WEBVTT - Debt deal Reached, U.S Inflation Data Worries

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<v Speaker 1>This is Bloomberg day Break Asia for this Monday, May

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<v Speaker 1>twenty ninth in Hong Kong, Sunday May twenty eighth in

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<v Speaker 1>New York, and coming up today, Asian stocks may rise

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<v Speaker 1>after US negotiators agreed to a tentative deal on the

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<v Speaker 1>debt crisis. Another hot inflation reading in the US may

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<v Speaker 1>persuade the Fed to hike interest rates again, and Boeing

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<v Speaker 1>is said to be in talks to land its second

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<v Speaker 1>major deal in Saudi Arabia this year.

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<v Speaker 2>President Biden and House Speaker Kevin McCarthy both sounding optimistic

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<v Speaker 2>Congress will approve their plan to raise the debt ceiling Russia,

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<v Speaker 2>wards of escalation in Ukraine and surprise reelection for Turkey's

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<v Speaker 2>President Erdawan. I'm Denise Pelygrinny with Global Neews.

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<v Speaker 3>One top ten player gets eliminated in the first round

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<v Speaker 3>of the Front Open, Dan Schwartzman, I'll have that story

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<v Speaker 3>more coming up in Bloomberg Sports.

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<v Speaker 4>That's all straight ahead on Bloomberg day Break Asia, the

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<v Speaker 4>business news you need to start your day, and just

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<v Speaker 5>Good morning, I'm Richard Salava and I'm Brian Curtiz.

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<v Speaker 1>Here are the stories we're following today.

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<v Speaker 5>Right Well, White House and Republican negotiates did reach a

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

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<v Speaker 5>is all designed to raise the debt seating. The Chicago

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<v Speaker 5>Fed President Ofustin Goldsby tell CBS has faced the nation

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<v Speaker 5>that the last minute deal is quote a little dangerous.

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<v Speaker 3>As Chair Powell has stated from the beginning, we must

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<v Speaker 3>raise the debt ceiling.

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<v Speaker 4>Now.

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<v Speaker 3>The fiscal decisions, of course, are between Congress and the President,

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<v Speaker 3>and however they sort it out is good by us.

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<v Speaker 3>But if you did not do that, the consequences for

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<v Speaker 3>the financial system and for the broader economy would be

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<v Speaker 3>extremely negative.

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<v Speaker 5>That's Austin goals we heard here on Bloomberg. Golesby said

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<v Speaker 5>that the recent debt impass couldn't have come at a

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<v Speaker 5>worse time, saying uncertain centering around recent bank failures and

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<v Speaker 5>the anticipation of a default has already been impacting financial markets.

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<v Speaker 5>Law Makers happen to the fifth of June for the

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<v Speaker 5>debt deal to pass through both houses of Congress. That's

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<v Speaker 5>when Treasury section for Janet Yellen has said her department

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<v Speaker 5>is expected to run out of cash to keep paying

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<v Speaker 5>its bills on time.

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<v Speaker 1>In the meantime, rish more disappointing inflation news could help

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<v Speaker 1>to persuade Fed policymakers to high rates again. US Commerce

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<v Speaker 1>Department figures on Friday showed the Personal Consumption Expenditures price

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<v Speaker 1>index rose a faster than expected zero point four percent.

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<v Speaker 1>In April, we heard from Bloomberg's Michael.

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<v Speaker 6>McKee, this is going to be a problem for the Fed.

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<v Speaker 6>This is their indicator. This is the one that they

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<v Speaker 6>watch and then they base policy on, and it is

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

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<v Speaker 6>think that would happen. They expected some volatility and lumpiness

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<v Speaker 6>in the numbers, but about half of them are more

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<v Speaker 6>said in the minutes and have said in speeches since

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<v Speaker 6>then that they're going to probably need to raise rates more.

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<v Speaker 6>So then the question becomes do they do it in

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<v Speaker 6>June or they do it in July, And this kind

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<v Speaker 6>of moves up the timetable one would think perhaps June.

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<v Speaker 1>Michael McKee. Fed officials have raised rates already by five

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<v Speaker 1>full percentage points in the past fourteen months. In an

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<v Speaker 1>effort to lower inflation, and the FED Chief J Powell

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<v Speaker 1>has said that policymakers could afford to watch the upcoming

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<v Speaker 1>data and see how inflation evolves. They'll get an additional

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<v Speaker 1>read on employment and consumer prices. Prior to the fed's

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<v Speaker 1>next meeting in the middle of June.

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<v Speaker 5>We hear that Boeing is working to land it's second

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<v Speaker 5>major deal in Saudi Arabia this year. The US planemaker

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<v Speaker 5>in talks to sell at least one hundred and fifty

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<v Speaker 5>of its seven three seven Max jetliners to the startup

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<v Speaker 5>real THEA air Till, the newcarrier owned by Saudi Arabia's

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<v Speaker 5>Sovereign Wealth Fund, is shopping for about three to four

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<v Speaker 5>hundred single aisle jets in total, including options. Talks are complicated,

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<v Speaker 5>with timing and structure still in flux. We hear a

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<v Speaker 5>possible announcement could be made at the Paris Air Show

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<v Speaker 5>in the middle of June.

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<v Speaker 1>And in the meantime, A Maid in China Aircraft has

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<v Speaker 1>flown its maiden commercial flight with China Eastern Airlines. This

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<v Speaker 1>is a jet that is set to rival Boeing and Airbus.

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<v Speaker 1>Bloomberg's Joan Wong has more from Hong Kong.

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<v Speaker 7>China Eastern Airlines said the flight took off from Shanghai

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<v Speaker 7>and lend it safely in Beijing. Comak, manufacturer of the

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<v Speaker 7>C nine to nineteen aircraft, first delivered the jet to

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<v Speaker 7>China Eastern in December. China is looking to disrupt the

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<v Speaker 7>dominance of Boeing and Airbus and commercial jet manufacturing. Both

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<v Speaker 7>Airbus and Boeing have a full order book through to

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<v Speaker 7>the end of the decade. It means that any carrier

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<v Speaker 7>wanting narrowbody jets sooner may need to find an alternative.

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<v Speaker 7>As of now, the C nine nineteen remained certified only

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<v Speaker 7>to fly within China and so far Comak has garnered

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<v Speaker 7>more than one thousand orders for the new jet in

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<v Speaker 7>Hong Kong. Join Wang Bloomberg Day Brigaisia.

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<v Speaker 1>And coming up in a few moments, we will be

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<v Speaker 1>talking with Steve Soznik, chief strategist at Interactive Brokers. You

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<v Speaker 1>get the latest on how the market will Interpresse interpret

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<v Speaker 1>this tentative deal done on the debt ceiling, and also

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<v Speaker 1>we want to remind you that the swamps market is

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<v Speaker 1>now projecting a nearly seventy percent chance of a rate

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<v Speaker 1>hike in June. We'll talk with Steve also about whether

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<v Speaker 1>or not Kevin McCarthy will actually be able to get

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<v Speaker 1>this deal through. We didn't have any big China scheduled

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<v Speaker 1>for release today the data there, but we will get

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<v Speaker 1>the PMIS on Wednesday. And as mentioned earlier, we did

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<v Speaker 1>get industrial profits out over the weekend with a relatively

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<v Speaker 1>disappointing reading. So that's all coming up. Seven minutes now

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

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<v Speaker 1>between Japan and North Korea, Russia, warning of escalation in Ukraine.

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<v Speaker 1>And as we've been reporting, a debt ceiling deal could

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<v Speaker 1>be official quickly or it could possibly still fall apart.

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<v Speaker 1>Let's get to Denise Pellegrini and the Bloomberg newsroom.

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<v Speaker 2>Denise, Yeah, Brian, the official response is positive. President Biden

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<v Speaker 2>says he's hopeful Congress will pass that deal to raise

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<v Speaker 2>the debt ceiling. Voting could take place Wednesday. Porters asking

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<v Speaker 2>the President about possible snags none, none, No sticking points,

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<v Speaker 2>Spiden says. Biden also says he believes he and House

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<v Speaker 2>Speaker Kevin MacArthur are in quote a good place. McCarthy

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<v Speaker 2>says he expects their plan to raise the dead ceiling

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<v Speaker 2>to pass with support from both sides of the aisle.

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<v Speaker 6>I think at the end of the day, people can

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<v Speaker 6>look together to be able to pass this in the

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<v Speaker 6>House and the Senate together.

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

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<v Speaker 2>It cuts the IRS budget by almost two billion dollars

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<v Speaker 2>that is, though much less than many GOP lawmakers want.

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<v Speaker 2>It also fails to overhaul energy industry permitting. That's another

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<v Speaker 2>thing Republicans wanted, and Bloomberg White House reporter Gregory Courty

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<v Speaker 2>says the timing of the deal may have been good,

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<v Speaker 2>but on the other hand, the fact that this is

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<v Speaker 2>a holiday weekend, well, he says that could backfire.

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<v Speaker 8>Yeah, a holiday weekend actually probably made this deal easier

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<v Speaker 8>to reach in principle, because you know, all of the

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<v Speaker 8>hardliners on both sides were out of town, back in

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<v Speaker 8>their districts and allowed the negotiators from the White House

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<v Speaker 8>and Speaker McCarthy to to sit down without any distractions

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<v Speaker 8>and hammer out a deal. But that also means that,

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<v Speaker 8>you know, it's the members are going to be hearing

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<v Speaker 8>from their constituents about this deal over the weekend at

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<v Speaker 8>Memorial Day parades or Picnics or wherever they are, and

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<v Speaker 8>if the news gets out and people don't like it,

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<v Speaker 8>then then they could The members could be returning to

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<v Speaker 8>Washington on Tuesday inclined not to support this deal.

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<v Speaker 2>Yeah, and Cordie also says watch for what the more

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<v Speaker 2>extreme members of both parties say about this deal. We're

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<v Speaker 2>tracking it all for you here on Bloomberg day Break

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<v Speaker 2>Asia in Turkey, Pasada as defying the naysayers and sealing

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<v Speaker 2>a re election victory. This could mean more friction though

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<v Speaker 2>with Western governments, and also more certainty uncertainty for investors.

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<v Speaker 2>North Korea announcing plans to launch a spy's satellite as

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

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<v Speaker 2>calling on North Korea not to do it. Russia's ambassador

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<v Speaker 2>to the UK warning of an escalation to the war

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<v Speaker 2>in Ukraine, has Britain, another Western allies, commit increasingly advanced

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<v Speaker 2>weapons to aid Kievan. Speaking on the BBC, the diplomat

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<v Speaker 2>says the actions of NATO countries, especially the UK, risk

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<v Speaker 2>lengthening and triggering a new dimension to the war. Ukraine

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<v Speaker 2>says drone attacks on Kiev are intensifying and in Texas,

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<v Speaker 2>A g Ken Paxton has been impeached by a Republican

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<v Speaker 2>led state House.

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<v Speaker 1>They've been one hundred and twenty one hours and twenty

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<v Speaker 1>three days to present, non voting three absent.

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<v Speaker 4>The resolution is adopted.

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<v Speaker 2>N Paxton's ulster is temporary, depending a Senate vote on

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<v Speaker 2>a permanent removal the House charging in with bribery and

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<v Speaker 2>other offenses. Paxton is a champion of far right GOP

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<v Speaker 2>legal fights over guns. In twenty twenty, you remember he's

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<v Speaker 2>the one who asked the Supreme Court to overturn Joe

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<v Speaker 2>Biden's presidential victory. Global News twenty four hours a day

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<v Speaker 2>on aired on Bloomberg Quick Take Power by more than

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<v Speaker 2>twenty seven hundred journalists and analysts in more than one

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<v Speaker 2>hundred and twenty countries. In the news, Romim Denise Pelgriny.

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<v Speaker 2>This is Bloomberg.

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

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<v Speaker 1>Steve Sasnik, chief strategist at Interactive Brokers. Steve, thanks for

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<v Speaker 1>the double duty on spending some time with this on

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<v Speaker 1>your Sunday evening. So we're getting some positive sounds out

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<v Speaker 1>of Joe Biden and Kevin McCarthy about about the deal,

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<v Speaker 1>the tentative deal that has been struck. Should we assume

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<v Speaker 1>that this does get through or do we need to

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<v Speaker 1>be mindful that that the Freedom Caucus they're always there

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<v Speaker 1>and you never know.

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<v Speaker 9>Good morning, Brian. Yeah, I think we I think I

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<v Speaker 9>would say that this will this should be bipartisan enough

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<v Speaker 9>to get over the finish line, but not without some drama.

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<v Speaker 9>You know, I wrote earlier in the week that you know,

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<v Speaker 9>if we even if we saw Biden and McCarthy come

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<v Speaker 9>out holding hands and singing kumbayad, there would still be

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<v Speaker 9>people yelling at them and having problems that the deal

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<v Speaker 9>would get done. But I think it does. I think

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<v Speaker 9>you'll get people, You'll get some people falling off.

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<v Speaker 8>On the right.

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<v Speaker 9>I think they'll be they'll just be impossible to win

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<v Speaker 9>over the progressive caucus. They made some noise you know,

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<v Speaker 9>on some of the Sunday shows this morning, some of

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<v Speaker 9>the more progressive numbers. But I think you'll get enough

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<v Speaker 9>down the middle who really don't want to see the

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<v Speaker 9>US government, you know, drive off the cliff to get

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<v Speaker 9>the deal across, to get the deal across the.

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<v Speaker 5>Table now here, Steve, you know, we've got at least

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

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<v Speaker 5>whatever they'll they'll work with whatever the federal government actually

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<v Speaker 5>comes up with. But ultimately, how are they going to.

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<v Speaker 4>Look at this?

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<v Speaker 9>Well, I mean it's probably it's probably enough of a

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<v Speaker 9>status quo that it's not going to change things too

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

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

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<v Speaker 9>of spending cuts, which would present a problem for the

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<v Speaker 9>Fed and present a problem for the market for markets

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<v Speaker 9>quite frankly, because you know, if you have big spending cuts,

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

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<v Speaker 9>But the Fed, you know, that would present a problem

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<v Speaker 9>for the Fed because you don't necessary only want to

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<v Speaker 9>see them aggressively tightening at the same time fiscal policy

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<v Speaker 9>is tightening. But this seems like a very modest tweak

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<v Speaker 9>to fiscal policy, which is why the which is why

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<v Speaker 9>the Freedom Caucus is going to have a huge problem

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<v Speaker 9>with it. But as a result, I don't think it

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<v Speaker 9>changes things very much for the FED.

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<v Speaker 1>As a result, if we look at data weakness and

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<v Speaker 1>equity equity futures in Asia also spemis. It looks like

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<v Speaker 1>we will get a relief rally here. I think there

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<v Speaker 1>was some people that were thinking, maybe, you know, there's

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<v Speaker 1>always a chance that you would buy the sell the

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<v Speaker 1>rumor and buy the fact or vice versa, and in

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<v Speaker 1>this case it looks like we will rally. Would you

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<v Speaker 1>prefer in this environment that the FED would actually raise

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<v Speaker 1>in June and then pause or should they pause now

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<v Speaker 1>and assess?

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<v Speaker 9>I you know, at this point, I think they should

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<v Speaker 9>do what the market thinks they should do. The bottom

0:11:57.520 --> 0:11:59.560
<v Speaker 9>line is I think as long as if they if

0:11:59.640 --> 0:12:03.160
<v Speaker 9>they've can convince the markets that twenty five basis points

0:12:03.240 --> 0:12:05.880
<v Speaker 9>is coming sooner rather than later, then just do it.

0:12:06.640 --> 0:12:09.240
<v Speaker 9>If they're not, I think what the market really doesn't

0:12:09.360 --> 0:12:13.240
<v Speaker 9>like from the Fed are surprises, and so if you've

0:12:13.240 --> 0:12:16.360
<v Speaker 9>got a seventy percent chance that it's going to happen

0:12:16.440 --> 0:12:18.840
<v Speaker 9>shortly and they're going to do it anyway, we'll then

0:12:18.920 --> 0:12:21.120
<v Speaker 9>just do it. Because I think I think what happens

0:12:21.160 --> 0:12:23.120
<v Speaker 9>is if you start to get consensus that they're going

0:12:23.160 --> 0:12:25.880
<v Speaker 9>to raise rates and then they end up not raising rates,

0:12:25.880 --> 0:12:28.320
<v Speaker 9>people start to wonder, what do they see that we don't,

0:12:29.240 --> 0:12:32.640
<v Speaker 9>And so I think just if your whole point is

0:12:32.640 --> 0:12:36.240
<v Speaker 9>to be transparent and guide the market with your thinking.

0:12:37.240 --> 0:12:39.560
<v Speaker 9>Then do that now, by the way, just about Biden

0:12:39.600 --> 0:12:41.160
<v Speaker 9>room or selling the news, I don't think that this

0:12:41.280 --> 0:12:44.400
<v Speaker 9>initial reaction takes to sell the news reaction off the table,

0:12:44.679 --> 0:12:48.280
<v Speaker 9>because remember we were we really were not pricing in

0:12:48.679 --> 0:12:50.720
<v Speaker 9>much of the chance of default the least stocks were,

0:12:50.760 --> 0:12:53.520
<v Speaker 9>and certainly they'll be parts of the curve. But that

0:12:53.600 --> 0:12:56.400
<v Speaker 9>also there also could be an interesting reaction in the

0:12:56.400 --> 0:12:58.400
<v Speaker 9>bond market because it means the treasury is going to

0:12:58.400 --> 0:13:00.520
<v Speaker 9>be free to raise a lot of money and need to.

0:13:01.040 --> 0:13:03.600
<v Speaker 9>So you could actually see some reactions in that regard

0:13:03.920 --> 0:13:07.760
<v Speaker 9>spilling over intequities beyond the initial you know, happy news,

0:13:07.800 --> 0:13:10.000
<v Speaker 9>which it is good news.

0:13:09.760 --> 0:13:12.640
<v Speaker 5>Yeah, I mean, you know, ultimately, Steve, is the old

0:13:12.640 --> 0:13:15.720
<v Speaker 5>adage that markets hate uncertainty, but the reverses they couldn't

0:13:15.720 --> 0:13:18.240
<v Speaker 5>live without and they wouldn't be a market. Now, Steve,

0:13:18.559 --> 0:13:20.840
<v Speaker 5>what are you looking at aside from this? How does

0:13:20.840 --> 0:13:23.040
<v Speaker 5>the you know, where where do you find yourself as

0:13:23.679 --> 0:13:24.480
<v Speaker 5>a strategist?

0:13:25.160 --> 0:13:27.840
<v Speaker 9>Well, I mean I wrote something the other day which

0:13:27.840 --> 0:13:29.959
<v Speaker 9>at this point it's it's in Vidia's world and we're

0:13:29.960 --> 0:13:32.400
<v Speaker 9>all living in it or investing in it, and that.

0:13:32.600 --> 0:13:36.000
<v Speaker 9>You know that to me, the the in Vidia being

0:13:36.000 --> 0:13:39.880
<v Speaker 9>the poster child of the AI craze. You know, we're

0:13:39.960 --> 0:13:45.320
<v Speaker 9>starting to get into Internet land, Internet ninety nine land.

0:13:45.360 --> 0:13:48.920
<v Speaker 9>We're not there yet they did. The valuations are nowhere close.

0:13:49.280 --> 0:13:51.160
<v Speaker 9>But you know, one of the interesting parallels to me

0:13:51.320 --> 0:13:53.800
<v Speaker 9>is think about when you think back to back then

0:13:53.880 --> 0:13:57.120
<v Speaker 9>everybody would get excited because company X, y Z would say,

0:13:57.120 --> 0:14:00.000
<v Speaker 9>oh at their confort school, oh, we're announcing a website. Well,

0:14:00.000 --> 0:14:02.840
<v Speaker 9>well they're now spend you know, all saying we're spending

0:14:02.840 --> 0:14:05.440
<v Speaker 9>money on AI to figure out how AI works in

0:14:05.480 --> 0:14:07.920
<v Speaker 9>our business. Now, AI has been out there for a while.

0:14:07.960 --> 0:14:11.040
<v Speaker 9>It's not something brand new, but you know, the beneficiary

0:14:11.120 --> 0:14:14.600
<v Speaker 9>is like you know, the beneficiaries and Vidia, Marvel Technology,

0:14:14.640 --> 0:14:17.640
<v Speaker 9>et cetera. They're benefiting because companies are just throwing money

0:14:17.640 --> 0:14:19.840
<v Speaker 9>at the problem. And so that not well not the

0:14:19.880 --> 0:14:23.760
<v Speaker 9>problem at at the at the topic. And so that's

0:14:23.800 --> 0:14:26.160
<v Speaker 9>really the theme to watch right now is can this

0:14:26.280 --> 0:14:30.000
<v Speaker 9>carry over and can this select group of stocks which

0:14:30.000 --> 0:14:33.560
<v Speaker 9>are which are carrying the broad indices, will that spill over?

0:14:33.640 --> 0:14:37.080
<v Speaker 9>Will we get a rotation into into a broadening rally

0:14:37.120 --> 0:14:39.520
<v Speaker 9>which right now has remains very very thin.

0:14:40.040 --> 0:14:42.120
<v Speaker 1>Yeah, That's where I wanted to go with this. If

0:14:42.160 --> 0:14:45.520
<v Speaker 1>by chance people slow down on big tech and say, wow,

0:14:45.800 --> 0:14:48.720
<v Speaker 1>that's been a powerful rally year to date, and if

0:14:48.800 --> 0:14:50.760
<v Speaker 1>by chance they were to peel back a little or

0:14:50.760 --> 0:14:53.920
<v Speaker 1>to go sideways, could you see cyclicals or let's say

0:14:54.520 --> 0:14:58.200
<v Speaker 1>the even weight index of the S and P benefit

0:14:58.240 --> 0:14:58.760
<v Speaker 1>from that.

0:14:59.840 --> 0:15:02.080
<v Speaker 9>You could and that, you know, that would be the

0:15:02.160 --> 0:15:04.560
<v Speaker 9>natural rotation trade. But I don't know that it would

0:15:04.560 --> 0:15:07.440
<v Speaker 9>be enough to compensate at this point because of the

0:15:07.440 --> 0:15:10.720
<v Speaker 9>top heaviness of the indices and because we don't really

0:15:10.800 --> 0:15:15.760
<v Speaker 9>see we're not getting this broad based economic pull pull

0:15:15.920 --> 0:15:17.960
<v Speaker 9>from you know that would that would lift a lot

0:15:18.000 --> 0:15:21.160
<v Speaker 9>of the cyclicals higher. We certainly didn't hear great news

0:15:21.160 --> 0:15:23.600
<v Speaker 9>from the vast majority of retailers, which is telling you

0:15:23.640 --> 0:15:27.520
<v Speaker 9>the consumer is a bit nerved unnerved right now, I

0:15:27.520 --> 0:15:31.000
<v Speaker 9>should say, And so it would be it would be

0:15:31.120 --> 0:15:33.960
<v Speaker 9>nice to see that rotation. I would love to see

0:15:33.960 --> 0:15:36.240
<v Speaker 9>it happen, but I think you need a little more

0:15:36.240 --> 0:15:40.080
<v Speaker 9>consensus that the economy remains solid and that consumers remain

0:15:41.360 --> 0:15:45.600
<v Speaker 9>enthusiastic for full rotation to take place without causing damage

0:15:45.600 --> 0:15:46.560
<v Speaker 9>to the broader market.

0:15:47.920 --> 0:15:50.800
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