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Speaker 1: This is Bloomberg day Break Asia for this Monday, May

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Speaker 1: twenty ninth in Hong Kong, Sunday May twenty eighth in

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Speaker 1: New York, and coming up today, Asian stocks may rise

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Speaker 1: after US negotiators agreed to a tentative deal on the

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Speaker 1: debt crisis. Another hot inflation reading in the US may

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Speaker 1: persuade the Fed to hike interest rates again, and Boeing

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Speaker 1: is said to be in talks to land its second

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Speaker 1: major deal in Saudi Arabia this year.

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Speaker 2: President Biden and House Speaker Kevin McCarthy both sounding optimistic

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Speaker 2: Congress will approve their plan to raise the debt ceiling Russia,

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Speaker 2: wards of escalation in Ukraine and surprise reelection for Turkey's

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Speaker 2: President Erdawan. I'm Denise Pelygrinny with Global Neews.

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Speaker 3: One top ten player gets eliminated in the first round

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Speaker 3: of the Front Open, Dan Schwartzman, I'll have that story

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Speaker 3: more coming up in Bloomberg Sports.

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Speaker 4: That's all straight ahead on Bloomberg day Break Asia, the

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Speaker 4: business news you need to start your day, and just

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Speaker 4: one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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Speaker 4: Business App, and everywhere you get your podcast.

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Speaker 5: Good morning, I'm Richard Salava and I'm Brian Curtiz.

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

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Speaker 5: Right Well, White House and Republican negotiates did reach a

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Speaker 5: tentative compromise late Saturday. That's what we've been reporting, and

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Speaker 5: is all designed to raise the debt seating. The Chicago

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Speaker 5: Fed President Ofustin Goldsby tell CBS has faced the nation

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Speaker 5: that the last minute deal is quote a little dangerous.

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Speaker 3: As Chair Powell has stated from the beginning, we must

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Speaker 3: raise the debt ceiling.

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Speaker 4: Now.

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Speaker 3: The fiscal decisions, of course, are between Congress and the President,

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Speaker 3: and however they sort it out is good by us.

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Speaker 3: But if you did not do that, the consequences for

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Speaker 3: the financial system and for the broader economy would be

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Speaker 3: extremely negative.

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Speaker 5: That's Austin goals we heard here on Bloomberg. Golesby said

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Speaker 5: that the recent debt impass couldn't have come at a

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Speaker 5: worse time, saying uncertain centering around recent bank failures and

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Speaker 5: the anticipation of a default has already been impacting financial markets.

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Speaker 5: Law Makers happen to the fifth of June for the

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Speaker 5: debt deal to pass through both houses of Congress. That's

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Speaker 5: when Treasury section for Janet Yellen has said her department

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Speaker 5: is expected to run out of cash to keep paying

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Speaker 5: its bills on time.

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Speaker 1: In the meantime, rish more disappointing inflation news could help

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Speaker 1: to persuade Fed policymakers to high rates again. US Commerce

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Speaker 1: Department figures on Friday showed the Personal Consumption Expenditures price

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Speaker 1: index rose a faster than expected zero point four percent.

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Speaker 1: In April, we heard from Bloomberg's Michael.

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Speaker 6: McKee, this is going to be a problem for the Fed.

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Speaker 6: This is their indicator. This is the one that they

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Speaker 6: watch and then they base policy on, and it is

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Speaker 6: going the wrong direction. Now it's not that they didn't

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Speaker 6: think that would happen. They expected some volatility and lumpiness

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Speaker 6: in the numbers, but about half of them are more

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Speaker 6: said in the minutes and have said in speeches since

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Speaker 6: then that they're going to probably need to raise rates more.

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Speaker 6: So then the question becomes do they do it in

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Speaker 6: June or they do it in July, And this kind

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Speaker 6: of moves up the timetable one would think perhaps June.

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Speaker 1: Michael McKee. Fed officials have raised rates already by five

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Speaker 1: full percentage points in the past fourteen months. In an

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Speaker 1: effort to lower inflation, and the FED Chief J Powell

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Speaker 1: has said that policymakers could afford to watch the upcoming

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Speaker 1: data and see how inflation evolves. They'll get an additional

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Speaker 1: read on employment and consumer prices. Prior to the fed's

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Speaker 1: next meeting in the middle of June.

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Speaker 5: We hear that Boeing is working to land it's second

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Speaker 5: major deal in Saudi Arabia this year. The US planemaker

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Speaker 5: in talks to sell at least one hundred and fifty

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Speaker 5: of its seven three seven Max jetliners to the startup

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Speaker 5: real THEA air Till, the newcarrier owned by Saudi Arabia's

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Speaker 5: Sovereign Wealth Fund, is shopping for about three to four

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Speaker 5: hundred single aisle jets in total, including options. Talks are complicated,

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Speaker 5: with timing and structure still in flux. We hear a

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Speaker 5: possible announcement could be made at the Paris Air Show

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Speaker 5: in the middle of June.

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Speaker 1: And in the meantime, A Maid in China Aircraft has

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Speaker 1: flown its maiden commercial flight with China Eastern Airlines. This

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Speaker 1: is a jet that is set to rival Boeing and Airbus.

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Speaker 1: Bloomberg's Joan Wong has more from Hong Kong.

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Speaker 7: China Eastern Airlines said the flight took off from Shanghai

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Speaker 7: and lend it safely in Beijing. Comak, manufacturer of the

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Speaker 7: C nine to nineteen aircraft, first delivered the jet to

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Speaker 7: China Eastern in December. China is looking to disrupt the

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Speaker 7: dominance of Boeing and Airbus and commercial jet manufacturing. Both

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Speaker 7: Airbus and Boeing have a full order book through to

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Speaker 7: the end of the decade. It means that any carrier

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Speaker 7: wanting narrowbody jets sooner may need to find an alternative.

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Speaker 7: As of now, the C nine nineteen remained certified only

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Speaker 7: to fly within China and so far Comak has garnered

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Speaker 7: more than one thousand orders for the new jet in

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Speaker 7: Hong Kong. Join Wang Bloomberg Day Brigaisia.

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Speaker 1: And coming up in a few moments, we will be

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Speaker 1: talking with Steve Soznik, chief strategist at Interactive Brokers. You

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Speaker 1: get the latest on how the market will Interpresse interpret

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Speaker 1: this tentative deal done on the debt ceiling, and also

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Speaker 1: we want to remind you that the swamps market is

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Speaker 1: now projecting a nearly seventy percent chance of a rate

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Speaker 1: hike in June. We'll talk with Steve also about whether

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Speaker 1: or not Kevin McCarthy will actually be able to get

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Speaker 1: this deal through. We didn't have any big China scheduled

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Speaker 1: for release today the data there, but we will get

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Speaker 1: the PMIS on Wednesday. And as mentioned earlier, we did

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Speaker 1: get industrial profits out over the weekend with a relatively

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Speaker 1: disappointing reading. So that's all coming up. Seven minutes now

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Speaker 1: past the hour, it's time for world news. Rising tension

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Speaker 1: between Japan and North Korea, Russia, warning of escalation in Ukraine.

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Speaker 1: And as we've been reporting, a debt ceiling deal could

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Speaker 1: be official quickly or it could possibly still fall apart.

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Speaker 1: Let's get to Denise Pellegrini and the Bloomberg newsroom.

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Speaker 2: Denise, Yeah, Brian, the official response is positive. President Biden

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Speaker 2: says he's hopeful Congress will pass that deal to raise

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Speaker 2: the debt ceiling. Voting could take place Wednesday. Porters asking

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Speaker 2: the President about possible snags none, none, No sticking points,

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Speaker 2: Spiden says. Biden also says he believes he and House

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Speaker 2: Speaker Kevin MacArthur are in quote a good place. McCarthy

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Speaker 2: says he expects their plan to raise the dead ceiling

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Speaker 2: to pass with support from both sides of the aisle.

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Speaker 6: I think at the end of the day, people can

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Speaker 6: look together to be able to pass this in the

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Speaker 6: House and the Senate together.

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Speaker 2: Now we're still learning what's in this deal. McCarthy says.

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Speaker 2: It cuts the IRS budget by almost two billion dollars

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Speaker 2: that is, though much less than many GOP lawmakers want.

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Speaker 2: It also fails to overhaul energy industry permitting. That's another

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Speaker 2: thing Republicans wanted, and Bloomberg White House reporter Gregory Courty

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Speaker 2: says the timing of the deal may have been good,

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Speaker 2: but on the other hand, the fact that this is

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Speaker 2: a holiday weekend, well, he says that could backfire.

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Speaker 8: Yeah, a holiday weekend actually probably made this deal easier

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Speaker 8: to reach in principle, because you know, all of the

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Speaker 8: hardliners on both sides were out of town, back in

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Speaker 8: their districts and allowed the negotiators from the White House

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Speaker 8: and Speaker McCarthy to to sit down without any distractions

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Speaker 8: and hammer out a deal. But that also means that,

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Speaker 8: you know, it's the members are going to be hearing

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Speaker 8: from their constituents about this deal over the weekend at

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Speaker 8: Memorial Day parades or Picnics or wherever they are, and

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Speaker 8: if the news gets out and people don't like it,

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Speaker 8: then then they could The members could be returning to

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Speaker 8: Washington on Tuesday inclined not to support this deal.

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Speaker 2: Yeah, and Cordie also says watch for what the more

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Speaker 2: extreme members of both parties say about this deal. We're

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Speaker 2: tracking it all for you here on Bloomberg day Break

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Speaker 2: Asia in Turkey, Pasada as defying the naysayers and sealing

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Speaker 2: a re election victory. This could mean more friction though

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Speaker 2: with Western governments, and also more certainty uncertainty for investors.

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Speaker 2: North Korea announcing plans to launch a spy's satellite as

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Speaker 2: soon as this Wednesday. That's according to Kyoto, Japan's prime minister,

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Speaker 2: calling on North Korea not to do it. Russia's ambassador

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Speaker 2: to the UK warning of an escalation to the war

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Speaker 2: in Ukraine, has Britain, another Western allies, commit increasingly advanced

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Speaker 2: weapons to aid Kievan. Speaking on the BBC, the diplomat

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Speaker 2: says the actions of NATO countries, especially the UK, risk

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Speaker 2: lengthening and triggering a new dimension to the war. Ukraine

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Speaker 2: says drone attacks on Kiev are intensifying and in Texas,

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Speaker 2: A g Ken Paxton has been impeached by a Republican

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Speaker 2: led state House.

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Speaker 1: They've been one hundred and twenty one hours and twenty

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Speaker 1: three days to present, non voting three absent.

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Speaker 4: The resolution is adopted.

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Speaker 2: N Paxton's ulster is temporary, depending a Senate vote on

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Speaker 2: a permanent removal the House charging in with bribery and

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Speaker 2: other offenses. Paxton is a champion of far right GOP

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Speaker 2: legal fights over guns. In twenty twenty, you remember he's

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Speaker 2: the one who asked the Supreme Court to overturn Joe

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Speaker 2: Biden's presidential victory. Global News twenty four hours a day

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Speaker 2: on aired on Bloomberg Quick Take Power by more than

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Speaker 2: twenty seven hundred journalists and analysts in more than one

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Speaker 2: hundred and twenty countries. In the news, Romim Denise Pelgriny.

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Speaker 2: This is Bloomberg.

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Speaker 1: I'm Brain Curtis along with Rishad's Salama. Our guest is

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Speaker 1: Steve Sasnik, chief strategist at Interactive Brokers. Steve, thanks for

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Speaker 1: the double duty on spending some time with this on

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Speaker 1: your Sunday evening. So we're getting some positive sounds out

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Speaker 1: of Joe Biden and Kevin McCarthy about about the deal,

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Speaker 1: the tentative deal that has been struck. Should we assume

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Speaker 1: that this does get through or do we need to

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Speaker 1: be mindful that that the Freedom Caucus they're always there

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Speaker 1: and you never know.

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Speaker 9: Good morning, Brian. Yeah, I think we I think I

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Speaker 9: would say that this will this should be bipartisan enough

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Speaker 9: to get over the finish line, but not without some drama.

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Speaker 9: You know, I wrote earlier in the week that you know,

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Speaker 9: if we even if we saw Biden and McCarthy come

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Speaker 9: out holding hands and singing kumbayad, there would still be

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Speaker 9: people yelling at them and having problems that the deal

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Speaker 9: would get done. But I think it does. I think

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Speaker 9: you'll get people, You'll get some people falling off.

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Speaker 8: On the right.

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Speaker 9: I think they'll be they'll just be impossible to win

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Speaker 9: over the progressive caucus. They made some noise you know,

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Speaker 9: on some of the Sunday shows this morning, some of

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Speaker 9: the more progressive numbers. But I think you'll get enough

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Speaker 9: down the middle who really don't want to see the

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Speaker 9: US government, you know, drive off the cliff to get

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Speaker 9: the deal across, to get the deal across the.

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Speaker 5: Table now here, Steve, you know, we've got at least

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Speaker 5: one fedificial usin goals. We're just saying that, you know,

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Speaker 5: whatever they'll they'll work with whatever the federal government actually

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Speaker 5: comes up with. But ultimately, how are they going to.

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Speaker 4: Look at this?

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Speaker 9: Well, I mean it's probably it's probably enough of a

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Speaker 9: status quo that it's not going to change things too

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Speaker 9: too much. We're not getting you know, I guess on

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Speaker 9: the good side, it doesn't look like there's huge amounts

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Speaker 9: of spending cuts, which would present a problem for the

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Speaker 9: Fed and present a problem for the market for markets

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Speaker 9: quite frankly, because you know, if you have big spending cuts,

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Speaker 9: that's a fiscal headwind, sort of reverse Keynesianism as it were.

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Speaker 9: But the Fed, you know, that would present a problem

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Speaker 9: for the Fed because you don't necessary only want to

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Speaker 9: see them aggressively tightening at the same time fiscal policy

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Speaker 9: is tightening. But this seems like a very modest tweak

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Speaker 9: to fiscal policy, which is why the which is why

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Speaker 9: the Freedom Caucus is going to have a huge problem

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Speaker 9: with it. But as a result, I don't think it

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Speaker 9: changes things very much for the FED.

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Speaker 1: As a result, if we look at data weakness and

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Speaker 1: equity equity futures in Asia also spemis. It looks like

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Speaker 1: we will get a relief rally here. I think there

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Speaker 1: was some people that were thinking, maybe, you know, there's

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Speaker 1: always a chance that you would buy the sell the

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Speaker 1: rumor and buy the fact or vice versa, and in

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Speaker 1: this case it looks like we will rally. Would you

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Speaker 1: prefer in this environment that the FED would actually raise

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Speaker 1: in June and then pause or should they pause now

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Speaker 1: and assess?

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Speaker 9: I you know, at this point, I think they should

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Speaker 9: do what the market thinks they should do. The bottom

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Speaker 9: line is I think as long as if they if

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Speaker 9: they've can convince the markets that twenty five basis points

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Speaker 9: is coming sooner rather than later, then just do it.

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Speaker 9: If they're not, I think what the market really doesn't

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Speaker 9: like from the Fed are surprises, and so if you've

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Speaker 9: got a seventy percent chance that it's going to happen

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Speaker 9: shortly and they're going to do it anyway, we'll then

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Speaker 9: just do it. Because I think I think what happens

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Speaker 9: is if you start to get consensus that they're going

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Speaker 9: to raise rates and then they end up not raising rates,

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Speaker 9: people start to wonder, what do they see that we don't,

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Speaker 9: And so I think just if your whole point is

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Speaker 9: to be transparent and guide the market with your thinking.

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Speaker 9: Then do that now, by the way, just about Biden

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Speaker 9: room or selling the news, I don't think that this

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Speaker 9: initial reaction takes to sell the news reaction off the table,

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Speaker 9: because remember we were we really were not pricing in

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Speaker 9: much of the chance of default the least stocks were,

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Speaker 9: and certainly they'll be parts of the curve. But that

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Speaker 9: also there also could be an interesting reaction in the

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Speaker 9: bond market because it means the treasury is going to

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Speaker 9: be free to raise a lot of money and need to.

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Speaker 9: So you could actually see some reactions in that regard

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Speaker 9: spilling over intequities beyond the initial you know, happy news,

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Speaker 9: which it is good news.

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Speaker 5: Yeah, I mean, you know, ultimately, Steve, is the old

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Speaker 5: adage that markets hate uncertainty, but the reverses they couldn't

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Speaker 5: live without and they wouldn't be a market. Now, Steve,

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Speaker 5: what are you looking at aside from this? How does

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Speaker 5: the you know, where where do you find yourself as

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Speaker 5: a strategist?

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Speaker 9: Well, I mean I wrote something the other day which

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Speaker 9: at this point it's it's in Vidia's world and we're

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Speaker 9: all living in it or investing in it, and that.

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Speaker 9: You know that to me, the the in Vidia being

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Speaker 9: the poster child of the AI craze. You know, we're

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Speaker 9: starting to get into Internet land, Internet ninety nine land.

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Speaker 9: We're not there yet they did. The valuations are nowhere close.

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Speaker 9: But you know, one of the interesting parallels to me

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Speaker 9: is think about when you think back to back then

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Speaker 9: everybody would get excited because company X, y Z would say,

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Speaker 9: oh at their confort school, oh, we're announcing a website. Well,

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Speaker 9: well they're now spend you know, all saying we're spending

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Speaker 9: money on AI to figure out how AI works in

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Speaker 9: our business. Now, AI has been out there for a while.

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Speaker 9: It's not something brand new, but you know, the beneficiary

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Speaker 9: is like you know, the beneficiaries and Vidia, Marvel Technology,

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Speaker 9: et cetera. They're benefiting because companies are just throwing money

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Speaker 9: at the problem. And so that not well not the

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Speaker 9: problem at at the at the topic. And so that's

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Speaker 9: really the theme to watch right now is can this

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Speaker 9: carry over and can this select group of stocks which

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Speaker 9: are which are carrying the broad indices, will that spill over?

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Speaker 9: Will we get a rotation into into a broadening rally

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Speaker 9: which right now has remains very very thin.

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Speaker 1: Yeah, That's where I wanted to go with this. If

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Speaker 1: by chance people slow down on big tech and say, wow,

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Speaker 1: that's been a powerful rally year to date, and if

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Speaker 1: by chance they were to peel back a little or

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Speaker 1: to go sideways, could you see cyclicals or let's say

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Speaker 1: the even weight index of the S and P benefit

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Speaker 1: from that.

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Speaker 9: You could and that, you know, that would be the

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Speaker 9: natural rotation trade. But I don't know that it would

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Speaker 9: be enough to compensate at this point because of the

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Speaker 9: top heaviness of the indices and because we don't really

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Speaker 9: see we're not getting this broad based economic pull pull

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Speaker 9: from you know that would that would lift a lot

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Speaker 9: of the cyclicals higher. We certainly didn't hear great news

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Speaker 9: from the vast majority of retailers, which is telling you

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Speaker 9: the consumer is a bit nerved unnerved right now, I

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Speaker 9: should say, And so it would be it would be

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Speaker 9: nice to see that rotation. I would love to see

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Speaker 9: it happen, but I think you need a little more

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Speaker 9: consensus that the economy remains solid and that consumers remain

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Speaker 9: enthusiastic for full rotation to take place without causing damage

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Speaker 9: to the broader market.

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