WEBVTT - Previewing Fed Minutes and Chinese Company Sanctions

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<v Speaker 1>This is Bloomberg Daybreak Asia. It is Wednesday, February twenty

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<v Speaker 1>second in Hong Kong, Tuesday February twenty first in New

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<v Speaker 1>York and coming up today. US stocks sell off on

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<v Speaker 1>fears the FED isn't close to ending the tightening cycle.

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<v Speaker 1>Retail giants Walmart and Home Depot give gloomy profit forecasts

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<v Speaker 1>for the year ahead. Fears of a price war between

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<v Speaker 1>China's tech giants grows as Beijing wind's back it's crackdown

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<v Speaker 1>on the tech sector. Joe Biden and warsaws as Ukraine

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<v Speaker 1>will never fall and that Vladimir Putin has lost standing

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<v Speaker 1>in the world. Poutin backs away from arms control agreement,

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<v Speaker 1>reports that Shijianping plans to visit Moscow in coming months.

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<v Speaker 1>I'm at Baxter with Global News. That's all straight Ahead

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<v Speaker 1>on Bloomberg Daybreak Asia, the business news you need to

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<v Speaker 1>start your day in just one fifteen minute podcast available

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<v Speaker 1>on Apples, Spotify, the Bloomberg Business app and everywhere you

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<v Speaker 1>get your podcasts. Good morning, I'm Dead Prisoner and I'm

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

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<v Speaker 1>will be looking to Wednesday's FED minutes for clues on

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<v Speaker 1>the Central Bank's rate hiking path, Let's get that story

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<v Speaker 1>from Bloomberg's Michael McKee. The surprise is gone now that

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<v Speaker 1>the presidents of the Cleveland and Saint Louis fedbanks have

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<v Speaker 1>said they saw a case for a half percentage point

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<v Speaker 1>increase at the February first meeting. If there were a

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<v Speaker 1>significant number of others who felt the same way, that

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<v Speaker 1>could influence views of the Fed's next move, given the

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<v Speaker 1>strong data we've seen since then. Moreover, at his post

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<v Speaker 1>meeting news conference, FED Chair j Powell teased a discussion

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<v Speaker 1>on the path forward for rates that we'd learn about

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<v Speaker 1>when the minutes were released. What might have been said

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<v Speaker 1>about how high rates will need to go, how fast,

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<v Speaker 1>and for how long. A lot of that will depend

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<v Speaker 1>on how FED officials felt about the prospects for inflation.

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<v Speaker 1>Another discussion to watch in the minutes, Michael McKee, Bloomberg

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<v Speaker 1>Daybreak Asia. So onto the big retailers. We begin with Walmart.

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<v Speaker 1>The company reported sales and profit above expectations for the

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<v Speaker 1>last quarter. Shoppers appeared to flock to those stores during

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<v Speaker 1>the holiday season to take advantage of Walmart's low prices.

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<v Speaker 1>Even so, the retail giant warned of tougher times ahead.

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<v Speaker 1>Walmart is now forecasting a second straight decline in annual profit. Here,

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<v Speaker 1>as the company's chief financial officer, John David Rainey, you're

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<v Speaker 1>seeing that our value proposition and certainly resonating with consumers

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<v Speaker 1>right now. But there's a lot of macro uncertainty again

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<v Speaker 1>as we look across the consumers across the globe, but

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<v Speaker 1>certainly here in the US, balance sheets are getting thinner.

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<v Speaker 1>You're seeing savings rates decline, and we really haven't been

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<v Speaker 1>in a position where we've seen the FED tighten at

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<v Speaker 1>this rate. And so as we look forward and give

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<v Speaker 1>guidance for the full year, we're adopting a cautious outlook

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<v Speaker 1>and we want to make sure that we're responsive to

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<v Speaker 1>whatever environment that we're going to find ourselves at. John

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<v Speaker 1>David Rainey, there, the CFO of Walmart. The news wasn't

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<v Speaker 1>a lot better for Home Depot, the home improvement retailers

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<v Speaker 1>now forecasting a profit decline for the full year. The

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<v Speaker 1>companies cited certainty tied to those higher interest rates now.

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<v Speaker 1>Home Depot said that could keep Americans from moving and

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<v Speaker 1>renovating their homes. Bryan Companies in China and around the

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<v Speaker 1>world have been warned that they will be punished by

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<v Speaker 1>the US if they keep doing business with Russia. That

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<v Speaker 1>story from Bloomberg's and Kates. The Treasury Department says the

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<v Speaker 1>cost of violating the Biden administration's sanctions against Moscow will

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<v Speaker 1>be steep, and that corporations and banks risk being cut

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<v Speaker 1>off from the US at its partner's financial systems. A

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<v Speaker 1>year after Vladimir Putin invaded Ukraine, the sanctions have had

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<v Speaker 1>a devastating impact on Russia's gas exports and imports of

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<v Speaker 1>high tech goods, but they have yet to seriously diminish

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<v Speaker 1>Putin's ability to wage war. In Washington and Kate's Bloomberg

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<v Speaker 1>Daybreak Asia, the big tech firms in China appear to

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<v Speaker 1>be on the verge of a price war. We have

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<v Speaker 1>that story from Bloomberg's Von Men. China's internet and e

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<v Speaker 1>commerce firms are beaving up efforts to outdo each other.

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<v Speaker 1>Media reports suggested jad dot Com was planning a one

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<v Speaker 1>point five billion dollars subsidy campaign to compete against Ping

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<v Speaker 1>Dual Door. Elsewhere, net Ees and miHoYo are upping their

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<v Speaker 1>battle against gaming leader ten Cent as competition rises, concerns

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<v Speaker 1>over margins grow, and equity investors have taken notice. JDM

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<v Speaker 1>Pingdodo fell ten to eleven percent in New York and

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<v Speaker 1>Ali Baba was down nearly five percent. The selling helped

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<v Speaker 1>push the NASDA Golden Dragon China Index down two point

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<v Speaker 1>nine percent in Hong Kong. I'm Ivan Mann Bloomberg Daybreak Asia.

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<v Speaker 1>Microsoft is promising that Call of Duty will not be

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<v Speaker 1>collateral damage as it tries to get approval for its

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<v Speaker 1>planned purchase of Activision Blizzard. The story from Bloomberg's Denise Pellegrini.

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<v Speaker 1>Britain's anti trust watchdog has suggested Microsoft agree to divest

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<v Speaker 1>Call of Duty to deflect criticism that buying its owner

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<v Speaker 1>Activision would stifle competition. But Call of Duty is one

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<v Speaker 1>of the most lucrative game franchises in the world, and

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<v Speaker 1>speaking after a European Union hearing, Microsoft president Brad Smith said,

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<v Speaker 1>no way. We don't see a viable path to sell

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<v Speaker 1>off the part of this company, Activision Blizzard that makes

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<v Speaker 1>Call of Duty. Microsoft did manage to flying two more

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<v Speaker 1>opponents of the merger today. It cut deals sharing Call

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<v Speaker 1>of Duty with Nintendo and also in Vidia's chief force

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<v Speaker 1>in addition to the antitrust concerns in Europe. Here in

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<v Speaker 1>the US, the FTC has already sued to block microsoft

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<v Speaker 1>sixty nine billion dollars deal. Denise Pelligriny Bloomberg day Breakasia.

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<v Speaker 1>I'm Brian Curtis, along with Doug Krisner and Rashad Salamat

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<v Speaker 1>will join us in a few moments. Now it's time

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<v Speaker 1>for Global News. The US President Joe Biden marking the

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<v Speaker 1>one year anniversary of Russia's invasion in Ukraine by saying

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<v Speaker 1>that Vladimir Putin will never find victory. Ed Baxter has

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<v Speaker 1>Global News in the nine sixty news room. Ed. Yeah,

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<v Speaker 1>that's exactly right, Brian Biden, in fact, saying, rather than

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<v Speaker 1>gating power and control, Putin's lost power and global standing,

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<v Speaker 1>President Putinsk front it was something today that you didn't

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<v Speaker 1>think was possible a year ago. The democracy of the world.

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<v Speaker 1>I've grown stronger, not weaker, But the autocrat to the

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<v Speaker 1>world have grown weaker, not stronger. And a message to

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<v Speaker 1>NATO there should be no doubt our support. Free grain

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<v Speaker 1>will not waiver, NATO will not be divided, and we

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<v Speaker 1>will not tire. Now, Biden, aiming for the Russian people,

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<v Speaker 1>saying the US and Europe do not seek to destroy

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<v Speaker 1>or control Russia. But freedom. There is no sweeter word

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<v Speaker 1>than freedom. There's no nobler goal than freedom. There's no

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<v Speaker 1>higher aspiration than freedom, and that the US will not

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<v Speaker 1>allow a Russian victory in Ukraine. Bloomberg's Amory horndern in

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<v Speaker 1>Warsaw says, a unifying message for NATO was followed a

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<v Speaker 1>message to the Polish people as well as these neighbor

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<v Speaker 1>neighboring countries around Ukraine was about this ironclad commitment to

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<v Speaker 1>Article five. This is something that would be very much

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<v Speaker 1>so welcomed by the Polish people. Yeah, and NATO countries

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<v Speaker 1>defending each other if under attack. Now, Earlier in the day,

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<v Speaker 1>Vladimir Putin pulled out participation in the nuclear agreement. He

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<v Speaker 1>threatened that there would be a response if the US

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<v Speaker 1>were to get long range missiles. We've seen throughout the

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<v Speaker 1>prior twelve months a little bit of hesitation from the West,

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<v Speaker 1>whether it was high Mars or another advance on a

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<v Speaker 1>military system. Now, Putin did say he would abide by

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<v Speaker 1>weapons limits, and the US is providing Ukraine long range

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<v Speaker 1>GPS guided bomb made by Boeing that is capable of

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<v Speaker 1>hitting targets forty five minutes away, and in the same

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<v Speaker 1>train of thought, China's President Hijunpeng is preparing to visit

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<v Speaker 1>Moscow for a summit with Vladimir Putin and coming months.

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<v Speaker 1>Wall Street Journals saying probably in late spring or early summer.

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<v Speaker 1>The story says that she will push for multi party

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<v Speaker 1>talks on peace in Ukraine and to reiterate what it

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<v Speaker 1>calls no nuclear weapons be used, and China's foreign ministers

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<v Speaker 1>urging the world to stop drawing parallels between Ukraine and Taiwan.

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<v Speaker 1>The statement urges countries to stop fueling the fire and

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<v Speaker 1>stop shifting blame to China and stop touting Ukraine today

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<v Speaker 1>Taiwan tomorrow. In the US, the Supreme Court Justice is

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<v Speaker 1>expressing awareness about opening Internet companies to lawsuits coming from

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<v Speaker 1>harmful user posts. The issue is whether Section two thirty

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<v Speaker 1>would be weakened, potentially opening the floodgates two lawsuits. Global

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<v Speaker 1>News powered by more than twenty seven hundred journalists and

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<v Speaker 1>analysts and over one hundred and twenty countries. In San Francisco,

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<v Speaker 1>I'm at Baxter and this is Bloomberg. This is Bloomberg Daybreakcasia,

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<v Speaker 1>Brian Curtis and Rashad Salamat, and our guest is Schoo,

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<v Speaker 1>financial advisor and managing director at UBS. So the short

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<v Speaker 1>end of the yield curve back to the yearly highs

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<v Speaker 1>of four point seven two percent, the long end not

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<v Speaker 1>quite buying in yet to the idea that yields to

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<v Speaker 1>a race to the upside. The high there was four

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<v Speaker 1>and a quarter and we're at three ninety five. But

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<v Speaker 1>the stock market feels like it's cracking now do you

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<v Speaker 1>agree with that? Well, you know, we always thought that

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<v Speaker 1>the rally this year it's not as sustainable, um, because

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<v Speaker 1>inflation is not completely under control. Uh. I mean, it's

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<v Speaker 1>still far from the said target two percent. So the

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<v Speaker 1>latest UH data suggesting is too early to expect as

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<v Speaker 1>pivot from the said and raped may stay higher for longer.

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<v Speaker 1>So um, you know. And it was great that the

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<v Speaker 1>speed of the rally of the year was was very fast,

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<v Speaker 1>but it's probably going to slow down a bit until

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<v Speaker 1>we have inflation more under control. This is it isn't

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<v Speaker 1>as year, But I mean the point being, do we

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<v Speaker 1>have to now wait? Really full a semblance of perhaps

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<v Speaker 1>calm well could be the other way round, of course,

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<v Speaker 1>until the FIRMC minutes. Yes, I mean, I think it's

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<v Speaker 1>we're always invested. I mean we're not going to wait

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<v Speaker 1>any you know, connected on the sidelines, but you know,

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<v Speaker 1>until we have that or data, until inflation is more

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<v Speaker 1>under control. Uh, you know, we have our portfolio pretty

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<v Speaker 1>well that vertified um and and kind of just see

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<v Speaker 1>what will happen with inflation, if that's going to eventually

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<v Speaker 1>be eventually going to modoring. It would feel almost like

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<v Speaker 1>this is a great time for some equity investors in

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<v Speaker 1>that when interest rates are close to zero, you know,

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<v Speaker 1>everybody can get into business, and you know, you can

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<v Speaker 1>be a disruptor pretty easily because the cost of capital

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<v Speaker 1>is is nothing. Now it's much more difficult. So if

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<v Speaker 1>you're a company that has an entrenched position, is this

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<v Speaker 1>a good time? Yes, I mean, this is definitely a

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<v Speaker 1>good time to be very selective. And you're absolutely right

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<v Speaker 1>with you know, rates or at zero, anybody can get

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<v Speaker 1>into business. But uh, you know, and that's why we're

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<v Speaker 1>very very selective with equity opportunities um and, Uh, you know,

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<v Speaker 1>we still prefer defensive, value oriented stocks, but of course

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<v Speaker 1>there's always opportunities in in uh, you know, consumer stables

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<v Speaker 1>and healthcare still just a bigger trend for those those

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<v Speaker 1>type of sectors are good and in including very selective

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<v Speaker 1>technology stocks as well. Tell me here as well, you

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<v Speaker 1>know you under preferred to should say if you at

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<v Speaker 1>least prefer the financial technology. No, financials shortly should be

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<v Speaker 1>doing better than what they are, given that we have

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<v Speaker 1>at least now interest rates as opposed to zero and

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<v Speaker 1>tech because well we've got to beaten down so much

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<v Speaker 1>last year, right, Yeah, absolutely, I think our concern with

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<v Speaker 1>financials is the recession risks. I mean, of course a

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<v Speaker 1>lot of people took that off the table, a lot

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<v Speaker 1>of investors. But if unemployment rate rises, earnings will take

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<v Speaker 1>a hit. And additionally, thanks apodit rates are rising, which

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<v Speaker 1>could criminate interest income growth. So we are careful on

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<v Speaker 1>financials and also still very careful on technology because you know,

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<v Speaker 1>if that is going to continue to raise rates, even

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<v Speaker 1>if it's at a slower pace, there's a greater potential

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<v Speaker 1>for a drag for growth sectors, and that includes technology

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<v Speaker 1>as well. What do you make of the price wars

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<v Speaker 1>now in Chinese technology companies, particularly internet and e commerce firms.

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<v Speaker 1>It seems like a new wrinkle that now all of

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<v Speaker 1>a sudden. We have to worry about their their margins.

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<v Speaker 1>And this has nothing to do with regulation, right absolutely. UM,

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<v Speaker 1>I think with China it's you know, the prize wars

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<v Speaker 1>are inevitable. I mean, it's going, it's going to happen.

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<v Speaker 1>But and but we're still very positive in China despite

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<v Speaker 1>the reason equity setback. We do feel like you know,

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<v Speaker 1>with the reason reopening in China. You know, we're very

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<v Speaker 1>preferred on emerging market equities. UH, specifically within Chinese equities,

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<v Speaker 1>we like direct beneficiaries of reopening and not include sectors

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<v Speaker 1>such as pharmaceuticals, medical equipment, and transportation. Um. Internet is good.

0:12:50.360 --> 0:12:52.880
<v Speaker 1>There is a prize war. Um, there's gonna be winners

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<v Speaker 1>and losers. So it's just you have to be I mean,

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<v Speaker 1>investors have to be very selective. You're going to get

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<v Speaker 1>into Internet. But we still for more of the direct

0:13:01.240 --> 0:13:06.320
<v Speaker 1>reopening beneficiaries and China is still our most preferred Asia

0:13:06.440 --> 0:13:09.520
<v Speaker 1>strategy right now. Tell me something though, you mean you

0:13:09.559 --> 0:13:11.719
<v Speaker 1>do with a lot of the high net worth individuals

0:13:12.520 --> 0:13:15.240
<v Speaker 1>in US, Hong Kong and China here as well, can

0:13:15.240 --> 0:13:17.920
<v Speaker 1>you tell me how that mood has changed in recent months,

0:13:18.040 --> 0:13:21.600
<v Speaker 1>especially since the reopening and number two, What is the

0:13:21.600 --> 0:13:27.000
<v Speaker 1>biggest the most common question they're asking you. Yes, I mean,

0:13:27.240 --> 0:13:30.079
<v Speaker 1>this is really a good question. I mean, I think

0:13:30.280 --> 0:13:35.560
<v Speaker 1>high net worth investors are definitely more optimistic this year.

0:13:35.640 --> 0:13:39.200
<v Speaker 1>I mean, last year was mostly every you know, a

0:13:39.200 --> 0:13:43.000
<v Speaker 1>lot more conservative, a lot of more cash management. Investors

0:13:43.000 --> 0:13:45.800
<v Speaker 1>are afraid to put cash awarp because they were just

0:13:45.840 --> 0:13:50.160
<v Speaker 1>so much uncertainty. But this year especially seen inflation, even

0:13:50.200 --> 0:13:53.120
<v Speaker 1>though it's still high, the moderate a bit, seeing that

0:13:53.160 --> 0:13:57.280
<v Speaker 1>the economy is still intact in China's reopening, that that

0:13:57.400 --> 0:14:02.800
<v Speaker 1>provided more certainty than before. So investors are more optimistic

0:14:02.880 --> 0:14:05.199
<v Speaker 1>in in putting a little bit more cash to work,

0:14:05.880 --> 0:14:08.840
<v Speaker 1>but still very very cautious because there's still a lot

0:14:08.840 --> 0:14:14.160
<v Speaker 1>of uncertainty out there. And in terms of you know,

0:14:14.200 --> 0:14:18.679
<v Speaker 1>just investors top question on their mind, it's still you know,

0:14:19.240 --> 0:14:21.840
<v Speaker 1>the lag effect of the ray heikes. You know, the

0:14:21.880 --> 0:14:24.560
<v Speaker 1>investors are very worried about if there's going to if

0:14:24.600 --> 0:14:27.520
<v Speaker 1>this is going to drag out, if a recession could

0:14:27.560 --> 0:14:31.160
<v Speaker 1>still happen. So I think, you know, there's that optimism,

0:14:31.200 --> 0:14:34.640
<v Speaker 1>but there's also a lot of caution as well. But overall,

0:14:35.320 --> 0:14:37.880
<v Speaker 1>there's more cash put to work this year than than

0:14:38.000 --> 0:14:41.200
<v Speaker 1>the day last year, we've burned off a lot of

0:14:41.200 --> 0:14:45.160
<v Speaker 1>the froth. I suppose in some of the equity markets.

0:14:45.200 --> 0:14:47.760
<v Speaker 1>Interesting that the DAO is now negative for the year.

0:14:48.040 --> 0:14:51.080
<v Speaker 1>The Nasdaq is still up about ten percent. Do you

0:14:51.440 --> 0:14:54.320
<v Speaker 1>expect I mean, if you're looking now at say the

0:14:54.360 --> 0:14:57.120
<v Speaker 1>next six months or so, is the dividing line whether

0:14:57.200 --> 0:15:00.240
<v Speaker 1>or not we go into recession or not or what's

0:15:00.280 --> 0:15:04.440
<v Speaker 1>the main dividing line? Um. I think it's whether we

0:15:04.560 --> 0:15:07.560
<v Speaker 1>go into recession. And I think the biggest dividing line

0:15:07.800 --> 0:15:10.440
<v Speaker 1>it would be, you know, the said policy if said

0:15:10.560 --> 0:15:13.600
<v Speaker 1>is going to continue to high rates, because a lot

0:15:13.640 --> 0:15:16.440
<v Speaker 1>of the rally was driven this year because there's that

0:15:16.560 --> 0:15:19.440
<v Speaker 1>optimism that ray hikes are going to slow down or

0:15:19.440 --> 0:15:21.920
<v Speaker 1>it's going to stop, and but now you know, it's

0:15:21.960 --> 0:15:25.880
<v Speaker 1>kind of reality hits that it didn't. Inflation still not

0:15:26.000 --> 0:15:29.080
<v Speaker 1>under control and said it is very likely and actually

0:15:29.320 --> 0:15:32.680
<v Speaker 1>stress the fact that they are going to hips are essential.

0:15:33.040 --> 0:15:37.000
<v Speaker 1>So there's I mean that greer potential draft for growth sectors.

0:15:37.080 --> 0:15:40.040
<v Speaker 1>So yeah, you know that we have most of the concern.

0:15:41.160 --> 0:15:44.040
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