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Speaker 1: Good morning.

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Speaker 2: I'm Doug Chrisner and I'm Brian Curtis. Here are the

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Speaker 2: stories we're following today. Chicago Fed President Austin Goulesby calls

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Speaker 2: slower US inflation data fabulous news a direct quote there.

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Speaker 2: He told Yahoo Finance that he's keeping an open mind

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Speaker 2: though about the Fed's next move.

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Speaker 3: We're going to get multiple important observations about both inflation

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Speaker 3: and the job market between now in September, and I'm

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Speaker 3: open to reading the data if there's a major change

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Speaker 3: of conditions. I haven't made up my mind for what

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Speaker 3: should happen in September, but this golden path, which so

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Speaker 3: far we're sticking on that line, that would be a triumph,

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Speaker 3: and it's certainly a possibility at this point.

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Speaker 2: Austin Goolsby is a voter on monetary policy this year.

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Speaker 2: He thinks the FED should be able to lower inflation

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Speaker 2: without triggering a recession. The Fed's next meeting is September

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Speaker 2: nineteenth and twentieth.

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Speaker 4: Well the FED saying today that US banks reported tighter

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Speaker 4: lending standards and continued weakness in demand for loans during

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Speaker 4: the second quarter. We have a little bit more from

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Speaker 4: Bloomberg's Charlie Pellett.

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Speaker 1: It extends a trend that began before recent stresses in

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Speaker 1: the banking sector emerged. According to a FED survey of

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Speaker 1: lending officers, the proportion of American banks tightening terms on

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Speaker 1: commercial and industrial loans from medium and large businesses rose

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Speaker 1: to fifty point eight percent, up from forty six percent

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Speaker 1: in the first quarter. The collapse of four US regional

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Speaker 1: banks since March sparked turmoil in the financial sector and

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Speaker 1: increased concerns that lenders would reign in access to credit

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Speaker 1: in a way that could tip the US economy into

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Speaker 1: a recession. In New York, Charlie Pellett Bloomberg Aybreak Asia.

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Speaker 2: US Commerce Secretary Gina Raimundo is planning to visit China

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Speaker 2: later this month to try to reduce tensions between the

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Speaker 2: two countries. Bloomberg's Bonnie Ao more from Hong Kong.

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Speaker 5: Ramando is slated to go to Beijing the week of

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Speaker 5: August twenty first, but the dates are not yet finalized.

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Speaker 5: Solsa say it's still unclear what Romando could expect to

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Speaker 5: deliver for US businesses, but the Commerce chief is hesitant

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Speaker 5: to go without knowing that trip will yield positive outcomes.

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Speaker 5: One likely deliverable could be a working group to discuss

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Speaker 5: US export controls. Her trip comes at a sensitive time

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Speaker 5: in the bilateral relationship. That's with President Joe Biden set

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Speaker 5: to sign an order this month that would curb US

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Speaker 5: technology investments in China. In Hong Kong, I'm Bonnie Al

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Speaker 5: Bloomberg Daybreak.

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Speaker 4: Asia Fox Cohn Technology Group, this, of course, is a

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Speaker 4: main supplier for Apple.

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Speaker 6: Well.

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Speaker 4: Fox KHN is now planning to invest about five hundred

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Speaker 4: million dollars to build two factories in India. The story

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Speaker 4: from Bloomberg's Juan Wong in Hong Kong.

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Speaker 7: We're told the factories will likely be built in India's

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Speaker 7: southern Karnataka state. The factories will produce parts for Apple devices,

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Speaker 7: including iPhones. This comes as a Taiwan supplier looks to

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Speaker 7: shifts for production away from China due to rising geopolitical tensions.

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Speaker 7: India has fast to become a popular destination for fox

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Speaker 7: Conn and others thanks to government incentives to boost local manufacturing. Separately,

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Speaker 7: fox Conn has also signed an initial agreement with the

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Speaker 7: Southern til Nadu government that's to set up a component

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Speaker 7: plan with an investment of one hundred and ninety five

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Speaker 7: million dollars in Hong Kong.

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Speaker 8: I'm joined one Bloomberg Day Brigaisia.

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Speaker 2: Economists and markets are split on whether or not the

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Speaker 2: Reserve Bank of Australia will hike interest rates one more

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Speaker 2: time at a meeting today. Bloomberg's Paul Allen has a

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Speaker 2: preview from Sydney.

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Speaker 9: Trade to zee a seventy five percent chance that the

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Speaker 9: ABA stays on hold again today. Economists meanwhile hard divided

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Speaker 9: leven see the ABA holding fifteen expect one more twenty

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Speaker 9: five basis point rise, taking the cash rate to four

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Speaker 9: point three five percent. The data is also balanced on

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Speaker 9: a knife edge. The jobs market remains strong, but retail

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Speaker 9: sales have softened. Inflation has also have been coming down

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Speaker 9: in Australia, with the trimmed man slowing to five point

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Speaker 9: nine percent, but that is still well outside the target

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Speaker 9: band of two to three percent, raising the question if

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Speaker 9: more needs to be done or if the lagging impact

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Speaker 9: of four hundred basis points of right hikes over the

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Speaker 9: past fourteen months is enough. Paul Allen, Bloomberg Daybreak Asia.

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Speaker 2: I'm Brian Curtis along with Doug Chrisner. So Doug Romando

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Speaker 2: going to Beijing. In itself, it's also a pretty big

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Speaker 2: story in that you know, it's good to see top

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Speaker 2: level officials.

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Speaker 6: Continuing to meet between the two sides. But also there was.

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Speaker 2: A line in that story that is kind of key,

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Speaker 2: which is that she might not be going if there

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Speaker 2: weren't some real deliverable So that's something to watch out for.

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Speaker 4: Yeah, and the State Council calling on cities at the

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Speaker 4: same time, talking about what's going on in China, the

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Speaker 4: State Council being kind of initiating this move to start

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Speaker 4: introducing policies to ensure the healthy development of the property market.

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Speaker 4: This is kind of consistent with everything that we've been

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Speaker 4: talking about, Brian. I wonder how critical property is to

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Speaker 4: reversing this kind of sanguine sentiment that we've been seeing

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Speaker 4: in China.

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Speaker 2: Well, you know, this is a very big story and

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Speaker 2: a very big issue in the State Council moving like this,

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Speaker 2: putting the onus on the cities to actually come up

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Speaker 2: with policies devised for their own markets, and it is

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Speaker 2: crucially important to get people spending again. And then we

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Speaker 2: also had the top planners yesterday releasing this document about

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Speaker 2: lifting restrictions on consumption, and this relates to car purchases

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Speaker 2: and a whole bunch of other projects, including infrastructure and

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Speaker 2: looking at food festivals and the like. Market it was

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Speaker 2: not jumping up and down over it, but it's just

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Speaker 2: another relentless move.

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Speaker 6: By policymakers to try to get things moving.

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Speaker 4: Yeah, and the currency seems to be holding up reasonably well.

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Speaker 4: I think offshore today we extended gains, not only offshore

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Speaker 4: but the onshore market as well in the face of

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Speaker 4: some dollar strength. And Joey Chu, who was head of

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Speaker 4: FX research over to HSBC, was saying that the firm

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Speaker 4: believes that the worst is over for the Yuwan. It'd

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Speaker 4: be curious to kind of look at the connection between

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Speaker 4: the stimulus that we've been talking about and the movement

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Speaker 4: in the currency.

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Speaker 2: Yeah, and I think it's quite key that you have

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Speaker 2: the offshore trading very similar to the onshore and that

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Speaker 2: shows that foreign investors, who usually are the first ones.

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Speaker 6: To kind of doubt what's going on, they're buying into

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Speaker 6: this to a certain degree. Now it's time for global news.

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Speaker 2: China is curbing drone exports after the US said that

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Speaker 2: it is it has been aiding Russia's war efforts. So

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Speaker 2: let's get to the details on that with Ed Baxter

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Speaker 2: in San Francisco.

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Speaker 7: Ed.

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Speaker 10: Yeah, that's right, Brian. While China says the restrictions are

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Speaker 10: not aimed at any specific country, it has slapped the

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Speaker 10: curbs not only on drones themselves, but on components that

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Speaker 10: could help in making them. This includes what it calls

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Speaker 10: aerial vehicles, including types employed by armed forces in the

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Speaker 10: Ukraine War. Starting September, first drones, they're engines, and infrared

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Speaker 10: imaging equipment will not be allowed without a license. Well,

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Speaker 10: we're getting more information about the executive order that's expected

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Speaker 10: to come out of the Biden administration. Regarding tech policy

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Speaker 10: towards China, Bloomberg's Kaylee Lyons says it is narrowing to

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Speaker 10: focus on chips and AI.

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Speaker 11: They're trying to keep it very narrow, very specific. We

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Speaker 11: understand that executive work, we'll focus on things like semiconductors,

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Speaker 11: AI and quantum computing. They aren't trying to put a

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Speaker 11: wide cast on on outbound investment into China. Just keep

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Speaker 11: it focused on what would protect US national security interest

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Speaker 11: and not harm China too greatly economically.

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Speaker 10: Kaylee says, the administration is saying it does not want

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Speaker 10: to hurt China, just protect national security. Presidential candidate Ron

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Speaker 10: DeSantis is calling today for ending China's preferred trade status, saying,

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Speaker 10: we have to restore the economic sovereignty of this country

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Speaker 10: and take back control from China.

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Speaker 12: The abusive relationship, the asymmetric relationship between our two countries

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Speaker 12: must come to an end.

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Speaker 10: Desantas also said he wants to increase domestic energy production,

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Speaker 10: that he might replace Federal Reserve chairger Own Powell, as

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Speaker 10: well Bloomberg'slaura Davison saying that he may be getting the

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Speaker 10: message at the Republican Party wants him to move on

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Speaker 10: to more economic issues and not just Bray Disney and

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Speaker 10: talk woke.

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Speaker 11: This is DeSantis trying to become the candidate that donors

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Speaker 11: want to support. He's had a major issue both in

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Speaker 11: campaign and getting enough money to fuel his campaign.

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Speaker 8: He laid off a third of his staff last week, and.

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Speaker 10: He has some polling problems. The New New York Times

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Speaker 10: Ciena poll has Trump hanging and very strongly shows him

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Speaker 10: with fifty four percent. This is the Republican Party fifty

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Speaker 10: four percent, desent US at seventeen percent and the others

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Speaker 10: at three or at two percent, but some political action

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Speaker 10: committee numbers coming out for the first half of the

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Speaker 10: year interesting.

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Speaker 8: One.

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Speaker 10: Americans for Prosperity Action, with close ties to the so

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Speaker 10: called Kim Maker Charles Coke, raised seventy eight million dollars.

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Speaker 6: The goal is to.

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Speaker 10: Try and prevent Donald Trump from becoming their publican nominee.

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Speaker 10: Along with Coke, the pack received five million dollars each

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Speaker 10: from billionaires Rob Walton and Jim Walton. Meanwhile, Carlos del

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Speaker 10: la Vera, the property manager at mar Lago, is supposed

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Speaker 10: to be arraigned and to enter a plea today in court,

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Speaker 10: but rules of the Federal Court in South Florida require

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Speaker 10: that a defendant is represented by a local lawyer, now

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Speaker 10: his at this point John Irving is not, but Irving

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Speaker 10: did briefly talk with a media on his way out

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Speaker 10: of court.

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Speaker 2: The Justice Department has, unfortunately decided to bring these charges

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Speaker 2: against mister Dale's.

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Speaker 1: Time to put their money where their mountains.

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Speaker 10: The judge did instruct de la Vera not to talk

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Speaker 10: with anybody about the proceedings, including Trump or fellow defendant

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Speaker 10: Walt Nada. He's expected back in court August tenth, and

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Speaker 10: China's weather alert for flooding is now at the highest

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Speaker 10: in their four tier system. Read Alert for potential disaster

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Speaker 10: in southwestern suburbs of Beijing. It is in force until

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Speaker 10: eight pm local tonight. Two people have died in northern

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Speaker 10: China as it has suffered two days of extremely heavier

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Speaker 10: rainfall as well. Global News powered by more than twenty

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Speaker 10: seven hundred journalists and analysts in over one hundred twenty countries.

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Speaker 10: In San Francisco, I'm at Baxter and this is Bloomberg.

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Speaker 2: This is Bloomberg Daybreak Asia. I'm Brian Curtis in Hong

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Speaker 2: Kong along with Rashad salamat I London. Our guest is

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Speaker 2: Adam Koons, chief portfolio manager at Winthrop Capital Management with

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Speaker 2: us in our studios in New York. Adam, thanks very much.

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Speaker 2: The basic theme seems intact here. Don't overthink it too much.

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Speaker 2: Recession seems far away. The FED is getting close to

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Speaker 2: taking his foot off the break, and there's momentum at

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Speaker 2: your back here.

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Speaker 6: Do you fight it or do you embrace it?

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Speaker 8: First? Thanks for having me.

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Speaker 13: I do think to some degree you do fight this,

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Speaker 13: that the FED is going to take their foot off

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Speaker 13: the gas. But I think a lot of the damage

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Speaker 13: has already been done. And so what we think is

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Speaker 13: that kind of heading into the end of this year

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Speaker 13: at the beginning of twenty twenty four, and we're going

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Speaker 13: to start to see the cracks really start to show

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Speaker 13: themselves here in the economy. So what we're looking at

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Speaker 13: is the you know, the index of leading economic indicators

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Speaker 13: has continued to decline over the last several months, and

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Speaker 13: so we're focused on that and not so focused on

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Speaker 13: all this lagging data that we've been focused that we've seen,

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Speaker 13: you know, over the past week.

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Speaker 12: Adam missed a situation now where market participants are more

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Speaker 12: or less pricing in soft landing and on top of that,

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Speaker 12: perhaps even celebrating mission accomplished with inflation, and if so,

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Speaker 12: are they at the moment just perhaps getting a little

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Speaker 12: bit too Pollyanna.

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Speaker 13: Absolutely, complacency is definitely the theme that we're seeing right now.

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Speaker 13: I mean, when you just look at valuations on the

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Speaker 13: S and P five hundred, especially some specific companies and

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Speaker 13: you know, in the top ten, it just doesn't make

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Speaker 13: a lot of sense to us right now when you're

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Speaker 13: looking at the growth prospects of the economy over the

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Speaker 13: coming year. You know, to see in Navidia and Tesla

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Speaker 13: training at the multiples that they are, it's just giving

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Speaker 13: us caution right now. And and that's why we're kind

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Speaker 13: of backing away from you know, the high growth, high

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Speaker 13: beta type type names right now.

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Speaker 6: I get the theme.

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Speaker 2: I mean, the leading indicators, which are more you know,

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Speaker 2: front and present, are are looking a little negative, whereas

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Speaker 2: the lagging indicators are up. But you have seen this

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Speaker 2: spreading out of the gains. They're also two thousand now

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Speaker 2: fourteen percent year to date, Energy is the best performing

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Speaker 2: sector of late, and that's a big surprise. Energy is

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Speaker 2: up fourteen percent since June first. Does it change things

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Speaker 2: at all that the money is flowing a little bit

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Speaker 2: more into the laggards rather than just the big seven?

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Speaker 8: It does, I wouldn't say it changes that much.

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Speaker 13: What we're focused on is really, you know, tightening our

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Speaker 13: belt for some sort of you know, bad weather. So

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Speaker 13: we're looking at it a high quality names, what has

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Speaker 13: performed lately or the deeper value. So we're moving into

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Speaker 13: high quality and so that still can be some large captive.

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Speaker 13: I mean when you look at Microsoft, Alphabet, Microsoft, those

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Speaker 13: are names that we still like, and the evaluations are

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Speaker 13: a little bit rich or fairly valued. But what we're

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Speaker 13: looking at are low debt, high cash flow type companies

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Speaker 13: that can weather an environment where the economy starts to

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Speaker 13: slow down and we do see some sort of retracement

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Speaker 13: of equity markets.

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Speaker 12: Adam, I done envy you because you can't ignore those

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Speaker 12: big names.

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Speaker 8: Can you? No, not at all? You killed and that's

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Speaker 8: the thing.

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Speaker 12: And you know, if you didn't have them, people who

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Speaker 12: tell to raise their eyebrows yep.

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Speaker 2: What about some other alternatives that like emerging markets or

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Speaker 2: China or Japan or perhaps even Europe. Have you have

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Speaker 2: you been looking at some of those markets and if so,

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Speaker 2: what do you like.

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Speaker 13: Or not like we have you know, in the past

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Speaker 13: we have like China. I've wanted to like that story

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Speaker 13: for a while. Unfortunately this is just a narrative that

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Speaker 13: it has begun to have too many headwinds. The consumer

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Speaker 13: confidence in China is just on a decline. You're seeing

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Speaker 13: real estate prices actually come down, and when you look

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Speaker 13: at the difference of that economy, you know, sixty percent

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Speaker 13: of assets owned our real estate, so to see those declining,

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Speaker 13: that is going to have a real impact, you know,

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Speaker 13: on investors and what they're willing to do, and then

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Speaker 13: when you look at you know, private investment continues to

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Speaker 13: be very, very low. So we're worried about really what

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Speaker 13: the policy changes look like in China because there is

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Speaker 13: this dynamic where they seem to want to protect their

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Speaker 13: currency to some degree, but I don't see how they

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Speaker 13: can do that while at the same time trying to

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Speaker 13: create the stimulus that's needed. So I think you're seeing,

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Speaker 13: you know, the CCP kind of hold their ground. They're

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Speaker 13: not moving quick to stimulate the economy. So I think

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Speaker 13: right now what you need to do is fade the

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Speaker 13: rally that you're seeing in China and continue to play

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Speaker 13: more defense, because that will be the first shoot to

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Speaker 13: drop in the global economy. When you're looking at Europe,

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Speaker 13: similar there, you know, it's it's the recession fears there

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Speaker 13: I think are even more heightened. Just the economic data

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Speaker 13: there just doesn't make sense to us. Japan I could

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Speaker 13: get behind. You know, there's enough growth just overall in

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Speaker 13: the economy. Policymakers seem to be able to maintain the

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Speaker 13: policy changes without necessarily, you know, taking away from from

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Speaker 13: that growth that we've seen. So Japan would probably the

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Speaker 13: only place I'd look outside of the US right now.

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Speaker 13: Unfortunately this has been a story for quite a while,

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Speaker 13: but the US equity markets is still the best place

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Speaker 13: to be right now.

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Speaker 12: I want to just die it back Adam to China.

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Speaker 12: You know, essentially there's been a biased strike. You know,

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Speaker 12: do you go into arbitration and what would you like

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Speaker 12: them to do in order to entice you in, because

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Speaker 12: I mean there's so many compelling reasons on evaluation front,

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Speaker 12: on an earnings level as well, it should be attracting investors,

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Speaker 12: but simply not.

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Speaker 13: Yeah, I mean I think there's still some you know,

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Speaker 13: effects from the tightening that they had on you know,

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Speaker 13: companies like ten Cent, Ali Baba, So that has given

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Speaker 13: investors a little bit of caution. It's given us caution

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Speaker 13: because that was a big theme for US in twenty

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Speaker 13: twenty one. In twenty twenty two, that really just didn't

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Speaker 13: work out the way we thought it was going to

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Speaker 13: because you know, the Chinese government stepped in.

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Speaker 8: So I think what we need to see is.

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Speaker 13: A little bit of a pullback of that type of

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Speaker 13: policy and less some of these large companies really run free.

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Speaker 8: It was showing that it was working.

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Speaker 13: So that's for US is really the biggest thing there's

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Speaker 13: a lot of different stimulus measures that they can take.

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Speaker 8: They have a lot of levers to pull.

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Speaker 13: But for us, the biggest thing that we need to

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Speaker 13: see is a shift in that tightening of these you know,

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Speaker 13: more democratic type type companies like like said Alibab and

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Speaker 13: ten cent.

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Speaker 2: So, Adam, you're pretty bear iss here. We've seen a

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Speaker 2: lot of the bearers capitulate to a degree. So I

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Speaker 2: imagine you're still looking at the bond market for safer

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Speaker 2: returns this year. Would you be at the longer end?

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Speaker 2: Is that your preference?

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Speaker 13: I would our our highest conviction trade right now is

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Speaker 13: long duration, high quality bonds.

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Speaker 8: You know, this is a point in time.

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Speaker 13: All the secular shifts that were pushing interest rates down,

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Speaker 13: there's really didn't change. So we're going to just kind

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Speaker 13: of see this as a short term reversal over the

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Speaker 13: last couple of years. So for us to be able to,

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Speaker 13: you know, clip a coupon of four to five percent

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Speaker 13: and wait and wait this out, I think is just

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Speaker 13: absolutely the not only the just safest trade, but it

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Speaker 13: is a trade that from a price appreciation, if we

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Speaker 13: see interest rates return back to their you know, two

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Speaker 13: percent type level, I mean those are going to be

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Speaker 13: tremendous returns, so absolutely our highest convection trade.

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