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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtins and I'm Doug Krisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 1: The US is reportedly looking to restrict China's access to

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Speaker 1: cloud computing to protect some advanced technology. To get the

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Speaker 1: story from Bloomberg, Scott Car.

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Speaker 3: It's a move that could further strain relations between the countries,

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Speaker 3: people familiar tell dow Jones. The new rule, if adopted

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Speaker 3: by the Biden administration, would likely require US cloud service

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Speaker 3: providers like Amazon and Microsoft to receive US permission before

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Speaker 3: they can provide cloud computing services that use advanced AI

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Speaker 3: chips to Chinese customers. Beijing on Monday announced its new

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Speaker 3: export restrictions on metals used in advanced chip making. The

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Speaker 3: move by the US administration is seen as a means

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Speaker 3: to close a significant loophole. As analysts Warren, Chinese AI

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Speaker 3: companies may have bypassed export controls by using cloud services

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Speaker 3: to gain powerful computing capabilities in Washington, Scott Car, Bloomberg,

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Speaker 3: Daybreak Asia.

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Speaker 2: Meantime, the Chin Chinese government has postponded trip to Beijing

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Speaker 2: by Europe's top diplomat, Joseph Barrell. We have that story

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Speaker 2: from Bloomberg zavon Men in Hong Kong.

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Speaker 4: Joseph Barrell's trip has been due next week. No details

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Speaker 4: were given for the postponement, but it comes at a

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Speaker 4: time when China is taking its trade fight to Europe.

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Speaker 4: Beijing's decision to restrict mineral exports will hit key sectors

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Speaker 4: in Europe's effort to decarbonise its economy, and it demonstrates

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Speaker 4: the limits of Western aspirations to shift supply chains beyond China.

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Speaker 4: But the restrictive measure is a double edged sword. It

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Speaker 4: may simply accelerate efforts by other countries to reduce dependence

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Speaker 4: on China. It could lead the West to boost's output

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Speaker 4: of the medals in places like Japan, Canada, and the US.

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Speaker 4: In Hong Kong, i'm ivon Mann Bloomberg day Break Asia.

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Speaker 1: China's top EV maker, BYD, will build its first manufacturing

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Speaker 1: hub outside Asia in Brazil. Bloomberg's Bonniao has more from

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Speaker 1: Hong Kong.

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Speaker 5: BYD will be interesting six hundred and twenty four million

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Speaker 5: dollars for the electric car plants in Brazil. The decision

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Speaker 5: comes as the Chinese giant seeks to extend its geographical reach.

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Speaker 5: That's as the EV industry is experiencing a global search

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Speaker 5: in sales, but so was looking to deepen ties with

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Speaker 5: China and to top companies to invest in the country.

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Speaker 5: This plant is expected to start operating in twenty twenty

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Speaker 5: four in Hong Kong. I'm bonni Al Bloomberg day Break Asia.

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Speaker 2: Meantime, Tesla's sales output in China soared nearly twenty percent

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Speaker 2: in the month of June. China's Passenger Car Association saying

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Speaker 2: today Tesla shipped more than ninety three thousand vehicles from

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Speaker 2: its factory in chung Hi last month. Now, the PCA

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Speaker 2: did not break out local deliveries versus exports. However, Tesla

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Speaker 2: typically focuses on the domestic market in the last month

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Speaker 2: of each quarter. Tesla gained momentum at the beginning of

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Speaker 2: the year when it cut prices of its Model three

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Speaker 2: sedans and Model Y SUVs, but it quickly faced pressure

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Speaker 2: from some local competitors in China as they followed suit

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Speaker 2: with steep discounts. After a price war, deliveries began to

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Speaker 2: pick up again, and now the overall market for new

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Speaker 2: energy vehicles is looking very strong.

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Speaker 1: Brian all right, Doug, Well, it's very interesting the relationship

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Speaker 1: between Europe and China, and we had a few new

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Speaker 1: developments overnight as well, which we just mentioned. Also, Maderna

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Speaker 1: will announce its first investment in China, perhaps as soon

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Speaker 1: as today, and that comes to about a billion dollars,

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Speaker 1: which is a pretty big investment. You know, this postponement

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Speaker 1: doug of the trip by Joseph Barrell to Europe. It's

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Speaker 1: not directly connected yet. We don't know some of the

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Speaker 1: details on this because the Chinese government didn't give details.

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Speaker 1: But there is this a move by China to restrict

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Speaker 1: the export of key metals and that could have a

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Speaker 1: big impact on Europe in its efforts to decarbonize the economy.

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Speaker 1: So it's interesting this may push more countries further away

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Speaker 1: from China, may have the opposite effect perhaps that China

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Speaker 1: had hoped for, because these metals can be produced in

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Speaker 1: places like Japan, Belgium, in the United States.

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Speaker 2: So I was reading a position paper that I was

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Speaker 2: able to access through the Bloomberg terminal. It came from

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Speaker 2: the BDI German Industrial Association. It was saying that Germany

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Speaker 2: and Europe's dependency on these minerals, these raw materials from

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Speaker 2: China is already greater than oil and natural gas from Russia.

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Speaker 2: So there's got to be a real effort now, I think,

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Speaker 2: at least if you listen to what we're hearing from

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Speaker 2: leaders on the continent in Europe, not just in Germany,

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Speaker 2: but more broadly, even in Brussels. I think we had

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Speaker 2: the Dutch government saying the EU must respond to these

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Speaker 2: new rules. So there's a real concern now that China

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Speaker 2: may be getting some type of upper hand when it

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Speaker 2: comes to critical mineral exports.

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Speaker 1: Well. As mentioned though, some of these minerals can be

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Speaker 1: produced elsewhere, it's just that they would probably cost more

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Speaker 1: and that would definitely raise costs in the production. And

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Speaker 1: it's interesting that Josip Brow was due to visit on

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Speaker 1: Monday next week and so that has been postponed. You've

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Speaker 1: got Jenny Yellen supposedly arriving I think tomorrow in China,

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Speaker 1: so it sets up very interesting. We'll get to more

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Speaker 1: on all of this all throughout the show today, but

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Speaker 1: now it's time for global news. Hong Kong Chief executive

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Speaker 1: John Lee has laid out some of the principles behind

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Speaker 1: Hong Kong's effort to prosecute eight residents who have fled

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Speaker 1: Hong Kong, and he takes it one step further, saying

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Speaker 1: that Hong Kong will pursue them for life. Let's get

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Speaker 1: to Ed Baxter with more on this story and others.

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Speaker 6: Ed Yeah quote a story Brian we started covering yesterday.

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Speaker 6: Li says the bounties of one hundred and twenty eight

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Speaker 6: thousand dollars for information is warranted in order to uphold

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Speaker 6: principles of Hong Kong.

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Speaker 7: And endangering national security is not something we will tolerate.

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Speaker 7: Hong Kong's national sitory law is one of the many

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Speaker 7: laws in other countries.

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Speaker 6: Yeah Li says to other countries will help and taking

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Speaker 6: extra territorial actions to protect international law. NATO Secretary General

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Speaker 6: Jan Stoltenberg has agreed to another year after Member States

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Speaker 6: agreed to extend his term. NATO statement says it's important

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Speaker 6: to continue the work of the military alliance to fight

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Speaker 6: Russia's invasion of Ukraine. As China ups its criticism of

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Speaker 6: the japan release of treated wastewater from the Fukushima nuclear

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Speaker 6: power plant disaster, the IAEA today says proposals to gradually

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Speaker 6: control fashion do not pose a threat to the Asian nations.

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Speaker 6: It says quote, it would have a negligible radiological impact

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Speaker 6: on people and the environment. US President Joe Biden, marking

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Speaker 6: the fourth of July thanking teachers for their work this

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Speaker 6: at the National Education Association conference, also criticized lawmakers for

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Speaker 6: not adequately handling the issue of guns in school.

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Speaker 3: Arming teachers is not the answer. Arming teachers not the answer,

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Speaker 3: Ben is.

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Speaker 2: Soul weapons and high capacity magazines, extensive background checks. They're

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Speaker 2: part of the answer.

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Speaker 6: Yeah, Biden says, teachers are the champions in our society.

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Speaker 6: Emilia Macron has pledged swift government support to help mayors

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Speaker 6: rebuild schools, libraries, and town halls destroyed during the week

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Speaker 6: of isolence that swept across France last week. Thousands of

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Speaker 6: insurance claims are pouring in. The cost of video of

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Speaker 6: rebuilding estimated at more than one point one billion dollars.

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Speaker 6: Global News powered by more than twenty seven hundred journalists

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Speaker 6: and analysts in over one hundred twenty countries. In San Francisco,

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Speaker 6: I'm at Baxter and this is Bloomberg.

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Speaker 8: I'm joined by Nick schun Maker, client portfolio manager at

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Speaker 8: Drummond Capital Partner's right here in the Sydney studio and

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Speaker 8: Nick because we're here signed by side, let's start with

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Speaker 8: the big Australian story of the moment. The BA on polls.

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Speaker 8: It was a really tough, cool yesterday's right decision. But

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Speaker 8: there we are four point one percent no change. Does

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Speaker 8: it make sense though in a way, because we've got

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Speaker 8: some important data coming up at the end of the month.

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Speaker 1: Yeah.

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Speaker 9: Look, I think there's different arguments for any instant. We

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Speaker 9: did see some softening in the recent inflation data here,

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Speaker 9: so it certainly seems like inflation has peaked and it's

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Speaker 9: coming down like we're seeing globally. The terminal rate pricing

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Speaker 9: for the RBA now is about four point five percent,

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Speaker 9: so market pricing is indicating one or two more hikes

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Speaker 9: from here. I think in terms of the very lagged

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Speaker 9: and veriable nature of monetary policy, due to that, you know,

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Speaker 9: having a pause now just to give households some breathing room,

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Speaker 9: I think made sense. So a couple more hikes to go,

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Speaker 9: I think we're going to see, probably less than what

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Speaker 9: we're going to see for the Bank of England. We've

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Speaker 9: probably got to one hundred bases points of hikes to

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Speaker 9: go there. But if you look at where most developed

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Speaker 9: market central banks are the US, New Zealand, the Bank

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Speaker 9: of England. They're all above five percent, and our inflation

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Speaker 9: still is very material, so it does make sense that

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Speaker 9: we have another couple of hikes to come from.

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Speaker 1: Here, Nick, we have a little bit of a tid

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Speaker 1: schedule here. I do want to talk a little bit

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Speaker 1: about Europe, China and US China and maybe Australia China.

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Speaker 1: But just to follow on from the comments about the

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Speaker 1: pies from the IRBA equity markets, they seem poised to

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Speaker 1: be moving beyond the central bank. So it may be

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Speaker 1: a little too soon to say that, but people are

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Speaker 1: starting to kind of see the finish line, do you

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Speaker 1: see it that way?

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Speaker 9: So investors have certainly cheered the better trade off with

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Speaker 9: inflation this year, and as you're alluding to, one of

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Speaker 9: the big risks last year was when do we reach

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Speaker 9: maximum central bank or FED fear and all getting closer

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Speaker 9: to that now. I think this year, you know, as

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Speaker 9: we've seen very narrow market leadership through technology, and some

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Speaker 9: of that's very warranted. You know, we've got this now

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Speaker 9: AI boom and it could be something like we saw

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Speaker 9: with the PC revolution in the nineteen nineties. So there's

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Speaker 9: a lot of reasons to be optimistic, but there's also

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Speaker 9: a lot of reasons to remain cautious, just given again

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Speaker 9: that narrow market leadership, the fact that it does seem

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Speaker 9: very likely that over the next year sometime we will

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Speaker 9: be heading into a recession. If nothing else, just given

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Speaker 9: the very strong performance in the first half of the year,

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Speaker 9: you'd expect some profit taking, probably in those megacap technology names.

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Speaker 9: And we have started to see a bit of a

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Speaker 9: broadening out in market leadership over recent weeks. But we

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Speaker 9: know again this year just that narrow market leadership does

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Speaker 9: mean that all other things being equable, are quite susceptible

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Speaker 9: to some pullback.

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Speaker 8: From here, there is a sense that we're reaching Pea

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Speaker 8: crates and many developed markets now. But I guess the

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Speaker 8: next chapter and the story is how long do we

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Speaker 8: stay at Pea crates And if we do get a recession, well,

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Speaker 8: are we going to get some cards?

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Speaker 1: Yeah?

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Speaker 9: It depends. Look, first of all, I'd say emerging markets

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Speaker 9: if we look at them in isolation for a second,

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Speaker 9: So we were seeing emerging market central banks hike will

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Speaker 9: in advance of developing markets. So central banks started to

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Speaker 9: hike in early first cord of two thousand and one.

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Speaker 9: In emerging markets. We have started to see Vietnam and

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Speaker 9: Hungary cut rates in emerging market, so that's coming off

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Speaker 9: very high levels, and we're probably likely to see Latin

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Speaker 9: American central banks cutting there sooner than later as well.

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Speaker 9: So in terms of the developed market complex, look at it.

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Speaker 9: When we've got labor markets being as tight as they are,

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Speaker 9: I still think there's the market underestimating the risk of

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Speaker 9: how sticky core inflation is, particularly in the US, so

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Speaker 9: it's hard to see any cuts coming in the shorter term.

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Speaker 9: If you look at our local Reserve Bank of Australia,

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Speaker 9: they're not expecting cuts throughout most of next year.

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Speaker 1: So we really have to be watching out data, watching

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Speaker 1: the data for sure. Let's talk a little bit about

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Speaker 1: geopolitics because we have Europe and China very much in

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Speaker 1: focus today and I already mentioned Australia, China, US China

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Speaker 1: which Annie Yellen arriving this week. Is China in a

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Speaker 1: delicate position here in its relations with the worst.

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Speaker 9: I bet it's in a very delicate position with its

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Speaker 9: relations in the West, and it has been increasingly for

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Speaker 9: some time. I mean, we've spoken before about just the

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Speaker 9: more nationalistic tendencies of the Chinese regime as you have

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Speaker 9: more economic pain within their local economy. You've seen again

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Speaker 9: this year, despite the loosening and regulatory regulation around the

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Speaker 9: property sector and technology last year, we're really starting to

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Speaker 9: see the property sector falter now in China and it's

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Speaker 9: about a quarter of their GDP. Not to mention issues

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Speaker 9: with demographics, so that GDP growth is below tread now

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Speaker 9: in China. And absolutely there's the technology war, there's the

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Speaker 9: war of words. We are going to see ongoing geopolitical

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Speaker 9: risk flares in that region and increasingly so I think

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Speaker 9: is safe to say.

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Speaker 8: Just ten seconds to put money to work. Can China

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Speaker 8: right now or just stand back for a bit.

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Speaker 9: We have a small allocation. It's it's not huge, but

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Speaker 9: we have a small allocation just given the fact that

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Speaker 9: they are aising policy in terms of each's rights. Have

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Speaker 9: said that recently and the valuations just looking at the

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Speaker 9: prost To book is one mains there at that as

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Speaker 9: cheap as the thing.

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