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Speaker 1: This is Bloomberg Day Break Asia for this Tuesday, April

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Speaker 1: eighteenth in Hong Kong, Monday April seventeenth in New York

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Speaker 1: and coming up today.

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Speaker 2: US equities bounced back as the market ways the possibility

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Speaker 2: of more policy tightening from the Fed.

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Speaker 1: Executives at Charles Schwabs say the firm can weather the

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Speaker 1: banking crisis as the company pauses stock buybacks.

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Speaker 2: And China's growth may have accelerated in the first quarter

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Speaker 2: as the country abandoned COVID zero measures.

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Speaker 3: US charges forty four people with harrising US residents under

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Speaker 3: China orders. Taiwan set to buy anti ship missiles from

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Speaker 3: the US to repel Chinese invasion. McCarthy goes to Wall

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Speaker 3: Street to blame Biden for debt sealing standoff. White House

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Speaker 3: says McCarthy has no plan. I'm 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 podcast.

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Speaker 2: Good morning, I'm Doug Chrisner and I'm Brian Curtiz.

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Speaker 1: Here are the stories we're following today. Leaders at Charles

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Speaker 1: Schwab say the firm can weather the banking industry's worst

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Speaker 1: crisis since two thousand and eight Bloomberg's and Kate's reports.

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Speaker 5: Though Schwab is grappling with longer term stresses, its first

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Speaker 5: quarter results show the financial services company kept the trust

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Speaker 5: of clients who continue to add to its investment products.

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Speaker 5: Profits at Schwab were up twelve percent, topping Wall Street's forecasts.

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Speaker 5: Schwab cited regulatory uncertainty for its decision to pause at

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Speaker 5: stock buybacks following the collapse last month of three US lenders,

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Speaker 5: including Silicon Valley Bank. Customer deposits are down thirty percent

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Speaker 5: from a year ago at Schwab, roughly in line with

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Speaker 5: estimates in Washington and Kate's Bloomberg Daybreak Asia.

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Speaker 2: We get another slew of bank earnings this week, and

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Speaker 2: with them more clues on the path of the American economy.

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Speaker 2: Here is Bloomberg Sonali Bossik.

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Speaker 6: We'll wait different Bank of America to c if it'll

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Speaker 6: increase its expectations for net interesting coming year. Remember, a

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Speaker 6: massive rival, JP Morgan already increased their expectation for lending

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Speaker 6: revenue by billions of dollars. We'll also here from Goldman

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Speaker 6: Sachs and at Goldman they have one of the biggest

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Speaker 6: fixed income houses on Wall Street. JP Morgan and Citygroup

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Speaker 6: already posted jumps in that business that were bigger than

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Speaker 6: Wall Street expected. We'll also here from BNY Mellon and

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Speaker 6: Western Alliance Bank. The big story this week will be

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Speaker 6: how regional banks and other big financial services firms are

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Speaker 6: being impacted by the rise in interest rates, because on

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Speaker 6: one hand, that might mean more net interest income. On

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Speaker 6: the other hand, for the regional banks, it might mean

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Speaker 6: that there are greater deposit outflows as people flock to

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Speaker 6: money market funds. The biggest US banks have been a

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Speaker 6: beneficiary of the deposit flows. JP Morgan posted a surprise

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Speaker 6: increase even We'll be watching for that deposit number at

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Speaker 6: Bank of America as well. Before we watched the rest

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Speaker 6: of the regionals report this week, that.

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Speaker 2: Is Bloomberg, Shanali Bosk, and Brian. Today, the S and

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Speaker 2: P Financials Index was up a little more than one

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Speaker 2: point one percent Yale and.

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Speaker 1: We've got Shina today to Doug which is very interesting.

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Speaker 1: Coming up a little bit later, we'll get some key

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Speaker 1: readings on the economic recovery that's underway. Let's get the

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Speaker 1: story from Bloomberg's Joan.

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Speaker 7: Wong China's growth. It's expected to have accelerated in the

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Speaker 7: first quarter as the country abandoned COVID zero measures. At

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Speaker 7: Bloomberg Survey shows GDP expanding by four percent from the

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Speaker 7: first quarter of twenty twenty two. High frequency data show

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Speaker 7: people filled restaurants and shopping malls again, and construction improved

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Speaker 7: as the government increased investment in infrastructure. Despite the positivity,

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Speaker 7: four percent growth will be below China's official annual target

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Speaker 7: of around five percent. We'll also get the March readings

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Speaker 7: on industrial output, retail sales, and fixed asset investments. Economists

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Speaker 7: see strengthening momentum. The question is whether the government concludes

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Speaker 7: more stimulus as needed. Yesterday, the People Spank of China's

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Speaker 7: showed patients by holding its key one year policy rates.

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Speaker 7: Dady in Hong Kong join Wong Bloomberg Day Brigasia well.

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Speaker 2: Tomorrow in the US, black Rock will begin selling securities

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Speaker 2: in failed banks. The story from Bloomberg's Charlie Pellett.

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Speaker 8: Blackrock is launching a month's long process to help the

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Speaker 8: federal deposit Insurance Corp offload one hundred and fourteen billion

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Speaker 8: dollars of assets it picked up from Silicon Valley Bank

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Speaker 8: and Signature Bank. According to emails about the sales sent

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Speaker 8: to investors seen by Bloomberg, BlackRock's Financial Markets Advisory unit

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Speaker 8: is going to be launching mortgage backed security pool sales

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Speaker 8: and continue the process later in the week. The government

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Speaker 8: hired Blackrock to sell the Collapse bank securities earlier this month,

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Speaker 8: highlighting the firm's role as an advisor to regulators in

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Speaker 8: times of financial peril. In New York. Charlie Pellett Bloomberg

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Speaker 8: Daybreak Asia.

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Speaker 1: Chat GPT is getting smarter, really fast, especially when it

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Speaker 1: comes to grasping what's happening on Wall Street. Bloomberg's Denise

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Speaker 1: Pellegrini is tracking some of those developments.

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Speaker 9: Two new academic papers are praising the AI chatbots understanding

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Speaker 9: of the FED and of financial markets as well. Richmond

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Speaker 9: FED researchers say chat GPT came closest to humans inaccurately

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Speaker 9: determining if FED statements were Dubvish or hawkish, and at

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Speaker 9: the University of Florida, researchers instructed chat GPT to pretend

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Speaker 9: to be a financial expert and then chat GPT's successfully

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Speaker 9: determined if headlines where positive are negative for stocks. This

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Speaker 9: all puts chat GPT head and shoulders above some of

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Speaker 9: the software that quant funds and others have been using

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Speaker 9: till now. And I should also mention Bloomberg LP parent

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Speaker 9: a Bloomberg News has also released a large language model

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Speaker 9: for finance. Denise Pelgrity Bloomberg Day Brick Asia.

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Speaker 1: I'm Brian Curtis, along with Doug Grisner and Rischad Solama

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Speaker 1: and Doug. You mentioned that the Financial Spider was up

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Speaker 1: one point two percent today. The S and P five

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Speaker 1: hundred is actually very close to the top end of

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Speaker 1: a range that's been in forty two hundred to thirty

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Speaker 1: eight hundred on the low side. We've been in this

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Speaker 1: range since October, so we could see some selling here.

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Speaker 1: But you have to think that the bears might be

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Speaker 1: getting a little nervous. One earnings are not as weak

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Speaker 1: as as feared. You haven't been paid to be a

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Speaker 1: bear this year. With the S and P five hundred

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Speaker 1: up eight percent year to date, you're losing your client's

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Speaker 1: money and two year yields have popped. But it was

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Speaker 1: quite interesting in our stock story today that they pointed

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Speaker 1: out that that as the two years well below the

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Speaker 1: FED funds rate. This is discounting fewer cuts from the Fed,

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Speaker 1: which the market had been expecting, not so much expecting

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Speaker 1: further rate hikes from the Fed. We're still right around

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Speaker 1: five point one percent at the terminal rate in that

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Speaker 1: swaps market.

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Speaker 2: Yeah, and you mentioned earnings there. We've got a key

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Speaker 2: week with some of the banks we've already discussed, but

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Speaker 2: on top of that, it's Netflix, Tesla and Johnson and

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Speaker 2: Johnson guidance here, Brian, to think we can agree is

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Speaker 2: going to be key more Constantly's Mike Wilson was saying

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Speaker 2: today earnings forecast still remained too optimistic despite some of

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Speaker 2: the downgrades that we have seen recently. Now, to be fair,

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Speaker 2: he is one of the most bearish of voices on

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Speaker 2: Wall Street. He is expecting the pace of declines in

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Speaker 2: earnings estimates who increase materially over the next few quarters.

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Speaker 2: So as we get these results this week, keep your

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Speaker 2: ears open for guidance.

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Speaker 1: And JP Morgan is in the same camp with Marko Kolanovitch,

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Speaker 1: really expecting a lot more fear of the downside and

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Speaker 1: a lot of that tied to earnings. We haven't seen

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Speaker 1: it so much yet, but it's very early in the

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Speaker 1: earning season. And just briefly on China, I think what's

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Speaker 1: interesting is that policymakers appear there to be seeing whether

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Speaker 1: or not the reopening of the economy itself will provide

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Speaker 1: enough organic stimulus before they actually move forward with more stimulus.

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Speaker 1: Because we haven't seen too much, and we'll get a

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Speaker 1: big indication this week on what's happening with the recovery,

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Speaker 1: it doesn't look like it's anywhere near as dynamic as

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Speaker 1: we thought.

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Speaker 2: More liquidity added yesterday, although the one year MLF, as

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Speaker 2: you know, was held steady at two point seventy five percent.

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Speaker 2: I thought it interesting that JP Morgan conducted a survey

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Speaker 2: investors right now consider China to be the EMC cory

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Speaker 2: they are most likely to retreat from among all emerging markets.

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Speaker 8: I thought that was interesting.

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Speaker 1: It is a lot of that tied to geopolitics and policy.

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Speaker 1: You know, they are not the friend of the capital

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Speaker 1: market at the moment, and that's something we'll get into

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Speaker 1: a little bit later this hour. By the way, coming up,

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Speaker 1: Walter Todd will join us from Greenwood Capital but now

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Speaker 1: it's time for Global News. US has charged forty four

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Speaker 1: defendants with an alleged campaign to Harris US residence and

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Speaker 1: that it was at the direction of the Chinese National

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Speaker 1: Police Force and back to with Global News in the

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Speaker 1: nine to sixty news room in San Francisco. Ahead, yeah,

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Speaker 1: Brian Roy.

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Speaker 3: They say the issue is sovereignty that offend us, most

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Speaker 3: of whom live in China and elsewhere in Asia. But

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Speaker 3: US Department of Justice says two are in custody now

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Speaker 3: in New York City.

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Speaker 10: Defendant's actions under the direction of the Chinese government are

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Speaker 10: flagrant violations of American sovereignty.

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Speaker 3: US Attorney for the Eastern District of New York At

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Speaker 3: Brian Piece says these individuals were running Harris Smith campaigns

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Speaker 3: against pro democracy discussions.

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Speaker 10: So pull back the curtain on the PRC's audacious and

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Speaker 10: illegal attempts to harass dissidents and stifle free speech in

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Speaker 10: our country.

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Speaker 3: And PCE says in New York they set up a

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Speaker 3: secret police station to do their work. Taiwan is set

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Speaker 3: to buy four hundred US and a ship missiles from

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Speaker 3: the US intended purpose to repel a potential Chinese invasion.

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Speaker 3: This completes a deal a so called harpoon that Congress

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Speaker 3: approved in twenty twenty. The missiles made by Boeing come

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Speaker 3: through a deal on behalf of Taiwan by the US

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Speaker 3: Naval Air System's Command. It marks the first for the

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Speaker 3: mobile land launch version. Meanwhile, Chinese military plans to conduct

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Speaker 3: what it calls major military activities in the yellowc today

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Speaker 3: between nine and noon at Warren's Mariners off the coast

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Speaker 3: of Shangong Province. House Speaker Kevin McCarthy at New York

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Speaker 3: Stock Exchange today accusing President Joe Biden of refusing to

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Speaker 3: compromise on any package regarding raising the debt limit or

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Speaker 3: a spend decrease.

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Speaker 11: I have not heard from the White House since our

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Speaker 11: very first meeting. President Biden has been missing an action

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Speaker 11: and misleading the public. Mister President, with all due respect,

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Speaker 11: enough is enough now.

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Speaker 3: Cent A Majority Leader Chuck Schumer says McCarthy's theme is

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Speaker 3: just old news.

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Speaker 12: What we got today was not a plan.

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Speaker 13: It was a recycled pile of the same things he's

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Speaker 13: been saying for months, none of which has moved the

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Speaker 13: ball forward an inch.

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Speaker 3: So Bloomberg's Wendy Benjamin sent on Bloomberg's Balance of Power

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Speaker 3: says McCarthy hasn't presented a budget and is getting caught

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Speaker 3: in the politics of his own party.

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Speaker 13: Kevin McCarthy became Speaker by empowering the right wing Freedom Caucus,

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Speaker 13: and they are using the power granted to them by

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Speaker 13: the new Speaker to make trouble for him.

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Speaker 3: And the clock ticks. SpaceX has postponed the launch of

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Speaker 3: it's a massive starship rocket system after what's being called

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Speaker 3: a pressurization valve issue. Bloomberg's Lauren Brush says is actually

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Speaker 3: the rocket that Elon Musk says can do the Mars mission.

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Speaker 3: But she says first that.

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Speaker 14: It can actually fly, that the two pieces can separate

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Speaker 14: what's called stage separation, and that starship can actually get

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Speaker 14: to near orbital speeds. It won't be doing a full orbit.

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Speaker 14: It'll actually be coming down off the coast of Hawaii.

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Speaker 1: Yeah.

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Speaker 3: So now she says it could be launched on the

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Speaker 3: day that Musk says is his favorite day of the year.

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Speaker 14: So there is a possibility that we could launch on

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Speaker 14: April twentieth. You know, there are certain things associated with

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Speaker 14: it at date. I won't go into them, but yes,

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Speaker 14: I think it would definitely please elon Musk if we

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Speaker 14: did launch.

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Speaker 1: On that date for twenty that's not Pie Day?

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Speaker 4: Is it?

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Speaker 3: A global news powered by more than twenty seven hundred

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

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

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Speaker 1: This is Bloomberg Daybreak Asia. I'm Brian Curtis, along with

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Speaker 1: Rashad salamat here in Hong Kong at Baxter as you

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Speaker 1: heard on News and Doug Grisner and taking a look

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Speaker 1: at the markets with us. Our guest is Walter Todd, President,

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Speaker 1: chief investment an officer and managing director at Greenwood Capital. Walter,

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Speaker 1: the equity market does not appear to be discounting a

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Speaker 1: mild recession, so it begs the question, what is it discounting?

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Speaker 15: Well, good evening from the US.

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Speaker 1: That's a great question.

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Speaker 15: Just continues to relentlessly go higher, and I think it's

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Speaker 15: perhaps discounting a slowdown of sorts, but certainly not a

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Speaker 15: mild recession. I know we talked about you were speaking

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Speaker 15: about earnings the earning season starting, and we've had estimates

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Speaker 15: be revised lower for this quarter to down around seven percent,

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Speaker 15: which is a pretty low bar to step over, and

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Speaker 15: I think you're starting to see companies do that. I

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Speaker 15: think the risk lies in the second half of the year,

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Speaker 15: perhaps in the earnings that need to be revised down

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Speaker 15: in that period.

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Speaker 12: Yeah, of course, perhaps they're looking at the moment at

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Speaker 12: what's going on with the earning season and the projections,

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Speaker 12: and I like the way you've characterized it, which is

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Speaker 12: better than feared.

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Speaker 4: Yeah.

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Speaker 15: I mean the revisions here, So the last quarter was negative,

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Speaker 15: the revisions for this court took us down negative, and

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Speaker 15: the next quarter is projected to be negative to three

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Speaker 15: consecutive quarters. So we do have an earnings recession of sorts.

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Speaker 15: So a question of whether we have an economic recession

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Speaker 15: the second half of this year. So I do think

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Speaker 15: this range that we've been in from say thirty eight

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Speaker 15: hundred to forty two hundred, we're obviously at the upper

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Speaker 15: end of that range right now. So it seems to

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Speaker 15: be the resk of rewards pretty one sided. Having said that,

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Speaker 15: positioning is very also one sided to the negative side.

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Speaker 15: So if we bump up through forty two hundred on

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Speaker 15: the SMP, you could continue to see people get pulled

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Speaker 15: into this market and grind higher towards that forty three

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Speaker 15: hundred level.

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Speaker 1: The bear argument is very easy to understand. It seemed

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Speaker 1: like a no brainer coming into this year given all

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Speaker 1: that happened. The FED was still talking about much higher

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Speaker 1: interest rates, inflation was proving to be sticky. So I

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Speaker 1: guess what I'm trying to figure out is why the

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Speaker 1: market is performing the way it is not telling investors

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Speaker 1: you know somehow you're wrong. So let me put it

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Speaker 1: to you this way. Then, what's the biggest challenge for

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Speaker 1: the bears right now? Is it the earnings that are

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Speaker 1: not as weak as expected? Or is it that the

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Speaker 1: FED actually does pause after the main meeting and that

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Speaker 1: in the big broader scheme of things, a pause from

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Speaker 1: the FED is a very big deal.

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Speaker 7: Yeah.

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Speaker 15: No, I mean, I think the biggest challenge to the

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Speaker 15: bears is just the price action itself, right, just continuing

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Speaker 15: to push higher. But I think if you peel it

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Speaker 15: back a little bit, you know, if you look at

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Speaker 15: the SMP performance versus the equal weight SMP, big disparity

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Speaker 15: there about five hundred basis points market cap out performing

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Speaker 15: the equal weight. Small caps have not really participated in

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Speaker 15: this rally, so I think there's some kind of nuances

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Speaker 15: to how the market's performed so far this year, but

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Speaker 15: the reality is it's higher. So I mean, until proven different.

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Speaker 15: The bears are kind of off sides here as the

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Speaker 15: market continues to, you know, seemingly climb the wall of worry,

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Speaker 15: as they say.

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Speaker 12: So tell me, Todd, Okay, you know, we'd look at

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Speaker 12: the data coming through and you know, base effects should

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Speaker 12: start taking a part, a big part in this, particularly shelter,

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Speaker 12: which some are expecting to drop out very soon. We

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Speaker 12: could see inflation actually surprising to the downside.

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Speaker 15: What's you're thinking, Yeah, so we think inflation's going to

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Speaker 15: have a three handle on it by the end of

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Speaker 15: the year, so we don't think the Fed needs to

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Speaker 15: do anything else. But it looks like the market's anticipating

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Speaker 15: that they're going to go another quarter point, which will

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Speaker 15: only accelerate that move down in inflation. And back to

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Speaker 15: the question about you know, the Fed pausing, that's generally

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Speaker 15: a good thing, and that's the mentality that we've been

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Speaker 15: kind of agreined with for the past kind of decade plus. However,

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Speaker 15: if we are going to have a recession, the Fed pausing,

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Speaker 15: the reason they're pausing is because we're starting to see

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Speaker 15: materials slow down and growth, and so that kind of

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Speaker 15: pleabook of buying the dip when the FED pauses, I

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Speaker 15: think could be a mistake, at least in the short term,

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Speaker 15: is where the upper end of this range.

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Speaker 1: But Walter, isn't that more on the cut rather than

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Speaker 1: the pause. The pause might be we feel we've done enough.

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Speaker 1: We want to see what the long and variable lag

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Speaker 1: of all these earlier ratetikes five hundred basis points of

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Speaker 1: rateikes does. Isn't that more of the case than things

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Speaker 1: are looking dire? That's what a cut might imply.

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Speaker 15: Yeah, well, the market's are you know, implying you know,

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Speaker 15: several cuts in the second half of the year. But

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Speaker 15: I think you're right. I mean, I think the knee

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Speaker 15: jerk reaction so with the fact, you know, the next

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Speaker 15: meeting says twenty five and we're done, we're going to pause,

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Speaker 15: I think the initial reaction by the market is to

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Speaker 15: rally on that news. However, I think the reality of

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Speaker 15: the preponerance of economic data that we're seeing here is

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Speaker 15: generally weaker and pointing to you know, pretty significant slow

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Speaker 15: down because we still haven't really felt the.

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Speaker 1: Effects, the full effects.

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Speaker 15: Of all the increases that occurred last year.

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Speaker 12: Tell me something, you know, how does this then change

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Speaker 12: the or how does the actually affect how you are investing?

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Speaker 12: Todd and you know this is going to be key

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Speaker 12: given that I think that you're pointing out that the

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Speaker 12: five hundred right now has near record shorts, and the

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Speaker 12: higher that goes, the more people get pulled in. But

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Speaker 12: that doesn't necessarily mean that they're going to make money.

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Speaker 12: They could have to liquidate.

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Speaker 15: Yeah, So I think with this market you have to

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Speaker 15: first and foremost you got to be humble because of

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Speaker 15: the very hard market to navigate. I think being you know,

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Speaker 15: having some dry powder in the form of cash, but

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Speaker 15: not you know, you don't want to get two off

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Speaker 15: sides from that perspective. Within our equity portfolios, we're trying

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Speaker 15: to do kind of a Barbelle approach where we've got

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Speaker 15: some heavy exposure to say healthcare, which is more defensive.

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Speaker 4: We really like.

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Speaker 15: That, but we've also got some overweights to select industrials

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Speaker 15: and energy in case we're wrong about the recessionary outcome.

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Speaker 15: So I think having a you know, kind of a

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Speaker 15: foot in both camps makes sense until we get a

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Speaker 15: little more clarity as we move through this earning season.

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Speaker 15: I think that's going to be key as we listen

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Speaker 15: to what management teams are telling us. I mean, by

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Speaker 15: the way, all four banks that reported on Friday their

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Speaker 15: base case now a mild recession in the second half

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Speaker 15: of this year.

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Speaker 1: Along with the staff of the FED. Yeah, it's a

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Speaker 1: lot of right heavyweight. But I think you made a

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Speaker 1: good point when you said that the equal weighted ETF

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Speaker 1: that particular one RSP is barely higher this year. So

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Speaker 1: it's really been mostly the big tech names. And what

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Speaker 1: if we get like some sort of accident from GPT,

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Speaker 1: could that bring the whole complex down because most of

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Speaker 1: the gains have been with tech.

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Speaker 15: You're talking about with the chat gpting.

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Speaker 1: Yeah, yeah, exactly, if you had some I mean, well,

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Speaker 1: there could be a lot of other reasons tech pulls back,

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Speaker 1: but that would be one as an accident of sorts. Yeah,

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Speaker 1: it seems like I agree.

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Speaker 15: I mean, it seems like the bar is really hot,

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Speaker 15: and like the banks where the bar is really low,

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Speaker 15: it seems like the bar is really high for these

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Speaker 15: tech names with the performance that they've had heading into earnings.

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Speaker 15: So I mean it could simply be you know, just

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Speaker 15: being a little bit less than the higher expectations. Don't forget. Also,

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Speaker 15: I know you were talking about the debt ceiling debate.

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Speaker 15: I mean that's hanging out there for the broader market

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Speaker 15: in general as a rest that nobody's really paying much

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Speaker 15: attention to. But as we move closer to that X date,

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Speaker 15: whenever that is, that's going to become more of a

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Speaker 15: challenge I think for overall risk appetite.

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Speaker 1: Walter, great to have you with this. Always a pleasure. Thanks,

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Speaker 1: come on as often as you like. Walter Todd, President,

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Speaker 1: Chief investment Officer, Managing director at Greenwood Capital. This is

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