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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis 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: New concerns have arisen over the health of China's shadow

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Speaker 1: banking industry. This comes after several firms saw overdo payments

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Speaker 1: on Jonger linked high yield investment products. That's a big

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Speaker 1: trust company, Jonger. Many investors are already worried about the

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Speaker 1: state of China's economy and its property market. We heard

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Speaker 1: earlier from Bloomberg's Tom Orlick.

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Speaker 3: What we see is the first signs of that extreme

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Speaker 3: stress in the real estate sector starting to trickle through

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Speaker 3: to the financial sector. With this big trust company in China.

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Speaker 3: Trust the financial institutions which take money, often from rich investors,

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Speaker 3: and channel them into high interest rate loans, often to

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Speaker 3: property developers. We've got one of China's biggest trusts saying

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Speaker 3: you know what, We're not going to be able to

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Speaker 3: make our investors whole.

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Speaker 1: In a sign that authorities are worried about potential contagion,

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Speaker 1: China's banking regulator has up a task for us to

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Speaker 1: examine potential debt at Jungjur analyst said JP Morgan, Chaso

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Speaker 1: warning that the turmoil may contribute to a vicious cycle

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Speaker 1: for real estate financing in China.

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Speaker 2: To the Chinese property developer Country Garden, the company is

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Speaker 2: now seeking to extend a maturing bond for the first

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Speaker 2: time ever. The story from Bloomberg's Juan Wong in Hong Kong.

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Speaker 4: The developer is seeking feedback on extending payment of a

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Speaker 4: five hundred and thirty seven million dollar note due in September.

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Speaker 4: It also suspended trading an eleven onshore notes issued by

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Speaker 4: the company and subsidiaries. Country Gardens worsening condition is a

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Speaker 4: nerving market given as sheer size, and add to that

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Speaker 4: nervousness in China's shadow banking industry. Meanwhile, we're also expanding

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Speaker 4: China's economic data for July later today. The economy is

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Speaker 4: likely to show further weakening as the housing slump deepens.

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Speaker 4: In Hong Kong. I'm joined Wang Bloomberg day Brigaisia, the

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Speaker 4: front runner.

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Speaker 1: In Taiwan's presidential election, says he won't stop team from

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Speaker 1: building more plants abroad if he's elected. Vice President Leichin

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Speaker 1: Da told us that Taiwan has a responsibility to give

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Speaker 1: back to the international community.

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Speaker 5: Banal TSMC's advanced processes are located here in Taiwan. Their

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Speaker 5: base is here in Taiwan, so if they choose to

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Speaker 5: set up operations in the US or other countries, this

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Speaker 5: is an expansion of Taiwan's economic power. This is also

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Speaker 5: part of the restructuring of global supply chains. I would

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Speaker 5: take these developments positively.

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Speaker 1: Lia's comments reflect his efforts to deepen engagement and cooperation

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Speaker 1: with countries around the world. It all comes as tensions

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Speaker 1: continue to simmer between the East and West. Last week,

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Speaker 1: President Biden issued an order that regulates US investments in

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Speaker 1: some Chinese semiconductor, in quantum computing, and AI firms.

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Speaker 2: Well a noted investors has exited stakes in two Chinese

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Speaker 2: tech giants, the story from Bloomberg's Tom Busby.

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Speaker 6: Regulatory filings just out show that Michael Burry of Sion

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Speaker 6: Asset Management, perhaps best known for predicting the two thousand

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Speaker 6: and eight US housing crash depicted in the book and

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Speaker 6: movie The Big Short, has exited his stakes in Ali

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Speaker 6: Baba Group and JD dot Com as of last quarter. Now,

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Speaker 6: it comes months after Sion doubled down on those same

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Speaker 6: two Chinese firms, which made up a fifth of the

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Speaker 6: firm's portfolio and were actually its biggest holdings at the

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Speaker 6: end of March, but since then, Sion liquidated holdings in

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Speaker 6: fifteen companies in all, including some troubled US lenders, along

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Speaker 6: with JD dot Com at Alibaba, Tom Busby, Bloomberg Daybreak Asia.

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Speaker 1: The CEO of Cleveland Cliffs, so Lorenco Convalda, says that

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Speaker 1: he's confident the takeover offer for US Steel will succeed

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Speaker 1: because it has backing from the United Steelworkers Union. US

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Speaker 1: Steel said it rejected Cliff's offer because the company terms

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Speaker 1: were unreasonable, and it announced a formal review of strategic alternatives.

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Speaker 7: Can call this.

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Speaker 1: It says that the proposed combination would make Cleveland Cliffs

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Speaker 1: one of the world's top ten steel producers and the

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Speaker 1: fourth largest outside of It's a very.

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Speaker 7: Good reset and restart with a national champion in the

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Speaker 7: United States and able to take care of business and

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Speaker 7: on behalf of our country.

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Speaker 1: Separately, we saw the steel processor s Mark say that

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Speaker 1: he had offered to buy US Steel for seven point

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Speaker 1: eight billion dollars. Unlike Cliffs, es Mark hasn't been active

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Speaker 1: in the deal space Force Steel, and it didn't provide

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Speaker 1: further details about his plans or how it would actually

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Speaker 1: fund to bid, and we saw a big spike in

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Speaker 1: US steel during the session, up nearly thirty seven percent.

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Speaker 2: Brian, I want to touch very quickly on what happened

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Speaker 2: in Argentina today. We had over the weekend the primary

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Speaker 2: election and the libertarian outsider Javier Medie surprisingly strong showing here.

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Speaker 2: I think he captured around thirty percent of the vote.

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Speaker 2: He's a far right candidate. He's got some pretty dramatic proposals,

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Speaker 2: including cutting government spending and making the country's currency the

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Speaker 2: US dollar. He also wants to tear down the central bank.

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Speaker 2: So when these election results were announced, we saw sharp

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Speaker 2: drops in not only in Argentinian bonds, but in the

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Speaker 2: currency as well. So the government stepped in. They devalued

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Speaker 2: the official foreign exchange rate by eighteen percent and lifted

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Speaker 2: the key interest rate by twenty one percentage points to

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Speaker 2: one hundred and eighteen percent.

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Speaker 1: Yeah, that's a huge story one we'll be covering a lot. Also,

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Speaker 1: back to a high degree of focus on the shadow

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Speaker 1: banking sector in China. Actually it never went away, Doug,

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Speaker 1: It's been there all along, kind of simmering, but this

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Speaker 1: heightened sense of crisis in the property sector has brought

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Speaker 1: all of this back into focus.

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Speaker 2: And we got some key data too, right industrial production,

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Speaker 2: retail sales, and fixed asset investment. We're going to keep

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Speaker 2: a close eye on those numbers as well.

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Speaker 1: And one of the other big stories the Morgan Stanley

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Speaker 1: call on in Nvidia that used up the whole sector

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Speaker 1: of AI related stocks and the super seven in Vidia

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Speaker 1: up more than seven percent. It had dropped about ten

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Speaker 1: percent in the past month, So we'll be watching that

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Speaker 1: and see if that extends onto other companies in the

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Speaker 1: days ahead. Now it's time for Global News. Taiwan's leading

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Speaker 1: presidential candidate, Vice President Laiching Dha, says that China is

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Speaker 1: the reason for increasing tensions in the Taiwan Strait at

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Speaker 1: Bachelor with Global News. In the nine to sixty News

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Speaker 1: from Ed.

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Speaker 8: Yeah Right, Brian Lai says peace in the Taiwan Strait

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Speaker 8: is of utmost importance, but in an exclusive Bloomberg Business

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Speaker 8: Week interview, he says it is important to know that

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Speaker 8: Taiwan is already a sovereign country and that he needs

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Speaker 8: to maintain the status.

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Speaker 5: Quo protecting Taiwan and maintaining democracy, peace and prosperity, so

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Speaker 5: no such framework exists. We must work to maintain the

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Speaker 5: peaceful status quo because Taiwan is already a sovereign country,

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Speaker 5: and through.

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Speaker 8: A translator, says, Taiwan does not want to be enemies

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Speaker 8: with China, but.

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Speaker 1: Paiai Shinzwang chins Chinzang.

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Speaker 5: Increased tensions impacting the status quote in the Taiwan Strait

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Speaker 5: have not originated from Taiwan. To China's growing assertiveness, China

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Speaker 5: not only seeks to annex Taiwan, it also hopes to

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Speaker 5: change the international rules based order. Under these circumstances, we

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Speaker 5: must be clear Taiwan's security is of international concern. Peace

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Speaker 5: and stability in the Taiwan Strait is aligned with the

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Speaker 5: international interest.

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Speaker 8: And Life says she believes the US stands behind Taiwan

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Speaker 8: and every way. The Fulton County Grand Jury has been

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Speaker 8: meeting today, there's a possibility an election interference in datement

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Speaker 8: could be handed out today still as we know, as

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Speaker 8: we are being told Cordish still in session, although Bloomberg's

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Speaker 8: Zoey Tillman says more than not likely today.

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Speaker 9: Good odds on tomorrow. The Grand Jury sits. Mondays and

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Speaker 9: Tuesdays and then a grand jury is back Thursdays and Fridays.

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Speaker 9: We know that two final, potentially final witnesses who were

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Speaker 9: supposed to testify tomorrow were actually in today, which suggests

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Speaker 9: that their timeline was expedited for whatever reason, and that

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Speaker 9: could mean it's because they're.

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Speaker 8: Ready to go and to make things more interesting. In

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Speaker 8: the Core website, today published a list of criminal charges

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Speaker 8: against Trump. It briefly appeared and then was taken down.

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Speaker 8: A spokesperson for the district attorneys of the site was inaccurate,

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Speaker 8: without commenting any further writers reported including state rocketeingan counts,

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Speaker 8: conspiracy to commit false statements, and solicitation of violation of

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Speaker 8: oath by a public officer. So the weight is on.

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Speaker 8: The death toll on the Maui wildfire stands at ninety six,

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Speaker 8: but Sir Cruise say progress is going through the rebel

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Speaker 8: of Lahina Town is slow and painstaking. They say they

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Speaker 8: expect the death toll to rise. Meanwhile, there's concern about

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Speaker 8: funding from the federal government to help right now and

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Speaker 8: then into the future. FEMA Secretary Deanna kriswell, this is

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Speaker 8: going to be a long term recovery operation.

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Speaker 5: We have the resources we need today, and as we

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Speaker 5: continue to identify what the needs are, will.

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Speaker 8: Continue to move more but to long term Bloomberg Jordan

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Speaker 8: Fabian says it could get cotton political mara asid is

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Speaker 8: funding for Ukraine and defense spending as a whole.

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Speaker 10: Do they decide to split up the packages and pass

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Speaker 10: the disaster rely funds separately from Ukraine or do they

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Speaker 10: try and move it all together. These are questions that

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Speaker 10: they'll have to answer in the next few weeks once

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Speaker 10: they get back from their August recess.

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Speaker 8: The famous says funds will run short within a month.

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Speaker 8: Global News powered by more than twenty seven hundred journalists

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Speaker 8: and and list in over one hundred twenty countries in

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Speaker 8: San Francisco. I'm Ed Baxter and this is Bloomberg. This

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Speaker 8: is Bloomberg Daybreak Asia. I'm Brian Curtis Loan with Vonnie Quinn.

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Speaker 8: Our guest is Gary Schlossberg, General market or Global market

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Speaker 8: strategists at Wells Fargo Investment Institute.

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Speaker 7: Gary.

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Speaker 1: So, the rebound in big tech here, this jump in

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Speaker 1: Nvidia up seven percenters, so a blip or is it

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Speaker 1: likely to continue?

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Speaker 7: We're course just on the outlook for tech in general.

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Speaker 7: Anything AI related in particular, really more in valuations rather

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Speaker 7: than the long term outlook for the tech sector. But

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Speaker 7: we did recently lower our our view on the sector

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Speaker 7: from favorable to neutral, just given the evaluations and the

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Speaker 7: uncertainty about the economic outlook.

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Speaker 11: Would you be selling at this point, Gary, and what

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Speaker 11: would you look to buy instead, or would you just

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Speaker 11: keep money on the sidelines.

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Speaker 7: No, we wouldn't be selling. We just wouldn't be adding

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Speaker 7: in a big way to our portfolio given our neutral rating,

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Speaker 7: keeping it more in line with the with the market rating,

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Speaker 7: or where you are right now, keeping it in line

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Speaker 7: with the market rating going forward. We're just generally cautious

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Speaker 7: on the outlook, focusing more energy just given the fundamentals

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Speaker 7: in the industry, defense of healthcare and even materials despite

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Speaker 7: their economic sensitivity.

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Speaker 1: Gary, Real rates are heading higher pretty quickly here. Some

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Speaker 1: might think that that might force the Fed's hand at

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Speaker 1: least on guidance, but you're actually taking the opposite position,

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Speaker 1: presumably because you think inflation is about ready to head higher.

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Speaker 7: Make that case, well, we're keeping an eye on food, fuel,

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Speaker 7: and rents. Rents could rental inflation could continue to move

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Speaker 7: lower for a time, but given the turn that we've

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Speaker 7: seen in more market based measures of rents, we think

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Speaker 7: they could be firming up along with food and fuel

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Speaker 7: prices as we move into what we think may be

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Speaker 7: a recession by early twenty twenty four. And in that

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Speaker 7: kind of environment, we would expect to Fed to raise

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Speaker 7: rates probably one more time before the year's out. With

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Speaker 7: the possibility of another rate hike early next year. I

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Speaker 7: think the market is beginning to reflect the less sanguine

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Speaker 7: view of inflation in nudging those yields higher. That and

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Speaker 7: of course treasury financing needs.

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Speaker 11: Yeah, well, of course, yesterday's big coal was golden sacess

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Speaker 11: called there'll be a rate cot by the middle of

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Speaker 11: next year. So after those one to two potential rate

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Speaker 11: increases that you're seeing, when do you see the first cut.

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Speaker 7: Probably not until further into twenty twenty four, a little

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Speaker 7: later than the middle of the year. We do look

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Speaker 7: for the economy to move through a recession. We're hopeful

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Speaker 7: we'll see a pretty good sized recovery during the latter

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Speaker 7: part of the year. Typically early in a recovery you

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Speaker 7: see inflation continuing to move lower, and that should provide

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Speaker 7: a good backdrop for the FED. Federal reserve probably sometime

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Speaker 7: during the latter part of the year.

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Speaker 1: So we should probably ask you about China. There's a

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Speaker 1: lot of churn there at the moment. We've got the

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Speaker 1: shadow banking crisis kind of re entering the picture as

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Speaker 1: seen through the lens of the trust industry. Now this

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Speaker 1: is dwarfed by the state banking sector, so there's some

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Speaker 1: room for movement there. But does what's happening in China

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Speaker 1: concern you here at the moment, Well.

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Speaker 7: I think they do have a number of challenges. Clearly,

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Speaker 7: the recovery that more open policy toward COVID late last

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Speaker 7: year has been a bit disappointing. We do have the

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Speaker 7: property sector, as you mentioned, the shadow banking system is

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Speaker 7: under some strain, and it's not clear that they will

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Speaker 7: be moving in with the kind of stimulus that helped

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Speaker 7: jump start the economy in past years. So yes, we

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Speaker 7: think that recovery will remain disappointing. And there's clearly spillover

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Speaker 7: to the global economy in the size of the domestic market,

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Speaker 7: their importance as a source of growth and importance as

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Speaker 7: a source of commodity consumption, number of spillover effects there,

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Speaker 7: and of course financial stability is undermined. That could have

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Speaker 7: a ripple effect elsewhere in the global economy as well.

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Speaker 11: Gary, How would those ripple effects manifest themselves. Would it

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Speaker 11: be through the DAR, Would it be through exporting disinflation?

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Speaker 7: Well, I think some of it could be exporting disinflation,

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Speaker 7: some of it could be through the effect of any

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Speaker 7: sort of turbulence if it does develop on the wand's

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Speaker 7: exchange rate funds moving back into China, perhaps by locals

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Speaker 7: but reluctant so foreign investors to move in, and that

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Speaker 7: could have an unsettling effect not only on the local

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Speaker 7: market there, but on certainly on neighboring markets and elsewhere

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Speaker 7: in the global financial system.

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Speaker 1: Probably our last question, Gary, you're pretty conservative here. Your

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Speaker 1: outlook is I wouldn't say dire, but it's concerning. Yet,

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Speaker 1: you like large cap equity over a number of other areas.

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Speaker 7: Make the case mainly because of the liquidity, the quality

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Speaker 7: transparency of those stocks, and at least part of that

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Speaker 7: allocation is in more defensive sectors of the market. But

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Speaker 7: it's really quality and liquidity and the focus on the US.

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