Speaker 1: This is Bloomberg Daybreak Asia for this Thursday February in
Speaker 1: Hong Kong, Wednesday February in New York and coming up today.
Speaker 1: US retail sales in January jump by the most in
Speaker 1: nearly two years. A SML says a former China based
Speaker 1: employee had stolen data related to its chip technology, and
Speaker 1: Tesla will halt some production at its factory in Shanghai
Speaker 1: as the company upgrades for the rollout of the Model three.
Speaker 1: China charges US balloons have travel over sensitive areas. Biden
Speaker 1: considers speech on balloon and China relations. Scotland's Nicola Sturgeon
Speaker 1: resigns big tech CEOs A pointed to testify before Congress
Speaker 1: over free speech. I'm at Baxter with Global News. That's
Speaker 1: all straight ahead on Bloomberg Daybreak Asia, the business news
Speaker 1: you need to start your day, and just one fifteen
Speaker 1: minute podcast available on Apple, Spotify, the Bloomberg Business App,
Speaker 1: and everywhere you get your podcasts. Good morning, I'm Dud
Speaker 1: Prisoner and I'm Brian Curtis. Here are the stories we're
Speaker 1: following today. US retail sales rising in January by the
Speaker 1: most in nearly two years. Commerce Department data show that
Speaker 1: the value of overall retail purchases increased three percent after
Speaker 1: one point one percent drop back in December. It shows
Speaker 1: that Americans are spending on goods and services even as
Speaker 1: borrowing costs rise and inflation remains elevated. We heard from
Speaker 1: Danta Telsey, the CEO of Telsey Advisory Group. She was
Speaker 1: reluctant to draw conclusions over one month's data. It was
Speaker 1: very strong. You looked at apperil, you looked at furniture,
Speaker 1: they showed strength. Also in addition to a big uptick
Speaker 1: in restaurants. Keep in mind, I don't take January as
Speaker 1: seriously as I take March, April and May. January is
Speaker 1: about clearing out promotional and clearance goods. You're hearing about
Speaker 1: retailers having inventory levels that are up twenty and thirty
Speaker 1: percent in the third quarter and now they're down in
Speaker 1: the fourth order. The fact that you went from up
Speaker 1: twenty and thirty and now you're negative. You moved product,
Speaker 1: some of it at markdown still worries amounting that strong
Speaker 1: consumer spending will keep prices elevated and force a hawkish
Speaker 1: response from the Fed. On Tuesday, several Fed official stress
Speaker 1: the need for further rate hikes, but expressed differing views
Speaker 1: about how close they were to stopping well. The Dutch
Speaker 1: chip equipment maker A s mL has accused a former
Speaker 1: Chinese based employee of stealing confidential information. We have that
Speaker 1: story from bloombergs Van Man. It's the second incident of
Speaker 1: this kind linked to China in less than a year.
Speaker 1: The Dutch company says export controls may have been violated.
Speaker 1: It's unclear the moment, though, whether the former worker had
Speaker 1: any connections to authorities in China or elsewhere. It's also
Speaker 1: not clear if the data allegedly stolen could be used
Speaker 1: to develop lithography systems for chips. The news comes just
Speaker 1: as the Netherlands and Japan had agreed to restrict exports
Speaker 1: of some equipment to China. These latest charges may lead
Speaker 1: to heightened geopolitical tensions in Hong Kong. I'm van ma'am Bloomberg,
Speaker 1: Daybreak Asia and as a footnote, a person familiar with
Speaker 1: the situation tells Bloomberg the alleged breach occurred in an
Speaker 1: area with sensitive details of systems that produce advanced semiconductors.
Speaker 1: Bryan Doug Tesla is going to halt production for some
Speaker 1: of its lines at the Shanghai factory until the end
Speaker 1: of February. The ev maker is upgrading its facility so
Speaker 1: it can start rolling out a revamped version of the
Speaker 1: Model three Sedan. The revamp comes as Tesla faces increased
Speaker 1: competition from b y D and Neo in the Chinese market.
Speaker 1: Upgrades have occurred at facility lines in stages over the
Speaker 1: past couple of months. The section of the Shanghai factory
Speaker 1: currently being worked on is is making Model threes and
Speaker 1: Model y sport utility vehicles, as like expects deliveries of
Speaker 1: the Model three Sedan to begin leader this year. White
Speaker 1: House officials have reached out to a key Democratic ally
Speaker 1: in the Senate to discuss filling the vacant role of
Speaker 1: FED Vice chair. That story from Bloomberg's Charlie Pellett. Senate
Speaker 1: Banking Chairman Shared Brown says he spoke with White House
Speaker 1: officials about the vacancy created by President Biden's decision to
Speaker 1: name Vice Chair Leo Brainer to be his top economic advisor.
Speaker 1: The Wall Street Journal reported that Chicago FED President Austin
Speaker 1: Goulsby is under consideration for the post. The Ohio Democrat
Speaker 1: would not disclose if any names were circulated, but said
Speaker 1: he wants a nominee who can focus on the Fed's
Speaker 1: dual mandate of employment and wages. Naming the fifty three
Speaker 1: year old Ghoulsby to the board would mark an abrupt
Speaker 1: job change for him after he assumed his role leading
Speaker 1: the Regional Fed Bank in Chicago last month. In New York,
Speaker 1: Charlie Pellett Bloomberg dabre Asia, Well, we got some strong
Speaker 1: earnings after the closing bell from Cisco, the maker of
Speaker 1: computer networking machines. Bloombergs Tom Busby has the story. Shares
Speaker 1: of Cisco rising upwards of eight percent in extended trading
Speaker 1: after the maker of computer networking gear top second quarter
Speaker 1: earnings at eight cents to share on revenues of thirteen
Speaker 1: point five billion dollars, up seven percent from a year ago.
Speaker 1: It also raised its forecast for the current quarter, saying
Speaker 1: sales of tech infrastructure could jump as much as double
Speaker 1: a previous estimate thanks to a backlog of orders that
Speaker 1: built up during the pandemic. Tom Busby Bloomberg Daybreak Asia.
Speaker 1: Cisco is currently up about two point eight percent in
Speaker 1: late trading. Well, Doug, I heard you allude to this
Speaker 1: earlier higher for longer about to be changed too much
Speaker 1: higher for longer, or maybe at the fed UH should
Speaker 1: investors start to plan for a possible fifty basis points
Speaker 1: at the Marcher Main meetings. That's one of the questions
Speaker 1: I'll put to our guests coming up in in a
Speaker 1: few moments here we'll be chatting with Marion Montange from
Speaker 1: Gradient Investments. That may be a little too aggressive. Although
Speaker 1: to your point today, the Atlanta Fed that did ratchet
Speaker 1: up its first quarter GDP now forecast a growth rate.
Speaker 1: I don't know if you saw this, Brian, two point
Speaker 1: four two, that's up from two point one six. A
Speaker 1: lot of that has to do with this beat on
Speaker 1: January retail sales, and we're a little more than a
Speaker 1: week away now from that January PCE deflator data. So
Speaker 1: when you start to consider retail sales, a lot of
Speaker 1: the other signs of robust consumption that we have seen
Speaker 1: higher growth expectations. I think you're onto something here, the
Speaker 1: so called no landing scenario. I think it's being fortified.
Speaker 1: The impact on the market, though, is a bit unclear,
Speaker 1: because the obvious offset to the the higher borrowing costs
Speaker 1: would be the strong sales that we saw I mean
Speaker 1: that's good for companies and and it's also I think
Speaker 1: interesting in that it's newer news than the pace of
Speaker 1: rate hikes, and so investors may ride this a while
Speaker 1: until they see sales weaken. I think you could be
Speaker 1: right about that as well, and that may be underpinning
Speaker 1: the gains that we had in the equity market today,
Speaker 1: right because we talked about yield spiking typically a negative
Speaker 1: for stocks, but that wasn't the case. Yeah, it's puzzling,
Speaker 1: isn't it. So you have to think that, well, maybe
Speaker 1: they just think that a strong economy is probably number one. Anyway,
Speaker 1: we will get into that with our guests coming up.
Speaker 1: Time for global news. China is saying that U S
Speaker 1: balloons have traveled over sensitive areas over the mainland in
Speaker 1: the western part of the country, out over sin Jong.
Speaker 1: Let's get to Ed Baxter. He's got global news in
Speaker 1: the news when San Francisco in Yeah, right, jar Bryan,
Speaker 1: the Foreign Ministry says some of the ten balloons since
Speaker 1: last May passed over sin Jong and Tibet. Those are
Speaker 1: the areas where the government is accused by the US
Speaker 1: and other nations of human rights violations. And China again
Speaker 1: warned it will retaliate against violations of its sovereignty, and
Speaker 1: the reports the US President Joe Biden is thinking about
Speaker 1: making a speech regarding balloon incidents and relations with China
Speaker 1: before heading to Poland later this week. Bloomberg's Mario Parker
Speaker 1: at the White House as the President is trying to
Speaker 1: scale a tone down a bit attention the balloons is
Speaker 1: the rhitorate some of the temperature around that is trying.
Speaker 1: They're trying to dial it back again both sides, but
Speaker 1: nevertheless we keep this in relative terms. The tensions between
Speaker 1: the US and sign of the world's second largest economy
Speaker 1: are really really high, right, Yeah, And Mario says not
Speaker 1: only does the President need to consider relations with China,
Speaker 1: but exactly what to say in a politically fractured Washington,
Speaker 1: d C. And United States And Susan Thornton Farmer, acting
Speaker 1: Assistant Secretary of State for East Asia and Pacific Affairs,
Speaker 1: says it is time for the lions of communication to reopen,
Speaker 1: making these meetings between the US and China normalized. It's
Speaker 1: regular diplomacy. We talked to other big powers, other important powers.
Speaker 1: We have to talk to the Chinese, and we can't
Speaker 1: just cancel every time something comes up. Thornton on Bloomberg's
Speaker 1: balance of power, says a meeting at the Munich Security
Speaker 1: Conference between the foreign ministers of the two countries is
Speaker 1: a very good start. Scotland's first Minister, Nicola Sturgeon, has resigned.
Speaker 1: She says her decision or eight years as head of
Speaker 1: the country's government may seem sudden, but really not. And
Speaker 1: it might seem sudden, but I have been wrestling with it,
Speaker 1: albeit with Ossole eting leavels of intensity, for some weeks
Speaker 1: and bloombergs Lizzie Burden in London says the first issue
Speaker 1: that will go wanting is independence. Nicolas Surgeon has been
Speaker 1: trying repeatedly to get a second referendum on Scottish independence
Speaker 1: and failing repeatedly. Most recently the UK Supreme Court tossed
Speaker 1: out the should they ruled against unilateral independence vote. Yeah,
Speaker 1: and Lizzie says Sturgeon was planning on using an upcoming
Speaker 1: election to try to gain more traction, but now that's
Speaker 1: not going to happen. The CEOs of Alphabet, Amazon, Apple,
Speaker 1: Made and Microsoft have received congressional subpoenas to testify before
Speaker 1: the House Judiciary Committee this an escalation of the Republican
Speaker 1: allegations that big tech suppresses free speech. The subpoenas have
Speaker 1: asked for documents from March three, the convicted shooter in
Speaker 1: the Buffalo Shop Being Center massacre has been sentenced to
Speaker 1: life in prison without possibility of parole a domestic act
Speaker 1: of terrorism motivated by hate in the first degree, an
Speaker 1: a one felony, and Judge Susan Egan says, too late
Speaker 1: for remorse. You will never see the light of day
Speaker 1: as a freeman ever again. Defense attorneys had argued that
Speaker 1: he had learned hate from white supremacist websites and was
Speaker 1: regretful for his actions. Global News powered by more than
Speaker 1: journalists and analysts and over one twenty countries in San Francisco.
Speaker 1: I'm d Baxter and this is Bloomberg. This is Bloomberg
Speaker 1: Daybreak Asia. I'm Brian Curtis along with Rashad Salama. We're
Speaker 1: here in Hong Kong and our guest is Marianne Montagne,
Speaker 1: portfolio manager at Gradient Investments. Marianne, you probably heard Doug
Speaker 1: and I'm musing over this much higher for longer possibilities
Speaker 1: for the FED. When when the data changes, we should
Speaker 1: change right, or do we need to factor in the
Speaker 1: lag effect and just be patient. Well, I think Brian,
Speaker 1: we've got that combination. We are waiting for that lag effect,
Speaker 1: but it's so lagging that we have to expect that
Speaker 1: we're going to get a couple of more basis point
Speaker 1: hikes in the rate this spring, and recognize that while
Speaker 1: the feed is tightening, that also has the effect of
Speaker 1: raising rates by about twenty five basis points each each
Speaker 1: time each go round. So we really are in a
Speaker 1: higher interest rate for longer scenario as far as we're concerned. Yeah,
Speaker 1: you know the thing is you have a look at
Speaker 1: what is happening in the US. Is this also, you know,
Speaker 1: despite interest rates going up, you would have thought people
Speaker 1: would be borrowing less, but we've got consumer credit card
Speaker 1: and lending it near record highs right now. Is this
Speaker 1: well just being fueled on debt. It is. But you
Speaker 1: have to recognize too that the labor force is getting
Speaker 1: hit by the Fed. They don't like the numbers. That
Speaker 1: big number that came out on February three UM is
Speaker 1: highly unlikely to be sustained. But right now, job openings
Speaker 1: are about equal to the number of people searching for
Speaker 1: work and layoffs are happening in those higher paying jobs
Speaker 1: while we're seeing uh, you know, additional people brought into
Speaker 1: work at very low paying jobs. So when you have
Speaker 1: a scenario of, uh, your friend is getting laid off
Speaker 1: or your next door neighbors getting laid off in such
Speaker 1: I think that will put a pause on the consumers borrowing. Yeah,
Speaker 1: they sent, they spent their savings. Now they've borrowed money,
Speaker 1: and so we could be getting towards the end of
Speaker 1: that that cycle. But you have to, you know, you
Speaker 1: have to take your hat off and give a hat
Speaker 1: tip to the strength here in the economy. And and
Speaker 1: that's a nice offset to higher interest rates, isn't it.
Speaker 1: And particularly if people don't need to borrow, they feel
Speaker 1: comfortable going out and spending. Well, I do believe it's
Speaker 1: rather temporary, and we can see that in retail sales
Speaker 1: that were reported today. It looks like their strength there.
Speaker 1: Uh it was three percent versus expectations for one point
Speaker 1: seven percent increase. But you have to recognize that sales
Speaker 1: were down in the prior two months. In January is
Speaker 1: the month of clearances, so people were looking to get
Speaker 1: the deals. That seventeen point five percent increase in sales
Speaker 1: at department stores. That's telling me that people are just
Speaker 1: diving into real savings because they're nervous. Oh, what about
Speaker 1: the market, and what are the implications here? That should
Speaker 1: of course in gender a bit of optimism. But you
Speaker 1: know it's always sometimes good news being bad news. And
Speaker 1: what does it mean for you stop picking and et cetera,
Speaker 1: and what you put into a portfolio. Well, here's a
Speaker 1: couple of things. On the equity side, we believe in buffers.
Speaker 1: Buffers are akin to keeping your seatbelt fastened when the
Speaker 1: airplane is in motion. So Innovators and First Trust both
Speaker 1: offer a variety of etf that provide a buffer to
Speaker 1: the downside, call it per cent or so, while providing
Speaker 1: some upside to a cap over the next twelve to
Speaker 1: eighteen months. And I would look for something maybe in
Speaker 1: the twenties for a cap on my buffer um. But
Speaker 1: that's one recommendation on the equity side. On the UH
Speaker 1: fixed income side, we're keeping duration below the six year
Speaker 1: level that's in the EGG index. We're overweighting investment grade
Speaker 1: and high yield um given those very current high rates
Speaker 1: of yield um. But again we're keeping our duration short.
Speaker 1: YEA high Yield today down about two tensive one percent. Well,
Speaker 1: if you look at h y G. I got to
Speaker 1: ask you about China. You know, we had a little
Speaker 1: uptick in the NASTAC Golden Dragon index, but you know
Speaker 1: the past two weeks has been brutal out here with
Speaker 1: about a ten sell off in the indexes in and
Speaker 1: some key names. What are you thinking about China at
Speaker 1: this moment? Yeah, I just think there's a lot of
Speaker 1: strife going on right now, and you know politically and
Speaker 1: the UM manufacturers and other purchasers of items from China
Speaker 1: have to be very nervous. Uh. So you know, the
Speaker 1: way we would play this situation is to UM look
Speaker 1: at small cap stocks, so they're going to be US
Speaker 1: based small cap stocks. Uh. We like high quality balance sheets,
Speaker 1: strong cash flows. And here's an e t F where
Speaker 1: you can find that. That's the ban X Small Cap
Speaker 1: Mote ETF kicker SMOT. This is Bloomberg Daybreak Asia, your
Speaker 1: morning brief on the story is making news from Hong
Speaker 1: Kong to Singapore and Wall Street. Look for us on
Speaker 1: your podcast feed every day on Apple, Spotify and anywhere
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Speaker 1: us again tomorrow for all the news you need to
Speaker 1: start your day right here on Bloomberg Daybreak Asia