Speaker 1: This is Bloomberg Daybreak Asia for this Tuesday, April twenty
Speaker 1: fifth in Hong Kong, Monday April twenty fourth in New
Speaker 1: York and coming up today.
Speaker 2: First Republic Bank is pursuing strategic options as it reports
Speaker 2: a slump in first quarter deposits.
Speaker 1: Credit Suie saw sixty nine billion dollars of outflows last
Speaker 1: quarter as it near to collapse.
Speaker 2: And China's Poloit Bureau is likely to shift its focus
Speaker 2: from stimulus to reforms.
Speaker 3: China distances itself from its French ambassador and supports former
Speaker 3: Soviet Bloc country sovereignty. Australia Defense Ministry says the military
Speaker 3: must make adjustments to be fit for purpose. McCarthy looks
Speaker 3: to be going ahead with debt vote. I'm Ed Baxter
Speaker 3: with Global News.
Speaker 4: That's all straight ahead on Bloomberg day Break Asia, The
Speaker 4: business news you need to start your day in just
Speaker 4: one fifteen minute podcast available on Apples, Spotify, the Bloomberg
Speaker 4: Business app and everywhere you get podcasts.
Speaker 1: Good morning, I'm Doug Chrisner and I'm Brian Curtiz. Here
Speaker 1: are the stories we're following today. First Republic saying it's
Speaker 1: pursuing strategic options. Now and seeking to shrink its balance sheet.
Speaker 1: That's after it reported deposits that fell to one hundred
Speaker 1: four point five billion in the first quarter. Deposits are
Speaker 1: down forty one percent from the end of last year.
Speaker 1: The California Lendo was engulfed in the regional banking turmoil
Speaker 1: that led to the collapse of three of its peers.
Speaker 5: First Republic.
Speaker 1: Slump also comes despite the largest US lenders injecting some
Speaker 1: thirty billion dollars of their own cash into the bank
Speaker 1: to try to help shore up the finances in response
Speaker 1: to the unprecedented outflows of deposits. The company says now
Speaker 1: that it plans to cut its workforce as much as
Speaker 1: twenty five percent. We heard earlier from Bloomberg's Herman Chen.
Speaker 6: They talked about some expense reductions with some employee cuts.
Speaker 6: That helps on the margin, but really instill confidence is
Speaker 6: more focused on stabilizing the balance sheet and getting those
Speaker 6: deposits back that left in the first quarter.
Speaker 5: And the bank's shares are down a little more than
Speaker 5: twenty one percent now.
Speaker 2: In late trading, well clients had credit Sueeze pulled sixty
Speaker 2: nine billion dollars from the bank during the first quarter.
Speaker 2: As the bank neared collapse, and now UBS will have
Speaker 2: big challenges ahead following that emergency takeover of its biggest rival.
Speaker 2: We have more from Bloomberg's Manis Kranny.
Speaker 7: Over the past six months, one hundred and seventy billion
Speaker 7: Swiss ranks of assets that yield for the bank have exited.
Speaker 7: The question now is what can UBS do to stop
Speaker 7: that rot when the deal closes? What can they offer clients?
Speaker 7: How can they make them stay? How can they make
Speaker 7: the rain makers within the institution of Credit Suite remain.
Speaker 7: The message was clear, we will make more substantial losses
Speaker 7: in wealth management from Credit Suie. We had to tap
Speaker 7: the Swiss National Bank for one hundred billion and more
Speaker 7: of liquidity. This is far from done. The challenges are
Speaker 7: significant for Colin kalaher Ikbal Khan and Sergio Motty, the
Speaker 7: CEO of UBS, on getting this flow show to stay
Speaker 7: and generate income in Zurich. On Manistrane.
Speaker 1: All right, let's take a closer look here at Tesla,
Speaker 1: because it's increasing its forecast for capex again and looks
Speaker 1: to be targeting nine billion dollars in twenty twenty three,
Speaker 1: according to a regulatory filing as of January Tesla provided
Speaker 1: a forecast range that was a billion less.
Speaker 5: At both the low and the high end.
Speaker 1: Tesla's capex boost comes while executives have been emphasizing cost
Speaker 1: cutting efforts. Bloombergs Ed Ludlow says it's being done with
Speaker 1: an emphasis on sustaining growth.
Speaker 8: They're cutting prices on evs here in North America, they
Speaker 8: did recently just re raise prices on Mode less and
Speaker 8: Model X, and internally a view on cutting costs is
Speaker 8: a big focus. But reminder of Elon musk commitment to
Speaker 8: sustaining growth at the expense of margin and profit. That's
Speaker 8: something that he's been relatively clear on.
Speaker 5: And while the cell side at least are.
Speaker 8: A little concern about the impact of price cuts to
Speaker 8: products on that bottom line, at least Tesla is consistent
Speaker 8: on the view of investing through periods like this to
Speaker 8: maintain that growth rate.
Speaker 1: Tesla shows are down one and a half percent in
Speaker 1: the regular sash and drifting just a little bit lower
Speaker 1: here in after hours. Not much about an extra four
Speaker 1: tenths of one percent overall, though the stock has risen
Speaker 1: some thirty four percent this year.
Speaker 2: A second round of job cuts underway at Walt Disney
Speaker 2: We have more from Bloomberg's and.
Speaker 9: Kate's play also take place in all Disney divisions, from
Speaker 9: corporate headquarters to ESPN, although hourly workers at its theme
Speaker 9: parks will not be affected. It's part of Disney's push
Speaker 9: to eliminate seven thousand positions in an effort to save
Speaker 9: five and a half billion dollars a year in costs.
Speaker 9: The entertainment giant is also racing to curb losses at
Speaker 9: its Disney Plus streaming service, as Wall Street shifts as
Speaker 9: focused from subscriber growth to the expense of operating online
Speaker 9: video platforms. In Washington and Kates Bloomberg day Break Asia.
Speaker 1: China's top leaders may convene a meeting of the party's
Speaker 1: politbureau this week to tweak economic policy.
Speaker 5: We get the story from Bloomberg's Joan Wong.
Speaker 10: Officials are looking to boost business confidence, increase jobs, and
Speaker 10: strengthen the property market without adding new stimulus. Economists say
Speaker 10: they're closely watching monetary and fiscal support now that growth
Speaker 10: is rebounding. Several banks have raised as there are China
Speaker 10: growth forecasts to six percent or higher for twenty twenty three.
Speaker 10: That's well above Beijing's target of around five percent, and
Speaker 10: that level of growth would reduce the need for more stimulus.
Speaker 10: Some economists say it could be too soon, as though
Speaker 10: as opposed, COVID recovery has been fairly uneven. But the
Speaker 10: PBOC has already signaled it will begin dialing back pandemic stimulus,
Speaker 10: and the thinking is officials may pull back further. In
Speaker 10: Hong Kong, I'm joined Wong Bloomberg day Brigeisia.
Speaker 1: I'm Brian Curtis along with Doug Krisner and Rashad Salamat
Speaker 1: and Doug. Nothing's really rattling page right now in markets.
Speaker 1: It's still the banking turmoil that didn't quite become a crisis,
Speaker 1: and yet the stocks haven't recovered.
Speaker 5: The regional banking stocks haven't recovered.
Speaker 1: And I don't think the earnings from First Republic today
Speaker 1: changed that at all.
Speaker 2: Well, you're right about that, and then there's the FED
Speaker 2: story on top of that. Right now, it's kind of
Speaker 2: interesting to see the divergence. On one hand, we have the
Speaker 2: swaps market continuing to see rates peaking in the coming
Speaker 2: weeks and then a series of cuts later in the year,
Speaker 2: So that seems to be the view of money market traders,
Speaker 2: right and then you look at the other story data
Speaker 2: from the CFTCS showing that net short positions on the
Speaker 2: ten year rose to the highest level on record this month.
Speaker 2: So the hedge fund community seems to be betting that
Speaker 2: the Fed will continue to raise rates. And look at
Speaker 2: today's data from the Dallas Fed Manufacturing week, but it's
Speaker 2: clear that inflationary pressures remain very elevated. So it's this
Speaker 2: tension in markets right now.
Speaker 1: Brian, Yeah, but the hedge fund position also indicates that
Speaker 1: they're not expecting recession, and I think that story is
Speaker 1: still to be written.
Speaker 2: That's another way of looking at it. But maybe it's
Speaker 2: a period of stagflation. That's what Bloomberg Economics is saying, Right,
Speaker 2: you get slow growth, but yet inflation remains persistent. Going
Speaker 2: back to that Dallas Fed stuff, the wages and benefits
Speaker 2: component of the manufacturing report now at the highest level
Speaker 2: since August. Ninety nine percent of the firm surveyed by
Speaker 2: the Dallas Fed reported higher or similar wages and benefit
Speaker 2: cost in the month. So this it remains sticky. Let
Speaker 2: me just say that.
Speaker 1: I think for most of the people we talked to,
Speaker 1: they acknowledge that this is one of the most difficult
Speaker 1: times to really understand and or predict whether we're heading
Speaker 1: toward recession or whether or not you escape this with
Speaker 1: a soft landing. It makes it great for us to
Speaker 1: put these questions to our guests. And we'll have Carol
Speaker 1: Pepper coming up shortly, founder and CEO of Pepper International.
Speaker 1: But now it's time for Global news. China has sought
Speaker 1: to distance itself from the firestorm caused by its ambassador
Speaker 1: to France and those comments from yesterday and back to
Speaker 1: with Global News from the nine to sixty newsroom in
Speaker 1: San Francisco.
Speaker 3: Ed, Yeah, exactly right, Brian. China says the comments by
Speaker 3: Ambassador at Lui Chu that former Soviet Bloc states are
Speaker 3: not sovereign nations was an expression of his personal point
Speaker 3: of view at a Beijing breast briefing. Spokes One mal
Speaker 3: And ning through a translator.
Speaker 10: Ye, China respects the status of the former Soviet republics
Speaker 10: and sovereign countries after the Soviet Unis dissolution.
Speaker 3: Now I'm ao saying the media has blown it out
Speaker 3: of proportion, and former Ambassador to China Paul Volker on
Speaker 3: Bloomberg sound On earlier said they don't like to contradict themselves,
Speaker 3: but the fact that they took down a transcript of
Speaker 3: loose comments shows they don't approve if you.
Speaker 11: Start playing through the implications, like you're now saying that
Speaker 11: Kazakhspan a neighbor of China and a vast one in
Speaker 11: which China has huge interests, that that should actually be
Speaker 11: part of right. I don't think the Chinese mean that.
Speaker 3: Meanwhile, France President Maniu mccron also distancing himself, saying it's
Speaker 3: not a diplomat's place to use this sort of language.
Speaker 3: Major Australian Defense Minister report has recommended sweeping changes to
Speaker 3: the country's defense forces as it readjusts to a changing
Speaker 3: into Pacific region. The Defense Strategic Reviews says Australia's military
Speaker 3: is not fit for purpose. Defense Minister Richard Marle says
Speaker 3: this will provide for an Australian defense force befitting a
Speaker 3: much more confident and self reliant nation. Meanwhile, US President
Speaker 3: Joe Biden will use this week's state visit by South
Speaker 3: Korean President Unsukiol to undersco support there, including being ready
Speaker 3: to step up its efforts to tour North Korean attack
Speaker 3: on the South. US House speaker Kevin McCarthy looks to
Speaker 3: be going ahead with a vote without the possibility of
Speaker 3: amendments for his debt sealing bill, even though Bloomberg Reporting
Speaker 3: says he may come up short on votes from the
Speaker 3: ultra conservative part of of his party now. Bloomberg's Windy
Speaker 3: Benjamin sent on Bloomberg's balance of power, says, it is
Speaker 3: hard to figure out what he is really thinking.
Speaker 5: And he thinks they're just going to go along with
Speaker 5: the plan. I guess that's what he thinks.
Speaker 12: But if he were a speaker who had a lot
Speaker 12: of power behind him, who had a lot of support
Speaker 12: behind him, who wasn't elected on the fifteenth ballot, that
Speaker 12: could be a good play. But it's clear his caucus
Speaker 12: doesn't believe him.
Speaker 3: It is dead in the Senate anyway, and the White
Speaker 3: House says we'll only talk about the Deat ceiling as
Speaker 3: a separate piece of legislation. Florida Governor Ron de Santis
Speaker 3: has met with Japan's Prime Minister Fumio Kishi to today
Speaker 3: in Tokyo.
Speaker 2: You see a lot of opportunities to build on our
Speaker 2: business and economic.
Speaker 3: Ties that Desanta says good for Japan. What is good
Speaker 3: for Japan? Is good for America. Cable TV is jettison
Speaker 3: two of their more inflammatory and controversial hosts, Fox News
Speaker 3: announcing that Tucker Carlson's last show was last Friday. Bloomberg's
Speaker 3: Felix Gillette says Dominion settlement was a takeoff point for
Speaker 3: this and that Rupert Murdoch treats people like Carlson as replaceable.
Speaker 13: Murdoch has always felt confident that he can replace the talent,
Speaker 13: even if it's someone like Tucker Carlson, who's currently the
Speaker 13: top rated primetime.
Speaker 5: Host for Fox News.
Speaker 13: You think back of when Fox News got rid of
Speaker 13: Glenn Beck, Red Events, Sustron, Meg and Kelly. They're always
Speaker 13: this question, Oh, how are they going to recover? And
Speaker 13: yet whoever they plug into those time slots always seem
Speaker 13: to do it.
Speaker 3: Carlson was due to testify at the trial, but the
Speaker 3: emails it would have been presented we have shown Fox
Speaker 3: is knowingly reported lying on the other side of the spectrum.
Speaker 3: Almost at the same time, CNN Don Lemon Boom.
Speaker 13: Don Lemon has been, you know, going from one controversy
Speaker 13: to the next for the last couple of months. They
Speaker 13: brought him back after he made these comments about Nikki Haley.
Speaker 13: That upset people. You know, the problem with Don Lemon
Speaker 13: is not only is the generating negative headlines for CNN,
Speaker 13: but also the ratings have been lousy.
Speaker 5: Well, I will do it.
Speaker 3: Carlson's departure from Fox estimated will cost six hundred and
Speaker 3: ninety million dollars in worth, shares falling as much as
Speaker 3: five point four percent. Today, Global News powered by more
Speaker 3: than twenty seven hundred journalists and analysts and over one
Speaker 3: hundred twenty countries. In San Francisco, I'm at Baxter and
Speaker 3: this is Bloomberg.
Speaker 1: I'm Brian Curtis along with Rushad Selama, and we have
Speaker 1: it Backstraw News as we just heard there, and also
Speaker 1: Doug Crisner looking at markets. And our guest, a live guest,
Speaker 1: Carol Pepper, a founder and CEO of Pepper International. Carol,
Speaker 1: there was a lot of anticipation about First Republic's earnings,
Speaker 1: so let's take a moment and just have a quick look.
Speaker 1: I mentioned that this is sort of the banking turmoil
Speaker 1: that didn't really develop into a crisis.
Speaker 5: Lots of reasons for.
Speaker 1: That, but one thing appears clear that it's going to
Speaker 1: be very hard for the regional.
Speaker 5: Banks to earn their way out of the position that
Speaker 5: they find themselves in.
Speaker 1: Can you see the regional banks coming back from this, well,
Speaker 1: I mean.
Speaker 14: I think there'll always be a place for regional banks,
Speaker 14: but I agree with you, the headwinds are definitely there.
Speaker 14: I think it's going to take a long time. I mean,
Speaker 14: there has to be some change hopefully coming in terms
Speaker 14: of how they measure the belt and suspenders for the
Speaker 14: regional banks, and I think they will do that, and
Speaker 14: I think that.
Speaker 1: I mean, if nothing else, they just need a lot
Speaker 1: of time, right because all those unrealized losses, they don't
Speaker 1: want to have them realized, and so you've got to
Speaker 1: you've got to wait till maturity.
Speaker 5: So that could be years and years and years.
Speaker 14: Down the road. No, I don't think they're going to
Speaker 14: have to wait to maturity. But I do think if
Speaker 14: we get some rolling back of those regulatory cuts, in
Speaker 14: other words, to put the regulations back in place, that
Speaker 14: will that will increase security for the banks and people's
Speaker 14: ability to be confident. And I think the second thing
Speaker 14: will be if rates start to go back down again
Speaker 14: and give them a little bit of a breather so
Speaker 14: the losses aren't so large. So those are the two
Speaker 14: things that we have to look for.
Speaker 5: Carol, though.
Speaker 15: I mean, the thing is they're going to be very judicious.
Speaker 15: In fact, that is the word that was used by
Speaker 15: the Huntington Banks Shares a CFO to Bloomberg the other
Speaker 15: day when it comes to lending. Judicious means they're going
Speaker 15: to have to raise their standards, which is going to
Speaker 15: be probably the case with most of these regional banks,
Speaker 15: which ten of course, means that we have a problem
Speaker 15: with the with the companies and smemes in particular getting money,
Speaker 15: and that is another form of perhaps.
Speaker 14: Tightening correct I think, well remember too, First Republic also,
Speaker 14: most of their loans were mortgages to ultra high net
Speaker 14: worth individuals. This was not a credit issue on them
Speaker 14: at all. They were doing ten years no interest loans.
Speaker 14: So they got stuck with this huge geno bullet at
Speaker 14: the end, which of course flaps around quite a bit
Speaker 14: in terms of value, and the rates went up, that
Speaker 14: went down significantly, So it wasn't really a credit issue.
Speaker 14: It was it was how they structured these bonds, which
Speaker 14: seemed frankly a little bit surprising that they couldn't have
Speaker 14: anticipated that some point in ten years the rates would
Speaker 14: have gotten up. So in this case from First Republic,
Speaker 14: their credit was stellar. This was not a problem for them.
Speaker 14: It was this interest only lending thing for ten years
Speaker 14: that they've got to stop doing.
Speaker 1: In the broader markets, who haven't had a lot of
Speaker 1: movement of lad although we have had in individual companies,
Speaker 1: but not so much in the broader picture. Are you
Speaker 1: waiting on a catalyst? Is there a catalyst coming for
Speaker 1: more direction in markets than what might it be?
Speaker 14: Well, I think even this week will be interesting for
Speaker 14: the tech names. You know, I'm a big tech bull,
Speaker 14: so I'm anticipating Amazon will give us a good story.
Speaker 14: And you know, again, once we get a clear picture
Speaker 14: of when these rate hikes are going to stop, you're
Speaker 14: going to see the rest of the markets start to
Speaker 14: run again. Because generally the economy is doing fine. This
Speaker 14: was a FED induced slowdown. This is not because the
Speaker 14: fundamentals of the companies were bad and they were slowing
Speaker 14: down organically, but because interest rate and cost barring costs
Speaker 14: have gone up. It has given all of the companies
Speaker 14: also frankly, an excuse to lay off a lot of employees.
Speaker 14: So guess what happens they do the layoffs those costs
Speaker 14: aren't coming back, and now if the boring costs go down,
Speaker 14: suddenly there a much better position. They have more cash
Speaker 14: and they could start moving forward. So I think that
Speaker 14: the catalyst will be, you know, when we see the
Speaker 14: I mean, I just don't think they can keep hiking
Speaker 14: for too much longer because the big ticking time bomb
Speaker 14: is the real estate loans. Honestly, I mean, the real
Speaker 14: estate developers are all hanging on here, but at a
Speaker 14: certain point they're going to run out. You're going to
Speaker 14: see a lot more bank problems if you don't lower
Speaker 14: those rates.
Speaker 15: Absolutely, So in that environment, who does well. You're a
Speaker 15: fan of tech, You're also find of medicare.
Speaker 14: Medical yes, drug companies for example, there's some really exciting
Speaker 14: blockbuster type of drugs that are coming along, the weight
Speaker 14: loss drugs Eli Lilly for example, with Goovy. The minute
Speaker 14: that that gets approved to use for weight loss, that
Speaker 14: thing is going to be excuse me, Monjarno for Eli
Speaker 14: Lilly and then Wagovy for Nova Nordisk. They're actually just
Speaker 14: announced today that they're going to do a head to
Speaker 14: head competition and study which one is going to be better.
Speaker 14: But the general thought is probably Munjaro is going to win,
Speaker 14: and that's a multi billion dollar opportunity. There are also
Speaker 14: wonderful new cancer drugs coming along. There's genetic medicine happening.
Speaker 14: So I do think there are certain categories like technology
Speaker 14: and drug development that will go do well regardless of
Speaker 14: where the interest rates are, because these are things people
Speaker 14: have to use.
Speaker 1: It is a difficult environment where you have basically half
Speaker 1: the people think we are heading toward recession, and that
Speaker 1: changes a lot of calculations for sure. I mean it
Speaker 1: would mean that you know, the twenty five percent draw
Speaker 1: down last year isn't enough probably if.
Speaker 5: You actually hit a full blown recession.
Speaker 1: Right, So it doesn't sound like you're too expecting of that.
Speaker 1: But can you outline or you know, give us your
Speaker 1: thoughts on where we're heading in say the middle term
Speaker 1: here on the economy, Well, when you.
Speaker 14: Say middletar, I would say the rest of that. Let's
Speaker 14: just look at where you know, let's say we're beginning
Speaker 14: the next quarter here, if we look at by the summer,
Speaker 14: if we look at by this summer, if the Fed
Speaker 14: stops raising, which I believe they will at some point
Speaker 14: June or July, the outside outside because things are slowing
Speaker 14: down on their own from what they've already done. And
Speaker 14: it also always happens this way that it takes a
Speaker 14: few months for the raises to actually start to slow
Speaker 14: the economy. Let's say it starts to go through then
Speaker 14: I think, you know, the will be sort of sideways
Speaker 14: through the summer and then maybe take off again in
Speaker 14: the fall. Okay, that's one possible scenario. I personally don't
Speaker 14: see the recession. I don't see enough science to convince
Speaker 14: me that a major recession is happening. However, if you're
Speaker 14: afraid of that, my advice would be throw your money
Speaker 14: into the money market funds and earn four and a
Speaker 14: half percent right now, and just stay out as long
Speaker 14: as you're that frightened. Just stay in the money market
Speaker 14: funds and wait to see what the Fed does. You
Speaker 14: don't have to, you know, the day after the Fed
Speaker 14: moves is still plenty of time for the average investor
Speaker 14: to get into the market. Just sit in those nice,
Speaker 14: you know, Treasury backed money market funds and earn your
Speaker 14: four and a half percent right now, and it will
Speaker 14: only go up if you're right. You learn five or
Speaker 14: six percent. Then you can wait so when you feel
Speaker 14: that the pain is over, and then look for some
Speaker 14: period around the month or two when the term is coming,
Speaker 14: and then go back in. So for those listeners who
Speaker 14: are very frightened the money markets, there's no shame in
Speaker 14: the money market. Sit over there and wait for those
Speaker 14: who think, eh, I really want to get in now,
Speaker 14: I'm afraid it's going to go higher. Then look at
Speaker 14: big tech names. Look at big you know, blue chip names.
Speaker 14: Those always do well regardless. So if you want to
Speaker 14: be a little ahead of the curb and you want
Speaker 14: to take the risk, go into bloo chips. If you don't, don't,
Speaker 14: All right.
Speaker 1: Carol, thanks very much for joining us. Carol Pepper, founder
Speaker 1: and CEO of Pepper International. This is Bloomberg Daybreak Asia,
Speaker 1: your morning brief on the stories making news from Hong
Speaker 1: Kong to Singapore and Wall Street.
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Speaker 5: I'm Brian Curtis.
Speaker 2: And I'm Doug Krisner. Join us again tomorrow for all
Speaker 2: the news you need to start your day, right here
Speaker 2: on Bloomberg day Break Asia