Speaker 1: This is Bloomberg Daybreak Asia. It is Wednesday, February twenty
Speaker 1: second in Hong Kong, Tuesday February twenty first in New
Speaker 1: York and coming up today. US stocks sell off on
Speaker 1: fears the FED isn't close to ending the tightening cycle.
Speaker 1: Retail giants Walmart and Home Depot give gloomy profit forecasts
Speaker 1: for the year ahead. Fears of a price war between
Speaker 1: China's tech giants grows as Beijing wind's back it's crackdown
Speaker 1: on the tech sector. Joe Biden and warsaws as Ukraine
Speaker 1: will never fall and that Vladimir Putin has lost standing
Speaker 1: in the world. Poutin backs away from arms control agreement,
Speaker 1: reports that Shijianping plans to visit Moscow in coming months.
Speaker 1: I'm at Baxter with Global News. That's all straight Ahead
Speaker 1: on Bloomberg Daybreak Asia, the business news you need to
Speaker 1: start your day in just one fifteen minute podcast available
Speaker 1: on Apples, Spotify, the Bloomberg Business app and everywhere you
Speaker 1: get your podcasts. Good morning, I'm Dead Prisoner and I'm
Speaker 1: Brian Curtis. Here are the stories we're following today. Traders
Speaker 1: will be looking to Wednesday's FED minutes for clues on
Speaker 1: the Central Bank's rate hiking path, Let's get that story
Speaker 1: from Bloomberg's Michael McKee. The surprise is gone now that
Speaker 1: the presidents of the Cleveland and Saint Louis fedbanks have
Speaker 1: said they saw a case for a half percentage point
Speaker 1: increase at the February first meeting. If there were a
Speaker 1: significant number of others who felt the same way, that
Speaker 1: could influence views of the Fed's next move, given the
Speaker 1: strong data we've seen since then. Moreover, at his post
Speaker 1: meeting news conference, FED Chair j Powell teased a discussion
Speaker 1: on the path forward for rates that we'd learn about
Speaker 1: when the minutes were released. What might have been said
Speaker 1: about how high rates will need to go, how fast,
Speaker 1: and for how long. A lot of that will depend
Speaker 1: on how FED officials felt about the prospects for inflation.
Speaker 1: Another discussion to watch in the minutes, Michael McKee, Bloomberg
Speaker 1: Daybreak Asia. So onto the big retailers. We begin with Walmart.
Speaker 1: The company reported sales and profit above expectations for the
Speaker 1: last quarter. Shoppers appeared to flock to those stores during
Speaker 1: the holiday season to take advantage of Walmart's low prices.
Speaker 1: Even so, the retail giant warned of tougher times ahead.
Speaker 1: Walmart is now forecasting a second straight decline in annual profit. Here,
Speaker 1: as the company's chief financial officer, John David Rainey, you're
Speaker 1: seeing that our value proposition and certainly resonating with consumers
Speaker 1: right now. But there's a lot of macro uncertainty again
Speaker 1: as we look across the consumers across the globe, but
Speaker 1: certainly here in the US, balance sheets are getting thinner.
Speaker 1: You're seeing savings rates decline, and we really haven't been
Speaker 1: in a position where we've seen the FED tighten at
Speaker 1: this rate. And so as we look forward and give
Speaker 1: guidance for the full year, we're adopting a cautious outlook
Speaker 1: and we want to make sure that we're responsive to
Speaker 1: whatever environment that we're going to find ourselves at. John
Speaker 1: David Rainey, there, the CFO of Walmart. The news wasn't
Speaker 1: a lot better for Home Depot, the home improvement retailers
Speaker 1: now forecasting a profit decline for the full year. The
Speaker 1: companies cited certainty tied to those higher interest rates now.
Speaker 1: Home Depot said that could keep Americans from moving and
Speaker 1: renovating their homes. Bryan Companies in China and around the
Speaker 1: world have been warned that they will be punished by
Speaker 1: the US if they keep doing business with Russia. That
Speaker 1: story from Bloomberg's and Kates. The Treasury Department says the
Speaker 1: cost of violating the Biden administration's sanctions against Moscow will
Speaker 1: be steep, and that corporations and banks risk being cut
Speaker 1: off from the US at its partner's financial systems. A
Speaker 1: year after Vladimir Putin invaded Ukraine, the sanctions have had
Speaker 1: a devastating impact on Russia's gas exports and imports of
Speaker 1: high tech goods, but they have yet to seriously diminish
Speaker 1: Putin's ability to wage war. In Washington and Kate's Bloomberg
Speaker 1: Daybreak Asia, the big tech firms in China appear to
Speaker 1: be on the verge of a price war. We have
Speaker 1: that story from Bloomberg's Von Men. China's internet and e
Speaker 1: commerce firms are beaving up efforts to outdo each other.
Speaker 1: Media reports suggested jad dot Com was planning a one
Speaker 1: point five billion dollars subsidy campaign to compete against Ping
Speaker 1: Dual Door. Elsewhere, net Ees and miHoYo are upping their
Speaker 1: battle against gaming leader ten Cent as competition rises, concerns
Speaker 1: over margins grow, and equity investors have taken notice. JDM
Speaker 1: Pingdodo fell ten to eleven percent in New York and
Speaker 1: Ali Baba was down nearly five percent. The selling helped
Speaker 1: push the NASDA Golden Dragon China Index down two point
Speaker 1: nine percent in Hong Kong. I'm Ivan Mann Bloomberg Daybreak Asia.
Speaker 1: Microsoft is promising that Call of Duty will not be
Speaker 1: collateral damage as it tries to get approval for its
Speaker 1: planned purchase of Activision Blizzard. The story from Bloomberg's Denise Pellegrini.
Speaker 1: Britain's anti trust watchdog has suggested Microsoft agree to divest
Speaker 1: Call of Duty to deflect criticism that buying its owner
Speaker 1: Activision would stifle competition. But Call of Duty is one
Speaker 1: of the most lucrative game franchises in the world, and
Speaker 1: speaking after a European Union hearing, Microsoft president Brad Smith said,
Speaker 1: no way. We don't see a viable path to sell
Speaker 1: off the part of this company, Activision Blizzard that makes
Speaker 1: Call of Duty. Microsoft did manage to flying two more
Speaker 1: opponents of the merger today. It cut deals sharing Call
Speaker 1: of Duty with Nintendo and also in Vidia's chief force
Speaker 1: in addition to the antitrust concerns in Europe. Here in
Speaker 1: the US, the FTC has already sued to block microsoft
Speaker 1: sixty nine billion dollars deal. Denise Pelligriny Bloomberg day Breakasia.
Speaker 1: I'm Brian Curtis, along with Doug Krisner and Rashad Salamat
Speaker 1: will join us in a few moments. Now it's time
Speaker 1: for Global News. The US President Joe Biden marking the
Speaker 1: one year anniversary of Russia's invasion in Ukraine by saying
Speaker 1: that Vladimir Putin will never find victory. Ed Baxter has
Speaker 1: Global News in the nine sixty news room. Ed. Yeah,
Speaker 1: that's exactly right, Brian Biden, in fact, saying, rather than
Speaker 1: gating power and control, Putin's lost power and global standing,
Speaker 1: President Putinsk front it was something today that you didn't
Speaker 1: think was possible a year ago. The democracy of the world.
Speaker 1: I've grown stronger, not weaker, But the autocrat to the
Speaker 1: world have grown weaker, not stronger. And a message to
Speaker 1: NATO there should be no doubt our support. Free grain
Speaker 1: will not waiver, NATO will not be divided, and we
Speaker 1: will not tire. Now, Biden, aiming for the Russian people,
Speaker 1: saying the US and Europe do not seek to destroy
Speaker 1: or control Russia. But freedom. There is no sweeter word
Speaker 1: than freedom. There's no nobler goal than freedom. There's no
Speaker 1: higher aspiration than freedom, and that the US will not
Speaker 1: allow a Russian victory in Ukraine. Bloomberg's Amory horndern in
Speaker 1: Warsaw says, a unifying message for NATO was followed a
Speaker 1: message to the Polish people as well as these neighbor
Speaker 1: neighboring countries around Ukraine was about this ironclad commitment to
Speaker 1: Article five. This is something that would be very much
Speaker 1: so welcomed by the Polish people. Yeah, and NATO countries
Speaker 1: defending each other if under attack. Now, Earlier in the day,
Speaker 1: Vladimir Putin pulled out participation in the nuclear agreement. He
Speaker 1: threatened that there would be a response if the US
Speaker 1: were to get long range missiles. We've seen throughout the
Speaker 1: prior twelve months a little bit of hesitation from the West,
Speaker 1: whether it was high Mars or another advance on a
Speaker 1: military system. Now, Putin did say he would abide by
Speaker 1: weapons limits, and the US is providing Ukraine long range
Speaker 1: GPS guided bomb made by Boeing that is capable of
Speaker 1: hitting targets forty five minutes away, and in the same
Speaker 1: train of thought, China's President Hijunpeng is preparing to visit
Speaker 1: Moscow for a summit with Vladimir Putin and coming months.
Speaker 1: Wall Street Journals saying probably in late spring or early summer.
Speaker 1: The story says that she will push for multi party
Speaker 1: talks on peace in Ukraine and to reiterate what it
Speaker 1: calls no nuclear weapons be used, and China's foreign ministers
Speaker 1: urging the world to stop drawing parallels between Ukraine and Taiwan.
Speaker 1: The statement urges countries to stop fueling the fire and
Speaker 1: stop shifting blame to China and stop touting Ukraine today
Speaker 1: Taiwan tomorrow. In the US, the Supreme Court Justice is
Speaker 1: expressing awareness about opening Internet companies to lawsuits coming from
Speaker 1: harmful user posts. The issue is whether Section two thirty
Speaker 1: would be weakened, potentially opening the floodgates two lawsuits. Global
Speaker 1: News powered by more than twenty seven hundred journalists and
Speaker 1: analysts and over one hundred and twenty countries. In San Francisco,
Speaker 1: I'm at Baxter and this is Bloomberg. This is Bloomberg Daybreakcasia,
Speaker 1: Brian Curtis and Rashad Salamat, and our guest is Schoo,
Speaker 1: financial advisor and managing director at UBS. So the short
Speaker 1: end of the yield curve back to the yearly highs
Speaker 1: of four point seven two percent, the long end not
Speaker 1: quite buying in yet to the idea that yields to
Speaker 1: a race to the upside. The high there was four
Speaker 1: and a quarter and we're at three ninety five. But
Speaker 1: the stock market feels like it's cracking now do you
Speaker 1: agree with that? Well, you know, we always thought that
Speaker 1: the rally this year it's not as sustainable, um, because
Speaker 1: inflation is not completely under control. Uh. I mean, it's
Speaker 1: still far from the said target two percent. So the
Speaker 1: latest UH data suggesting is too early to expect as
Speaker 1: pivot from the said and raped may stay higher for longer.
Speaker 1: So um, you know. And it was great that the
Speaker 1: speed of the rally of the year was was very fast,
Speaker 1: but it's probably going to slow down a bit until
Speaker 1: we have inflation more under control. This is it isn't
Speaker 1: as year, But I mean the point being, do we
Speaker 1: have to now wait? Really full a semblance of perhaps
Speaker 1: calm well could be the other way round, of course,
Speaker 1: until the FIRMC minutes. Yes, I mean, I think it's
Speaker 1: we're always invested. I mean we're not going to wait
Speaker 1: any you know, connected on the sidelines, but you know,
Speaker 1: until we have that or data, until inflation is more
Speaker 1: under control. Uh, you know, we have our portfolio pretty
Speaker 1: well that vertified um and and kind of just see
Speaker 1: what will happen with inflation, if that's going to eventually
Speaker 1: be eventually going to modoring. It would feel almost like
Speaker 1: this is a great time for some equity investors in
Speaker 1: that when interest rates are close to zero, you know,
Speaker 1: everybody can get into business, and you know, you can
Speaker 1: be a disruptor pretty easily because the cost of capital
Speaker 1: is is nothing. Now it's much more difficult. So if
Speaker 1: you're a company that has an entrenched position, is this
Speaker 1: a good time? Yes, I mean, this is definitely a
Speaker 1: good time to be very selective. And you're absolutely right
Speaker 1: with you know, rates or at zero, anybody can get
Speaker 1: into business. But uh, you know, and that's why we're
Speaker 1: very very selective with equity opportunities um and, Uh, you know,
Speaker 1: we still prefer defensive, value oriented stocks, but of course
Speaker 1: there's always opportunities in in uh, you know, consumer stables
Speaker 1: and healthcare still just a bigger trend for those those
Speaker 1: type of sectors are good and in including very selective
Speaker 1: technology stocks as well. Tell me here as well, you
Speaker 1: know you under preferred to should say if you at
Speaker 1: least prefer the financial technology. No, financials shortly should be
Speaker 1: doing better than what they are, given that we have
Speaker 1: at least now interest rates as opposed to zero and
Speaker 1: tech because well we've got to beaten down so much
Speaker 1: last year, right, Yeah, absolutely, I think our concern with
Speaker 1: financials is the recession risks. I mean, of course a
Speaker 1: lot of people took that off the table, a lot
Speaker 1: of investors. But if unemployment rate rises, earnings will take
Speaker 1: a hit. And additionally, thanks apodit rates are rising, which
Speaker 1: could criminate interest income growth. So we are careful on
Speaker 1: financials and also still very careful on technology because you know,
Speaker 1: if that is going to continue to raise rates, even
Speaker 1: if it's at a slower pace, there's a greater potential
Speaker 1: for a drag for growth sectors, and that includes technology
Speaker 1: as well. What do you make of the price wars
Speaker 1: now in Chinese technology companies, particularly internet and e commerce firms.
Speaker 1: It seems like a new wrinkle that now all of
Speaker 1: a sudden. We have to worry about their their margins.
Speaker 1: And this has nothing to do with regulation, right absolutely. UM,
Speaker 1: I think with China it's you know, the prize wars
Speaker 1: are inevitable. I mean, it's going, it's going to happen.
Speaker 1: But and but we're still very positive in China despite
Speaker 1: the reason equity setback. We do feel like you know,
Speaker 1: with the reason reopening in China. You know, we're very
Speaker 1: preferred on emerging market equities. UH, specifically within Chinese equities,
Speaker 1: we like direct beneficiaries of reopening and not include sectors
Speaker 1: such as pharmaceuticals, medical equipment, and transportation. Um. Internet is good.
Speaker 1: There is a prize war. Um, there's gonna be winners
Speaker 1: and losers. So it's just you have to be I mean,
Speaker 1: investors have to be very selective. You're going to get
Speaker 1: into Internet. But we still for more of the direct
Speaker 1: reopening beneficiaries and China is still our most preferred Asia
Speaker 1: strategy right now. Tell me something though, you mean you
Speaker 1: do with a lot of the high net worth individuals
Speaker 1: in US, Hong Kong and China here as well, can
Speaker 1: you tell me how that mood has changed in recent months,
Speaker 1: especially since the reopening and number two, What is the
Speaker 1: biggest the most common question they're asking you. Yes, I mean,
Speaker 1: this is really a good question. I mean, I think
Speaker 1: high net worth investors are definitely more optimistic this year.
Speaker 1: I mean, last year was mostly every you know, a
Speaker 1: lot more conservative, a lot of more cash management. Investors
Speaker 1: are afraid to put cash awarp because they were just
Speaker 1: so much uncertainty. But this year especially seen inflation, even
Speaker 1: though it's still high, the moderate a bit, seeing that
Speaker 1: the economy is still intact in China's reopening, that that
Speaker 1: provided more certainty than before. So investors are more optimistic
Speaker 1: in in putting a little bit more cash to work,
Speaker 1: but still very very cautious because there's still a lot
Speaker 1: of uncertainty out there. And in terms of you know,
Speaker 1: just investors top question on their mind, it's still you know,
Speaker 1: the lag effect of the ray heikes. You know, the
Speaker 1: investors are very worried about if there's going to if
Speaker 1: this is going to drag out, if a recession could
Speaker 1: still happen. So I think, you know, there's that optimism,
Speaker 1: but there's also a lot of caution as well. But overall,
Speaker 1: there's more cash put to work this year than than
Speaker 1: the day last year, we've burned off a lot of
Speaker 1: the froth. I suppose in some of the equity markets.
Speaker 1: Interesting that the DAO is now negative for the year.
Speaker 1: The Nasdaq is still up about ten percent. Do you
Speaker 1: expect I mean, if you're looking now at say the
Speaker 1: next six months or so, is the dividing line whether
Speaker 1: or not we go into recession or not or what's
Speaker 1: the main dividing line? Um. I think it's whether we
Speaker 1: go into recession. And I think the biggest dividing line
Speaker 1: it would be, you know, the said policy if said
Speaker 1: is going to continue to high rates, because a lot
Speaker 1: of the rally was driven this year because there's that
Speaker 1: optimism that ray hikes are going to slow down or
Speaker 1: it's going to stop, and but now you know, it's
Speaker 1: kind of reality hits that it didn't. Inflation still not
Speaker 1: under control and said it is very likely and actually
Speaker 1: stress the fact that they are going to hips are essential.
Speaker 1: So there's I mean that greer potential draft for growth sectors.
Speaker 1: So yeah, you know that we have most of the concern.
Speaker 1: This is Bloomberg Daybreak, Gasia, your morning brief on this
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