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

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

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Speaker 1: President Biden is vowing to retaliate after another attack on

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Speaker 1: a US military base by Iran backed militants, and Baxter

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Speaker 1: has this story and more in San Francisco. Ed.

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Speaker 3: Yeah, right, you're right, Brian attack and Jordan killed three

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Speaker 3: military wounded twenty five others. It was a drone attack,

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Speaker 3: the official line from the White Houses and officials are

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Speaker 3: still gathering details and will act pharmacy. A senior operations officer,

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Speaker 3: Daryl Blocker tells ABC this is not really new.

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Speaker 4: The administration has been dealing with this for over a decade.

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Speaker 5: I know it seems new in the sense of the.

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Speaker 4: Hamas kind of angle to it now, but our forces

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Speaker 4: and our partners in the region have been fighting this

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Speaker 4: and dealing with this issue for a long time.

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Speaker 1: Yeah.

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Speaker 3: The new chair of the Joint Chiefs of Staff mean

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Speaker 3: while General C. Q. Brown says, the questions in the

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Speaker 3: Middle East boiled down to deterrens conflict.

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Speaker 2: Do you want us in a full scale war?

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Speaker 4: And that's the goal is to turn them and we

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Speaker 4: don't want to go down the path of greater escalation

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Speaker 4: that drives to a much broader conflict within the region.

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Speaker 3: Yeah, Brown says, a constant balancing act. President Biden's Energy

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Speaker 3: Secretary Security Advisor Amos Hawkstein on CBS has heard on

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Speaker 3: Bloomberg says the impact of who the rebel attacks on

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Speaker 3: commercial ships in the Red Sea is limited and that

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Speaker 3: any impact in the US economy will be very his

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Speaker 3: word muted, but says we should all be concerned.

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Speaker 6: We want to do everything we can to prevent an

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Speaker 6: escalation of that lower level conflict into an all out

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Speaker 6: conflict that would drag US further into war and risk

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Speaker 6: civilian lives on both sides. And that's what we're trying

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Speaker 6: to do, is to avoid that.

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Speaker 3: SA says cost pressures have been more logistics than on

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Speaker 3: energy commodities. That reports out of DC that the Senate

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Speaker 3: negotiators are making progress toward an immigration compromise bill. One

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Speaker 3: of the architects is Republican James Lankford, and on CBS

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Speaker 3: has heard on, Bloomberg says, very high hopes.

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Speaker 1: Everyone's looking to be able to read the bill at

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Speaker 1: this point.

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Speaker 2: That's the key aspect.

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Speaker 3: We're working the final aspects of it to try to

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Speaker 3: be able to get it out so everyone can get

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Speaker 3: a chance to read it. Right now, they're all functioning

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Speaker 3: off of Internet rumors of what's in the bill, and

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Speaker 3: many of them are false. Yeah, and he says people

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Speaker 3: want to go through it and look at it for themselves.

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Speaker 3: Donald Trump, meanwhile, as you know, said he doesn't want

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Speaker 3: it passed. And Democrat Tim Kaine says, that makes no

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Speaker 3: sense to.

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Speaker 4: Know that fentel is coming over the border for Mexico,

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Speaker 4: largely through ports of entry.

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Speaker 2: This bill will help us deal with that. And that's

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Speaker 2: why when a President Trump says vote no, wait for

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Speaker 2: a year, wait for two years, people can't wait.

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Speaker 3: Biden is endorsing it. The House will be another matter,

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Speaker 3: and Fentanel also an issue for US China relations officials

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Speaker 3: is set to meet in Beijing this week to talk

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Speaker 3: about China clamping down on the trafficking of the deadly drug.

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Speaker 3: It marks the first person discussion of a group set

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Speaker 3: up following the November meeting between Presidents Biden and she.

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Speaker 3: It was twenty four hours a day, whenever you want

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Speaker 3: it with Bloomberg News Now in San Francisco. I'm Ed Baxter,

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Speaker 3: and this is Bloomberg Brian.

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Speaker 1: Ed thanks very much the time. Now six minutes past

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Speaker 1: the hour, it's now time to take a look at

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Speaker 1: the top business stories of the hour. Well Wall Street

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Speaker 1: is looking ahead to an extremely busy week for earnings news,

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Speaker 1: specifically by big technology companies, and the expectations are high.

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Speaker 1: Natty Level is senior US equity strategist at UBS Financial Services.

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Speaker 5: We do expect tech to be able to deliver on

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Speaker 5: the earnest some ab out early checks are already pointing

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Speaker 5: to that, so we think that this market can continue

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Speaker 5: to be a grind high. Now in fantis, you know,

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Speaker 5: the market is not too far from our base case

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Speaker 5: scenario for five thousand on the S and P five hundred.

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Speaker 1: Among the companies Alphabet, Microsoft, AMD, General Motors, Starbucks, UPS,

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Speaker 1: and Pfizer. And that's all in the Tuesday session alone.

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Speaker 1: And by the way, if you're tracking this, communication and

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Speaker 1: tech are the two top sectors in the S and

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Speaker 1: P five hundred this year.

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Speaker 2: So the Biden administration is set to announce massive subsidies

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Speaker 2: for the chip makers by the end of March. Now,

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Speaker 2: these companies obviously include names like Intel, even Taiwan Semiconductors

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Speaker 2: on the list. The grants you may know, are central

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Speaker 2: piece of the twenty twenty two Chips in Science Act.

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Speaker 2: Thirty nine billion dollars has been earmarked as a way

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Speaker 2: of revitalizing the American chip industry. Intel has said in

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Speaker 2: the past the grants will determine how quickly the company

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Speaker 2: can progress with expansion projects now that would include projects

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Speaker 2: in Arizona and Ohio. The grants are aimed at rebalancing

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Speaker 2: what is seen in Washington is a dangerous concentration of

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Speaker 2: production in East Asia. It's also a key pillar of

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Speaker 2: mister Biden's economic message as he heads to the November election.

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Speaker 1: Right well, China will halt the lending of certain shares

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Speaker 1: for short selling beginning today. Boom Berg's Joan Wong as

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Speaker 1: the story from Hong Kong.

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Speaker 7: The China Securities Regulatory Commission is moving to support the

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Speaker 7: country's slumping stock markets. Strategic investors will not be allowed

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Speaker 7: to lend out shares during lock up periods. Authorities are

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Speaker 7: taking measures following an alarming slide in Chinese stocks. The

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Speaker 7: MSCI China Index has lost sixty percent from a twenty

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Speaker 7: twenty one high. The CSRC also filed yesterday to crack

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Speaker 7: down on other lock up restrictions, including the timing of

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Speaker 7: the stock lending in Hong Kong. Joan Wong, Bloomberg Radio

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Speaker 7: and one of the other.

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Speaker 1: Big stories today in Hong Kong will be Evergrand back

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Speaker 1: in court here in Hong Kong. It's been eight weeks

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Speaker 1: since the big developer was given some extra time to

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Speaker 1: try to come to a deal with creditors, and what

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Speaker 1: we're hearing from investors and from those creditors, no deal

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Speaker 1: really has been made, and so it'll be very interesting

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Speaker 1: to see what the judge decides today, whether there's another

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Speaker 1: delay or whether or not perhaps we move forward towards liquidation. Well.

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Speaker 1: Joining us now on the program is principal senior portfolio

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Speaker 1: manager and head of few Income at New Edge Wealth,

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Speaker 1: Ben Emmons. So Ben a lot to talk about. I

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Speaker 1: know we've got the refunding coming tomorrow, so that's one thing.

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Speaker 1: Let's talk a little bit about the FED and inflation. First.

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Speaker 1: The FED may be close to a pivot, and I

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Speaker 1: think people are sensing that. That's one of the reasons

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Speaker 1: we've seen some buoyancy in the markets. But one of

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Speaker 1: our featured stories on the terminal is has a restaurant

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Speaker 1: that's saying, look we've kept prices steady for a couple

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Speaker 1: of years, but we don't think we can continue. Is

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Speaker 1: the public feeling the slowdown inflation?

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Speaker 4: Hey, Brian, It's very mixed picture on the ground here

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Speaker 4: because as much as that cored PC datash is very

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Speaker 4: encouraging and it shows that so all these annualized measures

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Speaker 4: are actually at or even below the target. Now, you know,

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Speaker 4: it's still a bifurcation in terms of as you mentioned bank,

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Speaker 4: if you go to any kind of restaurant here, you're

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Speaker 4: not really seeing those three or six month anualized inflation

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Speaker 4: rates being below two percent, right, You're paying triple of

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Speaker 4: that type of inflation. And that still has a lot

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Speaker 4: to do with I think the shock out of Ukraine

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Speaker 4: from twenty twenty two, but still to an extent reverberates,

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Speaker 4: you know, through food oils and other types of processing

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Speaker 4: of foods that has left food prices is more elevated.

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Speaker 4: So it's not so simple, but there is in that

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Speaker 4: sense in the broad picture, let's say the progress that

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Speaker 4: the fact can look at saying we'll have pretty restrictive

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Speaker 4: rates in their mind, and inflaces moving really towards the

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Speaker 4: target quicker. So there's a case here for reducing that rate,

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Speaker 4: I think sometime in the second quarter. But as we

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Speaker 4: just went through the top headlines, we already have new

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Speaker 4: challenges coming at us, like, for example, what's happening in

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Speaker 4: the Middle East. There's energy prices, right, So it's all

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Speaker 4: not that clear cut to me. The fact can move

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Speaker 4: so quickly, so fast on rad us here.

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Speaker 2: So, Ben, do you think that we're going to be

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Speaker 2: looking at a situation where it's higher for longer, maybe

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Speaker 2: the third quarter of the year, not the second.

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Speaker 4: Quarter would be more out of you, Doc, I mean,

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Speaker 4: we were certainly not subscribing to view of a March

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Speaker 4: cut because that means that any data until then would

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Speaker 4: really see like a significant weakening. And it's actually the

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Speaker 4: opposite that's happening, even though inflation is moving down and

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Speaker 4: if this economy holds up and it's still getting essentially

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Speaker 4: stimulus from so to speak, moderating inflation. Yeah, and you're

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Speaker 4: looking at a high for longa into the well into

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Speaker 4: the summer, and that's I think very possibility.

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Speaker 1: You know, we have this values in the bond market.

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Speaker 1: It seems to be getting absorbed pretty well. We haven't

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Speaker 1: had all that much pain. I can refer to the

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Speaker 1: two year yield the start of the year at about

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Speaker 1: four twenty five and we're only at four thirty four now,

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Speaker 1: so and it seems like investors are interested in loading

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Speaker 1: up here at these high rates before they eventually start

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Speaker 1: to move down. Is that is that right? Should they

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Speaker 1: feel that way?

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Speaker 4: Yeah, it's a very conditioned view, right in terms of

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Speaker 4: like where we came from pre pandemic. And again, if

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Speaker 4: all those annualized measures of infration show we're at pre

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Speaker 4: pandemic levels, that's what incentivizes those investors say I'm not

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Speaker 4: going to wait and I'm going to buy the bonds

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Speaker 4: now because we're going to get there one way or

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Speaker 4: the other. Right, And therefore, I think, as you mentioned

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Speaker 4: the refunding coming up this week, but maybe more supply

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Speaker 4: and more in the long antem we knows, you know,

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Speaker 4: the end of the day, there seems to be a

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Speaker 4: better demand picture here. We cautioned though, that the last

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Speaker 4: number of auctions have shown challenges. There's getting it properly covered,

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Speaker 4: with primary dealers still taking down a lot of the

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Speaker 4: supply in that auction. So it's not entirely I think

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Speaker 4: a healthy picture. But let's say this, I think, Brian,

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Speaker 4: we probably have reached some level of peak and treasury

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Speaker 4: yields last year, and we may go back towards that

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Speaker 4: peak temporarily given the strength of the economy. But to

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Speaker 4: see six seven percent yields that will probably be more

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Speaker 4: about a physical crisis or a major energy crisis, which

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Speaker 4: neither of that is happening right now.

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Speaker 2: Yeah, and as we speak, I mean, we've got crude

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Speaker 2: oil around just under a seventy nine a barrel. That's

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Speaker 2: w TI. You made a point a moment ago where

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Speaker 2: you said you think that the Fed's view on rates

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Speaker 2: is that they're pretty much restrictive at this point. And

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Speaker 2: I'm wondering as we head into the remainder of this

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Speaker 2: year and then look out to twenty twenty five and

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Speaker 2: the amount of debt that has to be rolled over

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Speaker 2: essentially and refinanced, whether the FED is cognizant of that,

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Speaker 2: and that would the FED would be inclined to try

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Speaker 2: to get to rate cuts sooner rather than later. If

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Speaker 2: inflation is at the Fed's back because of the awareness

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Speaker 2: of how much financial stress may be building in the system.

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Speaker 4: I think we cannot ignore that. Indeed, the doctor, you know,

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Speaker 4: if you just step back a year less than a

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Speaker 4: year ago about the banking crisis that suddenly erupted, which

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Speaker 4: wasn't effect of well, one hand interstate risk, but the

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Speaker 4: other hand is the fact that we have death in

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Speaker 4: the system that's causing fiction. Yes, the role of commercial

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Speaker 4: real estate death and of utter corporate debt and high

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Speaker 4: yield is major and including government that so there is

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Speaker 4: indeed a relief of rates to an extend needed. How

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Speaker 4: we got it already from the October high at five

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Speaker 4: oh four the TENNA to as low as as a

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Speaker 4: three three eighty five or so recently, but we probably

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Speaker 4: need someone more stability from here to get indeed that

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Speaker 4: rollover sufficient of without major disruption, so to an extent.

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Speaker 4: The fact has the inflation went in his back could

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Speaker 4: probably get that break up. We do think it will happen,

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Speaker 4: but maybe later this year, so before the election, but

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Speaker 4: sometime in the late summer and in the fall. Keeping

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Speaker 4: that financial conditions effect from that rollover, that that certainly

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Speaker 4: in mind.

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Speaker 1: Yeah, But Ben, I mean the layman would say, look,

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Speaker 1: corporate America and individuals, particularly homeowners had fifteen years of

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Speaker 1: refinancing and getting their loans, you know, into a pretty

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Speaker 1: affordable rate, and that's the lions share. What you guys

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Speaker 1: have just been talking about is just a sliver over

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Speaker 1: the past short period when rates were high, Right.

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Speaker 4: That's true. I think that, you know, if you look

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Speaker 4: back before the pandemic happened, all that refinancing then at

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Speaker 4: that low rate and determining out of that. That's part

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Speaker 4: of the reason why we haven't had any problems so

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Speaker 4: far with high rates affecting the economy's We generally acknowledge

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Speaker 4: now that potinki corporations, including households, have been able to

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Speaker 4: weather the interest rate storm, so to speak. Right, they're

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Speaker 4: interest rate average interest cosses is low, the the market

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Speaker 4: rates are currently. The reset of that interest rate cost

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Speaker 4: is what the concern is, and it's a bit difficult

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Speaker 4: to point exactly how much it will be, but there

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Speaker 4: are groups of companies out there that have to refinance

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Speaker 4: starting this year in the next year, and that's the issue.

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Speaker 4: So I don't think if that keeps it in mind,

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Speaker 4: but it's obviously all about financial conditions and that type

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Speaker 4: of analysis for them to consider the death rollover.

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Speaker 2: And before we let you go, we got to talk China.

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Speaker 2: You and I were kind of a trading email earlier.

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Speaker 2: One of the things that you highlighted was this piece

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Speaker 2: in the Washington Post on president former president Trump reportedly

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Speaker 2: weighing options for a new economic attack on China and

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Speaker 2: reading between the lines, it's pretty apparent what the strategy

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Speaker 2: would be. Let's let's jock up tariffs. What do you

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Speaker 2: think that net impact on the American economy would be

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Speaker 2: Imagining a world where we're looking at higher tariffs on

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Speaker 2: Chinese goods, Yeah, it will be very disruptive.

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Speaker 4: I think I would agree with the articles premise because

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Speaker 4: you bring fans economy with terrors. The theory is that

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Speaker 4: you will get the producers of the all our competition

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Speaker 4: to raise prices, right they don't have any foreign competition,

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Speaker 4: you know, in theory, it's not that straightforward. But I

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Speaker 4: do think that domestic production will be costs much higher

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Speaker 4: going forward if I given the tariff impacts, and you know,

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Speaker 4: we are guaring me getting very gentle deflation phone check

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Speaker 4: once again, and this is helping our economy. Really if

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Speaker 4: you think think of all the categories of goods that

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Speaker 4: are now much lower in price than they were a

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Speaker 4: year ago or two years ago. So I think the

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Speaker 4: traff is once again in a very disruptive measure, and

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Speaker 4: it has shown from different you know think tanks, independent

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Speaker 4: think tanks here, So let the job also.

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Speaker 1: Yeah, so is a vote for Trump, you know, get

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Speaker 1: ready for more inflation kind of vote.

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Speaker 4: Yeah, it's a bit political mcbrian, But I think that

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Speaker 4: the impact of pairs one inflation has been sort of

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Speaker 4: mixed from the previous situation. How this will be with

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Speaker 4: a universal part, Maybe it will be higher inflation definitely

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Speaker 4: will affect econy negatively. I would say that's the vote.

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Speaker 1: Yeah, because one analysis says that he's planning or thinking

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Speaker 1: about ten percent on all countries for tariffs. I know

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Speaker 1: that's not just China, and that would make a huge,

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Speaker 1: huge difference. Ben, thanks very much for joining us. Ben

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Speaker 1: Emmons from New Edge. Well, this is Bloomberg Daybreak Asia,

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