WEBVTT - Solid Eco Numbers And ASML's Data Stolen

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Thursday February in

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<v Speaker 1>Hong Kong, Wednesday February in New York and coming up today.

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<v Speaker 1>US retail sales in January jump by the most in

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<v Speaker 1>nearly two years. A SML says a former China based

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<v Speaker 1>employee had stolen data related to its chip technology, and

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<v Speaker 1>Tesla will halt some production at its factory in Shanghai

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<v Speaker 1>as the company upgrades for the rollout of the Model three.

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<v Speaker 1>China charges US balloons have travel over sensitive areas. Biden

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<v Speaker 1>considers speech on balloon and China relations. Scotland's Nicola Sturgeon

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<v Speaker 1>resigns big tech CEOs A pointed to testify before Congress

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<v Speaker 1>over free speech. I'm at Baxter with Global News. That's

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<v Speaker 1>all straight ahead on Bloomberg Daybreak Asia, the business news

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<v Speaker 1>you need to start your day, and just one fifteen

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<v Speaker 1>minute podcast available on Apple, Spotify, the Bloomberg Business App,

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<v Speaker 1>and everywhere you get your podcasts. Good morning, I'm Dud

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<v Speaker 1>Prisoner and I'm Brian Curtis. Here are the stories we're

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<v Speaker 1>following today. US retail sales rising in January by the

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<v Speaker 1>most in nearly two years. Commerce Department data show that

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<v Speaker 1>the value of overall retail purchases increased three percent after

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<v Speaker 1>one point one percent drop back in December. It shows

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<v Speaker 1>that Americans are spending on goods and services even as

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<v Speaker 1>borrowing costs rise and inflation remains elevated. We heard from

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<v Speaker 1>Danta Telsey, the CEO of Telsey Advisory Group. She was

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<v Speaker 1>reluctant to draw conclusions over one month's data. It was

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<v Speaker 1>very strong. You looked at apperil, you looked at furniture,

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<v Speaker 1>they showed strength. Also in addition to a big uptick

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<v Speaker 1>in restaurants. Keep in mind, I don't take January as

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<v Speaker 1>seriously as I take March, April and May. January is

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<v Speaker 1>about clearing out promotional and clearance goods. You're hearing about

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<v Speaker 1>retailers having inventory levels that are up twenty and thirty

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<v Speaker 1>percent in the third quarter and now they're down in

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<v Speaker 1>the fourth order. The fact that you went from up

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<v Speaker 1>twenty and thirty and now you're negative. You moved product,

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<v Speaker 1>some of it at markdown still worries amounting that strong

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<v Speaker 1>consumer spending will keep prices elevated and force a hawkish

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<v Speaker 1>response from the Fed. On Tuesday, several Fed official stress

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<v Speaker 1>the need for further rate hikes, but expressed differing views

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<v Speaker 1>about how close they were to stopping well. The Dutch

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<v Speaker 1>chip equipment maker A s mL has accused a former

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<v Speaker 1>Chinese based employee of stealing confidential information. We have that

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<v Speaker 1>story from bloombergs Van Man. It's the second incident of

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<v Speaker 1>this kind linked to China in less than a year.

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<v Speaker 1>The Dutch company says export controls may have been violated.

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<v Speaker 1>It's unclear the moment, though, whether the former worker had

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<v Speaker 1>any connections to authorities in China or elsewhere. It's also

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<v Speaker 1>not clear if the data allegedly stolen could be used

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<v Speaker 1>to develop lithography systems for chips. The news comes just

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<v Speaker 1>as the Netherlands and Japan had agreed to restrict exports

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<v Speaker 1>of some equipment to China. These latest charges may lead

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<v Speaker 1>to heightened geopolitical tensions in Hong Kong. I'm van ma'am Bloomberg,

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<v Speaker 1>Daybreak Asia and as a footnote, a person familiar with

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<v Speaker 1>the situation tells Bloomberg the alleged breach occurred in an

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<v Speaker 1>area with sensitive details of systems that produce advanced semiconductors.

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<v Speaker 1>Bryan Doug Tesla is going to halt production for some

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<v Speaker 1>of its lines at the Shanghai factory until the end

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<v Speaker 1>of February. The ev maker is upgrading its facility so

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<v Speaker 1>it can start rolling out a revamped version of the

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<v Speaker 1>Model three Sedan. The revamp comes as Tesla faces increased

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<v Speaker 1>competition from b y D and Neo in the Chinese market.

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<v Speaker 1>Upgrades have occurred at facility lines in stages over the

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<v Speaker 1>past couple of months. The section of the Shanghai factory

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<v Speaker 1>currently being worked on is is making Model threes and

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<v Speaker 1>Model y sport utility vehicles, as like expects deliveries of

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<v Speaker 1>the Model three Sedan to begin leader this year. White

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<v Speaker 1>House officials have reached out to a key Democratic ally

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<v Speaker 1>in the Senate to discuss filling the vacant role of

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<v Speaker 1>FED Vice chair. That story from Bloomberg's Charlie Pellett. Senate

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<v Speaker 1>Banking Chairman Shared Brown says he spoke with White House

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<v Speaker 1>officials about the vacancy created by President Biden's decision to

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<v Speaker 1>name Vice Chair Leo Brainer to be his top economic advisor.

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<v Speaker 1>The Wall Street Journal reported that Chicago FED President Austin

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<v Speaker 1>Goulsby is under consideration for the post. The Ohio Democrat

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<v Speaker 1>would not disclose if any names were circulated, but said

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<v Speaker 1>he wants a nominee who can focus on the Fed's

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<v Speaker 1>dual mandate of employment and wages. Naming the fifty three

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<v Speaker 1>year old Ghoulsby to the board would mark an abrupt

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<v Speaker 1>job change for him after he assumed his role leading

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<v Speaker 1>the Regional Fed Bank in Chicago last month. In New York,

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<v Speaker 1>Charlie Pellett Bloomberg dabre Asia, Well, we got some strong

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<v Speaker 1>earnings after the closing bell from Cisco, the maker of

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<v Speaker 1>computer networking machines. Bloombergs Tom Busby has the story. Shares

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<v Speaker 1>of Cisco rising upwards of eight percent in extended trading

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<v Speaker 1>after the maker of computer networking gear top second quarter

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<v Speaker 1>earnings at eight cents to share on revenues of thirteen

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<v Speaker 1>point five billion dollars, up seven percent from a year ago.

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<v Speaker 1>It also raised its forecast for the current quarter, saying

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<v Speaker 1>sales of tech infrastructure could jump as much as double

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<v Speaker 1>a previous estimate thanks to a backlog of orders that

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<v Speaker 1>built up during the pandemic. Tom Busby Bloomberg Daybreak Asia.

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<v Speaker 1>Cisco is currently up about two point eight percent in

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<v Speaker 1>late trading. Well, Doug, I heard you allude to this

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<v Speaker 1>earlier higher for longer about to be changed too much

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<v Speaker 1>higher for longer, or maybe at the fed UH should

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<v Speaker 1>investors start to plan for a possible fifty basis points

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<v Speaker 1>at the Marcher Main meetings. That's one of the questions

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<v Speaker 1>I'll put to our guests coming up in in a

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<v Speaker 1>few moments here we'll be chatting with Marion Montange from

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<v Speaker 1>Gradient Investments. That may be a little too aggressive. Although

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<v Speaker 1>to your point today, the Atlanta Fed that did ratchet

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<v Speaker 1>up its first quarter GDP now forecast a growth rate.

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<v Speaker 1>I don't know if you saw this, Brian, two point

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<v Speaker 1>four two, that's up from two point one six. A

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<v Speaker 1>lot of that has to do with this beat on

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<v Speaker 1>January retail sales, and we're a little more than a

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<v Speaker 1>week away now from that January PCE deflator data. So

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<v Speaker 1>when you start to consider retail sales, a lot of

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<v Speaker 1>the other signs of robust consumption that we have seen

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<v Speaker 1>higher growth expectations. I think you're onto something here, the

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<v Speaker 1>so called no landing scenario. I think it's being fortified.

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<v Speaker 1>The impact on the market, though, is a bit unclear,

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<v Speaker 1>because the obvious offset to the the higher borrowing costs

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<v Speaker 1>would be the strong sales that we saw I mean

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<v Speaker 1>that's good for companies and and it's also I think

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<v Speaker 1>interesting in that it's newer news than the pace of

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<v Speaker 1>rate hikes, and so investors may ride this a while

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<v Speaker 1>until they see sales weaken. I think you could be

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<v Speaker 1>right about that as well, and that may be underpinning

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<v Speaker 1>the gains that we had in the equity market today,

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<v Speaker 1>right because we talked about yield spiking typically a negative

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<v Speaker 1>for stocks, but that wasn't the case. Yeah, it's puzzling,

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<v Speaker 1>isn't it. So you have to think that, well, maybe

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<v Speaker 1>they just think that a strong economy is probably number one. Anyway,

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<v Speaker 1>we will get into that with our guests coming up.

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<v Speaker 1>Time for global news. China is saying that U S

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<v Speaker 1>balloons have traveled over sensitive areas over the mainland in

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<v Speaker 1>the western part of the country, out over sin Jong.

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<v Speaker 1>Let's get to Ed Baxter. He's got global news in

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<v Speaker 1>the news when San Francisco in Yeah, right, jar Bryan,

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<v Speaker 1>the Foreign Ministry says some of the ten balloons since

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<v Speaker 1>last May passed over sin Jong and Tibet. Those are

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<v Speaker 1>the areas where the government is accused by the US

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<v Speaker 1>and other nations of human rights violations. And China again

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<v Speaker 1>warned it will retaliate against violations of its sovereignty, and

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<v Speaker 1>the reports the US President Joe Biden is thinking about

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<v Speaker 1>making a speech regarding balloon incidents and relations with China

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<v Speaker 1>before heading to Poland later this week. Bloomberg's Mario Parker

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<v Speaker 1>at the White House as the President is trying to

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<v Speaker 1>scale a tone down a bit attention the balloons is

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<v Speaker 1>the rhitorate some of the temperature around that is trying.

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<v Speaker 1>They're trying to dial it back again both sides, but

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<v Speaker 1>nevertheless we keep this in relative terms. The tensions between

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<v Speaker 1>the US and sign of the world's second largest economy

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<v Speaker 1>are really really high, right, Yeah, And Mario says not

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<v Speaker 1>only does the President need to consider relations with China,

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<v Speaker 1>but exactly what to say in a politically fractured Washington,

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<v Speaker 1>d C. And United States And Susan Thornton Farmer, acting

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<v Speaker 1>Assistant Secretary of State for East Asia and Pacific Affairs,

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<v Speaker 1>says it is time for the lions of communication to reopen,

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<v Speaker 1>making these meetings between the US and China normalized. It's

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<v Speaker 1>regular diplomacy. We talked to other big powers, other important powers.

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<v Speaker 1>We have to talk to the Chinese, and we can't

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<v Speaker 1>just cancel every time something comes up. Thornton on Bloomberg's

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<v Speaker 1>balance of power, says a meeting at the Munich Security

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<v Speaker 1>Conference between the foreign ministers of the two countries is

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<v Speaker 1>a very good start. Scotland's first Minister, Nicola Sturgeon, has resigned.

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<v Speaker 1>She says her decision or eight years as head of

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<v Speaker 1>the country's government may seem sudden, but really not. And

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<v Speaker 1>it might seem sudden, but I have been wrestling with it,

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<v Speaker 1>albeit with Ossole eting leavels of intensity, for some weeks

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<v Speaker 1>and bloombergs Lizzie Burden in London says the first issue

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<v Speaker 1>that will go wanting is independence. Nicolas Surgeon has been

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<v Speaker 1>trying repeatedly to get a second referendum on Scottish independence

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<v Speaker 1>and failing repeatedly. Most recently the UK Supreme Court tossed

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<v Speaker 1>out the should they ruled against unilateral independence vote. Yeah,

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<v Speaker 1>and Lizzie says Sturgeon was planning on using an upcoming

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<v Speaker 1>election to try to gain more traction, but now that's

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<v Speaker 1>not going to happen. The CEOs of Alphabet, Amazon, Apple,

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<v Speaker 1>Made and Microsoft have received congressional subpoenas to testify before

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<v Speaker 1>the House Judiciary Committee this an escalation of the Republican

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<v Speaker 1>allegations that big tech suppresses free speech. The subpoenas have

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<v Speaker 1>asked for documents from March three, the convicted shooter in

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<v Speaker 1>the Buffalo Shop Being Center massacre has been sentenced to

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<v Speaker 1>life in prison without possibility of parole a domestic act

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<v Speaker 1>of terrorism motivated by hate in the first degree, an

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<v Speaker 1>a one felony, and Judge Susan Egan says, too late

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<v Speaker 1>for remorse. You will never see the light of day

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<v Speaker 1>as a freeman ever again. Defense attorneys had argued that

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<v Speaker 1>he had learned hate from white supremacist websites and was

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<v Speaker 1>regretful for his actions. Global News powered by more than

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<v Speaker 1>journalists and analysts and over one twenty countries in San Francisco.

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<v Speaker 1>I'm d Baxter and this is Bloomberg. This is Bloomberg

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<v Speaker 1>Daybreak Asia. I'm Brian Curtis along with Rashad Salama. We're

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<v Speaker 1>here in Hong Kong and our guest is Marianne Montagne,

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<v Speaker 1>portfolio manager at Gradient Investments. Marianne, you probably heard Doug

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<v Speaker 1>and I'm musing over this much higher for longer possibilities

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<v Speaker 1>for the FED. When when the data changes, we should

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<v Speaker 1>change right, or do we need to factor in the

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<v Speaker 1>lag effect and just be patient. Well, I think Brian,

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<v Speaker 1>we've got that combination. We are waiting for that lag effect,

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<v Speaker 1>but it's so lagging that we have to expect that

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<v Speaker 1>we're going to get a couple of more basis point

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<v Speaker 1>hikes in the rate this spring, and recognize that while

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<v Speaker 1>the feed is tightening, that also has the effect of

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<v Speaker 1>raising rates by about twenty five basis points each each

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<v Speaker 1>time each go round. So we really are in a

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<v Speaker 1>higher interest rate for longer scenario as far as we're concerned. Yeah,

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<v Speaker 1>you know the thing is you have a look at

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<v Speaker 1>what is happening in the US. Is this also, you know,

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<v Speaker 1>despite interest rates going up, you would have thought people

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<v Speaker 1>would be borrowing less, but we've got consumer credit card

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<v Speaker 1>and lending it near record highs right now. Is this

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<v Speaker 1>well just being fueled on debt. It is. But you

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<v Speaker 1>have to recognize too that the labor force is getting

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<v Speaker 1>hit by the Fed. They don't like the numbers. That

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<v Speaker 1>big number that came out on February three UM is

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<v Speaker 1>highly unlikely to be sustained. But right now, job openings

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<v Speaker 1>are about equal to the number of people searching for

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<v Speaker 1>work and layoffs are happening in those higher paying jobs

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<v Speaker 1>while we're seeing uh, you know, additional people brought into

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<v Speaker 1>work at very low paying jobs. So when you have

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<v Speaker 1>a scenario of, uh, your friend is getting laid off

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<v Speaker 1>or your next door neighbors getting laid off in such

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<v Speaker 1>I think that will put a pause on the consumers borrowing. Yeah,

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<v Speaker 1>they sent, they spent their savings. Now they've borrowed money,

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<v Speaker 1>and so we could be getting towards the end of

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<v Speaker 1>that that cycle. But you have to, you know, you

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<v Speaker 1>have to take your hat off and give a hat

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<v Speaker 1>tip to the strength here in the economy. And and

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<v Speaker 1>that's a nice offset to higher interest rates, isn't it.

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<v Speaker 1>And particularly if people don't need to borrow, they feel

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<v Speaker 1>comfortable going out and spending. Well, I do believe it's

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<v Speaker 1>rather temporary, and we can see that in retail sales

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<v Speaker 1>that were reported today. It looks like their strength there.

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<v Speaker 1>Uh it was three percent versus expectations for one point

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<v Speaker 1>seven percent increase. But you have to recognize that sales

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<v Speaker 1>were down in the prior two months. In January is

0:13:18.160 --> 0:13:21.960
<v Speaker 1>the month of clearances, so people were looking to get

0:13:22.240 --> 0:13:25.959
<v Speaker 1>the deals. That seventeen point five percent increase in sales

0:13:26.000 --> 0:13:29.080
<v Speaker 1>at department stores. That's telling me that people are just

0:13:29.520 --> 0:13:35.760
<v Speaker 1>diving into real savings because they're nervous. Oh, what about

0:13:35.960 --> 0:13:38.240
<v Speaker 1>the market, and what are the implications here? That should

0:13:38.400 --> 0:13:41.720
<v Speaker 1>of course in gender a bit of optimism. But you

0:13:41.720 --> 0:13:44.920
<v Speaker 1>know it's always sometimes good news being bad news. And

0:13:45.120 --> 0:13:47.800
<v Speaker 1>what does it mean for you stop picking and et cetera,

0:13:47.840 --> 0:13:51.520
<v Speaker 1>and what you put into a portfolio. Well, here's a

0:13:51.520 --> 0:13:54.679
<v Speaker 1>couple of things. On the equity side, we believe in buffers.

0:13:55.480 --> 0:13:58.440
<v Speaker 1>Buffers are akin to keeping your seatbelt fastened when the

0:13:58.480 --> 0:14:02.839
<v Speaker 1>airplane is in motion. So Innovators and First Trust both

0:14:02.960 --> 0:14:06.440
<v Speaker 1>offer a variety of etf that provide a buffer to

0:14:06.480 --> 0:14:11.479
<v Speaker 1>the downside, call it per cent or so, while providing

0:14:11.559 --> 0:14:14.679
<v Speaker 1>some upside to a cap over the next twelve to

0:14:14.840 --> 0:14:18.120
<v Speaker 1>eighteen months. And I would look for something maybe in

0:14:18.160 --> 0:14:22.000
<v Speaker 1>the twenties for a cap on my buffer um. But

0:14:22.280 --> 0:14:26.400
<v Speaker 1>that's one recommendation on the equity side. On the UH

0:14:26.680 --> 0:14:30.760
<v Speaker 1>fixed income side, we're keeping duration below the six year

0:14:31.920 --> 0:14:36.320
<v Speaker 1>level that's in the EGG index. We're overweighting investment grade

0:14:36.560 --> 0:14:41.520
<v Speaker 1>and high yield um given those very current high rates

0:14:41.600 --> 0:14:45.400
<v Speaker 1>of yield um. But again we're keeping our duration short.

0:14:45.880 --> 0:14:49.360
<v Speaker 1>YEA high Yield today down about two tensive one percent. Well,

0:14:49.520 --> 0:14:51.720
<v Speaker 1>if you look at h y G. I got to

0:14:51.760 --> 0:14:53.840
<v Speaker 1>ask you about China. You know, we had a little

0:14:54.160 --> 0:14:57.320
<v Speaker 1>uptick in the NASTAC Golden Dragon index, but you know

0:14:57.400 --> 0:14:59.480
<v Speaker 1>the past two weeks has been brutal out here with

0:14:59.560 --> 0:15:05.000
<v Speaker 1>about a ten sell off in the indexes in and

0:15:05.080 --> 0:15:07.480
<v Speaker 1>some key names. What are you thinking about China at

0:15:07.520 --> 0:15:10.960
<v Speaker 1>this moment? Yeah, I just think there's a lot of

0:15:10.960 --> 0:15:14.400
<v Speaker 1>strife going on right now, and you know politically and

0:15:14.680 --> 0:15:20.920
<v Speaker 1>the UM manufacturers and other purchasers of items from China

0:15:21.040 --> 0:15:24.800
<v Speaker 1>have to be very nervous. Uh. So you know, the

0:15:24.880 --> 0:15:29.680
<v Speaker 1>way we would play this situation is to UM look

0:15:29.720 --> 0:15:32.680
<v Speaker 1>at small cap stocks, so they're going to be US

0:15:32.800 --> 0:15:37.640
<v Speaker 1>based small cap stocks. Uh. We like high quality balance sheets,

0:15:37.640 --> 0:15:41.520
<v Speaker 1>strong cash flows. And here's an e t F where

0:15:41.560 --> 0:15:43.920
<v Speaker 1>you can find that. That's the ban X Small Cap

0:15:43.960 --> 0:15:49.920
<v Speaker 1>Mote ETF kicker SMOT. This is Bloomberg Daybreak Asia, your

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