WEBVTT - US Bank Stocks Fall, WeWork in Trouble

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Brian Curtiz and I'm Doug Prisner. Here are the

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

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<v Speaker 1>US bank stocks fell after Moodies downgraded ten small and

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<v Speaker 1>medium sized American lenders, and it said that it might

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<v Speaker 1>do the same with a handful of major firms. But

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<v Speaker 1>he said that higher funding costs, potential regulatory capital weaknesses,

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<v Speaker 1>and rising risks tied to commercial real estate are all

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<v Speaker 1>strains that are prompting the review. Now we heard from

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<v Speaker 1>Richard Beauvet at odeon Capital. He said the move came

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<v Speaker 1>late for Moodies.

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<v Speaker 3>I think that when the second quarter earnings came out,

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<v Speaker 3>it was evident that the banking industry was suffering. And

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<v Speaker 3>the reason why it was suffering is because basically, as

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<v Speaker 3>interest rates go up, and this sounds stupid to say,

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<v Speaker 3>the value of financial assets go down. And if he

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<v Speaker 3>took a look at the balance sheet of each one

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<v Speaker 3>of these banks, the value of their financial assets were

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<v Speaker 3>going down very, very sharply. That meant that the industry

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<v Speaker 3>was in trouble.

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<v Speaker 1>Declined for firms that had their ratings cut, including M

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<v Speaker 1>and T Bank closing down one point four percent, and

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<v Speaker 1>also the KBW Regional Bank Index was down one point

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<v Speaker 1>four percent.

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<v Speaker 2>We got a surprise earnings report after the bell today

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<v Speaker 2>from the nation's number two ride hailing service. That story

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<v Speaker 2>from Bloomberg's tom Busby.

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<v Speaker 4>Everything seemed to align for Lift last quarter, which had

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<v Speaker 4>been struggling to bounce back from the pandemic lockdowns and

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<v Speaker 4>a shortage of drivers. But recent costcuding measure seemed to

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<v Speaker 4>have worked and lower fare prices drew back more writers

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<v Speaker 4>to the service that helped Lift beat Wall Street estimates

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<v Speaker 4>and even raise its outlook for the current quarter. Revenue

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<v Speaker 4>for the second quarter just over one billion dollars, where

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<v Speaker 4>earnings coming in at sixteen cents a share. Analysts were

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<v Speaker 4>expecting a loss of one cent per share. Shares of

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<v Speaker 4>Lyft soaring in after hours trading tom Busby Bloomberg day

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<v Speaker 4>Break Asia.

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<v Speaker 1>Actually there was a quick change in after hours and

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<v Speaker 1>Lift shares and now down five point eight percent. Rivia

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<v Speaker 1>nudged up on its production guide guidance for the year

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<v Speaker 1>and narrowed its loss expectation. This comes after the company

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<v Speaker 1>narrowly missed its production target last year it grappled with

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<v Speaker 1>supply constraints and rising competition. Rivian cited an improved supply

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<v Speaker 1>chain outlook for its revised expectations, we get the story

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<v Speaker 1>from Bloomberg's Ed Ludlow.

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<v Speaker 5>They raised guidance modestly for the year by two thousand

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<v Speaker 5>units fifty two thousand evs across their two consumer vehicles

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<v Speaker 5>and the van that they build for Amazon. I reported

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<v Speaker 5>earlier in the year that Rivian executive had told staff

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<v Speaker 5>that actually their plan is to build sixty two thousand.

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<v Speaker 5>But what's interesting about this print is that they are

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<v Speaker 5>showing the benefits of scaling up.

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<v Speaker 1>And that's Ed Ludlow. Separately, Rivian reported second quarter earnings

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<v Speaker 1>that beat analyst expectations, and the shares currently are up

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<v Speaker 1>one point three percent.

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<v Speaker 2>In late trading, we Work said there is substantial doubt

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<v Speaker 2>about its ability to continue operating. The company cited sustained

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<v Speaker 2>losses along with canceled memberships for its office spaces. Now,

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<v Speaker 2>we Work is going to focus over the next year

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<v Speaker 2>on reducing rental cost, negotiating more favorable leases, and increasing revenue.

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<v Speaker 2>The company also wants to raise a little bit of

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<v Speaker 2>capital now. This warning comes just months after we Work

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<v Speaker 2>struck a deal with some of its biggest creditors and

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<v Speaker 2>soft Bank to reduce its debt load by around one

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<v Speaker 2>point five billion dollars. We Work shares are down in

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<v Speaker 2>late trading.

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<v Speaker 1>Brian Well, Chinese developer Country Gardens stock and bonds plunged

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<v Speaker 1>as noteholders said that they had not yet received coupon payments.

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<v Speaker 1>Bloomberg's Bonnieau has more from Hong Kong.

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<v Speaker 6>The noteholders said they had not received payments as of

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<v Speaker 6>yesterday afternoon. Data showed the company owned ten point five

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<v Speaker 6>million dollars of interest on a dollar bond that matures

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<v Speaker 6>in twenty twenty six, and that are twelve million dollars

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<v Speaker 6>is due on a note maturing in twenty thirty. In

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<v Speaker 6>a statement, Country Garden set a deterioration in seals and

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<v Speaker 6>a refinancing environment has hurt us cash flow. Country Garden

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<v Speaker 6>is one of the few major Chinese developers yet to default,

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<v Speaker 6>and a failure to pay were pummel market confidence. The

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<v Speaker 6>builder is facing more than two billion dollars of bond

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<v Speaker 6>payments over the rest of this year in Hong Kong.

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<v Speaker 6>I'm Bonnie Al Bloomberg Daybreak Asia, A.

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<v Speaker 1>Couple of other stories will be looking at China says

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<v Speaker 1>it's Europe's own fault for the soaring trade deficit.

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<v Speaker 7>With Beijing.

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<v Speaker 1>China says that it wants to buy more high tech

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<v Speaker 1>goods but cannot. And also we had the weak China

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<v Speaker 1>export and import numbers yesterday, Doug. And it turns out

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<v Speaker 1>that the US is now buying more goods from Mexico

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<v Speaker 1>and Canada than from China. The US buying twenty five

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<v Speaker 1>percent less in the first half of this year than

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<v Speaker 1>last year in terms of the value of goods. And

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<v Speaker 1>added to that, Taiwan's trade surplus surging to a record high.

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<v Speaker 1>So a lot's happening on the trade front.

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<v Speaker 2>Yeah, we knew, Brian that the US was planning at

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<v Speaker 2>some point to restrict investment in China. Well, now we're

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<v Speaker 2>being told that the restrictions will likely apply only to

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<v Speaker 2>Chinese companies that get at least half of their revenue

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<v Speaker 2>from cutting A areas like quantum computing and artificial intelligence.

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<v Speaker 2>One source is a part of the story, which you

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<v Speaker 2>can find on the Bloomberg terminal incidentally said that this order,

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<v Speaker 2>expected to be announced in the coming days by the

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<v Speaker 2>Biden administration, is going to prohibit investment in AI for

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<v Speaker 2>military end users. Notification will be required for investments in

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<v Speaker 2>other AI activities.

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<v Speaker 1>Yeah, there's so much tension between the two. It's a

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<v Speaker 1>little more than this pull back on it, and the

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<v Speaker 1>headline in all the paper is today in Hong Kong

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<v Speaker 1>and likely in China as well, will be things like

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<v Speaker 1>de risking and re shoring, shipping away at China's trade picture,

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<v Speaker 1>chipping away at China's exports. So we'll be covering that

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<v Speaker 1>in greater detail all throughout the program. Now it's time

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<v Speaker 1>for Global News. Well, let's get right over to Ed Baxter.

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<v Speaker 1>We are looking at China no longer the US's largest

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<v Speaker 1>importer of goods, which I just headlined there. Ed Baxter

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<v Speaker 1>has more from San Franceancisco a ed.

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<v Speaker 8>Yeah, let's detail it out, Brian, China now sells fewer

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<v Speaker 8>goods of the US and Mexico or Canada. Bloomberg Emerging

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<v Speaker 8>Markets correspondent Sherry On says the US imported about twenty

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<v Speaker 8>five percent year to year less from China the first

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<v Speaker 8>six months of the year.

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<v Speaker 7>According to analysts, perhaps a supply chain diversification is working

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<v Speaker 7>against China. I had an emergen markets analyst from Delta saying,

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<v Speaker 7>you know what, Mexico is a more interesting story because

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<v Speaker 7>the realignment of supply chains is already happening that way,

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<v Speaker 7>especially with those trade tensions, geopolitics being an issue and

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<v Speaker 7>the economic recovery slumping.

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<v Speaker 8>Now goods from Mexico in the same period we're up

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<v Speaker 8>five point four percent, so for the US trade partners

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<v Speaker 8>now Mexico, Canada, China, Germany and Japan. The former co

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<v Speaker 8>CEO of FDx, Ryan Salem, as the negotiations with prosecutors,

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<v Speaker 8>reportedly to plead guilty to criminal charges. Sources are saying

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<v Speaker 8>that the Republican mega donor may enter a plea as

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<v Speaker 8>soon as next month that may include campaign finance law violations.

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<v Speaker 8>Bloomberg's Ava Barry Morrison says this has been a long

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<v Speaker 8>time in coming.

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<v Speaker 9>Ryan Salem had a bit of an insight into the

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<v Speaker 9>political fun sorry political donation side of STX, so I

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<v Speaker 9>think it took them a long time to get information

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<v Speaker 9>about what he was involved in, cross checked out with

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<v Speaker 9>other people as well.

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<v Speaker 8>Aft Exit made donations to both Republicans and Democrats. At

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<v Speaker 8>this point, it is unclear whether he will enter into

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<v Speaker 8>cooperation deal to testify against co founder Sam Bankman freed.

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<v Speaker 8>July now officially the Earth's hottest month on record, taking

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<v Speaker 8>that record away from a year earlier July, the average

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<v Speaker 8>temperatures hit Paris cap of one point five celsius during

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<v Speaker 8>that was covered in the Accord. Now, the Arctic sea

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<v Speaker 8>ice dropped fifteen percent below average. It is the lowest

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<v Speaker 8>level since satellite observations began. The EU of Copernicus Climate

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<v Speaker 8>Change Service is warning of dire consequences if the trend

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<v Speaker 8>is not reversed. Ron Decantas has brought in a new

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<v Speaker 8>campaign manager in Bloomberg's Wendy Benjaminson says, James Uthmeyer has

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<v Speaker 8>served as chief of staff and dessentis Governor's office.

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<v Speaker 10>But has never run a presidential campaign before. And there

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<v Speaker 10>are lots of people in this town who have run

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<v Speaker 10>presidential campaigns. But he so keeps so closely to the

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<v Speaker 10>people he knows and trusts that he's putting inexperienced people

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<v Speaker 10>in charge.

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<v Speaker 8>Detractors say, insulating himself with cronies from Florida. This follows

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<v Speaker 8>a string of layoffs and strategy ships, same to the

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<v Speaker 8>addressing declining polling numbers. State leaders in Maryland are surveying

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<v Speaker 8>the damage from yesterday's major storm activity. A stretch of

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<v Speaker 8>highway had a row of utility poles lining it and

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<v Speaker 8>forty seven people trapped inside their cars because of it.

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<v Speaker 8>Governor Wes Moore says they were all rescued, but sections

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<v Speaker 8>of the state are thrashing.

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<v Speaker 11>This is going to take some time to fix.

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<v Speaker 6>The damage from last night is significant.

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<v Speaker 8>The authorities say most of the remaining customer with our

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<v Speaker 8>power will be restored by tomorrow night. Global newspower by

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<v Speaker 8>more than twenty seven hundred journalist and analysts in over

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<v Speaker 8>one hundred twenty countries in San Francisco. I'm Ed Baxter,

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<v Speaker 8>and this is Bloomberg.

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<v Speaker 1>This is Bloomberg Daybreak Asia. I'm Brian Curtis here in

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<v Speaker 1>Hong Kong along with Rashad so I'm not in London.

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<v Speaker 1>A flash here across the Bloomberg terminal. Amazon is in

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<v Speaker 1>talks to be an anchor investor in the arm IPO,

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<v Speaker 1>So that is the unit of SoftBank that's coming to

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<v Speaker 1>market we think quite soon. And that, of course, or

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<v Speaker 1>this story here from Reuters, So we'll get you details

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<v Speaker 1>on that as much as we can. Going forward. Let's

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<v Speaker 1>get to our guest, Sarah Ponzak, Vice President UBS Private

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<v Speaker 1>Wealth Management. Well, I mentioned that we did see we

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<v Speaker 1>did see some losses on Wall Street today but they

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<v Speaker 1>were not as bad so as to take away the

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<v Speaker 1>games we saw yesterday. And we also had the dip

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<v Speaker 1>buyers kind of entering the frame today. So I'm not

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<v Speaker 1>sure how to frame the action today, but it seems

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<v Speaker 1>a little more negative then perhaps the way I've just

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<v Speaker 1>put it, Sarah, your thoughts on the action today.

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<v Speaker 12>I think we have to put it in context of

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<v Speaker 12>the pretty unbelievable year that we've seen for stocks so far.

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<v Speaker 12>You know, through July, the for seven months of the year,

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<v Speaker 12>the S and P five hundred was up about twenty percent.

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<v Speaker 12>That was the best start to a year in the

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<v Speaker 12>first seven months since nineteen ninety seven, so pretty phenomenal.

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<v Speaker 12>And when you think about the shift that we saw

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<v Speaker 12>from last year through the beginning of the year through

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<v Speaker 12>the middle of twenty twenty three, it's really been this

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<v Speaker 12>change in perception of the assumption and the expectation that

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<v Speaker 12>we're going to fall into a recession to you know,

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<v Speaker 12>everyone kind of now believing and the consensus being that

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<v Speaker 12>we're going to have a soft landing. So when we

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<v Speaker 12>think about these past couple of months, you think about

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<v Speaker 12>that shift to you know, investors, economists throwing away that

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<v Speaker 12>recession call now believing in a soft landing. They're really

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<v Speaker 12>not being much negative news over the course of the summer,

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<v Speaker 12>to all of a sudden, a weekly last week in

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<v Speaker 12>which we get the Fitch downgrade of US sovereign debt

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<v Speaker 12>and then a day like today in which you have

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<v Speaker 12>the Moody's downgrade of regional banks. It's just negative news

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<v Speaker 12>in this stock market world in which there really hasn't

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<v Speaker 12>much been much negative news. So it's healthy to see,

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<v Speaker 12>you know, some volatility on the negative news. And if anything,

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<v Speaker 12>it seems complacency is more so a risk at this

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<v Speaker 12>point in.

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<v Speaker 11>Time, complacency in being the watchword, Sarah, given that we

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<v Speaker 11>saw the S and B banking index after those downgrades

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<v Speaker 11>from moody is sending the banking index absolutely to the

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<v Speaker 11>floor and then a recovery, a massive recovery to just

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<v Speaker 11>be just off the the gain line, as it were.

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<v Speaker 11>Should people be worried. It does portend for of course,

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<v Speaker 11>more liquidity tightening and loans which would not be given out,

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<v Speaker 11>which are all going to do the Fed's job in

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<v Speaker 11>some ways or amplify what the Fed's doing.

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<v Speaker 12>Right, So it's interesting to see that whereas heading into

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<v Speaker 12>the year Originally, you know, the impetus for investment was

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<v Speaker 12>more so to fade gains, believing that they wouldn't be sustained.

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<v Speaker 12>And how quickly that has changed, you know, in the

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<v Speaker 12>face of fomo fear of missing out, to dip buying

0:12:09.840 --> 0:12:13.640
<v Speaker 12>whenever we do see some type of downdraft in the market,

0:12:13.960 --> 0:12:16.679
<v Speaker 12>because you know, some people now believe that we are

0:12:16.720 --> 0:12:19.319
<v Speaker 12>going to see you know, further gains and if they

0:12:19.360 --> 0:12:21.120
<v Speaker 12>sold and went to cast at the beginning of the year,

0:12:21.400 --> 0:12:23.880
<v Speaker 12>it's a difficult position to be and you feel as

0:12:23.880 --> 0:12:26.360
<v Speaker 12>that you need to get in at some point in time.

0:12:26.440 --> 0:12:29.240
<v Speaker 12>So we do see this impetus of dip buying now.

0:12:29.480 --> 0:12:32.720
<v Speaker 12>But when we think about, you know, the larger ramifications

0:12:32.760 --> 0:12:34.520
<v Speaker 12>of the downgrades that we did see from Moodies on

0:12:34.559 --> 0:12:38.560
<v Speaker 12>some of those regional banks, this is not entirely new news.

0:12:39.200 --> 0:12:43.280
<v Speaker 12>You know, we have been listening to and thinking about

0:12:43.360 --> 0:12:46.600
<v Speaker 12>what is going on in the banking system for months

0:12:46.640 --> 0:12:49.320
<v Speaker 12>now after what we saw with you know, a couple

0:12:49.400 --> 0:12:54.200
<v Speaker 12>regional bank failures, and again this sheds more light and

0:12:54.280 --> 0:12:58.040
<v Speaker 12>it does bring focus back to the fact that you know,

0:12:58.160 --> 0:13:00.920
<v Speaker 12>the fallout that we saw with a few regional banks.

0:13:01.200 --> 0:13:04.240
<v Speaker 12>It's very possible. It's not over. There could be more

0:13:04.280 --> 0:13:08.280
<v Speaker 12>dominoes to fall, and we need to take you know,

0:13:08.520 --> 0:13:10.760
<v Speaker 12>we need to take stock of that when we think

0:13:10.800 --> 0:13:15.600
<v Speaker 12>about the overall US banking system. But really, all in all,

0:13:15.760 --> 0:13:17.680
<v Speaker 12>this isn't necessarily new news.

0:13:18.360 --> 0:13:23.520
<v Speaker 1>Yeah, in terms of well, I imagine you know you

0:13:23.600 --> 0:13:26.760
<v Speaker 1>have some contact with high net worth individuals. I'm curious

0:13:26.800 --> 0:13:29.840
<v Speaker 1>whether or not they're talking more about diversification now rather

0:13:29.880 --> 0:13:32.560
<v Speaker 1>than riding the gains that we saw in the first part.

0:13:32.559 --> 0:13:35.360
<v Speaker 1>And if so, what are they diversifying into they.

0:13:35.280 --> 0:13:39.000
<v Speaker 12>Are I actually had a conversation with a high networth

0:13:39.040 --> 0:13:43.400
<v Speaker 12>client individual today who was asking, Okay, you know, should

0:13:43.440 --> 0:13:46.880
<v Speaker 12>we be diversifying out of some of these high flying,

0:13:47.080 --> 0:13:51.160
<v Speaker 12>big tech names that have really driven the gains this year?

0:13:51.559 --> 0:13:57.800
<v Speaker 12>And our response was yes, especially if you have more

0:13:57.920 --> 0:14:00.600
<v Speaker 12>exposure to some of these names that have just led

0:14:00.640 --> 0:14:03.880
<v Speaker 12>the way this year been even the index, then yes

0:14:03.880 --> 0:14:06.080
<v Speaker 12>it could. It could take sense to take some chips

0:14:06.080 --> 0:14:09.200
<v Speaker 12>off the table and diversify those gains a bit. So

0:14:09.240 --> 0:14:12.760
<v Speaker 12>what we've been saying, ubs' chief investment office has really

0:14:13.080 --> 0:14:15.520
<v Speaker 12>been pounding the table on two key themes, one of

0:14:15.559 --> 0:14:18.440
<v Speaker 12>them being you know, if you missed out on the

0:14:18.480 --> 0:14:22.440
<v Speaker 12>gains this year, or if you are not diversified, if

0:14:22.440 --> 0:14:24.720
<v Speaker 12>you have a significant amount of capital tied up in

0:14:24.840 --> 0:14:27.280
<v Speaker 12>just a few big tech names, maybe it does make

0:14:27.280 --> 0:14:30.240
<v Speaker 12>sense to now look to the laggards, look to value,

0:14:30.320 --> 0:14:32.800
<v Speaker 12>look to more defensive areas of the market. Maybe look

0:14:32.880 --> 0:14:34.760
<v Speaker 12>to an equal weight version of the S and P

0:14:34.880 --> 0:14:37.680
<v Speaker 12>five hundred and we have seen this broadening out over

0:14:37.720 --> 0:14:39.920
<v Speaker 12>the past month or so. You know, you look at

0:14:40.000 --> 0:14:43.240
<v Speaker 12>value stocks, you look at small caps. It has happened.

0:14:43.480 --> 0:14:45.680
<v Speaker 1>It definitely has happened, Sharon. We have noted it on

0:14:45.680 --> 0:14:48.520
<v Speaker 1>this program quite a lot. To RSP is one ETF

0:14:48.520 --> 0:14:51.360
<v Speaker 1>that one can look at for the equal weight. We

0:14:51.560 --> 0:14:55.120
<v Speaker 1>enjoyed the conversation, Sharah. Thank you. Sarah Ponzak, Vice President

0:14:55.240 --> 0:15:00.400
<v Speaker 1>UBS Private Wealth Management. This is Bloomberg Daybreak Asia morning

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