WEBVTT - Banks Pass Fed Stress Test; Fed Talks Rates

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Nathan Hager and I'm Karen Moscow. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 1>Karen, we begin with the biggest banks on Wall Street

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<v Speaker 1>rallying this morning. This comes after they pass the Federal

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<v Speaker 1>Reserves annual stress tests. Let's get the details from Bloomberg's

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<v Speaker 1>John Tucker in New York. Good morning, John and Nathan.

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<v Speaker 3>After the collapse of three US banks this year's stress tests,

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<v Speaker 3>they carried extra weight passing grade on the annual exam

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<v Speaker 3>for the twenty three lenders, means they can probably go

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<v Speaker 3>ahead and pay billions of dollars in dividends to shareholders.

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<v Speaker 3>The results determine how much capital banks need to set

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<v Speaker 3>aside as a cush Alason Williams is the senior bank

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<v Speaker 3>analyst for Bloomberg Intelligence.

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<v Speaker 4>The good news is that the capital requirements are basically

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<v Speaker 4>headed lower as a result of this test.

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<v Speaker 3>Well less of a required cushion means more for shareholders.

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<v Speaker 3>JP Morgan, Chase, Morgan, Stanley, Goldman, Sachs, Wells Fargo. Their

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<v Speaker 3>balance sheets showed improved resiliency. A city group citizens financial

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<v Speaker 3>and capital, and we're less resilient. I'm looking at shares

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<v Speaker 3>trading of the pre market right now, you have JP

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<v Speaker 3>Morgan Chase, that's a one point two percent. Bank of

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<v Speaker 3>America is up one percent in New York. I'm John

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<v Speaker 3>Tucker Bloomberg day Break.

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<v Speaker 2>All right, John, thank you. Let me turned to the

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<v Speaker 2>broader economy now and hawksh talk from central bankers. For

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<v Speaker 2>the second day in a row. J Powell is signaling

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<v Speaker 2>more rate hikes are on the way. The FED chair

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<v Speaker 2>spoke this morning at a Bank of Spain conference in Madrid.

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<v Speaker 5>As noted in the fmc's summary of Economic projections, a

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<v Speaker 5>strong majority of Committee participants expect that it will be

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<v Speaker 5>appropriate to raise interest rates two or more times by

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<v Speaker 5>the end of this year.

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<v Speaker 2>And J. Powell says the Fed still has a long

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<v Speaker 2>way to go to get inflation back down to two percent.

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<v Speaker 1>All rates do appear headed higher. Caaren, a former FED official,

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<v Speaker 1>says the central bank could take a u turn as

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<v Speaker 1>soon as next year. We caught up with former Federal

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<v Speaker 1>Reserve Vice Chair Richard Clarina.

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<v Speaker 6>The feds rationale is that if they succeed and inflation

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<v Speaker 6>starts to fall, they can cut rates basically to keep

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<v Speaker 6>real rates unchanged. So I do think their baseline probably

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<v Speaker 6>does have some cuts, does have cuts for next year,

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<v Speaker 6>certainly in the baseline. The question is markets I think

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<v Speaker 6>have priced in more than the FED seas right now.

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<v Speaker 1>Former FED Vice Chair Richard claire To says he can

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<v Speaker 1>see inflation falling below three percent next year.

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<v Speaker 2>Well, Nathan, as inflation and rates remain front and center.

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<v Speaker 2>US China relations are also and focused. This morning, Treasury

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<v Speaker 2>Secretary Janet Yellen says she hopes her upcoming trip to

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<v Speaker 2>China will lead to better ties between the world's two

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<v Speaker 2>largest economies.

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<v Speaker 7>We really welcome and want to have a healthy economic relationship,

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<v Speaker 7>and we think it's generally beneficial. We have disagreements. My

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<v Speaker 7>hope in traveling to China is to re establish contact.

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<v Speaker 7>They're a new group of leaders. We need to get

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<v Speaker 7>to know one another.

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<v Speaker 2>And Secretary Yellen made the comments in an interview with MSNBC.

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<v Speaker 1>President Biden is staying laser focused on the economy care

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<v Speaker 1>and it has emerged as a major theme in the

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<v Speaker 1>president's reelection campaign. In Chicago yesterday, the President said Bidenomics

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<v Speaker 1>is working man. The trickle down approach from Republicans has

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<v Speaker 1>failed the middle class.

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<v Speaker 8>Under trickle down economics, it didn't matter whether you made

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<v Speaker 8>things as long as you help the company's bottom line.

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<v Speaker 8>Eight of that meant seeing jobs and industries go overseas

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<v Speaker 8>for cheaper labor, supply chains and key products moved overseas

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<v Speaker 8>like China and much of Asia.

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<v Speaker 1>And then President Biden says the billions spent under the

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<v Speaker 1>chips in science and inflation reduction acts will grow the

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<v Speaker 1>middle class and promote competition to cut costs.

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<v Speaker 2>Meantime, Nathan, we're learning more about the sleeping habits of

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<v Speaker 2>the President. It's been disclosed that mister Biden now uses

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<v Speaker 2>a seapat machine at night. Bloombergs Amy Morris has more

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<v Speaker 2>from Washington.

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<v Speaker 4>President Biden first disclosed his sleep apnea during the campaign

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<v Speaker 4>in two thousand and eight. It's a common condition in

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<v Speaker 4>which your airway becomes obstructed while you were asleep, and

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<v Speaker 4>that can restrict airflow. The President's medical report also shows

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<v Speaker 4>he's dealt with restricted airways for most of his life.

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<v Speaker 4>He has asthma and carries an inhaler so the White

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<v Speaker 4>House says the apnea isn't new, but the use of

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<v Speaker 4>the machine is. The CPAP machine helps improve sleep quality

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<v Speaker 4>and reduce snoring. President Biden is the oldest president in

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<v Speaker 4>US history, polls show his age and fitness, or his

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<v Speaker 4>biggest liabilities as he seeks re election in Washington. I'm

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<v Speaker 4>Mamy Morris, Bloomberg Daybreak.

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<v Speaker 1>Thank you, Amy. Turning back to market shares of Micron Technology.

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<v Speaker 1>You're up three and a half percent in early training

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<v Speaker 1>after an upbeat forecast from the chip maker. We get

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<v Speaker 1>more from Bloomberg's Charlie Pellett.

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<v Speaker 9>Micron is the largest American chip maker, and the quarter

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<v Speaker 9>indicates that an industry glut is easing, even as the

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<v Speaker 9>chip maker continues to face challenges in China. Like many

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<v Speaker 9>of its peers, Micron Who's suffered a collapse in orders

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<v Speaker 9>for its products after sluggish demand for smartphones and personal

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<v Speaker 9>computers led to a build up of inventory in New York.

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<v Speaker 9>Charlie Pellett Bloomberg Daybreak.

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<v Speaker 2>Ll right, Charlie, thank you.

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<v Speaker 10>Well.

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<v Speaker 2>Elsewhere on Wall Street, we're learning Fidelity Investments plans to

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<v Speaker 2>convert six more of its mutual funds into exchange traded funds.

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<v Speaker 2>According to a cord filing, the Acid manager will turn

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<v Speaker 2>these six actively managed mutual funds into ETFs in November.

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<v Speaker 2>Those Fidelity funds collectively manage assets worth roughly thirteen billion dollars.

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<v Speaker 1>Time now to take a look at some of the

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<v Speaker 1>other stories making news in New York and around the world,

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<v Speaker 1>with Bloomberg's Michael bar Good morning, Michael.

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<v Speaker 10>Good morning Nathan. In air quality emergency from the Canadian

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<v Speaker 10>wildfires is growing in the US. At least twenty states

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<v Speaker 10>and several major cities from Chicago to Detroit to Pittsburg

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<v Speaker 10>are affected. New York City will see SMAG today emergency

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<v Speaker 10>room physician doctor dry and Sutton.

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<v Speaker 11>The chemicals inside that bloom are what danger is. And

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<v Speaker 11>I'm talking not just about the soot that you might

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<v Speaker 11>see on the ground. I'm talking about microscopic chemicals, things

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<v Speaker 11>like nitrogen dioxide, sulfur dioxide, carbon monoxide.

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<v Speaker 10>Doctor Sutton spoke to ABE ahead of Fourth of July

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<v Speaker 10>travel this weekend. Airlines are playing catch up after widespread

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<v Speaker 10>flight delays blamed on weather and staffing issues. Passengers in

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<v Speaker 10>the New York area have been frustrated, as well as

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<v Speaker 10>these passengers in San Francisco.

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<v Speaker 1>I've got my wife who hasn't slept in like thirty

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<v Speaker 1>six hours. I've got two kids. They are just absolutely.

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<v Speaker 10>Spend Experts say the FAA needs more air traffic controllers.

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<v Speaker 10>The investigation into the implosion of the Titan submersible is

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<v Speaker 10>expected focus in part on the carbon composite construction. Bloomberg's

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<v Speaker 10>Dan Schwartzmann reports recovery efforts continue for the wreckage of

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<v Speaker 10>the sub.

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<v Speaker 12>Nearly one week after the conclusion of the search for

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<v Speaker 12>the Titan submersible, vehicle to brief from the craft was

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<v Speaker 12>hauled back to shore near Newfoundland in Canada. Five people

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<v Speaker 12>were killed after the Titan suffered a catastrophic implosion. As

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<v Speaker 12>a descendant on the wreckage of the Titanic, the pieces

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<v Speaker 12>of the craft are covered include some of the hull

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<v Speaker 12>as well as a circular portal window. Human remains have

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<v Speaker 12>also been found, with official saying medical professionals will study

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<v Speaker 12>an air them for clues. The debris will be examined

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<v Speaker 12>as investigators look for a cause as to what led

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<v Speaker 12>to the deadly implosion in New York. I'm Dan Schwartzman

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<v Speaker 12>Bloomberg Daybreak.

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<v Speaker 10>New details about the Wagner rebellion in Russia. According to

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<v Speaker 10>ABC AS, senior US official says that the leader of

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<v Speaker 10>the Mercenary group of Guinea progosion contacted top Russian leaders

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<v Speaker 10>in Moscow before the mutiny, possibly to seek their help

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<v Speaker 10>in the uprising. Kremlin officials call that gossip. Madonna spent

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<v Speaker 10>several days in the ICU because of a bacterial infection

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<v Speaker 10>that has postponed her twenty twenty three celebration tour that

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<v Speaker 10>was supposed to start July fifteenth in Vancouver. Her manager

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<v Speaker 10>says she is expected to make a full recovery. Global

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<v Speaker 10>News twenty four hours a day, powered by more than

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<v Speaker 10>twenty seven hundred journalists and analysts and over one hundred

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<v Speaker 10>twenty countries. I'm Michael Barren. This is Bloomberg. Nathan.

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<v Speaker 1>Okay, Michael, thanks time now for the Bloomberg Sports update.

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<v Speaker 1>After a perfect night, here's John Stashower. Yeah right, Nathan

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<v Speaker 1>Domno Herman.

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<v Speaker 13>He's at his ups and downs as a Yankee, really

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<v Speaker 13>more down than up since he was an eighteen game

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<v Speaker 13>winner back in twenty nineteen. Injuries at a long suspension

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<v Speaker 13>for domestic violence, a recent suspension for using an illegal

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<v Speaker 13>substance on.

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<v Speaker 1>His pitching hand.

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<v Speaker 13>Herman took the mound in Oakland, having allowed fifteen earned

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<v Speaker 13>runs in his last two stars, to before a crowd

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<v Speaker 13>of only twelve thousand. Perfection twenty seven Up twenty seven down.

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<v Speaker 13>The Yankees meet the A's eleven to nothing, with Herman

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<v Speaker 13>throwing the twenty fourth perfect game in MLB history. The

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<v Speaker 13>fourth player Yankee. Herman joins David Wells, David Conan, Don Larsen.

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<v Speaker 13>His of course, came in the nineteen fifty six World Series.

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<v Speaker 13>He struck out nine got helping the fifth inning on

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<v Speaker 13>a diving stop by Anthony Bizzo. As for the Mets,

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<v Speaker 13>five to two loss at City Field to Milwaukee, so

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<v Speaker 13>the Mets record of the last twenty three games six

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<v Speaker 13>and seventeen. Their owner Steve cohenell they rare press conference

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<v Speaker 13>before the game, was asked about making changes.

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<v Speaker 14>I'm a patient guy.

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<v Speaker 8>Okay.

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<v Speaker 15>Now everybody wants and you know, a headline everybody says,

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<v Speaker 15>fire this person, fire that person. But I don't see

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<v Speaker 15>that as a way to operate. If you want to

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<v Speaker 15>track good people to this organization, the worst thing you

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<v Speaker 15>can do is being pulsel.

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<v Speaker 13>Cohen said he wants to hire a president of Baseball

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<v Speaker 13>Operations to oversee GM Billy Eppler, but he hasn't found

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<v Speaker 13>the right person. They held the NHL Draft in Nashville,

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<v Speaker 13>first pick to Chicago, taking seventeen year old phenom Connor

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<v Speaker 13>Madready scores seventy one goals and fifty one games in

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<v Speaker 13>the Western Hockey League. Rangers in the first round drafted

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<v Speaker 13>Gabrielle Perrot. His father had a long NHL career. The Devils,

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<v Speaker 13>who acquired Timo Meyer from San Jose have given him

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<v Speaker 13>an eight year extension.

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<v Speaker 1>John Stashewer Bloomberg.

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<v Speaker 16>Sports from coast to coast, from New York to San Francisco,

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<v Speaker 16>Boston to Washington, d C. Nationwide on Syrias exam the

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<v Speaker 16>Bloomberg Business Appen Bloomberg dot Com.

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<v Speaker 1>This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. Could J.

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<v Speaker 1>Powell really ratchet down rates? It's possible, depending on where

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<v Speaker 1>inflation goes over the next several months. In a conversation

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<v Speaker 1>with Bloomberg's Matt Miller and Katie Greifeld, PIMCO Global Economic

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<v Speaker 1>advisor and former FED Vice chair Richard Clarita used those

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<v Speaker 1>exact words ratchet down to describe the Fed's rate hike path.

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<v Speaker 1>He also offered his outlook for recession in the US.

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<v Speaker 1>Let's listen into that conversation now.

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<v Speaker 6>I think at the last press conference man he indicated

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<v Speaker 6>it maybe several years before they project inflation getting down

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<v Speaker 6>all the way to two percent. But the SEP projections

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<v Speaker 6>themselves actually do have rate cuts in for next year.

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<v Speaker 6>The feds rationale is that if they succeed and inflation

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<v Speaker 6>starts to fall, they can cut rates basically to keep

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<v Speaker 6>real rates unchanged. And so I do think their baseline

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<v Speaker 6>probably does have some cuts, does have cuts for next year,

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<v Speaker 6>certainly in the baseline. The question is markets I think

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<v Speaker 6>have priced in more than the Fed seas right now,

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<v Speaker 6>and in.

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<v Speaker 17>Looking through the headlines of what we heard this call

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<v Speaker 17>my eye sort of on this topic that policies us

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<v Speaker 17>getting two percent core inflation by twenty twenty five. And

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<v Speaker 17>to your point that if you look at the dot plot,

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<v Speaker 17>you actually see some cuts penciled in next year. Is

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<v Speaker 17>there a situation where okay, we're not at two percent yet,

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<v Speaker 17>but the Fed see something and is willing to cut

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<v Speaker 17>even though we're not back to target.

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<v Speaker 6>Oh yes, In fact, that's that's really our baseline view

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<v Speaker 6>at PEMCO. It's what we sometimes call the two points

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<v Speaker 6>something a destination, that is, we could see them under

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<v Speaker 6>their outlook, we could see inflation next year falling below three.

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<v Speaker 6>That's obviously is not two, but in that context inflation

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<v Speaker 6>will have fallen substantially, and we do think the FED

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<v Speaker 6>can ratchet down and would ratchet down rates in those circumstances,

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<v Speaker 6>and so so yes, obviously, you know the FED will

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<v Speaker 6>be like the ECB and other central banks, will be

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<v Speaker 6>especially data dependent. But you know, we could see cuts

0:11:58.720 --> 0:12:02.280
<v Speaker 6>next year even if inflation remains somewhat above two percent.

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<v Speaker 17>On June fifteenth, after the FED meeting on Bloomberg Television,

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<v Speaker 17>I believe it was you made the point that I

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<v Speaker 17>really think that for the first time in a long

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<v Speaker 17>time that the FED is data dependent. Does that imply

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<v Speaker 17>that up until this point, perhaps they hadn't been. What

0:12:16.960 --> 0:12:20.199
<v Speaker 17>has changed that now they are definitely data dependent?

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<v Speaker 6>Well quite frankly, the FED really risk falling behind the

0:12:24.200 --> 0:12:27.439
<v Speaker 6>curve last year. You know, they only began to hike

0:12:27.559 --> 0:12:32.080
<v Speaker 6>rates at the March of twenty twenty two meeting, and

0:12:32.120 --> 0:12:34.920
<v Speaker 6>then under Jay's Palace leadership, and I think he showed

0:12:34.920 --> 0:12:38.480
<v Speaker 6>excellent leadership. He unified the committee to a very very

0:12:38.480 --> 0:12:42.480
<v Speaker 6>aggressive steep lift off path. And I actually thought really

0:12:42.520 --> 0:12:45.559
<v Speaker 6>for most of last year the focus was on getting

0:12:45.640 --> 0:12:48.040
<v Speaker 6>rates into restrictive territory, and they were going to do

0:12:48.120 --> 0:12:52.400
<v Speaker 6>that for a pretty wide range of data. I think

0:12:52.480 --> 0:12:54.720
<v Speaker 6>they now agree and I would we would agree that

0:12:54.840 --> 0:12:58.120
<v Speaker 6>rates are in restrictive territory. They have to keep them

0:12:58.160 --> 0:13:00.560
<v Speaker 6>there for a while. And I really do you think

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<v Speaker 6>for the first time in this cycle there is some

0:13:03.440 --> 0:13:06.080
<v Speaker 6>data dependence. You know, for example, they did skip or

0:13:06.120 --> 0:13:09.720
<v Speaker 6>pause at the last meeting, and the chair did not

0:13:09.840 --> 0:13:13.400
<v Speaker 6>want to rule out that they could pause at future meetings,

0:13:13.400 --> 0:13:15.120
<v Speaker 6>but he also didn't want to rule out they could

0:13:15.120 --> 0:13:18.920
<v Speaker 6>go at the next two meetings. So more optionality now

0:13:18.960 --> 0:13:21.480
<v Speaker 6>for the palfed than I think that we've seen in

0:13:21.559 --> 0:13:22.120
<v Speaker 6>some time.

0:13:22.679 --> 0:13:24.840
<v Speaker 18>Obviously, there's going to be a recesion at some point.

0:13:24.920 --> 0:13:27.680
<v Speaker 18>The question is when. On the one hand, we're seeing

0:13:27.960 --> 0:13:31.120
<v Speaker 18>strong economic surprises to the upside. If you look at

0:13:31.120 --> 0:13:34.600
<v Speaker 18>the Bloomberg Economic Surprise Indicator, it's really spiked over the

0:13:34.640 --> 0:13:37.720
<v Speaker 18>past few weeks. And on the other hand, we're seeing

0:13:37.840 --> 0:13:43.840
<v Speaker 18>things like delinquencies on car loans starting to ratchet higher,

0:13:44.040 --> 0:13:47.720
<v Speaker 18>right savings and a bank balances starting to come down.

0:13:48.000 --> 0:13:50.120
<v Speaker 18>What's your take on a recession and when we're going

0:13:50.160 --> 0:13:50.520
<v Speaker 18>to get it?

0:13:50.880 --> 0:13:53.960
<v Speaker 6>I think you phrased the question well, Matt, there will

0:13:54.000 --> 0:13:56.920
<v Speaker 6>at some point be a recession we've not banished the

0:13:56.960 --> 0:14:01.200
<v Speaker 6>business cycle. Economists are not good on a lot of things,

0:14:01.200 --> 0:14:02.920
<v Speaker 6>and one of things we're not good at is is

0:14:03.000 --> 0:14:05.920
<v Speaker 6>forecasting recessions. If we do get a recession, say later

0:14:06.000 --> 0:14:08.880
<v Speaker 6>this year or early next year, it'll probably be one

0:14:08.880 --> 0:14:13.400
<v Speaker 6>of the most anticipated or forecasted recessions in my professional career.

0:14:14.000 --> 0:14:17.280
<v Speaker 6>Our baseline view is, you know, monetary policy does operate

0:14:17.600 --> 0:14:20.720
<v Speaker 6>with a lag. We've seen a tightening and lending standards

0:14:20.920 --> 0:14:25.400
<v Speaker 6>by banks. The leading indicators are a negative territory. The

0:14:25.440 --> 0:14:29.479
<v Speaker 6>curve is inverted, so all the classic signals are flashing

0:14:30.080 --> 0:14:33.640
<v Speaker 6>a recession either later this year or next year. The

0:14:33.720 --> 0:14:37.320
<v Speaker 6>labor market traditionally is a lagging indicator. It's certainly lagging

0:14:37.880 --> 0:14:41.440
<v Speaker 6>in this cycle. It would be great if we could

0:14:41.440 --> 0:14:44.840
<v Speaker 6>get a soft or softish landing. So we're not putting

0:14:44.840 --> 0:14:48.840
<v Speaker 6>a zero probability on that, but we do think that

0:14:49.360 --> 0:14:52.160
<v Speaker 6>all together that a recession is more likely than not.

0:14:53.600 --> 0:14:56.680
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