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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast Time, Doug Krisner. We

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Speaker 2: begin in Australia, where the country is reeling after a

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Speaker 2: mass shooting at a Honka celebration on Sydney's Bandai Beach.

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Speaker 2: Sixteen people were killed and dozens more injured. This attack

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Speaker 2: has been officially designated as a terrorist attack. Bloomberg's Paul

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Speaker 2: Allen is on the scene.

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Speaker 3: At the moment.

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Speaker 4: The overwhelming sense is one of grief. The mood down

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Speaker 4: here very very somewhat. There was a floral tribute starting

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Speaker 4: to build up. An Israeli flag has been draped around

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Speaker 4: the flowers. An Australian flag visible in the background there

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Speaker 4: as well, and you'd expect that that tribute's probably going

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Speaker 4: to build up over the course of the day. Just

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Speaker 4: a steady stream of people coming here to lay wreaths

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Speaker 4: and pay their respects. Now, as to who was responsible

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Speaker 4: for this, two people, a father and son, neither of

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Speaker 4: whom are on any security watch. The father of fifty

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Speaker 4: year old as deceased. He was a licensed firearms holder.

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Speaker 4: He held licenses and legally owned six guns. Police say

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Speaker 4: all six of those weapons are now accounted for. There

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Speaker 4: were also two rudimentary IEDs improvised explosive devices found on

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Speaker 4: the scene. They were active but later disarmed by police

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Speaker 4: bomb disposal. Now the other gunman, twenty four year old

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Speaker 4: Navid Akram. His identity became known after it was widely

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Speaker 4: distributed on social media last night, so there was really

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Speaker 4: no point in trying to keep that a secret anymore.

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Speaker 4: He told his mother that he was headed down the coast.

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Speaker 4: In reality, he was with his father at an Airbnb

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Speaker 4: somewhere else in the city. That property now also the

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Speaker 4: target of heavy police presence. Amid all of the carnage

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Speaker 4: at that Harneko events also notable acts of heroism, not

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Speaker 4: the least of which from Armad al Amad, a forty

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Speaker 4: three year old fruit shop owner who an extraordinary video

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Speaker 4: jumped one of the gunmen from behind and disarmed him. Armad,

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Speaker 4: al Armed was later shot in the US and in

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Speaker 4: the hand. He's now recovering in the hospital. Like I said,

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Speaker 4: an uneasy sense of calm here today, police calling for

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Speaker 4: Kam saying that this is not a time to be

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Speaker 4: seeking retribution.

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Speaker 2: That is Bloomberg's Paul Allen in Sydney. We turn next

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Speaker 2: to markets. First in Japan, where the Bank of Japan

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Speaker 2: reported confidence among Japan's large manufacturers rose in the month

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Speaker 2: of November to its highest level in four years. This

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Speaker 2: is the boj's large manufacturer, a ton Khan. It came

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Speaker 2: in at a reading of fifteen, which was right in

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Speaker 2: line with estimates. Now, the boj does have a rate

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Speaker 2: decision later in the week, and money markets are betting

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Speaker 2: on a quarter point rate hike. Later this morning, we'll

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Speaker 2: get the monthly activity data for China, and that's where

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Speaker 2: we started the conversation with Sean Fenner. She is head

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Speaker 2: of Business and Industry Economics at Westpac. Shaan spoke earlier

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Speaker 2: with Bloomberg TV host Avril Hong and NML droolers, and

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Speaker 2: we got Shawn's view on what the China data may

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Speaker 2: indicate activity.

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Speaker 1: We know it's going to be soft. It's it's lost

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Speaker 1: meant from the beginning of the year. What's going to

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Speaker 1: be very important is that going forward, what kind of

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Speaker 1: policy that we actually see to try and support growth,

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Speaker 1: even if they go for a five percent but to

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Speaker 1: get that we will need more policy.

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Speaker 5: Yeah, I think you really see that in the fixed

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Speaker 5: asset investment numbers in particular that they're really showing that

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Speaker 5: sign of deterioration or at least not picking up. But

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Speaker 5: where do we go then for twenty twenty six and

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Speaker 5: what's the outlook? Do you see any sort of significant

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Speaker 5: changes around the inflation outlook?

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Speaker 1: For instance, I think inflation's going to remain sort of

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Speaker 1: quite soft. If we think about sort of the pressures

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Speaker 1: behind that domestic demand consumption, that's unlikely to pick up significantly.

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Speaker 1: But on the fixed asset investment side, I think things

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Speaker 1: are going to look a little bit brighter next year,

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Speaker 1: notably on manufacturing investment and infrastructure, and that's going to

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Speaker 1: be that big sort of fiscal push that we're expecting

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Speaker 1: to provide support.

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Speaker 6: Yeah, is that fiscal push going to be enough to

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Speaker 6: sort of fix the consumer sentiment to stir things in

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Speaker 6: the Chinese economy?

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Speaker 1: That's going to be the big question. I think at

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Speaker 1: the moment, the focus and the fiscal focus is very

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Speaker 1: much on that supply side, probably less directly going to consumers.

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Speaker 1: They're hoping that if they actually sort of boost the

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Speaker 1: manufacturing investment that will provide support for corporate earnings, investment,

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Speaker 1: and wages. That transmission looks a little bit sort of ify,

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Speaker 1: so we'll see actually how that sort of progresses. They

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Speaker 1: may need to provide more support try and arrest this

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Speaker 1: decline that we've been seeing in the property market.

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Speaker 2: Sean.

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Speaker 6: Has also been interesting is the rally we're seen in

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Speaker 6: the room and be talk to us about how that

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Speaker 6: is affecting maybe Chinese consumers being a bit more open

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Speaker 6: to spending. And then at the same time, how does

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Speaker 6: that affect the exports picture for the country.

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Speaker 1: Well, actually, if we think about the relative inflation for

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Speaker 1: China versus its peers, the fact that's actually been supporting

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Speaker 1: a real depreciation and effective turns so for export it's

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Speaker 1: been very good because that means there's you know, it's contained,

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Speaker 1: you know, continue to provide competition. It's very competitive for China.

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Speaker 1: For consumers, it very much that it depends on the

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Speaker 1: domestic front and that yes, it could see some important

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Speaker 1: price being being higher, but I think overall it's you know,

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Speaker 1: the domestic pure pressures, demand pool pressures there are just

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Speaker 1: still very very weak. Even if we have seen that

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Speaker 1: sort of uptick that we did see in November.

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Speaker 5: It's interesting and you know, I see, yes, we've got

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Speaker 5: that boj decision and most economists that we've surveyed are

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Speaker 5: expecting them to hike. You're still looking at the risk

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Speaker 5: though that are tilted perhaps in favor of them standing

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Speaker 5: pad again.

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Speaker 1: Yeah, I mean our baseline is for them to cut,

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Speaker 1: but it's the BOJ. We do know that they still

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Speaker 1: want to get a lot of confidence about that sort

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Speaker 1: of wage sustainability moving into inflation. I mean, positively, we

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Speaker 1: did see the RENGO wage negotiations. It's another five percent.

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Speaker 1: They're also looking for real wages to be up about

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Speaker 1: one percent. So that's pointing in the right direction, but

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Speaker 1: they may want to just wait a little bit more

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Speaker 1: for some more data.

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Speaker 5: All Right, We've got BOJ, We've got China. That other

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Speaker 5: one we're going to be watching is us RUNT as well,

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Speaker 5: because we've got a couple of different data points that

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Speaker 5: are out. Again, what are you expecting and how does

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Speaker 5: it also feed into the trajectory for the FED moving

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Speaker 5: into next year?

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Speaker 1: Yeah, so I think it's you know, I mean, this

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Speaker 1: is sort of a tough lot of data that we're

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Speaker 1: getting out in the sense that we know there's still

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Speaker 1: a lot of distortions going on because we haven't had

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Speaker 1: a full set you know, it's the first lot of

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Speaker 1: data that we're getting out post the shutdown. To be honest,

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Speaker 1: I don't think we're going to get a real clear

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Speaker 1: picture until we sort of move into January we get

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Speaker 1: the next lot of data, so it could be quite

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Speaker 1: you know, sort of a bit messy, if you like.

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Speaker 1: We're probably seeing an increase in the non farm pay

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Speaker 1: rolls with the unemployment rate about four point four. For

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Speaker 1: inflation though it's still looking at about sort of three

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Speaker 1: point one, so we're probably going to get a little

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Speaker 1: bit of a lift on the goods front. That's a

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Speaker 1: little bit on the tariffs for services. It's also going

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Speaker 1: to be sort of quite firm outside, particularly outside of

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Speaker 1: the shelter. So it's still that balancing act that the

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Speaker 1: Fed needs to undertake. Sort of this sort of overall

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Speaker 1: probably that ongoing softness in the labor market confronted with

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Speaker 1: the sort of upside a risk still to inflation, broader

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Speaker 1: risk to inflation.

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Speaker 5: Yes, certainly that risk that we see reacceleration in next

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Speaker 5: year as well. Sean, thanks so much for joining us

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Speaker 5: this morning. That was Sean Fenna, the head of Business

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Speaker 5: and Industry Economics at Westpac.

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Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: There are several key data points for the American economy

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Speaker 2: due in the coming week. On Tuesday, we will get

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Speaker 2: the delayed report on October and November employment. We'll also

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Speaker 2: have retail inflation data for the month of November and

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Speaker 2: on top of that October retail sales. So for a

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Speaker 2: closer look at market action, I'm joined by Eric Teel.

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Speaker 2: He is the chief investment officer at Comerica Wealth Management.

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Speaker 2: Eric joins from Charlotte, North Carolina. Thank you for being here.

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Speaker 2: I think we can agree there's been a lot of

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Speaker 2: volatility in markets lately, not just here in the US,

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Speaker 2: but globally as well. I'm curious as to how you're

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Speaker 2: reading the situation right now.

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Speaker 7: Well, we've seen I think a shift, Doug, from the

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Speaker 7: first eight months of the year where we are high momentum,

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Speaker 7: very concentrated in tech, which is a replay from the

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Speaker 7: last two years. And I think beginning about two or

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Speaker 7: three months ago, we saw a rotation of broadening out.

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Speaker 3: We anticipated that would begin.

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Speaker 7: In small cap and in the smallest companies like microcap stocks.

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Speaker 7: That's continued to unfold. With that, you've seen some other

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Speaker 7: sectors come back to life, like financials healthcare, which have

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Speaker 7: been laggered over the past two or three years. So

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Speaker 7: I think the conditions are ripe for markets to begin

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Speaker 7: to broaden more. A lot of that's due to valuations,

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Speaker 7: but some of the areas that we thinkcent some really

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Speaker 7: good opportunities for investers would be some of these value

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Speaker 7: areas that I think are lining up good as we

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Speaker 7: go into twenty twenty six.

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Speaker 2: So how much of that broadening would be due to

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Speaker 2: expectations for much more in the way of FED easing.

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Speaker 7: I think that's an important ingredient, certainly for the financial sector.

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Speaker 7: Getting lower rates steepening of the yield curve is important,

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Speaker 7: So I think a lot shouldn't hang just in the

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Speaker 7: balance of lower rates. It's important, but twenty five business

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Speaker 7: points here there should not guide consumer centiment should not

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Speaker 7: really pull the markets a lot further ahead. It's important backdrop,

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Speaker 7: but there's much more things like growing earnings, getting confidence

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Speaker 7: back up higher. So we'll see how the monetary picture

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Speaker 7: plays out, but we need some other things to improve,

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Speaker 7: and I think that broadening out is going to happen,

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Speaker 7: which will be good for overall sentiment.

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Speaker 2: So speaking, of consumer sentiment. At the end of the week,

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Speaker 2: we're going to hear from the University of Michigan. We'll

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Speaker 2: also get numbers this week on retail sales, and I'm curious, Eric,

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Speaker 2: how you're thinking about the American consumer and the extent

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Speaker 2: to which we've seen some bifurcation.

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Speaker 7: Yeah, I think there's a lot too that is certainly

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Speaker 7: showing up in the sentiment numbers. When you think about

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Speaker 7: the impact of tariffs that has been primarily felt on

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Speaker 7: lower incomes, and so we're going to have to improve centiment.

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Speaker 7: I think these readings that we're going to get later

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Speaker 7: this week and really into January, it's going to take

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Speaker 7: a while for that to begin to improve. There is

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Speaker 7: a relief on the horizon, particularly as you get into

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Speaker 7: tax cuts for next year, but it's going to take time.

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Speaker 7: But you know, some of the things like lower gas prices,

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Speaker 7: retail sales, they do point to some improvement. But this

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Speaker 7: is not something I think that's going to turn on

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Speaker 7: a dime. We need this some fiscal stimulus to kick

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Speaker 7: in here and I think will begin to shift those

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Speaker 7: But right now, there's a lot of truth that there

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Speaker 7: is this sort of K shaped economy. The wealth effect

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Speaker 7: primarily benefiting the top ten to twenty percent.

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Speaker 3: Of the market.

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Speaker 7: So we need to get this broadening out not only

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Speaker 7: of the stock market, but of the overall economy, and

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Speaker 7: that's really going to be important to drive markets.

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Speaker 2: I think that seems to be clear with affordability becoming

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Speaker 2: a hot button issue right now on the political front,

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Speaker 2: which then takes us to this week's CPI reading. How

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Speaker 2: do you view the US inflation story right now?

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Speaker 7: It's coming down and it's been I think a good

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Speaker 7: way to approach getting inflation down the way we've have

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Speaker 7: really tackled it. However, you look at historically there has

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Speaker 7: been a second wave of inflation happened in the seventies.

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Speaker 7: There's areas if you've seen, particularly those that have been

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Speaker 7: in acted by terrors, that I think temporarily are slow

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Speaker 7: and not passing along to higher prices to consumers. But

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Speaker 7: it's really a tight balancing act that we have right

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Speaker 7: now between the soltening in the jobs market, ongoing sort

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Speaker 7: of higher inflationary readings, not high, but higher, and so

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Speaker 7: this is really in balance right now and it can

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Speaker 7: tilt one way or the other. Again, done a good

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Speaker 7: job bringing it down. Still much more work to do

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Speaker 7: and can't take our eye out the ball as.

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Speaker 3: It comes into that.

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Speaker 2: So Eric, you can understand the Fed's dilemma and why

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Speaker 2: we have FED presidents like Beth Hammock of Cleveland and

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Speaker 2: Jeff Schmidt of Kansas City basically saying it's important to

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Speaker 2: just kind of hang in here right now, not make

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Speaker 2: another adjustment to the policy rate until the inflation story

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Speaker 2: becomes a little clearer.

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Speaker 7: The inflation story is not going away. It's going to

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Speaker 7: the back burner with the saltness that we've had in

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Speaker 7: the labor market. But if you look at what gold

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Speaker 7: is pointing to, and you look at some structural concerns

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Speaker 7: that we have with deficit spending, and we know the

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Speaker 7: ultimate impact of terrors is higher prices. Now, when you

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Speaker 7: think about how all of that eventually gets cycled through,

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Speaker 7: it could result in this second wave that we're talking about.

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Speaker 7: So we can't get too focused on unemployment at this point.

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Speaker 7: Their saltness, but we have to balance that and that's

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Speaker 7: the type that we're trying to deal with at this point.

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Speaker 2: We saw a little bit of a wabble in the

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Speaker 2: equity market in the month of November on concern over

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Speaker 2: some of these high valuations, particularly where big cap tech

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Speaker 2: was concerned. A lot of head scratching when it came

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Speaker 2: to the AI trade that seems to have, at least

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Speaker 2: for the moment subsided. Are you surprised that we have

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Speaker 2: not seen a meaningful pullback in the equity market?

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Speaker 7: Boy, it's been in fits and starts. I think we're

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Speaker 7: beginning to see some rotation, Doug. You spoke to some

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Speaker 7: of the things that have surfaced, certainly the amount of

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Speaker 7: debt and credit associated with many of the AI companies,

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Speaker 7: and then evaluations, So we've seen that rotation. I think

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Speaker 7: it's going to be renewed. I've said, let's pay attention

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Speaker 7: to a January effect when you have a momentum market

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Speaker 7: of this magnitude taking place, and that has.

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Speaker 3: Often led to a reversal.

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Speaker 7: That reversal often comes in the first three or four

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Speaker 7: trading days of January. I think it's being pulled forward

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Speaker 7: right now, and we're seeing it in some of this

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Speaker 7: rotation that's taking place. But a January effect has been

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Speaker 7: pronounced when you see this high momental market and a

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Speaker 7: high retail component to it like we have this time around.

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Speaker 7: So I think that story is something we're paying close

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Speaker 7: attention to certainly looking at all the parallels that have

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Speaker 7: taken place between the new Economy period and other sort

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Speaker 7: of boom cycles. And the key is to watch the

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Speaker 7: credit which tends to be the match that lights the fire,

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Speaker 7: and that can lead to some really sobering results for investors,

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Speaker 7: and so we have to be mindful of that as

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Speaker 7: it relates to market returns here.

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Speaker 2: So if you're looking at maybe a little bit of

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Speaker 2: risk at the early part of the year, are you

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Speaker 2: expecting things to calm down to the extent that you

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Speaker 2: would be bullish on twenty twenty six?

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Speaker 7: Cautiously optimistic and overused expression, but I don't think any

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Speaker 7: expression can capture how we feel better than cautious optimism

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Speaker 7: at this point. Is you look at markets now three

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Speaker 7: years of a strong recovery bull market, A lot of

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Speaker 7: fiscal and monetary stimulus has been put toward.

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Speaker 3: The markets right now.

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Speaker 7: As you look at twenty twenty six, you have to

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Speaker 7: have a lot of things continue to go right, which.

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Speaker 3: I think they can.

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Speaker 7: But boy, some of these markets, particularly technology, dug price

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Speaker 7: to perfection. So we need to be looked for opportunities

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Speaker 7: outside a handful of technology companies.

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Speaker 3: That's why we focus back on.

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Speaker 7: Value some of these areas that have really not participated

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Speaker 7: the last couple of years. You think about the small

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Speaker 7: cap premium, which has been dormant. So there are opportunities

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Speaker 7: in the market, but they're not going to be sort

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Speaker 7: of this high momentum, high retail flavor that's embraced the

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Speaker 7: market thus fall.

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Speaker 2: Well, I'm thinking about opportunities in fixed income. Are you

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Speaker 2: seeing any some.

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Speaker 7: We look at being able to clip the coupon there

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Speaker 7: where rates are as you get in this sort of

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Speaker 7: this intermediate range. I think there's opportunity in fixed income.

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Speaker 7: Sprints remain very tight, Doug, so I would look for

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Speaker 7: traditional fixed income, maybe municipals, which I think are in

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Speaker 7: good shape for taxable portfolios. So I'm not seeing it

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Speaker 7: in high yield and in credit in fixed income, looking

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Speaker 7: at more traditional areas, I think where you can earn

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Speaker 7: the five to six and a half percent return without

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Speaker 7: sort of chasing it in some of the lower quality

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Speaker 7: credit related issues because you're simply just not being paid

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Speaker 7: to take that sort of risk at this.

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Speaker 2: Point, Eric, believe it there. Thank you so very much.

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Speaker 2: Eric TiAl is the chief investment officer at Comerica Wealth Management,

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Speaker 2: joining us from Charlotte, North Carolina here on the Daybreak

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Speaker 2: Asia Podcast. Thanks for listening to today's episode of the

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Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 2: You can find us on Apple, Spotify, THEMBERG podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg