:11.920 --> 0:12:14.000
<v Speaker 1>I mean, everybody's been waiting for the CPI number, and

0:12:14.240 --> 0:12:16.640
<v Speaker 1>in this economic cycle, it's where the CPI, it's the

0:12:16.720 --> 0:12:20.400
<v Speaker 1>key release. But I think that might be like yesterday's story.

0:12:20.679 --> 0:12:23.600
<v Speaker 1>And here's why. I think that between the employment data

0:12:23.800 --> 0:12:27.080
<v Speaker 1>and the inflation data, the market knows the Fed would

0:12:27.080 --> 0:12:29.720
<v Speaker 1>like to raise interest rates further. You know, before the

0:12:29.880 --> 0:12:34.440
<v Speaker 1>financial stress hit, Powell was talking about higher for longer

0:12:34.640 --> 0:12:36.840
<v Speaker 1>and the market is tricing in five and three quarters

0:12:36.880 --> 0:12:39.720
<v Speaker 1>FED funds rate. So now I think that the focus

0:12:39.800 --> 0:12:41.880
<v Speaker 1>is really shifting. I think that someone said it in

0:12:42.640 --> 0:12:46.319
<v Speaker 1>one of your previous shows about the importance of Thursday

0:12:46.320 --> 0:12:50.439
<v Speaker 1>and Friday Federal Reserve data. On Thursday, after the markets closed,

0:12:50.440 --> 0:12:54.000
<v Speaker 1>the Federal Reserve tells us how much the banks are

0:12:54.040 --> 0:12:56.480
<v Speaker 1>borrowing from it, and we're focusing on it. Of course,

0:12:56.600 --> 0:12:59.720
<v Speaker 1>is the emergency borrowing from both the discount window and

0:12:59.760 --> 0:13:03.960
<v Speaker 1>the FED facilities. And secondly, on Friday we get the

0:13:04.040 --> 0:13:06.720
<v Speaker 1>numbers that tells us about the banks, about the bank

0:13:06.840 --> 0:13:10.000
<v Speaker 1>lending and bank deposits, And that's really the concern to

0:13:10.040 --> 0:13:12.800
<v Speaker 1>me is that C and I loans, So banks have

0:13:12.840 --> 0:13:14.720
<v Speaker 1>a lot of different types of loans. They were big

0:13:14.760 --> 0:13:17.800
<v Speaker 1>sellers of mortgage backed securities, which in effect reduces their

0:13:17.840 --> 0:13:21.120
<v Speaker 1>loan book. But the focus for the economy, I think

0:13:21.200 --> 0:13:24.640
<v Speaker 1>auto beyond the commercial and industry loans. They have fallen

0:13:24.640 --> 0:13:26.320
<v Speaker 1>in the past in the last two weeks of March

0:13:27.000 --> 0:13:30.080
<v Speaker 1>by a record amount and sounds small. It's only two

0:13:30.080 --> 0:13:33.240
<v Speaker 1>and a half percent of overall loans have fault have

0:13:33.679 --> 0:13:37.080
<v Speaker 1>been reduced. Typically in a recession we get to twenty

0:13:37.120 --> 0:13:39.920
<v Speaker 1>to twenty five percent, but this is a big move

0:13:40.000 --> 0:13:42.680
<v Speaker 1>for two weeks, and I suspect that when the FED

0:13:42.720 --> 0:13:47.560
<v Speaker 1>talks about economic data, this is really what they're talking about. Now, Mark,

0:13:47.920 --> 0:13:50.480
<v Speaker 1>that is something we comes to the second detail something

0:13:50.480 --> 0:13:52.440
<v Speaker 1>that Brian and I have been really talking about the

0:13:52.520 --> 0:13:54.280
<v Speaker 1>credit conditions, But I just want to zoom in on

0:13:54.480 --> 0:13:57.760
<v Speaker 1>the inflation side of it, and you know, with China

0:13:58.440 --> 0:14:00.960
<v Speaker 1>at the moment, with some of the most inflation even

0:14:01.000 --> 0:14:04.880
<v Speaker 1>deflation in some cases, this is something the FED surely

0:14:04.960 --> 0:14:08.079
<v Speaker 1>must be watching. Given that the idea was after reopening

0:14:08.080 --> 0:14:12.320
<v Speaker 1>we would see China exporting inflation, we could see going

0:14:12.480 --> 0:14:17.000
<v Speaker 1>reverting to exporting disinflation, and I know, you know, I

0:14:17.000 --> 0:14:20.080
<v Speaker 1>think a lot of people thought like that, and I'm

0:14:20.120 --> 0:14:24.080
<v Speaker 1>really suspicious. Here's why. You know, last year or two

0:14:24.120 --> 0:14:26.280
<v Speaker 1>years ago, people are telling us that the PPI in

0:14:26.440 --> 0:14:30.680
<v Speaker 1>China is somehow correly the USCPI, even though for China,

0:14:30.800 --> 0:14:34.840
<v Speaker 1>exports to the US is primarily consumer goods, and from

0:14:34.880 --> 0:14:38.080
<v Speaker 1>those consumer goods it gets to a port, say a

0:14:38.120 --> 0:14:41.640
<v Speaker 1>New Jersey port or Los Angeles port. By time I

0:14:41.800 --> 0:14:44.720
<v Speaker 1>buy as a consumer, there are so many middlemen as

0:14:44.760 --> 0:14:48.880
<v Speaker 1>we transport it marketed store. It ensure that I might

0:14:48.880 --> 0:14:51.560
<v Speaker 1>be looking at a price twice when it comes into

0:14:51.560 --> 0:14:55.400
<v Speaker 1>the into the US as secondly comes to CPI that

0:14:55.600 --> 0:14:57.680
<v Speaker 1>O reserve has been I think the Power especially has

0:14:57.680 --> 0:15:00.080
<v Speaker 1>been very good about pointing us in the direction of

0:15:00.200 --> 0:15:05.600
<v Speaker 1>services X housing, X shelter. These are these kind of

0:15:05.600 --> 0:15:12.480
<v Speaker 1>prices service goods, core service goods excluding food, energy, and shelter.

0:15:13.040 --> 0:15:16.480
<v Speaker 1>These are domestic, home grown issues. So I kind of

0:15:16.480 --> 0:15:18.360
<v Speaker 1>think that we think that China is going to hurt

0:15:18.400 --> 0:15:20.440
<v Speaker 1>us to help us. But in the US, I think

0:15:20.440 --> 0:15:25.320
<v Speaker 1>most of our challenges are really homegrown shelter costs, medical costs,

0:15:25.920 --> 0:15:28.880
<v Speaker 1>other services. These are what's rising. And you know, when

0:15:29.000 --> 0:15:31.760
<v Speaker 1>we look at the CPI, it's not just that last

0:15:31.840 --> 0:15:35.160
<v Speaker 1>year's high numbers drop off, but you look at what's happening.

0:15:35.400 --> 0:15:37.880
<v Speaker 1>And if you look at the first quarter and I

0:15:37.880 --> 0:15:40.760
<v Speaker 1>think the median forecast in the Bloomberg surveys for air

0:15:40.800 --> 0:15:44.360
<v Speaker 1>two tenths rides in the headline rate, that turns into

0:15:44.680 --> 0:15:49.320
<v Speaker 1>a four point four percent annualized rate in Q one.

0:15:49.880 --> 0:15:52.440
<v Speaker 1>In Q four was three point two percent. So inflation

0:15:52.800 --> 0:15:55.600
<v Speaker 1>is accelerating in the wrong direction, and tomorrow we might

0:15:55.680 --> 0:15:58.840
<v Speaker 1>see that core rate pick up. So the bias, I

0:15:58.840 --> 0:16:01.480
<v Speaker 1>think on the inflation fence point of view is it's

0:16:01.480 --> 0:16:05.800
<v Speaker 1>too high and they need to take more action. Yeah,

0:16:05.840 --> 0:16:09.600
<v Speaker 1>so are you estimating just one more or you think

0:16:09.720 --> 0:16:13.080
<v Speaker 1>more aggressive than that? Well, you know, when when the

0:16:13.160 --> 0:16:15.960
<v Speaker 1>financial stress hit, the issue is how much is that

0:16:16.080 --> 0:16:19.400
<v Speaker 1>financial tightening doing some of the fed's heavy lifting. And

0:16:19.880 --> 0:16:21.760
<v Speaker 1>of course the market triced it in like there was

0:16:21.800 --> 0:16:24.480
<v Speaker 1>going to be an OA trisis again and began pricing

0:16:24.600 --> 0:16:27.240
<v Speaker 1>in not only would be FED be done, but they'd

0:16:27.240 --> 0:16:29.520
<v Speaker 1>be cutting rates by a hundred basis points this year.

0:16:30.160 --> 0:16:32.480
<v Speaker 1>And so the pendulum has swung back a bit, and

0:16:32.520 --> 0:16:35.320
<v Speaker 1>the market now says the mayhike and that's it, and

0:16:35.360 --> 0:16:37.680
<v Speaker 1>I think there might be one after that. I just

0:16:38.080 --> 0:16:41.640
<v Speaker 1>I think that the economy is proving the self fairly resilient.

0:16:41.840 --> 0:16:43.960
<v Speaker 1>And you know, it's also like you take a look

0:16:43.960 --> 0:16:48.600
<v Speaker 1>at like the Atlanta Feds GDP tracker, and they're talking

0:16:48.680 --> 0:16:52.800
<v Speaker 1>about two point two percent. It doesn't sound like a lot,

0:16:53.120 --> 0:16:55.320
<v Speaker 1>but two point two percent from the fence point of view,

0:16:55.360 --> 0:16:57.840
<v Speaker 1>is above the speed limit. And the speed limit you

0:16:57.880 --> 0:17:01.720
<v Speaker 1>get from this the summary of economic projections with their

0:17:01.720 --> 0:17:05.520
<v Speaker 1>long term forecast day not an inflationary growth is seen

0:17:05.760 --> 0:17:08.080
<v Speaker 1>on one point seven percent, and here's gonna be another

0:17:08.160 --> 0:17:11.800
<v Speaker 1>quarter where the economy grows faster than that. So you're

0:17:11.800 --> 0:17:15.600
<v Speaker 1>in the yelling camp that everything's pretty rosy out there. No,

0:17:15.720 --> 0:17:17.720
<v Speaker 1>I mean, I think that we should be watching those

0:17:17.760 --> 0:17:21.119
<v Speaker 1>financial conditions and especially those loans. But I think that

0:17:21.280 --> 0:17:24.200
<v Speaker 1>right now, the federal reserves attitude, there's something like this,

0:17:24.960 --> 0:17:30.360
<v Speaker 1>interest rates are important to guide the overall economy. They

0:17:30.400 --> 0:17:34.719
<v Speaker 1>have other tools to address the financial stress, which does

0:17:34.760 --> 0:17:36.280
<v Speaker 1>seem to be easy. I mean, I was just looking

0:17:36.359 --> 0:17:40.200
<v Speaker 1>at the KBW Bank Index. It's up for the third

0:17:40.280 --> 0:17:44.040
<v Speaker 1>day in a road today one percent one point three

0:17:44.080 --> 0:17:47.119
<v Speaker 1>percent on most in the US. And that's like I

0:17:47.240 --> 0:17:49.720
<v Speaker 1>want to say, it's like eight or nine days out

0:17:49.720 --> 0:17:52.360
<v Speaker 1>of the last three weeks it's up, which is so

0:17:52.600 --> 0:17:55.199
<v Speaker 1>I think bank chers are recovering as the loans that's

0:17:55.240 --> 0:17:58.240
<v Speaker 1>the real issue now. Yeah, so month brings me nice

0:17:58.240 --> 0:17:59.639
<v Speaker 1>in to what we're going to talk about earlier and

0:17:59.640 --> 0:18:02.560
<v Speaker 1>what you also alluded to earlier too, and that is

0:18:02.800 --> 0:18:11.560
<v Speaker 1>how concerned are you about underlying issues of base liquidity? Yeah?

0:18:11.960 --> 0:18:14.840
<v Speaker 1>So base liquidity, it's like one of these measures like

0:18:14.880 --> 0:18:17.480
<v Speaker 1>real interest rates. Everybody has their own definition of it.

0:18:17.640 --> 0:18:20.720
<v Speaker 1>Is a concern to me that M two is actually contracting.

0:18:20.760 --> 0:18:24.119
<v Speaker 1>That's the broad measure of money supplies actually not just

0:18:24.200 --> 0:18:27.520
<v Speaker 1>growing slowly but actually fall it. So I'm worried that

0:18:27.560 --> 0:18:29.320
<v Speaker 1>we're aheaded through recession. But it sort of like one

0:18:29.320 --> 0:18:33.000
<v Speaker 1>of those Astop stables about about the fox from the scorpion.

0:18:33.760 --> 0:18:35.520
<v Speaker 1>Both sides have to do what they have to do.

0:18:35.600 --> 0:18:39.080
<v Speaker 1>The Federal Reserve, I think, slow to begin raising rates

0:18:39.080 --> 0:18:42.080
<v Speaker 1>in the cycle, slow to begin the papering, and so

0:18:42.119 --> 0:18:44.800
<v Speaker 1>I think that the risk is that it has to

0:18:44.880 --> 0:18:48.119
<v Speaker 1>overdo it this time on the tightening decide to demonstrate

0:18:48.119 --> 0:18:53.120
<v Speaker 1>its resolve. Yeah, yeah, it's an interesting point. Just finally,

0:18:53.320 --> 0:18:55.760
<v Speaker 1>maybe thirty seconds or so, do you like Warren Buffett's

0:18:55.800 --> 0:18:59.240
<v Speaker 1>move into Japan adding to his positions in those trading houses.

0:19:00.080 --> 0:19:02.160
<v Speaker 1>You know, it's very interesting because we're seeing this among

0:19:02.280 --> 0:19:04.520
<v Speaker 1>our clients as well. You know, when you look at

0:19:05.080 --> 0:19:08.359
<v Speaker 1>on a page Bloomberg has WCRSS, you can get the

0:19:08.400 --> 0:19:12.879
<v Speaker 1>OECDS measure of purchasing power parity, and typically the OECD

0:19:13.040 --> 0:19:16.280
<v Speaker 1>currencies don't move more than twenty percent away from the

0:19:16.400 --> 0:19:19.720
<v Speaker 1>fair value purchasing power parity by the OECDS model. But

0:19:19.800 --> 0:19:22.040
<v Speaker 1>as we sit here today, the euro is over fifty

0:19:22.080 --> 0:19:26.159
<v Speaker 1>percent undervalued, the yen is forty percent undervalue. So I

0:19:26.160 --> 0:19:29.920
<v Speaker 1>think for a dollar based investors buying those assets in

0:19:30.000 --> 0:19:32.560
<v Speaker 1>Japan or Europe, you get the currency even if it

0:19:32.560 --> 0:19:35.119
<v Speaker 1>takes a couple of years to normaliz, and that's a

0:19:35.200 --> 0:19:37.480
<v Speaker 1>good that's an interesting call. I even given that the

0:19:37.560 --> 0:19:41.360
<v Speaker 1>dollar has weekend since last October. Anyway, we've got to go, Mark,

0:19:41.400 --> 0:19:44.600
<v Speaker 1>Thanks so much. Mark Chandler, Managing director at Bannockburn Global.

0:19:44.800 --> 0:19:48.640
<v Speaker 1>This is Bloomberg. This is Bloomberg Day Break Asia. Your

0:19:48.640 --> 0:19:51.040
<v Speaker 1>morning brief on the story is making news from Hong

0:19:51.119 --> 0:19:53.800
<v Speaker 1>Kong to Singapore and Wall Street. Look for us on

0:19:53.840 --> 0:19:58.080
<v Speaker 1>your podcast feed every day, on Apple, Spotify, and anywhere

0:19:58.080 --> 0:20:00.240
<v Speaker 1>else you get your podcasts. You can also us and

0:20:00.320 --> 0:20:03.080
<v Speaker 1>live each day on Bloomberg eleven three zero in New York,

0:20:03.280 --> 0:20:06.720
<v Speaker 1>Bloomberg ninety nine one in Washington, Bloomberg one oh sixty

0:20:06.720 --> 0:20:10.440
<v Speaker 1>one in Boston, and Bloomberg nine sixty in San Francisco.

0:20:10.440 --> 0:20:13.320
<v Speaker 1>Our flagship New York station is also available on your

0:20:13.359 --> 0:20:18.240
<v Speaker 1>Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty

0:20:18.280 --> 0:20:21.399
<v Speaker 1>plus listen coast to coast on the Bloomberg Business app,

0:20:21.720 --> 0:20:25.959
<v Speaker 1>Sirius XM Channel one nineteen, the iHeartRadio app, and on

0:20:26.000 --> 0:20:30.000
<v Speaker 1>Bloomberg dot Com. I'm Brian Curtis and I'm Doug Prisoner.

0:20:30.080 --> 0:20:32.240
<v Speaker 1>Join us again tomorrow for all the news unique to

0:20:32.280 --> 0:20:38.080
<v Speaker 1>start your day right here on Bloomberg Daybreak Asia