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Speaker 1: Good morning. I'm Brian Curtis.

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Speaker 2: And I'm Doug Krisner. Here are the stories we're following today.

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Speaker 1: Iranian backed Houties are vowing to respond to the US

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Speaker 1: and British led air strikes after those recent attacks. Ed

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Speaker 1: Baxter has that story and more from San Francisco.

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Speaker 3: Ed.

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Speaker 4: Yeah, that's right, Brian. Two days and the US is

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Speaker 4: vowing to continue more attacks after it says dozens of

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Speaker 4: targets were struck in Yemen overnight. National Security Advisor Jake

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Speaker 4: Sullivan on ABC has heard on Bloomberg says the US

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Speaker 4: has prepared for whatever the Houthies want to bring, and

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Speaker 4: that damage to them has really been done.

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Speaker 3: We believe they had good effect in reducing degrading the

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Speaker 3: capabilities of the militias and of the Houthies, and as necessary,

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Speaker 3: we will continue to take action.

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Speaker 4: And NSC spokesman John Kirby, talking about both yesterday and Friday,

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Speaker 4: says it will continue.

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Speaker 5: What you saw Friday night was just the first round

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Speaker 5: and it's not going to be the last one by

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Speaker 5: any stretch.

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Speaker 4: And Ali al Cahum, a member of the Houthi Political Council,

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Speaker 4: says there is now open war. Meanwhile, Sullivan talking about Israel,

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Speaker 4: says a hostage release pause and the war is proving

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Speaker 4: to be elusive, and says it is in Hamas Court

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Speaker 4: right now.

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Speaker 3: From our perspective, the security of Israel should be sacred.

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Speaker 3: It should not be a political game, and so everyone

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Speaker 3: should get behind a comprehensive package of the kind that

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Speaker 3: bipartisan bipartisan group of senators are negotiating as we speak.

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Speaker 4: Yeah, so going to the package. You may see it

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Speaker 4: from the Senate this afternoon. But House Speaker Mike Johnson

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Speaker 4: on NBC has heard on Bloomberg, says there are two

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Speaker 4: packages right now in the House and wants them move

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Speaker 4: to the Senate and approved.

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Speaker 6: This border is out of control. All these problems have

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Speaker 6: mounted in the Senate has been dithering ever since. We

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Speaker 6: cannot wait anymore. The reason we are going to send

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Speaker 6: the new Israel package over is because the time is

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Speaker 6: urgent and we have to take care of that responsibility now.

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Speaker 4: House Minority Leader Hakim Jeffrey says the bills cannot forget

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Speaker 4: about Ukraine and Asia.

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Speaker 7: First and foremost certainly to support Ukraine's effort to push

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Speaker 7: back against Russian aggression. Also to support our allies in

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Speaker 7: the Indo Pacific, Taiwan, Japan, South Korea. The legislation being

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Speaker 7: put forth by House Republicans does none of that. The

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Speaker 7: responsible approach is a comprehensive one to address America's national

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Speaker 7: security priority.

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Speaker 4: By the way, Johnson on NBC when asked directly whether

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Speaker 4: Donald Trump was calling the shots and the House said

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Speaker 4: of course not that he Johnson is calling the shots.

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Speaker 4: And Israeli Prime Minister Benjamin net Yahu says he does

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Speaker 4: not need any help navigating relations with the US and

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Speaker 4: apparent reference to criticisms from one of his ministers that

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Speaker 4: the Biden administration hasn't fully backed Israel and its war

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Speaker 4: against Hamas. California's coast being battered by some heavy weather,

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Speaker 4: heavy rains, flood warnings from north to the south. It's

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Speaker 4: expected to last most of the day with showers into tomorrow.

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Speaker 4: There has been some flooding in the Modterrey area and

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Speaker 4: at and t at Pebble Beach. Round four has been

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Speaker 4: postponed until tomorrow with hopes of getting it in. So

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Speaker 4: the leader board when we stopped yesterday Wyndam Clark a

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Speaker 4: top at seventeen under Ludwig Olberg at sixteen under Matejo

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Speaker 4: Pavon at fifteen under Mark Hubbard and Thomas the Tree

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Speaker 4: at fourteen under let's hope they can get it in.

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Speaker 4: Some really good shooting out there with definitely less than

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Speaker 4: favorable conditions. And the World Cup twenty twenty six final

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Speaker 4: has been awarded to New York City, beating out Los

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Speaker 4: Angeles and Dallas. Global News twenty four hours a day

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Speaker 4: and whenever you want it with Bloomberg News Now in

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Speaker 4: San Francisco, I'm at Baxter in This is Bloomberg.

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Speaker 1: Brian, thanks very much. Coming up on seven minutes past

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Speaker 1: the hour. I'm Brian Curtis along with Chrisner, and we

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Speaker 1: look at some of the top business stories. Now, well,

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Speaker 1: we mentioned a few moments ago that it's been a

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Speaker 1: tough period for Chinese stocks. The CSI three hundred was

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Speaker 1: down six point three percent in the month of January,

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Speaker 1: and that was the sixth consecutive month of losses. Well,

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Speaker 1: now China is pledging to stabilize markets after stocks were sinking. There,

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Speaker 1: let's get more on the story from Bloomberg's Bonny Ow

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Speaker 1: in Hong Kong.

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Speaker 8: The CSI three hundred plunged much as three point four

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Speaker 8: percent before finishing down one point two percent. The China

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Speaker 8: Securities Regulatory Commission filed to prevent abnormal fluctuations, but it

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Speaker 8: offered no specifics on how to end a sell off.

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Speaker 8: Investors took to social media to express frustration. The selloff

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Speaker 8: has erased more than six trillion dollars of value in

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Speaker 8: the Chinese economy. The CSRC also said it would guide

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Speaker 8: more funds into the market and that it would crack

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Speaker 8: down on what it caused malicious short selling and insider trading.

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Speaker 8: The lead academic Liu yu Hue, said China should do more.

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Speaker 8: Leo told State media China should set up a stock

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Speaker 8: stabilization fund as soon as possible. In Hong Kong, I'm

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Speaker 8: Bonnie al Bloomberg Radio.

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Speaker 2: Former President Donald Trump is saying he might impose a

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Speaker 2: new terror of fund Chinese goods if elected. Trump told

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Speaker 2: The Washington Post he was considering a sixty percent terror

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Speaker 2: fund Chinese imports, and when asked about this today on

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Speaker 2: Fox News Sunday Morning Futures, Trump rejected the idea his

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Speaker 2: move could start a trade war.

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Speaker 5: You know, obviously I'm not looking at to her China.

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Speaker 5: I want to get along with China. I think it's

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Speaker 5: great but they've really taken advantage of our country, and

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Speaker 5: we turned it around. We put big tariffs on steel.

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Speaker 5: I saved the steel companies, and now Japan is buying

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Speaker 5: US Steel. US Steel. You know what a name that is.

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Speaker 5: That's the most important name. Fifty years ago there was

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Speaker 5: no company like US Steel. Now that Japan is buying it,

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Speaker 5: I don't think I'd let that deal go through.

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Speaker 2: By the way, former President Donald Trump there now his

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Speaker 2: comments on tariffs only add to the already long list

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Speaker 2: of concerns for domestic Chinese investors.

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Speaker 1: Brian Well, let's switch to a look at the economy

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Speaker 1: in the US. Friday's jobs report shows that US companies

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Speaker 1: boosted payrolls by three hundred and fifty three thousand in January,

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Speaker 1: and with the revisions, December's hiring figure also was increased.

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Speaker 1: Now the number suggests the reacceleration that is likely to

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Speaker 1: delay any rate cuts for the time being. Mohammedel Arian,

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Speaker 1: president of Queen's College, Cambridge, and the Bloomberg opinion columnist, weighed.

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Speaker 9: In, Wow, I mean, what an amazing job report. It

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Speaker 9: just confirms that this is an exceptional labor market that's

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Speaker 9: going to feed into the exceptionalism of the US economy.

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Speaker 9: I do think it's a bit of a headache for

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Speaker 9: the FED because of the wage growth numbers for your markets. Look,

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Speaker 9: this means March is off the table.

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Speaker 1: That's Bloomberg opinion colling this. Mohammed el Arian us Ism

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Speaker 1: data out later this week could further indicate the Fed's

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Speaker 1: path forward on rate cuts. According to analysis from Bloomberg Intelligence,

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Speaker 1: January's ISM services gauge is expected to rise slightly from Decembers.

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Speaker 1: Let's get to our guest, Garfield. Reynolds joins us Bloomberg

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Speaker 1: Chief correspondent for rates. So we just talked generally here

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Speaker 1: about conditions in the marketplace. Garfield, the strong jobs number

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Speaker 1: yields up in the dollar up. The Atlanta Fed GDP

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Speaker 1: now figure is pointing toward four point two percent growth.

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Speaker 1: So there's a slight negative for markets if the FED

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Speaker 1: is less likely to cut rates. But there's a slight

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Speaker 1: positive for the markets for risk assets. That growth like that,

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Speaker 1: you know, is pretty pretty consistent with earnings. So where

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Speaker 1: are we in terms of the balance on risk.

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Speaker 10: Well, the balance seems to have shifted quite markedly, you know,

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Speaker 10: towards risk with the only the only lingering concern there

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Speaker 10: is that your bond yields could move higher, which raises

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Speaker 10: the bar for valuations, you know, and the bond yields

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Speaker 10: can move higher because some of those Fed rate cuts

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Speaker 10: that had been priced in, we already lost a little bit,

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Speaker 10: well not quite one, but we're now at exactly five

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Speaker 10: rate cuts priced in. At some stages of the last

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Speaker 10: couple of weeks, we were looking at a good chance

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Speaker 10: of a sixth rate cut, So that six rate cutters

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Speaker 10: off the table, the March rate cutters off the table.

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Speaker 10: But you know, the reasons why it is off the

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Speaker 10: table are more to do with economic strength and with

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Speaker 10: FED hawkishness. So for the moment, that's that's a positive,

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Speaker 10: even if a slightly cautious one you have for risk assets,

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Speaker 10: especially because you know there was some back and forth

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Speaker 10: about it. But you know a lot of the more

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Speaker 10: important big companies earnings are out and on balance they've

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Speaker 10: been you know, at least moderately positive, in some cases

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Speaker 10: extremely positive. So that sets things up where equities look

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Speaker 10: like outperforming and bonds definitely look like underperforming.

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Speaker 2: Yeah, no doubt about that. I mean, right now, the

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Speaker 2: swaps market, I think is indicating to the odds for

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Speaker 2: a move in March to say a cut of twenty

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Speaker 2: five basis points. That probability is only around fifteen percent

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Speaker 2: right now, and since Friday, the May contract, a swaps

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Speaker 2: market is no longer fully pricing in a rate cut,

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Speaker 2: So we're looking farther down the road, no question about it.

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Speaker 2: Let's not forget that consumer sentiment data which was up

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Speaker 2: in a very very big way as well. I'm wondering

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Speaker 2: whether you're hearing rumblings, whether people are beginning to express

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Speaker 2: any concern of a reacceleration in inflation. I mean, we

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Speaker 2: know that the market has embraced this idea that inflation

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Speaker 2: has been coming down. That's let us into the conversation

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Speaker 2: around rate cuts. But is there a risk that inflation

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Speaker 2: could pick up?

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Speaker 10: Well, that risk is definitely there. You know a couple

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Speaker 10: of things that happened going on to some extent out

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Speaker 10: of the surface. We did get a marked increase in

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Speaker 10: break even rates, you know, the bond market's best estimate

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Speaker 10: of where inflation is going to average over the next

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Speaker 10: number of years, depending on the tenor the two year

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Speaker 10: break even rate rose about thirty something basis points in January,

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Speaker 10: which was the biggest monthly increase since last February, so

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Speaker 10: that's a warning. The thing that has mitigated against that

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Speaker 10: a lot has been the way that oil prices have

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Speaker 10: remained lower. You're, even amid what's been happening in the

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Speaker 10: Middle East, we haven't seen crude prices significantly advanced, and

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Speaker 10: you know, even this morning, after we had those attacks

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Speaker 10: over the weekend, it's not a huge jump, and crude

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Speaker 10: oil sold off quite strongly at the end of last week.

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Speaker 10: So as long as you have crude oil staying in

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Speaker 10: the sort of range it's been, then you don't get

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Speaker 10: that feeding through the gasoline prices. Then you don't get

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Speaker 10: both the direct impact on inflation from higher gasoline prices

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Speaker 10: and in particular, the sort of thing that worries central bankers.

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Speaker 10: You don't get that feeding into stronger consumer expectations of

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Speaker 10: increased prices.

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Speaker 1: So it's going to be really interesting to watch inflation there.

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Speaker 1: Now let's switch to China, because we did get an

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Speaker 1: offer more support from the CSRC. It didn't look like

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Speaker 1: there was anything too specific in there. They did talk

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Speaker 1: about cracking down on what they referred to as malicious

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Speaker 1: short selling and insider trading, So I raised this point

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Speaker 1: earlier that it still seems to be that Chinese regulators

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Speaker 1: think that it's bad actors that are playing the role here,

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Speaker 1: it's not just investors losing confidence. So two prong question one,

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Speaker 1: is this going to work to bring confidence back to

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Speaker 1: the market, and what do we think of the regulators?

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Speaker 10: Well, a Chinese regulators that stuck between a rock and

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Speaker 10: a hard place, because you know, they as long as

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Speaker 10: you've got markets, their markets kind of want to be free,

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Speaker 10: and so you're going to have people wanting to sell

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Speaker 10: short companies that look like the prices are going to fall,

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Speaker 10: and you're also it's a bit different if if you're

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Speaker 10: the SEC and the S and P five hundred drops

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Speaker 10: by ten percent, well that's not your fault unless it's

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Speaker 10: somebody who's been breaking the rules and you haven't caught them.

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Speaker 10: But there's kind of an instinct in China that you

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Speaker 10: under the wise leadership of Sizingping and the Communist Party,

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Speaker 10: common prosperity is the goal and things are going to improve.

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Speaker 10: And the economy did end up doing better last year

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Speaker 10: than a lot of people expected, and yet the stock

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Speaker 10: market did worse. So there's definitely some pressure there implicitly

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Speaker 10: and perhaps even explicitly to for regulators to make the

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Speaker 10: markets conform better with how the authorities think the economy

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Speaker 10: is going. The difficulty that they face is the more

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Speaker 10: they fret and the more they try and impose a

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Speaker 10: direction on equities, the more that's likely the spook investors.

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Speaker 10: There was data out over the weekend. I think about,

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Speaker 10: you know, strong outflows into ETFs to you know, the

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Speaker 10: Chinese investors want to bet on foreign stocks because they're

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Speaker 10: the picture is clearer, you can get a better read

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Speaker 10: on where things go to go. And the other difficulty

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Speaker 10: is that there are some concerns about the Chinese economy's

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Speaker 10: long term direction. So anytime you manage to goose the

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Speaker 10: share market higher, what you potentially do is offer a

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Speaker 10: more attractive exit point for people who might have gone

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Speaker 10: long earlier. They got trapped. They're looking at a twenty

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Speaker 10: percent loss. You can get it to grow ten percent.

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Speaker 10: They're going to go, well, I think I'm going to

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Speaker 10: take that ten percent loss instead of a twenty percent

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Speaker 10: loss and put my money where I've got a better

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Speaker 10: clue of what's going to happen.

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Speaker 2: So with a deterioration we've been talking about in the

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Speaker 2: equity market, in China, along with the problems in the

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Speaker 2: housing market in low confidence. Generally speaking, very quickly, Garfield

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Speaker 2: in about thirty seconds or so. Does that mean that

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Speaker 2: the bond market in China is where you want to

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Speaker 2: be right now?

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Speaker 10: Well, the bond market certainly looks more likely to perform

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Speaker 10: decently in China. It's already gained a lot, so that's

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Speaker 10: a concern. The other difficulty you have is, of course

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Speaker 10: it's a managed currency regime, and that makes it more

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Speaker 10: complicated for investors to get into an out of Chinese bonds,

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Speaker 10: But yet they look more attractive than equities at the timement.

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Speaker 10: Mm hmm