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Speaker 1: This is Bloomberg Daybreak Asia for this Tuesday, April twenty

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Speaker 1: fifth in Hong Kong, Monday April twenty fourth in New

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Speaker 1: York and coming up today.

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Speaker 2: First Republic Bank is pursuing strategic options as it reports

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Speaker 2: a slump in first quarter deposits.

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Speaker 1: Credit Suie saw sixty nine billion dollars of outflows last

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Speaker 1: quarter as it near to collapse.

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Speaker 2: And China's Poloit Bureau is likely to shift its focus

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Speaker 2: from stimulus to reforms.

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Speaker 3: China distances itself from its French ambassador and supports former

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Speaker 3: Soviet Bloc country sovereignty. Australia Defense Ministry says the military

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Speaker 3: must make adjustments to be fit for purpose. McCarthy looks

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Speaker 3: to be going ahead with debt vote. I'm Ed Baxter

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Speaker 3: 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 in 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 1: Good morning, I'm Doug Chrisner and I'm Brian Curtiz. Here

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Speaker 1: are the stories we're following today. First Republic saying it's

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Speaker 1: pursuing strategic options. Now and seeking to shrink its balance sheet.

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Speaker 1: That's after it reported deposits that fell to one hundred

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Speaker 1: four point five billion in the first quarter. Deposits are

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Speaker 1: down forty one percent from the end of last year.

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Speaker 1: The California Lendo was engulfed in the regional banking turmoil

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Speaker 1: that led to the collapse of three of its peers.

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Speaker 5: First Republic.

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Speaker 1: Slump also comes despite the largest US lenders injecting some

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Speaker 1: thirty billion dollars of their own cash into the bank

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Speaker 1: to try to help shore up the finances in response

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Speaker 1: to the unprecedented outflows of deposits. The company says now

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Speaker 1: that it plans to cut its workforce as much as

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Speaker 1: twenty five percent. We heard earlier from Bloomberg's Herman Chen.

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Speaker 6: They talked about some expense reductions with some employee cuts.

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Speaker 6: That helps on the margin, but really instill confidence is

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Speaker 6: more focused on stabilizing the balance sheet and getting those

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Speaker 6: deposits back that left in the first quarter.

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Speaker 5: And the bank's shares are down a little more than

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Speaker 5: twenty one percent now.

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Speaker 2: In late trading, well clients had credit Sueeze pulled sixty

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Speaker 2: nine billion dollars from the bank during the first quarter.

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Speaker 2: As the bank neared collapse, and now UBS will have

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Speaker 2: big challenges ahead following that emergency takeover of its biggest rival.

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Speaker 2: We have more from Bloomberg's Manis Kranny.

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Speaker 7: Over the past six months, one hundred and seventy billion

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Speaker 7: Swiss ranks of assets that yield for the bank have exited.

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Speaker 7: The question now is what can UBS do to stop

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Speaker 7: that rot when the deal closes? What can they offer clients?

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Speaker 7: How can they make them stay? How can they make

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Speaker 7: the rain makers within the institution of Credit Suite remain.

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Speaker 7: The message was clear, we will make more substantial losses

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Speaker 7: in wealth management from Credit Suie. We had to tap

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Speaker 7: the Swiss National Bank for one hundred billion and more

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Speaker 7: of liquidity. This is far from done. The challenges are

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Speaker 7: significant for Colin kalaher Ikbal Khan and Sergio Motty, the

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Speaker 7: CEO of UBS, on getting this flow show to stay

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Speaker 7: and generate income in Zurich. On Manistrane.

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Speaker 1: All right, let's take a closer look here at Tesla,

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Speaker 1: because it's increasing its forecast for capex again and looks

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Speaker 1: to be targeting nine billion dollars in twenty twenty three,

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Speaker 1: according to a regulatory filing as of January Tesla provided

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Speaker 1: a forecast range that was a billion less.

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Speaker 5: At both the low and the high end.

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Speaker 1: Tesla's capex boost comes while executives have been emphasizing cost

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Speaker 1: cutting efforts. Bloombergs Ed Ludlow says it's being done with

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Speaker 1: an emphasis on sustaining growth.

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Speaker 8: They're cutting prices on evs here in North America, they

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Speaker 8: did recently just re raise prices on Mode less and

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Speaker 8: Model X, and internally a view on cutting costs is

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Speaker 8: a big focus. But reminder of Elon musk commitment to

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Speaker 8: sustaining growth at the expense of margin and profit. That's

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Speaker 8: something that he's been relatively clear on.

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Speaker 5: And while the cell side at least are.

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Speaker 8: A little concern about the impact of price cuts to

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Speaker 8: products on that bottom line, at least Tesla is consistent

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Speaker 8: on the view of investing through periods like this to

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Speaker 8: maintain that growth rate.

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Speaker 1: Tesla shows are down one and a half percent in

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Speaker 1: the regular sash and drifting just a little bit lower

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Speaker 1: here in after hours. Not much about an extra four

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Speaker 1: tenths of one percent overall, though the stock has risen

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Speaker 1: some thirty four percent this year.

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Speaker 2: A second round of job cuts underway at Walt Disney

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Speaker 2: We have more from Bloomberg's and.

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Speaker 9: Kate's play also take place in all Disney divisions, from

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Speaker 9: corporate headquarters to ESPN, although hourly workers at its theme

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Speaker 9: parks will not be affected. It's part of Disney's push

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Speaker 9: to eliminate seven thousand positions in an effort to save

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Speaker 9: five and a half billion dollars a year in costs.

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Speaker 9: The entertainment giant is also racing to curb losses at

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Speaker 9: its Disney Plus streaming service, as Wall Street shifts as

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Speaker 9: focused from subscriber growth to the expense of operating online

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Speaker 9: video platforms. In Washington and Kates Bloomberg day Break Asia.

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Speaker 1: China's top leaders may convene a meeting of the party's

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Speaker 1: politbureau this week to tweak economic policy.

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Speaker 5: We get the story from Bloomberg's Joan Wong.

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Speaker 10: Officials are looking to boost business confidence, increase jobs, and

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Speaker 10: strengthen the property market without adding new stimulus. Economists say

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Speaker 10: they're closely watching monetary and fiscal support now that growth

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Speaker 10: is rebounding. Several banks have raised as there are China

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Speaker 10: growth forecasts to six percent or higher for twenty twenty three.

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Speaker 10: That's well above Beijing's target of around five percent, and

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Speaker 10: that level of growth would reduce the need for more stimulus.

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Speaker 10: Some economists say it could be too soon, as though

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Speaker 10: as opposed, COVID recovery has been fairly uneven. But the

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Speaker 10: PBOC has already signaled it will begin dialing back pandemic stimulus,

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Speaker 10: and the thinking is officials may pull back further. In

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Speaker 10: Hong Kong, I'm joined Wong Bloomberg day Brigeisia.

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Speaker 1: I'm Brian Curtis along with Doug Krisner and Rashad Salamat

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Speaker 1: and Doug. Nothing's really rattling page right now in markets.

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Speaker 1: It's still the banking turmoil that didn't quite become a crisis,

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Speaker 1: and yet the stocks haven't recovered.

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Speaker 5: The regional banking stocks haven't recovered.

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Speaker 1: And I don't think the earnings from First Republic today

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Speaker 1: changed that at all.

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Speaker 2: Well, you're right about that, and then there's the FED

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Speaker 2: story on top of that. Right now, it's kind of

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Speaker 2: interesting to see the divergence. On one hand, we have the

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Speaker 2: swaps market continuing to see rates peaking in the coming

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Speaker 2: weeks and then a series of cuts later in the year,

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Speaker 2: So that seems to be the view of money market traders,

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Speaker 2: right and then you look at the other story data

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Speaker 2: from the CFTCS showing that net short positions on the

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Speaker 2: ten year rose to the highest level on record this month.

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Speaker 2: So the hedge fund community seems to be betting that

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Speaker 2: the Fed will continue to raise rates. And look at

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Speaker 2: today's data from the Dallas Fed Manufacturing week, but it's

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Speaker 2: clear that inflationary pressures remain very elevated. So it's this

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Speaker 2: tension in markets right now.

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Speaker 1: Brian, Yeah, but the hedge fund position also indicates that

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Speaker 1: they're not expecting recession, and I think that story is

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Speaker 1: still to be written.

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Speaker 2: That's another way of looking at it. But maybe it's

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Speaker 2: a period of stagflation. That's what Bloomberg Economics is saying, Right,

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Speaker 2: you get slow growth, but yet inflation remains persistent. Going

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Speaker 2: back to that Dallas Fed stuff, the wages and benefits

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Speaker 2: component of the manufacturing report now at the highest level

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Speaker 2: since August. Ninety nine percent of the firm surveyed by

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Speaker 2: the Dallas Fed reported higher or similar wages and benefit

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Speaker 2: cost in the month. So this it remains sticky. Let

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Speaker 2: me just say that.

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Speaker 1: I think for most of the people we talked to,

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Speaker 1: they acknowledge that this is one of the most difficult

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Speaker 1: times to really understand and or predict whether we're heading

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Speaker 1: toward recession or whether or not you escape this with

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Speaker 1: a soft landing. It makes it great for us to

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Speaker 1: put these questions to our guests. And we'll have Carol

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Speaker 1: Pepper coming up shortly, founder and CEO of Pepper International.

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Speaker 1: But now it's time for Global news. China has sought

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Speaker 1: to distance itself from the firestorm caused by its ambassador

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Speaker 1: to France and those comments from yesterday and back to

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Speaker 1: with Global News from the nine to sixty newsroom in

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Speaker 1: San Francisco.

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Speaker 3: Ed, Yeah, exactly right, Brian. China says the comments by

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Speaker 3: Ambassador at Lui Chu that former Soviet Bloc states are

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Speaker 3: not sovereign nations was an expression of his personal point

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Speaker 3: of view at a Beijing breast briefing. Spokes One mal

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Speaker 3: And ning through a translator.

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Speaker 10: Ye, China respects the status of the former Soviet republics

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Speaker 10: and sovereign countries after the Soviet Unis dissolution.

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Speaker 3: Now I'm ao saying the media has blown it out

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Speaker 3: of proportion, and former Ambassador to China Paul Volker on

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Speaker 3: Bloomberg sound On earlier said they don't like to contradict themselves,

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Speaker 3: but the fact that they took down a transcript of

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Speaker 3: loose comments shows they don't approve if you.

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Speaker 11: Start playing through the implications, like you're now saying that

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Speaker 11: Kazakhspan a neighbor of China and a vast one in

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Speaker 11: which China has huge interests, that that should actually be

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Speaker 11: part of right. I don't think the Chinese mean that.

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Speaker 3: Meanwhile, France President Maniu mccron also distancing himself, saying it's

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Speaker 3: not a diplomat's place to use this sort of language.

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Speaker 3: Major Australian Defense Minister report has recommended sweeping changes to

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Speaker 3: the country's defense forces as it readjusts to a changing

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Speaker 3: into Pacific region. The Defense Strategic Reviews says Australia's military

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Speaker 3: is not fit for purpose. Defense Minister Richard Marle says

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Speaker 3: this will provide for an Australian defense force befitting a

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Speaker 3: much more confident and self reliant nation. Meanwhile, US President

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Speaker 3: Joe Biden will use this week's state visit by South

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Speaker 3: Korean President Unsukiol to undersco support there, including being ready

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Speaker 3: to step up its efforts to tour North Korean attack

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Speaker 3: on the South. US House speaker Kevin McCarthy looks to

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Speaker 3: be going ahead with a vote without the possibility of

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Speaker 3: amendments for his debt sealing bill, even though Bloomberg Reporting

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Speaker 3: says he may come up short on votes from the

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Speaker 3: ultra conservative part of of his party now. Bloomberg's Windy

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Speaker 3: Benjamin sent on Bloomberg's balance of power, says, it is

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Speaker 3: hard to figure out what he is really thinking.

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Speaker 5: And he thinks they're just going to go along with

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Speaker 5: the plan. I guess that's what he thinks.

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Speaker 12: But if he were a speaker who had a lot

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Speaker 12: of power behind him, who had a lot of support

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Speaker 12: behind him, who wasn't elected on the fifteenth ballot, that

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Speaker 12: could be a good play. But it's clear his caucus

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Speaker 12: doesn't believe him.

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Speaker 3: It is dead in the Senate anyway, and the White

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Speaker 3: House says we'll only talk about the Deat ceiling as

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Speaker 3: a separate piece of legislation. Florida Governor Ron de Santis

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Speaker 3: has met with Japan's Prime Minister Fumio Kishi to today

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Speaker 3: in Tokyo.

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Speaker 2: You see a lot of opportunities to build on our

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Speaker 2: business and economic.

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Speaker 3: Ties that Desanta says good for Japan. What is good

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Speaker 3: for Japan? Is good for America. Cable TV is jettison

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Speaker 3: two of their more inflammatory and controversial hosts, Fox News

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Speaker 3: announcing that Tucker Carlson's last show was last Friday. Bloomberg's

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Speaker 3: Felix Gillette says Dominion settlement was a takeoff point for

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Speaker 3: this and that Rupert Murdoch treats people like Carlson as replaceable.

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Speaker 13: Murdoch has always felt confident that he can replace the talent,

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Speaker 13: even if it's someone like Tucker Carlson, who's currently the

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Speaker 13: top rated primetime.

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Speaker 5: Host for Fox News.

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Speaker 13: You think back of when Fox News got rid of

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Speaker 13: Glenn Beck, Red Events, Sustron, Meg and Kelly. They're always

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Speaker 13: this question, Oh, how are they going to recover? And

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Speaker 13: yet whoever they plug into those time slots always seem

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Speaker 13: to do it.

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Speaker 3: Carlson was due to testify at the trial, but the

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Speaker 3: emails it would have been presented we have shown Fox

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Speaker 3: is knowingly reported lying on the other side of the spectrum.

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Speaker 3: Almost at the same time, CNN Don Lemon Boom.

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Speaker 13: Don Lemon has been, you know, going from one controversy

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Speaker 13: to the next for the last couple of months. They

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Speaker 13: brought him back after he made these comments about Nikki Haley.

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Speaker 13: That upset people. You know, the problem with Don Lemon

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Speaker 13: is not only is the generating negative headlines for CNN,

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Speaker 13: but also the ratings have been lousy.

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Speaker 5: Well, I will do it.

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Speaker 3: Carlson's departure from Fox estimated will cost six hundred and

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Speaker 3: ninety million dollars in worth, shares falling as much as

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Speaker 3: five point four percent. Today, Global News powered by more

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Speaker 3: than twenty seven hundred journalists and analysts and over one

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Speaker 3: hundred twenty countries. In San Francisco, I'm at Baxter and

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Speaker 3: this is Bloomberg.

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Speaker 1: I'm Brian Curtis along with Rushad Selama, and we have

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Speaker 1: it Backstraw News as we just heard there, and also

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Speaker 1: Doug Crisner looking at markets. And our guest, a live guest,

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Speaker 1: Carol Pepper, a founder and CEO of Pepper International. Carol,

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Speaker 1: there was a lot of anticipation about First Republic's earnings,

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Speaker 1: so let's take a moment and just have a quick look.

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Speaker 1: I mentioned that this is sort of the banking turmoil

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Speaker 1: that didn't really develop into a crisis.

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Speaker 5: Lots of reasons for.

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Speaker 1: That, but one thing appears clear that it's going to

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Speaker 1: be very hard for the regional.

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Speaker 5: Banks to earn their way out of the position that

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Speaker 5: they find themselves in.

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Speaker 1: Can you see the regional banks coming back from this, well,

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Speaker 1: I mean.

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Speaker 14: I think there'll always be a place for regional banks,

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Speaker 14: but I agree with you, the headwinds are definitely there.

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Speaker 14: I think it's going to take a long time. I mean,

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Speaker 14: there has to be some change hopefully coming in terms

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Speaker 14: of how they measure the belt and suspenders for the

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Speaker 14: regional banks, and I think they will do that, and

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Speaker 14: I think that.

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Speaker 1: I mean, if nothing else, they just need a lot

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Speaker 1: of time, right because all those unrealized losses, they don't

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Speaker 1: want to have them realized, and so you've got to

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Speaker 1: you've got to wait till maturity.

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Speaker 5: So that could be years and years and years.

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Speaker 14: Down the road. No, I don't think they're going to

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Speaker 14: have to wait to maturity. But I do think if

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Speaker 14: we get some rolling back of those regulatory cuts, in

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Speaker 14: other words, to put the regulations back in place, that

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Speaker 14: will that will increase security for the banks and people's

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Speaker 14: ability to be confident. And I think the second thing

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Speaker 14: will be if rates start to go back down again

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Speaker 14: and give them a little bit of a breather so

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Speaker 14: the losses aren't so large. So those are the two

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Speaker 14: things that we have to look for.

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Speaker 5: Carol, though.

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Speaker 15: I mean, the thing is they're going to be very judicious.

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Speaker 15: In fact, that is the word that was used by

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Speaker 15: the Huntington Banks Shares a CFO to Bloomberg the other

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Speaker 15: day when it comes to lending. Judicious means they're going

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Speaker 15: to have to raise their standards, which is going to

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Speaker 15: be probably the case with most of these regional banks,

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Speaker 15: which ten of course, means that we have a problem

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Speaker 15: with the with the companies and smemes in particular getting money,

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Speaker 15: and that is another form of perhaps.

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Speaker 14: Tightening correct I think, well remember too, First Republic also,

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Speaker 14: most of their loans were mortgages to ultra high net

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Speaker 14: worth individuals. This was not a credit issue on them

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Speaker 14: at all. They were doing ten years no interest loans.

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Speaker 14: So they got stuck with this huge geno bullet at

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Speaker 14: the end, which of course flaps around quite a bit

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Speaker 14: in terms of value, and the rates went up, that

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Speaker 14: went down significantly, So it wasn't really a credit issue.

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Speaker 14: It was it was how they structured these bonds, which

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Speaker 14: seemed frankly a little bit surprising that they couldn't have

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Speaker 14: anticipated that some point in ten years the rates would

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Speaker 14: have gotten up. So in this case from First Republic,

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Speaker 14: their credit was stellar. This was not a problem for them.

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Speaker 14: It was this interest only lending thing for ten years

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Speaker 14: that they've got to stop doing.

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Speaker 1: In the broader markets, who haven't had a lot of

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Speaker 1: movement of lad although we have had in individual companies,

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Speaker 1: but not so much in the broader picture. Are you

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Speaker 1: waiting on a catalyst? Is there a catalyst coming for

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Speaker 1: more direction in markets than what might it be?

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Speaker 14: Well, I think even this week will be interesting for

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Speaker 14: the tech names. You know, I'm a big tech bull,

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Speaker 14: so I'm anticipating Amazon will give us a good story.

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Speaker 14: And you know, again, once we get a clear picture

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Speaker 14: of when these rate hikes are going to stop, you're

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Speaker 14: going to see the rest of the markets start to

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Speaker 14: run again. Because generally the economy is doing fine. This

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Speaker 14: was a FED induced slowdown. This is not because the

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Speaker 14: fundamentals of the companies were bad and they were slowing

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Speaker 14: down organically, but because interest rate and cost barring costs

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Speaker 14: have gone up. It has given all of the companies

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Speaker 14: also frankly, an excuse to lay off a lot of employees.

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Speaker 14: So guess what happens they do the layoffs those costs

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Speaker 14: aren't coming back, and now if the boring costs go down,

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Speaker 14: suddenly there a much better position. They have more cash

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Speaker 14: and they could start moving forward. So I think that

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Speaker 14: the catalyst will be, you know, when we see the

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Speaker 14: I mean, I just don't think they can keep hiking

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Speaker 14: for too much longer because the big ticking time bomb

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Speaker 14: is the real estate loans. Honestly, I mean, the real

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Speaker 14: estate developers are all hanging on here, but at a

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Speaker 14: certain point they're going to run out. You're going to

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Speaker 14: see a lot more bank problems if you don't lower

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Speaker 14: those rates.

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Speaker 15: Absolutely, So in that environment, who does well. You're a

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Speaker 15: fan of tech, You're also find of medicare.

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Speaker 14: Medical yes, drug companies for example, there's some really exciting

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Speaker 14: blockbuster type of drugs that are coming along, the weight

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Speaker 14: loss drugs Eli Lilly for example, with Goovy. The minute

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Speaker 14: that that gets approved to use for weight loss, that

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Speaker 14: thing is going to be excuse me, Monjarno for Eli

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Speaker 14: Lilly and then Wagovy for Nova Nordisk. They're actually just

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Speaker 14: announced today that they're going to do a head to

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Speaker 14: head competition and study which one is going to be better.

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Speaker 14: But the general thought is probably Munjaro is going to win,

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Speaker 14: and that's a multi billion dollar opportunity. There are also

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Speaker 14: wonderful new cancer drugs coming along. There's genetic medicine happening.

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Speaker 14: So I do think there are certain categories like technology

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Speaker 14: and drug development that will go do well regardless of

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Speaker 14: where the interest rates are, because these are things people

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Speaker 14: have to use.

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Speaker 1: It is a difficult environment where you have basically half

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Speaker 1: the people think we are heading toward recession, and that

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Speaker 1: changes a lot of calculations for sure. I mean it

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Speaker 1: would mean that you know, the twenty five percent draw

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Speaker 1: down last year isn't enough probably if.

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Speaker 5: You actually hit a full blown recession.

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Speaker 1: Right, So it doesn't sound like you're too expecting of that.

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Speaker 1: But can you outline or you know, give us your

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Speaker 1: thoughts on where we're heading in say the middle term

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Speaker 1: here on the economy, Well, when you.

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Speaker 14: Say middletar, I would say the rest of that. Let's

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Speaker 14: just look at where you know, let's say we're beginning

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Speaker 14: the next quarter here, if we look at by the summer,

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Speaker 14: if we look at by this summer, if the Fed

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Speaker 14: stops raising, which I believe they will at some point

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Speaker 14: June or July, the outside outside because things are slowing

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Speaker 14: down on their own from what they've already done. And

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Speaker 14: it also always happens this way that it takes a

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Speaker 14: few months for the raises to actually start to slow

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Speaker 14: the economy. Let's say it starts to go through then

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Speaker 14: I think, you know, the will be sort of sideways

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Speaker 14: through the summer and then maybe take off again in

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Speaker 14: the fall. Okay, that's one possible scenario. I personally don't

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Speaker 14: see the recession. I don't see enough science to convince

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Speaker 14: me that a major recession is happening. However, if you're

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Speaker 14: afraid of that, my advice would be throw your money

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Speaker 14: into the money market funds and earn four and a

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Speaker 14: half percent right now, and just stay out as long

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Speaker 14: as you're that frightened. Just stay in the money market

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Speaker 14: funds and wait to see what the Fed does. You

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Speaker 14: don't have to, you know, the day after the Fed

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Speaker 14: moves is still plenty of time for the average investor

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Speaker 14: to get into the market. Just sit in those nice,

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Speaker 14: you know, Treasury backed money market funds and earn your

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Speaker 14: four and a half percent right now, and it will

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Speaker 14: only go up if you're right. You learn five or

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Speaker 14: six percent. Then you can wait so when you feel

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Speaker 14: that the pain is over, and then look for some

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Speaker 14: period around the month or two when the term is coming,

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Speaker 14: and then go back in. So for those listeners who

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Speaker 14: are very frightened the money markets, there's no shame in

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Speaker 14: the money market. Sit over there and wait for those

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Speaker 14: who think, eh, I really want to get in now,

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Speaker 14: I'm afraid it's going to go higher. Then look at

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Speaker 14: big tech names. Look at big you know, blue chip names.

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Speaker 14: Those always do well regardless. So if you want to

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Speaker 14: be a little ahead of the curb and you want

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Speaker 14: to take the risk, go into bloo chips. If you don't, don't,

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Speaker 14: All right.

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Speaker 1: Carol, thanks very much for joining us. Carol Pepper, founder

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Speaker 1: and CEO of Pepper International. This is Bloomberg Daybreak Asia,

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Speaker 1: your morning brief on the stories making news from Hong

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Speaker 1: Kong to Singapore and Wall Street.

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Speaker 1: You can also listen live each day on Bloomberg eleven

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