Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast Time, Doug Krisner. We
Speaker 2: begin in Australia, where the country is reeling after a
Speaker 2: mass shooting at a Honka celebration on Sydney's Bandai Beach.
Speaker 2: Sixteen people were killed and dozens more injured. This attack
Speaker 2: has been officially designated as a terrorist attack. Bloomberg's Paul
Speaker 2: Allen is on the scene.
Speaker 3: At the moment.
Speaker 4: The overwhelming sense is one of grief. The mood down
Speaker 4: here very very somewhat. There was a floral tribute starting
Speaker 4: to build up. An Israeli flag has been draped around
Speaker 4: the flowers. An Australian flag visible in the background there
Speaker 4: as well, and you'd expect that that tribute's probably going
Speaker 4: to build up over the course of the day. Just
Speaker 4: a steady stream of people coming here to lay wreaths
Speaker 4: and pay their respects. Now, as to who was responsible
Speaker 4: for this, two people, a father and son, neither of
Speaker 4: whom are on any security watch. The father of fifty
Speaker 4: year old as deceased. He was a licensed firearms holder.
Speaker 4: He held licenses and legally owned six guns. Police say
Speaker 4: all six of those weapons are now accounted for. There
Speaker 4: were also two rudimentary IEDs improvised explosive devices found on
Speaker 4: the scene. They were active but later disarmed by police
Speaker 4: bomb disposal. Now the other gunman, twenty four year old
Speaker 4: Navid Akram. His identity became known after it was widely
Speaker 4: distributed on social media last night, so there was really
Speaker 4: no point in trying to keep that a secret anymore.
Speaker 4: He told his mother that he was headed down the coast.
Speaker 4: In reality, he was with his father at an Airbnb
Speaker 4: somewhere else in the city. That property now also the
Speaker 4: target of heavy police presence. Amid all of the carnage
Speaker 4: at that Harneko events also notable acts of heroism, not
Speaker 4: the least of which from Armad al Amad, a forty
Speaker 4: three year old fruit shop owner who an extraordinary video
Speaker 4: jumped one of the gunmen from behind and disarmed him. Armad,
Speaker 4: al Armed was later shot in the US and in
Speaker 4: the hand. He's now recovering in the hospital. Like I said,
Speaker 4: an uneasy sense of calm here today, police calling for
Speaker 4: Kam saying that this is not a time to be
Speaker 4: seeking retribution.
Speaker 2: That is Bloomberg's Paul Allen in Sydney. We turn next
Speaker 2: to markets. First in Japan, where the Bank of Japan
Speaker 2: reported confidence among Japan's large manufacturers rose in the month
Speaker 2: of November to its highest level in four years. This
Speaker 2: is the boj's large manufacturer, a ton Khan. It came
Speaker 2: in at a reading of fifteen, which was right in
Speaker 2: line with estimates. Now, the boj does have a rate
Speaker 2: decision later in the week, and money markets are betting
Speaker 2: on a quarter point rate hike. Later this morning, we'll
Speaker 2: get the monthly activity data for China, and that's where
Speaker 2: we started the conversation with Sean Fenner. She is head
Speaker 2: of Business and Industry Economics at Westpac. Shaan spoke earlier
Speaker 2: with Bloomberg TV host Avril Hong and NML droolers, and
Speaker 2: we got Shawn's view on what the China data may
Speaker 2: indicate activity.
Speaker 1: We know it's going to be soft. It's it's lost
Speaker 1: meant from the beginning of the year. What's going to
Speaker 1: be very important is that going forward, what kind of
Speaker 1: policy that we actually see to try and support growth,
Speaker 1: even if they go for a five percent but to
Speaker 1: get that we will need more policy.
Speaker 5: Yeah, I think you really see that in the fixed
Speaker 5: asset investment numbers in particular that they're really showing that
Speaker 5: sign of deterioration or at least not picking up. But
Speaker 5: where do we go then for twenty twenty six and
Speaker 5: what's the outlook? Do you see any sort of significant
Speaker 5: changes around the inflation outlook?
Speaker 1: For instance, I think inflation's going to remain sort of
Speaker 1: quite soft. If we think about sort of the pressures
Speaker 1: behind that domestic demand consumption, that's unlikely to pick up significantly.
Speaker 1: But on the fixed asset investment side, I think things
Speaker 1: are going to look a little bit brighter next year,
Speaker 1: notably on manufacturing investment and infrastructure, and that's going to
Speaker 1: be that big sort of fiscal push that we're expecting
Speaker 1: to provide support.
Speaker 6: Yeah, is that fiscal push going to be enough to
Speaker 6: sort of fix the consumer sentiment to stir things in
Speaker 6: the Chinese economy?
Speaker 1: That's going to be the big question. I think at
Speaker 1: the moment, the focus and the fiscal focus is very
Speaker 1: much on that supply side, probably less directly going to consumers.
Speaker 1: They're hoping that if they actually sort of boost the
Speaker 1: manufacturing investment that will provide support for corporate earnings, investment,
Speaker 1: and wages. That transmission looks a little bit sort of ify,
Speaker 1: so we'll see actually how that sort of progresses. They
Speaker 1: may need to provide more support try and arrest this
Speaker 1: decline that we've been seeing in the property market.
Speaker 2: Sean.
Speaker 6: Has also been interesting is the rally we're seen in
Speaker 6: the room and be talk to us about how that
Speaker 6: is affecting maybe Chinese consumers being a bit more open
Speaker 6: to spending. And then at the same time, how does
Speaker 6: that affect the exports picture for the country.
Speaker 1: Well, actually, if we think about the relative inflation for
Speaker 1: China versus its peers, the fact that's actually been supporting
Speaker 1: a real depreciation and effective turns so for export it's
Speaker 1: been very good because that means there's you know, it's contained,
Speaker 1: you know, continue to provide competition. It's very competitive for China.
Speaker 1: For consumers, it very much that it depends on the
Speaker 1: domestic front and that yes, it could see some important
Speaker 1: price being being higher, but I think overall it's you know,
Speaker 1: the domestic pure pressures, demand pool pressures there are just
Speaker 1: still very very weak. Even if we have seen that
Speaker 1: sort of uptick that we did see in November.
Speaker 5: It's interesting and you know, I see, yes, we've got
Speaker 5: that boj decision and most economists that we've surveyed are
Speaker 5: expecting them to hike. You're still looking at the risk
Speaker 5: though that are tilted perhaps in favor of them standing
Speaker 5: pad again.
Speaker 1: Yeah, I mean our baseline is for them to cut,
Speaker 1: but it's the BOJ. We do know that they still
Speaker 1: want to get a lot of confidence about that sort
Speaker 1: of wage sustainability moving into inflation. I mean, positively, we
Speaker 1: did see the RENGO wage negotiations. It's another five percent.
Speaker 1: They're also looking for real wages to be up about
Speaker 1: one percent. So that's pointing in the right direction, but
Speaker 1: they may want to just wait a little bit more
Speaker 1: for some more data.
Speaker 5: All Right, We've got BOJ, We've got China. That other
Speaker 5: one we're going to be watching is us RUNT as well,
Speaker 5: because we've got a couple of different data points that
Speaker 5: are out. Again, what are you expecting and how does
Speaker 5: it also feed into the trajectory for the FED moving
Speaker 5: into next year?
Speaker 1: Yeah, so I think it's you know, I mean, this
Speaker 1: is sort of a tough lot of data that we're
Speaker 1: getting out in the sense that we know there's still
Speaker 1: a lot of distortions going on because we haven't had
Speaker 1: a full set you know, it's the first lot of
Speaker 1: data that we're getting out post the shutdown. To be honest,
Speaker 1: I don't think we're going to get a real clear
Speaker 1: picture until we sort of move into January we get
Speaker 1: the next lot of data, so it could be quite
Speaker 1: you know, sort of a bit messy, if you like.
Speaker 1: We're probably seeing an increase in the non farm pay
Speaker 1: rolls with the unemployment rate about four point four. For
Speaker 1: inflation though it's still looking at about sort of three
Speaker 1: point one, so we're probably going to get a little
Speaker 1: bit of a lift on the goods front. That's a
Speaker 1: little bit on the tariffs for services. It's also going
Speaker 1: to be sort of quite firm outside, particularly outside of
Speaker 1: the shelter. So it's still that balancing act that the
Speaker 1: Fed needs to undertake. Sort of this sort of overall
Speaker 1: probably that ongoing softness in the labor market confronted with
Speaker 1: the sort of upside a risk still to inflation, broader
Speaker 1: risk to inflation.
Speaker 5: Yes, certainly that risk that we see reacceleration in next
Speaker 5: year as well. Sean, thanks so much for joining us
Speaker 5: this morning. That was Sean Fenna, the head of Business
Speaker 5: and Industry Economics at Westpac.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: There are several key data points for the American economy
Speaker 2: due in the coming week. On Tuesday, we will get
Speaker 2: the delayed report on October and November employment. We'll also
Speaker 2: have retail inflation data for the month of November and
Speaker 2: on top of that October retail sales. So for a
Speaker 2: closer look at market action, I'm joined by Eric Teel.
Speaker 2: He is the chief investment officer at Comerica Wealth Management.
Speaker 2: Eric joins from Charlotte, North Carolina. Thank you for being here.
Speaker 2: I think we can agree there's been a lot of
Speaker 2: volatility in markets lately, not just here in the US,
Speaker 2: but globally as well. I'm curious as to how you're
Speaker 2: reading the situation right now.
Speaker 7: Well, we've seen I think a shift, Doug, from the
Speaker 7: first eight months of the year where we are high momentum,
Speaker 7: very concentrated in tech, which is a replay from the
Speaker 7: last two years. And I think beginning about two or
Speaker 7: three months ago, we saw a rotation of broadening out.
Speaker 3: We anticipated that would begin.
Speaker 7: In small cap and in the smallest companies like microcap stocks.
Speaker 7: That's continued to unfold. With that, you've seen some other
Speaker 7: sectors come back to life, like financials healthcare, which have
Speaker 7: been laggered over the past two or three years. So
Speaker 7: I think the conditions are ripe for markets to begin
Speaker 7: to broaden more. A lot of that's due to valuations,
Speaker 7: but some of the areas that we thinkcent some really
Speaker 7: good opportunities for investers would be some of these value
Speaker 7: areas that I think are lining up good as we
Speaker 7: go into twenty twenty six.
Speaker 2: So how much of that broadening would be due to
Speaker 2: expectations for much more in the way of FED easing.
Speaker 7: I think that's an important ingredient, certainly for the financial sector.
Speaker 7: Getting lower rates steepening of the yield curve is important,
Speaker 7: So I think a lot shouldn't hang just in the
Speaker 7: balance of lower rates. It's important, but twenty five business
Speaker 7: points here there should not guide consumer centiment should not
Speaker 7: really pull the markets a lot further ahead. It's important backdrop,
Speaker 7: but there's much more things like growing earnings, getting confidence
Speaker 7: back up higher. So we'll see how the monetary picture
Speaker 7: plays out, but we need some other things to improve,
Speaker 7: and I think that broadening out is going to happen,
Speaker 7: which will be good for overall sentiment.
Speaker 2: So speaking, of consumer sentiment. At the end of the week,
Speaker 2: we're going to hear from the University of Michigan. We'll
Speaker 2: also get numbers this week on retail sales, and I'm curious, Eric,
Speaker 2: how you're thinking about the American consumer and the extent
Speaker 2: to which we've seen some bifurcation.
Speaker 7: Yeah, I think there's a lot too that is certainly
Speaker 7: showing up in the sentiment numbers. When you think about
Speaker 7: the impact of tariffs that has been primarily felt on
Speaker 7: lower incomes, and so we're going to have to improve centiment.
Speaker 7: I think these readings that we're going to get later
Speaker 7: this week and really into January, it's going to take
Speaker 7: a while for that to begin to improve. There is
Speaker 7: a relief on the horizon, particularly as you get into
Speaker 7: tax cuts for next year, but it's going to take time.
Speaker 7: But you know, some of the things like lower gas prices,
Speaker 7: retail sales, they do point to some improvement. But this
Speaker 7: is not something I think that's going to turn on
Speaker 7: a dime. We need this some fiscal stimulus to kick
Speaker 7: in here and I think will begin to shift those
Speaker 7: But right now, there's a lot of truth that there
Speaker 7: is this sort of K shaped economy. The wealth effect
Speaker 7: primarily benefiting the top ten to twenty percent.
Speaker 3: Of the market.
Speaker 7: So we need to get this broadening out not only
Speaker 7: of the stock market, but of the overall economy, and
Speaker 7: that's really going to be important to drive markets.
Speaker 2: I think that seems to be clear with affordability becoming
Speaker 2: a hot button issue right now on the political front,
Speaker 2: which then takes us to this week's CPI reading. How
Speaker 2: do you view the US inflation story right now?
Speaker 7: It's coming down and it's been I think a good
Speaker 7: way to approach getting inflation down the way we've have
Speaker 7: really tackled it. However, you look at historically there has
Speaker 7: been a second wave of inflation happened in the seventies.
Speaker 7: There's areas if you've seen, particularly those that have been
Speaker 7: in acted by terrors, that I think temporarily are slow
Speaker 7: and not passing along to higher prices to consumers. But
Speaker 7: it's really a tight balancing act that we have right
Speaker 7: now between the soltening in the jobs market, ongoing sort
Speaker 7: of higher inflationary readings, not high, but higher, and so
Speaker 7: this is really in balance right now and it can
Speaker 7: tilt one way or the other. Again, done a good
Speaker 7: job bringing it down. Still much more work to do
Speaker 7: and can't take our eye out the ball as.
Speaker 3: It comes into that.
Speaker 2: So Eric, you can understand the Fed's dilemma and why
Speaker 2: we have FED presidents like Beth Hammock of Cleveland and
Speaker 2: Jeff Schmidt of Kansas City basically saying it's important to
Speaker 2: just kind of hang in here right now, not make
Speaker 2: another adjustment to the policy rate until the inflation story
Speaker 2: becomes a little clearer.
Speaker 7: The inflation story is not going away. It's going to
Speaker 7: the back burner with the saltness that we've had in
Speaker 7: the labor market. But if you look at what gold
Speaker 7: is pointing to, and you look at some structural concerns
Speaker 7: that we have with deficit spending, and we know the
Speaker 7: ultimate impact of terrors is higher prices. Now, when you
Speaker 7: think about how all of that eventually gets cycled through,
Speaker 7: it could result in this second wave that we're talking about.
Speaker 7: So we can't get too focused on unemployment at this point.
Speaker 7: Their saltness, but we have to balance that and that's
Speaker 7: the type that we're trying to deal with at this point.
Speaker 2: We saw a little bit of a wabble in the
Speaker 2: equity market in the month of November on concern over
Speaker 2: some of these high valuations, particularly where big cap tech
Speaker 2: was concerned. A lot of head scratching when it came
Speaker 2: to the AI trade that seems to have, at least
Speaker 2: for the moment subsided. Are you surprised that we have
Speaker 2: not seen a meaningful pullback in the equity market?
Speaker 7: Boy, it's been in fits and starts. I think we're
Speaker 7: beginning to see some rotation, Doug. You spoke to some
Speaker 7: of the things that have surfaced, certainly the amount of
Speaker 7: debt and credit associated with many of the AI companies,
Speaker 7: and then evaluations, So we've seen that rotation. I think
Speaker 7: it's going to be renewed. I've said, let's pay attention
Speaker 7: to a January effect when you have a momentum market
Speaker 7: of this magnitude taking place, and that has.
Speaker 3: Often led to a reversal.
Speaker 7: That reversal often comes in the first three or four
Speaker 7: trading days of January. I think it's being pulled forward
Speaker 7: right now, and we're seeing it in some of this
Speaker 7: rotation that's taking place. But a January effect has been
Speaker 7: pronounced when you see this high momental market and a
Speaker 7: high retail component to it like we have this time around.
Speaker 7: So I think that story is something we're paying close
Speaker 7: attention to certainly looking at all the parallels that have
Speaker 7: taken place between the new Economy period and other sort
Speaker 7: of boom cycles. And the key is to watch the
Speaker 7: credit which tends to be the match that lights the fire,
Speaker 7: and that can lead to some really sobering results for investors,
Speaker 7: and so we have to be mindful of that as
Speaker 7: it relates to market returns here.
Speaker 2: So if you're looking at maybe a little bit of
Speaker 2: risk at the early part of the year, are you
Speaker 2: expecting things to calm down to the extent that you
Speaker 2: would be bullish on twenty twenty six?
Speaker 7: Cautiously optimistic and overused expression, but I don't think any
Speaker 7: expression can capture how we feel better than cautious optimism
Speaker 7: at this point. Is you look at markets now three
Speaker 7: years of a strong recovery bull market, A lot of
Speaker 7: fiscal and monetary stimulus has been put toward.
Speaker 3: The markets right now.
Speaker 7: As you look at twenty twenty six, you have to
Speaker 7: have a lot of things continue to go right, which.
Speaker 3: I think they can.
Speaker 7: But boy, some of these markets, particularly technology, dug price
Speaker 7: to perfection. So we need to be looked for opportunities
Speaker 7: outside a handful of technology companies.
Speaker 3: That's why we focus back on.
Speaker 7: Value some of these areas that have really not participated
Speaker 7: the last couple of years. You think about the small
Speaker 7: cap premium, which has been dormant. So there are opportunities
Speaker 7: in the market, but they're not going to be sort
Speaker 7: of this high momentum, high retail flavor that's embraced the
Speaker 7: market thus fall.
Speaker 2: Well, I'm thinking about opportunities in fixed income. Are you
Speaker 2: seeing any some.
Speaker 7: We look at being able to clip the coupon there
Speaker 7: where rates are as you get in this sort of
Speaker 7: this intermediate range. I think there's opportunity in fixed income.
Speaker 7: Sprints remain very tight, Doug, so I would look for
Speaker 7: traditional fixed income, maybe municipals, which I think are in
Speaker 7: good shape for taxable portfolios. So I'm not seeing it
Speaker 7: in high yield and in credit in fixed income, looking
Speaker 7: at more traditional areas, I think where you can earn
Speaker 7: the five to six and a half percent return without
Speaker 7: sort of chasing it in some of the lower quality
Speaker 7: credit related issues because you're simply just not being paid
Speaker 7: to take that sort of risk at this.
Speaker 2: Point, Eric, believe it there. Thank you so very much.
Speaker 2: Eric TiAl is the chief investment officer at Comerica Wealth Management,
Speaker 2: joining us from Charlotte, North Carolina here on the Daybreak
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 2: You can find us on Apple, Spotify, THEMBERG podcast YouTube channel,
Speaker 2: or anywhere else you listen. Join us again tomorrow for
Speaker 2: insight on the market moves from Hong Kong to Singapore
Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg