WEBVTT - China's Short-Selling Ban, Tech Earnings in Focus

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<v Speaker 1>Good morning. I'm Brian Curtis.

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

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<v Speaker 1>President Biden is vowing to retaliate after another attack on

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<v Speaker 1>a US military base by Iran backed militants, and Baxter

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<v Speaker 1>has this story and more in San Francisco. Ed.

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<v Speaker 3>Yeah, right, you're right, Brian attack and Jordan killed three

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<v Speaker 3>military wounded twenty five others. It was a drone attack,

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<v Speaker 3>the official line from the White Houses and officials are

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<v Speaker 3>still gathering details and will act pharmacy. A senior operations officer,

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<v Speaker 3>Daryl Blocker tells ABC this is not really new.

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<v Speaker 4>The administration has been dealing with this for over a decade.

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<v Speaker 5>I know it seems new in the sense of the.

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<v Speaker 4>Hamas kind of angle to it now, but our forces

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<v Speaker 4>and our partners in the region have been fighting this

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<v Speaker 4>and dealing with this issue for a long time.

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<v Speaker 1>Yeah.

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<v Speaker 3>The new chair of the Joint Chiefs of Staff mean

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<v Speaker 3>while General C. Q. Brown says, the questions in the

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<v Speaker 3>Middle East boiled down to deterrens conflict.

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<v Speaker 2>Do you want us in a full scale war?

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<v Speaker 4>And that's the goal is to turn them and we

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<v Speaker 4>don't want to go down the path of greater escalation

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<v Speaker 4>that drives to a much broader conflict within the region.

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

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<v Speaker 3>Secretary Security Advisor Amos Hawkstein on CBS has heard on

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<v Speaker 3>Bloomberg says the impact of who the rebel attacks on

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<v Speaker 3>commercial ships in the Red Sea is limited and that

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<v Speaker 3>any impact in the US economy will be very his

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<v Speaker 3>word muted, but says we should all be concerned.

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<v Speaker 6>We want to do everything we can to prevent an

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<v Speaker 6>escalation of that lower level conflict into an all out

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<v Speaker 6>conflict that would drag US further into war and risk

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

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<v Speaker 6>to do, is to avoid that.

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<v Speaker 3>SA says cost pressures have been more logistics than on

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<v Speaker 3>energy commodities. That reports out of DC that the Senate

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<v Speaker 3>negotiators are making progress toward an immigration compromise bill. One

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<v Speaker 3>of the architects is Republican James Lankford, and on CBS

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<v Speaker 3>has heard on, Bloomberg says, very high hopes.

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<v Speaker 1>Everyone's looking to be able to read the bill at

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<v Speaker 1>this point.

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<v Speaker 2>That's the key aspect.

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<v Speaker 3>We're working the final aspects of it to try to

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<v Speaker 3>be able to get it out so everyone can get

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

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<v Speaker 3>off of Internet rumors of what's in the bill, and

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<v Speaker 3>many of them are false. Yeah, and he says people

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<v Speaker 3>want to go through it and look at it for themselves.

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<v Speaker 3>Donald Trump, meanwhile, as you know, said he doesn't want

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<v Speaker 3>it passed. And Democrat Tim Kaine says, that makes no

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<v Speaker 3>sense to.

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<v Speaker 4>Know that fentel is coming over the border for Mexico,

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<v Speaker 4>largely through ports of entry.

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<v Speaker 2>This bill will help us deal with that. And that's

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<v Speaker 2>why when a President Trump says vote no, wait for

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<v Speaker 2>a year, wait for two years, people can't wait.

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<v Speaker 3>Biden is endorsing it. The House will be another matter,

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<v Speaker 3>and Fentanel also an issue for US China relations officials

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<v Speaker 3>is set to meet in Beijing this week to talk

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<v Speaker 3>about China clamping down on the trafficking of the deadly drug.

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<v Speaker 3>It marks the first person discussion of a group set

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<v Speaker 3>up following the November meeting between Presidents Biden and she.

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<v Speaker 3>It was twenty four hours a day, whenever you want

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

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<v Speaker 3>and this is Bloomberg Brian.

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<v Speaker 1>Ed thanks very much the time. Now six minutes past

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<v Speaker 1>the hour, it's now time to take a look at

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<v Speaker 1>the top business stories of the hour. Well Wall Street

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<v Speaker 1>is looking ahead to an extremely busy week for earnings news,

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<v Speaker 1>specifically by big technology companies, and the expectations are high.

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<v Speaker 1>Natty Level is senior US equity strategist at UBS Financial Services.

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<v Speaker 5>We do expect tech to be able to deliver on

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<v Speaker 5>the earnest some ab out early checks are already pointing

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<v Speaker 5>to that, so we think that this market can continue

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<v Speaker 5>to be a grind high. Now in fantis, you know,

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<v Speaker 5>the market is not too far from our base case

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<v Speaker 5>scenario for five thousand on the S and P five hundred.

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<v Speaker 1>Among the companies Alphabet, Microsoft, AMD, General Motors, Starbucks, UPS,

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<v Speaker 1>and Pfizer. And that's all in the Tuesday session alone.

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<v Speaker 1>And by the way, if you're tracking this, communication and

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<v Speaker 1>tech are the two top sectors in the S and

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<v Speaker 1>P five hundred this year.

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<v Speaker 2>So the Biden administration is set to announce massive subsidies

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<v Speaker 2>for the chip makers by the end of March. Now,

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<v Speaker 2>these companies obviously include names like Intel, even Taiwan Semiconductors

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<v Speaker 2>on the list. The grants you may know, are central

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<v Speaker 2>piece of the twenty twenty two Chips in Science Act.

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<v Speaker 2>Thirty nine billion dollars has been earmarked as a way

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<v Speaker 2>of revitalizing the American chip industry. Intel has said in

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<v Speaker 2>the past the grants will determine how quickly the company

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<v Speaker 2>can progress with expansion projects now that would include projects

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<v Speaker 2>in Arizona and Ohio. The grants are aimed at rebalancing

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<v Speaker 2>what is seen in Washington is a dangerous concentration of

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<v Speaker 2>production in East Asia. It's also a key pillar of

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

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<v Speaker 1>Right well, China will halt the lending of certain shares

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<v Speaker 1>for short selling beginning today. Boom Berg's Joan Wong as

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<v Speaker 1>the story from Hong Kong.

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<v Speaker 7>The China Securities Regulatory Commission is moving to support the

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<v Speaker 7>country's slumping stock markets. Strategic investors will not be allowed

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<v Speaker 7>to lend out shares during lock up periods. Authorities are

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<v Speaker 7>taking measures following an alarming slide in Chinese stocks. The

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<v Speaker 7>MSCI China Index has lost sixty percent from a twenty

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<v Speaker 7>twenty one high. The CSRC also filed yesterday to crack

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<v Speaker 7>down on other lock up restrictions, including the timing of

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<v Speaker 7>the stock lending in Hong Kong. Joan Wong, Bloomberg Radio

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<v Speaker 7>and one of the other.

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<v Speaker 1>Big stories today in Hong Kong will be Evergrand back

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<v Speaker 1>in court here in Hong Kong. It's been eight weeks

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<v Speaker 1>since the big developer was given some extra time to

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<v Speaker 1>try to come to a deal with creditors, and what

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<v Speaker 1>we're hearing from investors and from those creditors, no deal

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<v Speaker 1>really has been made, and so it'll be very interesting

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<v Speaker 1>to see what the judge decides today, whether there's another

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<v Speaker 1>delay or whether or not perhaps we move forward towards liquidation. Well.

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<v Speaker 1>Joining us now on the program is principal senior portfolio

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<v Speaker 1>manager and head of few Income at New Edge Wealth,

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<v Speaker 1>Ben Emmons. So Ben a lot to talk about. I

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

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

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<v Speaker 1>The FED may be close to a pivot, and I

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<v Speaker 1>think people are sensing that. That's one of the reasons

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<v Speaker 1>we've seen some buoyancy in the markets. But one of

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<v Speaker 1>our featured stories on the terminal is has a restaurant

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

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<v Speaker 1>of years, but we don't think we can continue. Is

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<v Speaker 1>the public feeling the slowdown inflation?

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<v Speaker 4>Hey, Brian, It's very mixed picture on the ground here

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<v Speaker 4>because as much as that cored PC datash is very

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<v Speaker 4>encouraging and it shows that so all these annualized measures

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<v Speaker 4>are actually at or even below the target. Now, you know,

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

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<v Speaker 4>if you go to any kind of restaurant here, you're

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<v Speaker 4>not really seeing those three or six month anualized inflation

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<v Speaker 4>rates being below two percent, right, You're paying triple of

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<v Speaker 4>that type of inflation. And that still has a lot

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<v Speaker 4>to do with I think the shock out of Ukraine

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<v Speaker 4>from twenty twenty two, but still to an extent reverberates,

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<v Speaker 4>you know, through food oils and other types of processing

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<v Speaker 4>of foods that has left food prices is more elevated.

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<v Speaker 4>So it's not so simple, but there is in that

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<v Speaker 4>sense in the broad picture, let's say the progress that

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<v Speaker 4>the fact can look at saying we'll have pretty restrictive

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<v Speaker 4>rates in their mind, and inflaces moving really towards the

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

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<v Speaker 4>I think sometime in the second quarter. But as we

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<v Speaker 4>just went through the top headlines, we already have new

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<v Speaker 4>challenges coming at us, like, for example, what's happening in

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

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<v Speaker 4>not that clear cut to me. The fact can move

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<v Speaker 4>so quickly, so fast on rad us here.

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<v Speaker 2>So, Ben, do you think that we're going to be

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<v Speaker 2>looking at a situation where it's higher for longer, maybe

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<v Speaker 2>the third quarter of the year, not the second.

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<v Speaker 4>Quarter would be more out of you, Doc, I mean,

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<v Speaker 4>we were certainly not subscribing to view of a March

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<v Speaker 4>cut because that means that any data until then would

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<v Speaker 4>really see like a significant weakening. And it's actually the

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<v Speaker 4>opposite that's happening, even though inflation is moving down and

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<v Speaker 4>if this economy holds up and it's still getting essentially

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

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<v Speaker 4>looking at a high for longa into the well into

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<v Speaker 4>the summer, and that's I think very possibility.

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<v Speaker 1>You know, we have this values in the bond market.

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<v Speaker 1>It seems to be getting absorbed pretty well. We haven't

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<v Speaker 1>had all that much pain. I can refer to the

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<v Speaker 1>two year yield the start of the year at about

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<v Speaker 1>four twenty five and we're only at four thirty four now,

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<v Speaker 1>so and it seems like investors are interested in loading

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<v Speaker 1>up here at these high rates before they eventually start

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<v Speaker 1>to move down. Is that is that right? Should they

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<v Speaker 1>feel that way?

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<v Speaker 4>Yeah, it's a very conditioned view, right in terms of

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<v Speaker 4>like where we came from pre pandemic. And again, if

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<v Speaker 4>all those annualized measures of infration show we're at pre

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

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<v Speaker 4>going to wait and I'm going to buy the bonds

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<v Speaker 4>now because we're going to get there one way or

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<v Speaker 4>the other. Right, And therefore, I think, as you mentioned

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<v Speaker 4>the refunding coming up this week, but maybe more supply

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<v Speaker 4>and more in the long antem we knows, you know,

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<v Speaker 4>the end of the day, there seems to be a

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<v Speaker 4>better demand picture here. We cautioned though, that the last

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

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<v Speaker 4>with primary dealers still taking down a lot of the

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<v Speaker 4>supply in that auction. So it's not entirely I think

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

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<v Speaker 4>we probably have reached some level of peak and treasury

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<v Speaker 4>yields last year, and we may go back towards that

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<v Speaker 4>peak temporarily given the strength of the economy. But to

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<v Speaker 4>see six seven percent yields that will probably be more

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<v Speaker 4>about a physical crisis or a major energy crisis, which

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<v Speaker 4>neither of that is happening right now.

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<v Speaker 2>Yeah, and as we speak, I mean, we've got crude

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<v Speaker 2>oil around just under a seventy nine a barrel. That's

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<v Speaker 2>w TI. You made a point a moment ago where

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<v Speaker 2>you said you think that the Fed's view on rates

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<v Speaker 2>is that they're pretty much restrictive at this point. And

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<v Speaker 2>I'm wondering as we head into the remainder of this

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<v Speaker 2>year and then look out to twenty twenty five and

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<v Speaker 2>the amount of debt that has to be rolled over

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<v Speaker 2>essentially and refinanced, whether the FED is cognizant of that,

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<v Speaker 2>and that would the FED would be inclined to try

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<v Speaker 2>to get to rate cuts sooner rather than later. If

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<v Speaker 2>inflation is at the Fed's back because of the awareness

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<v Speaker 2>of how much financial stress may be building in the system.

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<v Speaker 4>I think we cannot ignore that. Indeed, the doctor, you know,

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<v Speaker 4>if you just step back a year less than a

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<v Speaker 4>year ago about the banking crisis that suddenly erupted, which

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<v Speaker 4>wasn't effect of well, one hand interstate risk, but the

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<v Speaker 4>other hand is the fact that we have death in

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<v Speaker 4>the system that's causing fiction. Yes, the role of commercial

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<v Speaker 4>real estate death and of utter corporate debt and high

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<v Speaker 4>yield is major and including government that so there is

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<v Speaker 4>indeed a relief of rates to an extend needed. How

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<v Speaker 4>we got it already from the October high at five

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<v Speaker 4>oh four the TENNA to as low as as a

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<v Speaker 4>three three eighty five or so recently, but we probably

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<v Speaker 4>need someone more stability from here to get indeed that

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<v Speaker 4>rollover sufficient of without major disruption, so to an extent.

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<v Speaker 4>The fact has the inflation went in his back could

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<v Speaker 4>probably get that break up. We do think it will happen,

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<v Speaker 4>but maybe later this year, so before the election, but

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<v Speaker 4>sometime in the late summer and in the fall. Keeping

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<v Speaker 4>that financial conditions effect from that rollover, that that certainly

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<v Speaker 4>in mind.

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<v Speaker 1>Yeah, But Ben, I mean the layman would say, look,

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<v Speaker 1>corporate America and individuals, particularly homeowners had fifteen years of

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<v Speaker 1>refinancing and getting their loans, you know, into a pretty

0:11:58.440 --> 0:12:01.760
<v Speaker 1>affordable rate, and that's the lions share. What you guys

0:12:01.840 --> 0:12:04.120
<v Speaker 1>have just been talking about is just a sliver over

0:12:04.160 --> 0:12:08.240
<v Speaker 1>the past short period when rates were high, Right.

0:12:09.480 --> 0:12:12.800
<v Speaker 4>That's true. I think that, you know, if you look

0:12:12.840 --> 0:12:17.240
<v Speaker 4>back before the pandemic happened, all that refinancing then at

0:12:17.280 --> 0:12:20.520
<v Speaker 4>that low rate and determining out of that. That's part

0:12:20.520 --> 0:12:23.280
<v Speaker 4>of the reason why we haven't had any problems so

0:12:23.440 --> 0:12:26.600
<v Speaker 4>far with high rates affecting the economy's We generally acknowledge

0:12:26.640 --> 0:12:30.120
<v Speaker 4>now that potinki corporations, including households, have been able to

0:12:30.200 --> 0:12:33.880
<v Speaker 4>weather the interest rate storm, so to speak. Right, they're

0:12:33.960 --> 0:12:36.760
<v Speaker 4>interest rate average interest cosses is low, the the market

0:12:36.800 --> 0:12:40.280
<v Speaker 4>rates are currently. The reset of that interest rate cost

0:12:40.360 --> 0:12:42.680
<v Speaker 4>is what the concern is, and it's a bit difficult

0:12:42.720 --> 0:12:45.040
<v Speaker 4>to point exactly how much it will be, but there

0:12:45.080 --> 0:12:48.720
<v Speaker 4>are groups of companies out there that have to refinance

0:12:49.120 --> 0:12:51.320
<v Speaker 4>starting this year in the next year, and that's the issue.

0:12:51.360 --> 0:12:53.560
<v Speaker 4>So I don't think if that keeps it in mind,

0:12:53.600 --> 0:12:56.400
<v Speaker 4>but it's obviously all about financial conditions and that type

0:12:56.400 --> 0:12:59.400
<v Speaker 4>of analysis for them to consider the death rollover.

0:13:00.000 --> 0:13:02.040
<v Speaker 2>And before we let you go, we got to talk China.

0:13:02.440 --> 0:13:05.160
<v Speaker 2>You and I were kind of a trading email earlier.

0:13:05.640 --> 0:13:07.680
<v Speaker 2>One of the things that you highlighted was this piece

0:13:07.720 --> 0:13:11.959
<v Speaker 2>in the Washington Post on president former president Trump reportedly

0:13:12.000 --> 0:13:16.200
<v Speaker 2>weighing options for a new economic attack on China and

0:13:16.600 --> 0:13:20.360
<v Speaker 2>reading between the lines, it's pretty apparent what the strategy

0:13:20.400 --> 0:13:23.240
<v Speaker 2>would be. Let's let's jock up tariffs. What do you

0:13:23.280 --> 0:13:25.880
<v Speaker 2>think that net impact on the American economy would be

0:13:26.520 --> 0:13:29.480
<v Speaker 2>Imagining a world where we're looking at higher tariffs on

0:13:29.559 --> 0:13:33.280
<v Speaker 2>Chinese goods, Yeah, it will be very disruptive.

0:13:33.360 --> 0:13:35.920
<v Speaker 4>I think I would agree with the articles premise because

0:13:36.280 --> 0:13:39.560
<v Speaker 4>you bring fans economy with terrors. The theory is that

0:13:39.600 --> 0:13:42.760
<v Speaker 4>you will get the producers of the all our competition

0:13:42.840 --> 0:13:45.719
<v Speaker 4>to raise prices, right they don't have any foreign competition,

0:13:45.920 --> 0:13:49.120
<v Speaker 4>you know, in theory, it's not that straightforward. But I

0:13:49.120 --> 0:13:52.400
<v Speaker 4>do think that domestic production will be costs much higher

0:13:52.520 --> 0:13:56.480
<v Speaker 4>going forward if I given the tariff impacts, and you know,

0:13:57.000 --> 0:13:59.960
<v Speaker 4>we are guaring me getting very gentle deflation phone check

0:14:00.400 --> 0:14:02.840
<v Speaker 4>once again, and this is helping our economy. Really if

0:14:03.200 --> 0:14:05.480
<v Speaker 4>you think think of all the categories of goods that

0:14:05.559 --> 0:14:07.160
<v Speaker 4>are now much lower in price than they were a

0:14:07.200 --> 0:14:09.920
<v Speaker 4>year ago or two years ago. So I think the

0:14:10.000 --> 0:14:13.559
<v Speaker 4>traff is once again in a very disruptive measure, and

0:14:13.600 --> 0:14:16.840
<v Speaker 4>it has shown from different you know think tanks, independent

0:14:16.880 --> 0:14:20.280
<v Speaker 4>think tanks here, So let the job also.

0:14:20.120 --> 0:14:23.520
<v Speaker 1>Yeah, so is a vote for Trump, you know, get

0:14:23.600 --> 0:14:25.600
<v Speaker 1>ready for more inflation kind of vote.

0:14:26.880 --> 0:14:30.120
<v Speaker 4>Yeah, it's a bit political mcbrian, But I think that

0:14:30.800 --> 0:14:33.520
<v Speaker 4>the impact of pairs one inflation has been sort of

0:14:33.520 --> 0:14:37.520
<v Speaker 4>mixed from the previous situation. How this will be with

0:14:38.240 --> 0:14:41.640
<v Speaker 4>a universal part, Maybe it will be higher inflation definitely

0:14:41.680 --> 0:14:44.280
<v Speaker 4>will affect econy negatively. I would say that's the vote.

0:14:44.720 --> 0:14:47.840
<v Speaker 1>Yeah, because one analysis says that he's planning or thinking

0:14:47.880 --> 0:14:51.560
<v Speaker 1>about ten percent on all countries for tariffs. I know

0:14:51.640 --> 0:14:54.400
<v Speaker 1>that's not just China, and that would make a huge,

0:14:54.760 --> 0:14:56.960
<v Speaker 1>huge difference. Ben, thanks very much for joining us. Ben

0:14:56.960 --> 0:15:03.080
<v Speaker 1>Emmons from New Edge. Well, this is Bloomberg Daybreak Asia,

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