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Speaker 1: This is Bloomberg Day Break Asia for this Monday, May

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Speaker 1: fifteenth in Hong Kong, Sunday May fourteenth in New York,

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Speaker 1: and coming up today.

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Speaker 2: NEEC director Layel Brainerd says negotiations over raising the debt

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Speaker 2: ceiling are serious and continuing.

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Speaker 1: Newmont Corp Is said to be near a twenty billion

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Speaker 1: dollars deal to acquire new Crest Mining.

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Speaker 2: G seven finance chiefs agree to put more aid on

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Speaker 2: the table for Ukraine.

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Speaker 3: India's Modi suffers loss in swing state election, pro democracy

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Speaker 3: on top in Thailand, Turkey's Airwan and a tight race.

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Speaker 3: Flow of migrants at the US border slows dramatically. I'm

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Speaker 3: at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg day Break Asia, the

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Speaker 4: business news you need to start your day in just

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Speaker 4: one fifteen minute podcast available on Apples, Spotify, the Bloomberg

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Speaker 4: Business app and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Brian Curtis.

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Speaker 2: And I'm Doug Chrisner. Here are the stories we're following today.

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Speaker 1: Well. Teams from the White House and the Office of

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Speaker 1: the House Speaker are trying to forge an agreement on

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Speaker 1: raising the US debt ceiling. National Economic Council Director Laiel

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Speaker 1: Brainerd says the negotiations are serious and continuing. Here's Brainerd

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Speaker 1: on CBS's Face the Nation.

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Speaker 5: So the staff is very engaged. I would characterize the

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Speaker 5: engagement as serious as constructive. When I talk to CEOs

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Speaker 5: to business leaders around the country, they tell me things

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Speaker 5: are actually going very well, but their biggest concern is

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Speaker 5: that Congress might fail to prevent default and that that

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Speaker 5: would be catastrophic.

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Speaker 1: Brainerd downplayed the prospects for a short term deal, one

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Speaker 1: where the ceiling would be increased for a limited time

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Speaker 1: to allow more haggling overspending.

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Speaker 2: Meantime, the White House is saying it has no unilateral

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Speaker 2: options when it comes to averting disaster if the debt

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Speaker 2: ceiling is not raised. Here is Deputy Treasury Secretary Wally

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Speaker 2: Audimo speaking earlier on CNN's State of the Union.

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Speaker 6: What the President said was that he did not think

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Speaker 6: the fourteenth men would solve our problems now. The only

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Speaker 6: thing that can solve our problems now is for Congress

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Speaker 6: to lift the debt limit, which they've done, by the way,

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Speaker 6: seventy eight times, and last smititiation they had three times

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Speaker 6: without negotiation and that's what the President wants them to do.

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Speaker 5: Now.

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Speaker 2: That is Wally Adimo, Deputy Treasury Secretary. By the way,

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Speaker 2: the fourteenth Amendment to the Constitution says the validity of

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Speaker 2: public debts shall not be questioned. Now, constitutional scholars and

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Speaker 2: economists have been split on the idea of invoking it

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Speaker 2: as a way of avoiding a default. Last week, you

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Speaker 2: may recall President Biden said using the fourteenth Amendment would

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Speaker 2: lead to a high stakes legal fight. Well, after three

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Speaker 2: days of talks in Nigata, Japan, G seven finance chiefs

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Speaker 2: have agreed to put more aid on the table for Ukraine.

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Speaker 2: They have also set up a new supply chain INITIE

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Speaker 2: and vowed to fight regulatory gaps in the banking industry. Now,

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Speaker 2: these measures seem to show unity on global political and

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Speaker 2: economic issues. Here is Bank of Japan Governor Kazuo Uwaita

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Speaker 2: speaking on Saturday.

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Speaker 7: With regards to the global economy. Given the recent indicators,

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Speaker 7: global economies remain resilient, but we are faced with inflation

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Speaker 7: and rising hikes in policy rates. The pace of recovery

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Speaker 7: has been slowing down, and at some specific financial institutions

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Speaker 7: there have been developments. Therefore, we need to remain vigilant

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Speaker 7: and outlook those points that were raised by the members.

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Speaker 2: That is BOJ Governor Kazuo Uwaita speaking on Saturday at

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Speaker 2: the G seven Finance ministers meeting. Now, the finance chiefs

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Speaker 2: also flagged the need to stay agile and flexible on

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Speaker 2: economic policy given the height and uncertainty we've been talking

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Speaker 2: about for the global economy.

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Speaker 6: Now.

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Speaker 2: The G seven leaders are scheduled to meet next week

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Speaker 2: at a summit in Hiroshima, Japan.

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Speaker 1: Brian Well to that complex story we mentioned, Bloomberg Economics

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Speaker 1: sees the People's Bank of China cutting its one year

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Speaker 1: MLF rate. Today. Bloomberg's David and Glace has more from

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Speaker 1: Hong Kong.

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Speaker 8: The call runs counter to a Bloomberg survey of economists

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Speaker 8: FA see no change, But Bloomberg Economics is calling for

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Speaker 8: a ten basis point cut to two point sixty five percent.

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Speaker 8: It would be the first reduction since August of twenty

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Speaker 8: twenty two. The Bloomberg team says such a cut is

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Speaker 8: not dramatic, but it could signal an easy commitment, and

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Speaker 8: that the move could have an outsize impact on confidence.

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Speaker 8: Official data on retail sales and industrial production for April

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Speaker 8: are expected to show big gains, but they compared to

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Speaker 8: a period last year when Shanghai and much of the

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Speaker 8: country was under lockdown. In Hong Kong, I'm David Ingless

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Speaker 8: Bloomberg Day, brig Asia.

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Speaker 1: I'm Brian Curtis along with Doug Christner, and in a

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Speaker 1: fast moving story, Newcrest Mining is confirming a Bloomberg report

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Speaker 1: earlier on Sunday that this this merger is happening, that

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Speaker 1: Newcrest Mining has agreed to being taken over by Neumont Corp.

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Speaker 1: And the price tag nineteen point two billion dollars. Well, Doug,

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Speaker 1: one thing that I've noticed about the way things look

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Speaker 1: this morning is probably one of the most neutral environments

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Speaker 1: we've had on a Monday morning for a long period

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Speaker 1: of time. We have no last minute, urgent negotiations to

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Speaker 1: save a regional bank, no big headlines over the weekend

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Speaker 1: that really put things in doubt. And also the debt

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Speaker 1: ceiling talks seem at least to be showing a little

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Speaker 1: bit of progress. So I don't know whether that means

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Speaker 1: today will just be a boring day of trading, or

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Speaker 1: maybe that this is the kind of day where you

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Speaker 1: get a real feeling of underlying sentiment.

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Speaker 2: Yeah, it's going to be very interesting to see what

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Speaker 2: happens in the foreign exchange. That was a great deal

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Speaker 2: of yen weakness that we had in the New York

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Speaker 2: session Friday, Brian, So here we are around one thirty

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Speaker 2: five point eighty, and despite what we had in terms

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Speaker 2: of equity trade and really the aversion toward risk, that

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Speaker 2: was pretty good rally in the dollar as well, with

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Speaker 2: the Bloomberg Dollar Spot Index jumping about a half of

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Speaker 2: one percent. I think what may have caught the market

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Speaker 2: a little by surprise was that big increase in consumer

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Speaker 2: expectations for inflation as a part of the University of

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Speaker 2: Michigan survey.

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Speaker 1: Sure, but you notice that the stocks closed well off

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Speaker 1: the lows of the day on Friday, coming up for

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Speaker 1: the s and P five hundred almost to flat for

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Speaker 1: the session. So we're in that kind of period where

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Speaker 1: both sides have a lot that can chew on, whether

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Speaker 1: it's the bulls or the bears. I note that Oak

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Speaker 1: Tree Capitals Howard Marx told the FT that we haven't

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Speaker 1: really seen the test yet that will show you what

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Speaker 1: could happen with credit. He says that higher rates and

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Speaker 1: slow in growth are affecting private credit. But if you

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Speaker 1: look overall, and he kind of quotes Warren Buffett here

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Speaker 1: about when you can see people swimming naked, the tide

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Speaker 1: has gone out. It hasn't gone out yet on private lending,

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Speaker 1: meaning these portfolios haven't been tested. So that's a big

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Speaker 1: obstacle out there is where the credit really takes a

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Speaker 1: whack because of what we're seeing.

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Speaker 2: Douge, Well, he likes to buy a lot of distress

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Speaker 2: dead and I'm sure that particularly as it relates to

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Speaker 2: areas in the commercial real estate market, he's got his

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Speaker 2: eyes wide open and he's probably identified a few, if

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Speaker 2: not several targets.

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Speaker 1: Yeah, that's what made it pretty surprising about Warren Buffett,

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Speaker 1: because he likes to buy low and sell high, and

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Speaker 1: he didn't seem to be talking about all the opportunities.

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Speaker 1: But then again, he probably wouldn't mention it, you know,

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Speaker 1: even if he were eyeing something in particular. All Right,

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Speaker 1: it's time now for Global News. Indian Prime Minister at

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Speaker 1: Narendra Modi has suffered a major loss in one of

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Speaker 1: the country's swing states and backs to with Global News

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Speaker 1: in their nine to sixty news room in San Francisco.

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Speaker 3: Yeah, that's exactly why Brian Modi's conceded the loss in Karnataka.

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Speaker 3: This's a rare victory of Rural Gandhi's opposition Congress parties.

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Speaker 3: It looks to build some momentum ahead of the national

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Speaker 3: elections which happened next year. Karnataka is only southern state

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Speaker 3: in which Modi's a bj HE held power and is

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Speaker 3: the first of several Key state elections to watch. Thailand's

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Speaker 3: pro democracy parties have notched a resounding victory in Sunday's

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Speaker 3: parliamentary vote. This sets up the biggest challenge to the

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Speaker 3: royalist back establishment since the military seized power in a

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Speaker 3: coup nearly a decade ago. And Turkish President Airduwan is

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Speaker 3: locked in a very tight race with rival Kamal Koach

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Speaker 3: of Ruglu. A different polling show a difference in numbers.

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Speaker 3: It is Turkey's most pivotal elections in a generation. There

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Speaker 3: are some signs the talks and work that has been

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Speaker 3: going on behind the scenes on the debt ceiling in

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Speaker 3: the United States are progressing nicely, but again warning today

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Speaker 3: from Congressman Michael McCall about the international perils of default.

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Speaker 3: McCall on ABC has heard here on Bloomberg says, US

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Speaker 3: adversaries are watching very closely.

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Speaker 1: I think they would love nothing more, particularly China, to

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Speaker 1: see US default.

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Speaker 9: You know, are full faith and credit under the Constitution.

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Speaker 3: Yeah, McCall says he optimistic it can be solved before

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Speaker 3: it goes that far. Germany is preparing new military aid

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Speaker 3: for Ukraine worth more than two point nine billion dollars US.

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Speaker 3: It includes tanks and anti aircraft systems. The government says

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Speaker 3: it is serious about providing continued aid. It gives and

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Speaker 3: President Zelenski in Akeen, Germany today to accept the city's

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Speaker 3: International Charlemagne Prize. It is awarded annually for work in

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Speaker 3: the surface of European unification, and after leaving Germany, President

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Speaker 3: Zelenski is scheduled to have dinner with French president of Monumakron,

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Speaker 3: again furthering efforts for continued support in Russia's war. So far,

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Speaker 3: the flow of migrants across the US southern border has

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Speaker 3: not been as intense as had been feared. As a

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Speaker 3: matter of fact, down about fifty percent. Homeland Security Secretary

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Speaker 3: Alejandro Majorca says it may be because they know they

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Speaker 3: are there more legal pathways now, and there also are

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Speaker 3: a more stringent penalty in place as well.

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Speaker 10: If one arrives at the southern border without either accessing

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Speaker 10: the lawful pathways we've made available to them or seeking

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Speaker 10: relief in one of the countries through which they have traveled,

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Speaker 10: then they will have a higher threshold to meet.

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Speaker 3: My arkas on ABC has heard here on Bloomberg says

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Speaker 3: still a large group gathered south of the borders, so

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Speaker 3: the drama will continue to play out. Japan US South

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Speaker 3: Korea is set to meet on the sidelines of the

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Speaker 3: G seven this week in Hiroshima. President yunsukiol and Prime

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Speaker 3: Minister Fumio Kishita had handed it last week, but now

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Speaker 3: it's been officially set. They say they'll discuss strategic coordination

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Speaker 3: measures to upgrade cooperation on shared challenges regarding China and

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Speaker 3: North Korea. Global News powered by more than twenty seven

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Speaker 3: hundred journalists and analysts in over one hundred twenty countries.

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Speaker 3: In San Francisco, I'm Ed Baxter, and this is Bloomberg.

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Speaker 1: I'm Brian Curtis along with Rashad Salamat. We are in

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Speaker 1: Hong Kong and we have ed Bax draw News. The

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Speaker 1: Krisner is taken look at markets in our g is

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Speaker 1: Marvin Lowe, Senior global macro strategist at State Street. Marvin,

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Speaker 1: we only have a seventeen percent chance If you look

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Speaker 1: at the WORP function the swaps market on an interest

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Speaker 1: rate hike in June, it's only seventeen percent. So it

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Speaker 1: seems that most people think that we will be neutral

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Speaker 1: here now. I suppose that this will test our belief

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Speaker 1: in the FED, whether or not it has done too

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Speaker 1: much or it hasn't done enough in addressing what plagues

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Speaker 1: the US economy. Will we see when we get the answer,

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Speaker 1: will we see it in jobs first, or in the

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Speaker 1: credit market.

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Speaker 11: Yeah, I'm in the camp that the credit market is

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Speaker 11: creating enough of a concern, you know, And we've heard

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Speaker 11: the FED express that both in their policy statements Palace

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Speaker 11: presser as well as a minute that it's one of

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Speaker 11: their top concerns. And it's going to take a while

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Speaker 11: for that to ultimately play out. And while data certainly

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Speaker 11: isn't perfectly in line with where they want it to be,

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Speaker 11: you know, there are.

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Speaker 9: Signs that it's moving in the right direction.

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Speaker 11: Last Friday's Michigan inflation number pushed against that a little bit,

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Speaker 11: you know, We've got retail sales coming up, so so

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Speaker 11: we've got a lot of data yet between now and

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Speaker 11: the JUM meeting.

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Speaker 9: But I'm thinking unless there's a massive surprise.

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Speaker 11: To upside inflation, to upside jobs, the FED is on

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Speaker 11: pause for an extended period of time.

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Speaker 12: Marvin, though, I mean, without looking at you know, credit markets,

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Speaker 12: what's your gut feeling about this.

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Speaker 11: I mean, my gut heeling is that we already might

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Speaker 11: have tightened too much. The credit stress that we saw

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Speaker 11: earlier this year, you know, particularly in March, was just

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Speaker 11: one of a few different steps that will evolve as

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Speaker 11: we get a sense of what credit tightening is going

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Speaker 11: to be. But really the deposit discussion, the difference between

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Speaker 11: bank yields and money market fund yields, as well as

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Speaker 11: you know, deteriorating economic data. I think it's going to

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Speaker 11: pull credit enough down so that you're going to see

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Speaker 11: the real economy affected in the second half of this year.

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Speaker 1: So it raises an interesting question. You know, we had

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Speaker 1: a period I think it was back in the nineties

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Speaker 1: where it paused for a while and then had to hike.

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Speaker 1: Do you think that this is a time with pause

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Speaker 1: and then eventually the next move is a cut. So

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Speaker 1: I guess the basic question next move hike or cut?

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Speaker 9: Yeah, and the next move for me is a cut.

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Speaker 11: I think the market's a little bit too aggressive and

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Speaker 11: expecting cuts as soon.

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Speaker 9: As they do.

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Speaker 11: Again, using the work puncetent, it shows that it begins

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Speaker 11: in September. You know, I'm in the camp that we're

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Speaker 11: still in this process where we're not going to get

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Speaker 11: a lot of clarity on either the credit front end

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Speaker 11: or the inflation slash slash.

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Speaker 9: Jobs part of the discussion.

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Speaker 11: So cuts are probably not going to happen until much

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Speaker 11: later this year or probably more likely early next year.

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Speaker 12: So when you when you look at the way that

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Speaker 12: various set parts of the market, you know, pricing things

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Speaker 12: in and you know they're looking last week, we had

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Speaker 12: part of the swapskind of looking at the cut in July,

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Speaker 12: which just seemed very strange unless something you and completely

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Speaker 12: out of left field happened. You know, we just keep on,

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Speaker 12: you know, hearing the FED keeping on telling investors in

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Speaker 12: the markets to take it's a tough talk seriously, but

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Speaker 12: they don't. And is that because they're just blindsided by

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Speaker 12: what happened over the last few years and there and

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Speaker 12: they're free money and they just want their bubble back

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Speaker 12: as it were.

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Speaker 11: Yeah, I mean, you know that the FED put is

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Speaker 11: certainly a strong motivator for for folks that think.

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Speaker 9: That the next step is a cut. So you know,

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Speaker 9: I'm kind of in that camp.

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Speaker 11: And despite the fact that we've had as aggressive of

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Speaker 11: a tightening process, there's still a lot of liquidity in

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Speaker 11: the system, I think, and I think that's a real

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Speaker 11: challenge for the FED.

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Speaker 9: Because it ultimately continues to support risk assets.

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Speaker 11: You're absolutely right, you know, equities spread, credit spreads are

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Speaker 11: still are still signaling either a soft land and one

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Speaker 11: ware where you know, all the tightening that the FED

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Speaker 11: has put in the system doesn't affect risk assets that much.

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Speaker 11: And and I ultimately think that's that's incorrect.

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Speaker 1: Yeah. I thought it was interesting last week when at

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Speaker 1: first when we had some improving inflation data from the

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Speaker 1: CPI report, that the odds went up for a rate

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Speaker 1: cut in using again the WORP function. And one of

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Speaker 1: the interesting parts of that story is that it means

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Speaker 1: that the market is suggesting that the FED could cut

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Speaker 1: because inflation is coming down, not because growth is falling badly,

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Speaker 1: or that we have some sort of accident in the

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Speaker 1: banking sector, and that would be a more normal kind

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Speaker 1: of function. The FED would not mind bringing rates down

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Speaker 1: if it had inflation falling pretty quickly. So how do

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Speaker 1: you actually see inflation moving over the next three to

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Speaker 1: six months.

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Speaker 11: Yeah, sure, And that's that's really the biggest challenge. I mean,

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Speaker 11: really for the last six to nine months now, the

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Speaker 11: inflation curve, as price by the market has been has

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Speaker 11: been really really aggressive. It's almost to a certain magical

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Speaker 11: return to two percent inflation numbers. We kind of get

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Speaker 11: back into the end of this year, you know, the

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Speaker 11: real data that's coming out, whether whether again it's it's

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Speaker 11: Michigan expectations, which probably is something that the FED is

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Speaker 11: concerned with because it's showing that inflation is becoming more

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Speaker 11: ingrained in the consumer's mind as well as you know,

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Speaker 11: those CPI numbers could be interpreted in many ways. I

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Speaker 11: did see the positive in it. You know, certain numbers

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Speaker 11: moved in the correct direction, but others didn't. And kind

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Speaker 11: of after this past year where we got you know,

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Speaker 11: certain sectors improving, other sectors accelerating, it's hard to take

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Speaker 11: comfort that we're not going to get that type of interplay.

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Speaker 9: And I think the FED is really waiting to see

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Speaker 9: a more you know, a more comfortable.

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Speaker 11: Movement towards its targets across the board, rather than Okay,

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Speaker 11: we've got used car this month doing one thing, and

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Speaker 11: we've got you know, airline fares this month doing another thing,

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Speaker 11: and all all of a sudden they balance out. But

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Speaker 11: it still shows stresses and tightness within the economy.

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Speaker 12: Bovin. As we look ahead and we perhaps you know,

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Speaker 12: have seen the FED done hiking at least, what's the

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Speaker 12: impact for the dollar? Does it remain incoding? You said

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Speaker 12: a couple of months ago that it will remain weak

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Speaker 12: and the week and through to the end of the year.

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Speaker 9: Yeah, you know, I think so. I think so long

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Speaker 9: as so long as we're in.

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Speaker 11: An environment where the FED is on hold and we've

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Speaker 11: got kind of this mixed data which is kind of

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Speaker 11: supporting FED, that's not gonna really have a clear reason

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Speaker 11: to do anything. But we've still got you know, higher

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Speaker 11: rates coming out of Europe. We still have questions around

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Speaker 11: the BOE and the UK's overall inflation profile, the dollar,

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Speaker 11: the dollar can continue to weaken into into.

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Speaker 9: That type of world.

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Speaker 11: The real concern I have is that if we are

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Speaker 11: higher for longer, which is kind of what the FED

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Speaker 11: is saying and what I think the markets aren't really pricing.

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Speaker 11: And if we're already restrictive, the actual decline in activity

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Speaker 11: going into next year could be more severe than what

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Speaker 11: the market is saying, and then that ultimately becomes this

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Speaker 11: risk catalyst for the dollar again. But for the moment,

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Speaker 11: you know, I do hold on to kind of these

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Speaker 11: weaker dollar trends that might continue as we go through

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Speaker 11: at least the first couple of months of summer.

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Speaker 1: Marvin, you're a bond guy. What part of the curve

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Speaker 1: do you like the most? Here?

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Speaker 9: Yeah, I'm a bond guy.

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Speaker 11: I'm waiting for cuts, so sorry, I'm waiting for that

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Speaker 11: curve steepener. I've been using an analogy that the two

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Speaker 11: year is trading like bitcoin, So I probably stay away

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Speaker 11: from the two year part of the curve, but you know,

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Speaker 11: really look for that steepening from a five to thirties perspective,

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Speaker 11: and I do think a higher for longer environment is

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Speaker 11: attractive for cash. Quite frankly, you know, the most boring,

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Speaker 11: and maybe boring is good for us these days.

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