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Speaker 1: This is Bloomberg day Break Asia for this Friday, June

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Speaker 1: twenty third in Hong Kong, Thursday June twenty second in

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Speaker 1: New York and coming up today.

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Speaker 2: Chair Jay Powell says the Fed may need to hike

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Speaker 2: interest rates one or two more times this year.

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Speaker 1: The Bank of England hikes rates more than expected and

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Speaker 1: signals that persistent inflation will require even more action.

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Speaker 2: President Biden and Indian Prime Minister Mody green light a

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Speaker 2: series of deals on semiconductors.

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Speaker 3: The Coastguard says all five of that subversible near the

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Speaker 3: Titanic wreckage are dead. President Biden says he'll meet with

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Speaker 3: China's leaders soon, and Meadow blocks news on Facebook and Instagram.

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Speaker 3: In Canada, I'm to these Pelgrene with Global News.

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Speaker 4: That's all straight ahead on Bloomberg day Break Asia, the

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Speaker 4: business news you need to start your day, and just

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Speaker 4: one fifteen minute podcast available on Apples, Spotify, the Bloomberg

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Speaker 4: Business app and everywhere you get podcasts.

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Speaker 2: Good morning, I'm Doug Krisner and I'm Brian Curtiz.

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Speaker 1: Here are the stories we're following today. President Biden and

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Speaker 1: Indian Prime Minister Nearendra Modi debuted a series of semiconductor deals.

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Speaker 1: They're designed to take advantage of Indian subsidies intended to

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Speaker 1: bring advanced technology manufacturing to India. Micron Technology will invest

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Speaker 1: more than eight hundred million dollars toward a two and

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Speaker 1: three quarter billion dollar semiconductor assembly and testing facility in India.

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Speaker 1: Applied Materials will announce a new semiconductor center for commercialization

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Speaker 1: and innovation, and ship manufacturer LAMB Research is announcing the

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Speaker 1: training program in India for up to sixty thousand engineers.

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Speaker 1: President Biden also says Indian companies will be investing in

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Speaker 1: the United States.

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Speaker 5: Indian firms are announcing more than two billion dollars more

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Speaker 5: than two billion dollars in new investments in manufacturing solar

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Speaker 5: in Colorado, steel in Ohio, and an optic fiber in

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Speaker 5: South Carolina, and much more, further proof that America's manufacturing

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Speaker 5: is back.

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Speaker 1: The announcements mean that there will be closer cooperation on

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Speaker 1: projects between the US and India going forward. Bloomberg's Denise

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Speaker 1: Pellegrini will have more on the series of defense and

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Speaker 1: commercial deals that the countries are looking at that are

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Speaker 1: designed to improve military and economic ties.

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Speaker 2: So we go to the interest rate story next and

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Speaker 2: fedhair J. Powell, who said today the FED may need

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Speaker 2: to do maybe one two more rate hikes this year

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Speaker 2: to lower inflation. Here's Powell speaking before the Senate Banking Committee.

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Speaker 6: It is working families who suffer most directly and quickly

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Speaker 6: from high inflation, and it is for the benefit of

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Speaker 6: those people and all other people that we need to

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Speaker 6: restore two percent inflation in this country on a sustained basis.

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Speaker 2: Now, on a different topic, the fedchairman went on to

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Speaker 2: say Wall Street's biggest banks will bear the brunt of

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Speaker 2: moves by US regulators to raise capital requirements for those banks.

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Speaker 2: He said some of these lines could face an increase

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Speaker 2: of about twenty percent in what they have to set aside.

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Speaker 2: These long awaited changes are part of an international overhaul

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Speaker 2: of capital rules. They began more than a decade of go,

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Speaker 2: of course, in response to the global financial crisis. The issue, though,

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Speaker 2: did become a little more stark and political this year

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Speaker 2: with the collapse of several regional banks here in the US.

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Speaker 1: Brian Well, the Bank of England unexpectedly raised its benchmark

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Speaker 1: interest rate by half a percentage point of five percent.

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Speaker 1: It represents the highest level in fifteen years. In the

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Speaker 1: biggest move since February bo Week, Governor Andrew Bailey said

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Speaker 1: that more tightening may be needed if inflation pressure persists.

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Speaker 7: Well, I understand the difficulty in the pain it causes

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Speaker 7: for many people, and I do understand that. What I

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Speaker 7: would say, though, is that if we don't get inflation

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Speaker 7: back down to target, then it goes on for much longer,

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Speaker 7: and the pain goes on for longer, and none of

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Speaker 7: us want that.

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Speaker 1: The market is now pricing in a thirty percent chance

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Speaker 1: that the boh He's key rate we'll peak at six

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Speaker 1: and a quarter percent by February. This would be the

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Speaker 1: highest point in more than two decades. BOE officials are

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Speaker 1: now drawing up new forecasts for growth and inflation in

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Speaker 1: time for the next decision, and that is due on

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Speaker 1: August third.

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Speaker 2: Well Ford and it's South Korean battery partner sk On

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Speaker 2: have been awarded a conditional loan worth nine point two

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Speaker 2: billion dollars from the US Department of Energy. This is

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Speaker 2: part of President Bliden's plan to go all in on

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Speaker 2: green technologies that planned, by the way, is worth four

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Speaker 2: hundred billion dollars, and with this Biden is hoping to

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Speaker 2: increase production of electric vehicles domestically. Here's Bloomberg's Keith Naughton.

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Speaker 8: I think it speaks to the Biden administration's focus on

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Speaker 8: really taking on China, which has this huge lead in

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Speaker 8: evs and batteries. Eighty percent of the world's lithium IAM

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Speaker 8: batteries come out of China. China controls the minerals, the processing,

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Speaker 8: and they have the largest by far EV market in

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Speaker 8: the world in China.

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Speaker 2: That is Bloomberg's Keith Norton. Now, this joint venture from

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Speaker 2: Ford and sk On will be called Blue Oval sk

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Speaker 2: It will use the new funds to build three EV

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Speaker 2: planned stateside. They're already under construction, by the way. Two

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Speaker 2: are located in Kentucky and other in Tennessee, and Ford

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Speaker 2: is now planning to make as many as two million

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Speaker 2: evs by twenty twenty six. The automaker only produced one

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Speaker 2: hundred and thirty two thousand last year.

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Speaker 1: Bryan Dutch chip maker ASML could face new export restrictions

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Speaker 1: to China as soon as next week. Bloomberg's Bonnie Ao

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Speaker 1: has the story from Hong Kong.

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Speaker 9: Bloomberg reported earlier the controls will restrict three models of

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Speaker 9: ASML's machines to China, and the Dutch government is now

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Speaker 9: expected to publish the new restrictions as soon as June thirtieth.

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Speaker 9: So also say the rules will serve as a blueprint

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Speaker 9: that can be used by other European Union members. The

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Speaker 9: US has been pressing the Netherlands and other countries to

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Speaker 9: stop China from further developing its own chip industry. What

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Speaker 9: makes it difficult well, is that China is one of

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Speaker 9: ASML's biggest customers and ASML is the netherlands most valuable company.

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Speaker 9: The new measures, while tough, still four shots off the

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Speaker 9: steps taken by the Biden administration in Hong Kong. I'm

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Speaker 9: Bonnie al Bloomberg day Break Asia.

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Speaker 1: In the latest trading, ASML did move higher, up about

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Speaker 1: nine tenths of one percent in European trading. I'm Brian Curtis,

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Speaker 1: along with Rishad Salamat and Christner So Doug. Not to

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Speaker 1: state the obvious here, but President Biden's comment that India

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Speaker 1: shares the same democratic character of the United States won't

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Speaker 1: be lost on China. It's a kind of indirect warning.

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Speaker 1: But as as many have pointed out, it's not like

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Speaker 1: under Modi's leadership that things have gotten better for civil liberties,

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Speaker 1: press freedom, and minority rights, they've actually gotten worse. However,

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Speaker 1: even detractors would say that President Biden should lift up

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Speaker 1: India to a certain degree as a means of countering China.

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Speaker 2: Yeah, and the relaish ship of Russia is kind of

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Speaker 2: curious too. We know that India has been continuing to

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Speaker 2: import a lot of Russian oil even though there are

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Speaker 2: those US led sanctions in place. But I think based

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Speaker 2: on what we just discussed a moment ago, Brian, the

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Speaker 2: focus seems to be squarely on not just economic issues,

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Speaker 2: but trying to diversify supply chains away from China.

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Speaker 1: Yeah, it'd be really interesting to be a fly on

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Speaker 1: the wall with discussions between President Biden and or INDOMODI

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Speaker 1: whether or not because India hasn't condemned Russia's invasion of Ukraine.

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Speaker 1: So that's a foreign for sure in the side in

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Speaker 1: the relationship. So let's talk about the central banks. Pretty

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Speaker 1: big move there by the Bank of England, a little

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Speaker 1: bit more than expected for sure in terms of the US.

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Speaker 1: When you see the S and P five hundred gain

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Speaker 1: like that, I think that the way the market is

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Speaker 1: kind of interpreting this that if you look at at

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Speaker 1: what the FED has done in increments of twenty five

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Speaker 1: basis points, it's done twenty of them, So another one

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Speaker 1: or two doesn't seem like it's enough to maybe upset

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Speaker 1: the apple cart, unless you're in that camp that thinks

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Speaker 1: that it would be this straw or two that break

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Speaker 1: the camel's back.

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Speaker 2: Yeah, and I think in that camp squarely is Christina Hooper,

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Speaker 2: the chief Global strategist to over at Investco. She was

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Speaker 2: saying that today that if the FED does two more

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Speaker 2: rate hikes this year, that risk sending the economy into

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Speaker 2: significant recession. And if you look at the economic news

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Speaker 2: that we had today, unemployment benefits unchanged last week, though

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Speaker 2: we remain at the highest level since October twenty one.

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Speaker 2: Maybe the labor market is cooling here in the US.

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Speaker 2: The government also reporting that sales have previously owned homes

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Speaker 2: barely rose in May, so higher mortgage rates are having

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Speaker 2: an impact. It's tough to make the call that we're

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Speaker 2: headed for recession right now. But to Christina's point, if

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Speaker 2: the Fed continues on its mission, that becomes an increasing risk.

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Speaker 4: Yeah.

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Speaker 1: Absolutely, and yields moving up something we can talk about

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Speaker 1: with Margie Pateell coming up in a few moments, senior

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Speaker 1: Portfoli manager at all Spring Global Investments. But now it's

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Speaker 1: time for global news, sad news about the submersible carrying

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Speaker 1: people to look at the Titanic wreckage. We'll get to that.

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Speaker 1: The Coastguard saying that the pilot and four passengers are

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Speaker 1: likely dead.

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Speaker 4: And for that and.

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Speaker 1: Other global news, let's get to Denise Pellegrini in the

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Speaker 1: Bloomberg newsroom.

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Speaker 3: Denise, thank you, Brian. That's submersible titan. It has been

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Speaker 3: found in fragments, Brian, so no chance of survival. They're

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Speaker 3: calling the wreckage consistent with the catastrophic implosion. The US

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Speaker 3: Coast Guard reports finding pieces of the tail cone, both

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Speaker 3: ends of the pressure chamber on the ocean floor. They

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Speaker 3: found this all about sixteen hundred feet from the Titanic rear.

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Speaker 3: Admiral John Mauger.

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Speaker 10: The debris is consistent with the catastrophic loss of the

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Speaker 10: pressure chamber.

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Speaker 3: And Muger also says it's likely that this implosion happens Sunday.

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Speaker 3: I would be early in the trip, before rescue crews

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Speaker 3: converged on the scene.

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Speaker 10: We've had Sarnar bowies and the water nearly continuously and

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Speaker 10: have not detected any catastrophic events when those Sonobowies have

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Speaker 10: been in the water.

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Speaker 3: Right so Oceangate Expeditions meantime, that's company running all this.

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Speaker 3: They're saying that CEO Stockton Rush is among those lost,

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Speaker 3: along with two members of a prominent Pakistani family, British

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Speaker 3: Adventure Hamish Harding, and a Titanic expert. Investigation, as you

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Speaker 3: can imagine, is in the early stages. Now, you know

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Speaker 3: how earlier this week President Biden called China's president a dictator. Well,

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Speaker 3: now we had a change of tone today. Biden now

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Speaker 3: says he expects to meet with She. Jim pinkson Tector

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Speaker 3: Blincoln had a great trip to China.

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Speaker 5: I expect to be meeting with President She sometime in.

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Speaker 3: The future, in the near term, and Biden spoke after

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Speaker 3: that meeting with India's president. We've been tracking closely for

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Speaker 3: you here on Bloomberg day Break Asia. And as for

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Speaker 3: those deals Biden and narendro Modi announced today, they are

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Speaker 3: designed to enhance military and economic ties between the US

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Speaker 3: and India. Here's Modi on that through a translator.

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Speaker 11: We have transitioned today to a relationship involving transfer of technology,

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Speaker 11: co development and co production.

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Speaker 3: Co production like this, General Electric plans to jointly manufacture

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Speaker 3: F four to one four engines with state owned Indian

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Speaker 3: from Hindustan Aeronautics and Biden and Modi also announced new

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Speaker 3: defense collaborations, including progress on MQ nine b C Guardian drones.

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Speaker 3: Those are made by General Atomics. And also there's an

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Speaker 3: agreement now to allow US Navy ships to undertake major

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Speaker 3: repairs at Indian shipyards. Remember, of course, as you were

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Speaker 3: talking about earlier, India does have those close military ties

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Speaker 3: to Russia because of its tension with China. Right, so

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Speaker 3: this is all being watched very closely by a lot

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Speaker 3: of people right now. Meta blocking news on Facebook and

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Speaker 3: Instagram in Canada, this is because of a new law there.

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Speaker 3: This new Canadian legislation requires digital platforms to pay local publishers.

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Speaker 3: And if you like to nap in the afternoon, now

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Speaker 3: you have a good excuse because researchers say it can

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Speaker 3: improve overall banks in health by preventing the shrinkage of

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Speaker 3: your brain tissue.

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Speaker 5: People who take a nap for say an hour, when

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Speaker 5: they're waking up from it, they actually feel more groggy

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Speaker 5: because they got into a deeper stage of sleep.

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Speaker 3: And that is clinical psychologist Shelby Harris.

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Speaker 9: So the shorter naps actually tend to be better for

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Speaker 9: many people.

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Speaker 3: Yeah, she recommends twenty to thirty minutes, but guys don't

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Speaker 3: dip into it anymore than that, or its counterproductive. Global

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Speaker 3: News twenty four hours a day and on Bloomberg Quick Take,

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Speaker 3: powered by more than twenty seven hundred journalists and analysts

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Speaker 3: in more than one hundred and twenty countries in the

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Speaker 3: news or mind Denise Pellgrini, this is Bloomberg.

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Speaker 1: This is Bloomberg Daybreak Asia. I'm Brian Curtis along with

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Speaker 1: Rashad Sala'm not here in Hong Kong. Our guest is

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Speaker 1: Margie Pettil, senior portfolio manager at all Spring Global Investments. So, Margie,

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Speaker 1: one of the things that you're a little bit concerned

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Speaker 1: about is reduced liquidity going forward for a variety of reasons.

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Speaker 1: Lay out how that advises you on adjusting your portfolio.

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Speaker 12: Well, you see, the SAD reduces liquid it could put

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Speaker 12: stress in the banking system. In March, we had failures

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Speaker 12: of several smaller banks and that really was going to

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Speaker 12: cascade through the financial system until the said provided a

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Speaker 12: lot more liquidity. So I think that if they tightened

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Speaker 12: again to try to take away that liquidity. They are

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Speaker 12: supposed to be on a quantitative tightening mode if you

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Speaker 12: recall as an adjunct to raising interest rates over the

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Speaker 12: last year, and yet really what they've done is actually

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Speaker 12: expand liquidity year to date because of these other activities

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Speaker 12: that they did. So I think they once again try

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Speaker 12: to reduce the amount of the balance sheet restricting liquidity,

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Speaker 12: and as I said, I think I would have repercussions

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Speaker 12: most directly in the banking the financial system.

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Speaker 11: Margie, Yeah, I mean I take your point, but I

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Speaker 11: mean we're seeing liquidity also being drained away. I mean

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Speaker 11: we've got a huge issuits of treasuries being undertaken at

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Speaker 11: one point seven trillion or something like that is a

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Speaker 11: figure I think you have. And then on top of that,

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Speaker 11: we've got mp to money supply growth negative for the

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Speaker 11: last couple of months. These things don't all go well.

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Speaker 12: Well, that's true, actually M two is shrinking. But if

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Speaker 12: you look at an alternative measure, the old M three

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Speaker 12: where you added money market deposits and so forth, on

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Speaker 12: that measure of liquidity, it actually is growing, but I

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Speaker 12: think you're right about the enormous flood of treasury bills

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Speaker 12: that we're going to get, And that says to me, one,

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Speaker 12: we're likely to see short term rates the bill rate

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Speaker 12: securities in under a year remain abnormally high compared to

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Speaker 12: what the history books would tell us, regardless of the

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Speaker 12: rest of the curve. And also that says that we

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Speaker 12: might see treasury yields trading at a closer relationship to

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Speaker 12: investment grade and high old bonds than you would expect. Again,

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Speaker 12: simply because supply demand, there's a flood of treasury bills,

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Speaker 12: you have to clear the market at a higher higher

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Speaker 12: interest rates, whereas on investment grade corporates and high yield bonds,

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Speaker 12: you actually of supply modestly shrinking, so you have more

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Speaker 12: of a supply scarcity. So I would think yield spreads

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Speaker 12: would actually narrow. And that's how the market's going to

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Speaker 12: adjust for treasury bill rates being higher than we would expect,

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Speaker 12: simply because they have to bring trillons and trots to

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Speaker 12: the marketplace.

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Speaker 1: Well, there are a lot of signs that the economy

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Speaker 1: may weaken, it may go into recession. The inversion of

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Speaker 1: the yield curve is just one, but consumer behavior could

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Speaker 1: be another. And that makes it kind of hard if

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Speaker 1: you have bought a lot of these high flying tech stocks,

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Speaker 1: if you're thinking about diversifying into, say cyclicals, hard to

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Speaker 1: really get your head around that if the economy is slowing.

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Speaker 1: But what about say, are sort of rolling into the

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Speaker 1: S and P five hundred, number ten to number fifty

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Speaker 1: ranked market cap companies because the top seven or the

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Speaker 1: top ten have rallied so much that their valuations are high.

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Speaker 1: You have good balance sheets in there and can weather

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Speaker 1: the storm. Is that something that attracts you.

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Speaker 12: I haven't done that yet because I'm looking more at

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Speaker 12: industry outlooks, and frankly, I think the tech sector, which

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Speaker 12: a lot of the very megacap companies are in, is

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Speaker 12: still going to outperform. I think after we had all

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Speaker 12: those companies report the first quarter numbers that were quite

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Speaker 12: good and much better than feared, that really gave the

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Speaker 12: go ahead that you could still buy these names. And

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Speaker 12: then you saw a flood of money come in and

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Speaker 12: buy the fang names, the top seven, the top ten,

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Speaker 12: however you want to define them. And so they've continued

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Speaker 12: on their ride. And if you think growth is likely

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Speaker 12: to be rather modest over the next year, say maybe

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Speaker 12: one percent, maybe two percent, Maybe we have a recession.

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Speaker 12: When you look at these names, yes, the prices are

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Speaker 12: very high, but you could say, well, I think I

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Speaker 12: have a short growth there. They will grow faster than

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Speaker 12: the rest of the economy, so I'm still going to

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Speaker 12: buy them, And that's what's happened. So until you see

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Speaker 12: a break in those one of those companies outlooks, I

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Speaker 12: think they probably are going to continue to outperform the market.

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Speaker 12: Even though they're very high. They're actually not quite as

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Speaker 12: high as they were during their peak in twenty twenty one.

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Speaker 12: But it's no comfort to thinking we're going to see

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Speaker 12: a reversion and see more value priced stocks rise up

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Speaker 12: in those stocks decline. So I think they still have

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Speaker 12: a little bit more to run until there's a fundamental

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Speaker 12: change in their outlook.

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Speaker 11: Just want to get your views here, Margie on what

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Speaker 11: is going on in the corporate bond market in terms

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Speaker 11: of high yield at least if we take a look

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Speaker 11: at that triple C rated paper globally speaking, well, it

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Speaker 11: is actually amongst the best performing assets out there at

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Speaker 11: the moment. Can that be sustained and why well, I

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Speaker 11: think that.

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Speaker 12: Really reflects more of a restolerance. I think that as

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Speaker 12: we got into the market and people feel they know

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Speaker 12: what the FED is going to do, and we've seen

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Speaker 12: the equity market take off, a lot of settlement in

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Speaker 12: the high yeld market is really looking at what the

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Speaker 12: equity market is doing. So you had that whole bottom

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Speaker 12: tier of the triple c's actually be the best performer,

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Speaker 12: but they still represent risk. They still are trading more

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Speaker 12: than a thousand basis points over the equivalent maturity treasury.

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Speaker 12: So I think that's just more of a short term move.

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Speaker 12: But actually I think high yield bonds will continue to

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Speaker 12: be attractive because defaults in the latest months were only

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Speaker 12: a little over three percent, so that's really quite good.

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Speaker 12: So it says that you should be able to keep

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Speaker 12: all that extra yield for most high yield bonds, and

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Speaker 12: so I think it's attractive.

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Speaker 1: I sometimes think of you as conservative, but you know,

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Speaker 1: with your call there to stick with the megacaps, I

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Speaker 1: find that very interesting. Do you not feel a need

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Speaker 1: to rebalance as the values have gone up a lot?

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Speaker 1: Do you try to rebalance portfolios or you just ride it?

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Speaker 12: No, we try to look at where the best relative

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Speaker 12: value is. If it looks as if earnings are going

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Speaker 12: to slow down or disappointing, then we exit. But I

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Speaker 12: think you can just see them amendumum in that those

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Speaker 12: handfuls of stock is so strong. It's only going to

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Speaker 12: take a real world change to make people say I'm

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Speaker 12: going to take my money out of this called pot

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Speaker 12: names give or take.

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Speaker 1: I love it.

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Speaker 12: Yeah, so frustrating, but that's what investing is.

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Speaker 1: This swashbuckling. Margie Patel, thank you so much for joining us.

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Speaker 1: Good session. Margi Patel, it's senior portfolio manager at all

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Speaker 1: Spring Global Investments. This is Bloomberg Daybreak Asia, your morning

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