Speaker 1: Good morning. I'm Brian Curtis.
Speaker 2: And I'm Doug Prisner. Here are the stories we're following today.
Speaker 1: Now In the top stories, China has told its state
Speaker 1: owned banks to boost support for the yuan, the Chinese currency.
Speaker 1: Bloomberg's Joan Wong has the story from Hong Kong.
Speaker 3: The request came as the yuan fell towards seven point
Speaker 3: three five per dollar. China is now in a push
Speaker 3: to prevent a search in yuon volatility. Senior officials are
Speaker 3: also considering cutting banks forign exchange reserve requirements, and they're
Speaker 3: checking whether domestic companies helped accelerate yuan declines by conducting
Speaker 3: speculative trades against it. A sense of gloom has descended
Speaker 3: on China's markets, even though Beijing sawt to bolster sentiment
Speaker 3: was an interest rate cut. The banks will release their
Speaker 3: lone prime rates on Monday next week. In Hong Kong,
Speaker 3: I'm joined Wang Bloomberg Day Brigasia Well China.
Speaker 2: Evergrand Group is seeking Chapter fifteen bankruptcy protection in New
Speaker 2: York now. Chapter fifteen protects a company's US assets while
Speaker 2: restructuring arrangements are worked out in foreign jurisdictions. This type
Speaker 2: of filing is routine in cases involving a restructuring of
Speaker 2: debt held internationally. Now, Evergrand has been working for months
Speaker 2: to finalize an offshore debt restructuring plan. Back in April,
Speaker 2: you may recall Evergrand disclosed it did not yet have
Speaker 2: the level of credit or support needed to implement the plan.
Speaker 1: Now.
Speaker 2: Today's petition here in New York references proceedings being carried
Speaker 2: out by Evergrand in both Hong Kong and the Cayman Islands.
Speaker 1: Right Hines's police officers went to the homes of people
Speaker 1: who invested in Jongjur's trust unit and told them to
Speaker 1: avoid public protests. People all the way from from Beijing
Speaker 1: to Sichuan to jung Su received these visits, which they
Speaker 1: did refer to as cordial. But it's the latest sign
Speaker 1: that authorities are worried about unrest. Fears of financial contagion
Speaker 1: have grown since the company Jongrong International Trust, which is
Speaker 1: not Jongjur Unit, missed dozens of high yield products. This week,
Speaker 1: group gathered briefly at the Beijing offices of General to
Speaker 1: demand payment on these financial products.
Speaker 2: Well back here in the States, President Biden will host
Speaker 2: the leaders of Japan and South Korea. This will happen
Speaker 2: at the Camp David Presidential Retreat. It's in rural Maryland,
Speaker 2: and that will get underway tomorrow. The president is looking
Speaker 2: to strengthen ties and open up lines of communications with
Speaker 2: both countries. We spoke earlier with Bloomberg's Jack Fitzpatrick.
Speaker 4: North Korea will be on the dock at Nuclear non
Speaker 4: proliferation is something they have said they're going to talk about,
Speaker 4: and the latest there is that South Korean experts have
Speaker 4: told our colleagues that North Korea may actually time the
Speaker 4: test launch of a missile that can deliver a nuclear
Speaker 4: warhead to the US mainland to coincide with that summit.
Speaker 2: That is Bloomberg's Jack Fitzpatrick, by the way, was back
Speaker 2: in June that the US, Japan, and South Korea all
Speaker 2: agreed to share real time information on North Korean missile launches,
Speaker 2: and they have since conducted several joint anti submarine and
Speaker 2: missile defense exercises.
Speaker 1: Right we hear Goldman Sachs Doug is planning to hire
Speaker 1: several hundred new staffers to help address concerns raised by
Speaker 1: banking supervisors. We get more from Bloomberg's Studhart Notrogen.
Speaker 5: Over the past year. We understand that there has been
Speaker 5: ramped up FED scrutiny from their banking supervisors that are
Speaker 5: trying to remediate what they see as lapses. We of
Speaker 5: course know that their consumer business, their credit card practices
Speaker 5: have been looked at by the CFPB and other government agencies,
Speaker 5: and we know that the FED had been asking questions
Speaker 5: on that.
Speaker 1: Goldman's hiring spree is notable in a year in which
Speaker 1: the firm has been shrinking headcount because of a market slowdown.
Speaker 1: Unclear is what deficiencies Goldman is seeking to address with this.
Speaker 1: The firm largely abandoned an effort to build out a
Speaker 1: consumer bank that may have set off some questions from
Speaker 1: the FED.
Speaker 2: Last year, well after the bell here in the States,
Speaker 2: Applied Materials gave a bullish forecast for the current quarter.
Speaker 2: We have that story from Bloomberg's Charlie Pellett.
Speaker 6: Applied is the largest American maker of chip making machinery,
Speaker 6: and its forecast indicates that an industry slump maybe fading.
Speaker 6: CEO Gary Dickerson says a shift toward artificial intelligence computing
Speaker 6: and the rise of Internet connected devices are helping bolster results.
Speaker 6: Applied Materials said fiscal fourth quarter sales will be about
Speaker 6: six point five one billion dollars. That compares with an
Speaker 6: average analyst estimate of five point eight eight billion in
Speaker 6: New York Charlie Pellett, Bloomberg Daybreak as and shares in
Speaker 6: Applied Materials right now higher by more than two percent
Speaker 6: in late US trading, Brian, So what.
Speaker 1: Struck me is interesting about that? Hence my tongue in
Speaker 1: cheek comment about dazzling you with some brilliant So is this?
Speaker 1: You know, We've had a lot of companies actually who've
Speaker 1: had pretty solid earnings in the stocks have traded down.
Speaker 1: But it's different with Applied Materials. I think simply because
Speaker 1: the time went on and this stock sold down from
Speaker 1: the one fifties down to the one thirties, to the
Speaker 1: point where the valuation was at a point where when
Speaker 1: investors got a beat right across the board, they decided
Speaker 1: to go in there.
Speaker 6: And buy it.
Speaker 1: So you had that move up, as you just mentioned,
Speaker 1: two point one percent. So it's interesting if you think
Speaker 1: that a lot of the correction that we're seeing at
Speaker 1: the moment is really due to valuation.
Speaker 2: Very interesting day in the bond market, and I wanted
Speaker 2: to talk a little bit more about one of the
Speaker 2: things that may have been functioning today as it relates
Speaker 2: to week foreign currencies, particularly the Chinese You won, as
Speaker 2: we heard earlier, the U one weekend over nine two
Speaker 2: seven spot three five against the greenback. That's when we
Speaker 2: were told Chinese authorities gave instruction to some state owned
Speaker 2: banks to step up their intervention. Now it's reasonable to
Speaker 2: assume that a few of those banks sold some US
Speaker 2: dollar assets, long dated US treasuries as an example, to
Speaker 2: raise funds in order to buy the Chinese currency, and that, Brian,
Speaker 2: I think may have been one of the reasons that
Speaker 2: we see a little bit of weakness at the long
Speaker 2: end today.
Speaker 1: Yeah, and it's interesting that China would be selling US treasurers.
Speaker 1: We had reported that that had been the case in
Speaker 1: this latest round, and that Japan had upped its amount
Speaker 1: of treasures, but China had sold. So there's definitely a
Speaker 1: lot of nervousness there. And I think, as you mentioned
Speaker 1: right now, we've got the offshore Chinese currency at seven
Speaker 1: thirty forty, so strengthening considerably. Very interesting stories out of China.
Speaker 1: I mean, we mentioned that people said that police officers
Speaker 1: came to their homes and paid a cordial visit visit,
Speaker 1: but we know in China, when police officers go to
Speaker 1: your home and tell you don't go out to public protests,
Speaker 1: people get the message, whether or not they consider the
Speaker 1: visit cordial or not. Another interesting point, sources telling us
Speaker 1: that Tyson Foods, the biggest US meat company, is looking
Speaker 1: at options, including selling its China business. Interesting process.
Speaker 2: Looking forward to next week, right with those loone prime
Speaker 2: rate cuts.
Speaker 1: Yep on Monday. Very interesting. Indeed, we'll see most likely
Speaker 1: they'll follow what we saw from the PBOC earlier. It's
Speaker 1: not always slam dunk, but I think that's what we expect.
Speaker 1: Now it's time for Global news. Questions mounting here over
Speaker 1: why Maui's warning sirens system did not sound when the
Speaker 1: Maui wildfires broke out. A batched with Global News in
Speaker 1: the nine to sixty News from San Francisco.
Speaker 7: Ed, Yeah, that's right. Brian officials are saying that they
Speaker 7: were not designed for fires, but for tsunamis, and that
Speaker 7: instructions are to flee to higher ground. They say, the
Speaker 7: officials do that that would have had people running toward
Speaker 7: the flames. The Attorney General is dubious and investigating, as
Speaker 7: well as accounts that some of the alarms are broken. Anyway,
Speaker 7: It's been no official cause released for those fires, but
Speaker 7: from the beginning there's been concern that it could have
Speaker 7: been down power lines. Bob Marshall's CEO of Whisker Lobs
Speaker 7: power Monitoring System, says that new video shows little doubt
Speaker 7: about what happened. There is didn't meddle and sparks falling
Speaker 7: down to the ground, So if you've got dry grass
Speaker 7: and fuel underneath, that's what sparks the fire. Hawaiian Electric
Speaker 7: is not commenting. There are now thirty FEMA canine teams
Speaker 7: searching through the rubble of the Hina Town fire, and
Speaker 7: Governor Josh Green says a slow, painful process, one.
Speaker 8: Individual by one individual.
Speaker 2: It makes us, like I said, heartbroken.
Speaker 7: And President Biden has made his most visible comments about
Speaker 7: the fires today.
Speaker 9: Already from the darkness and the smoke and the ash,
Speaker 9: we've seen the light of hope and strength, first responders
Speaker 9: working around the clock. Many of those first responders in
Speaker 9: fact impacted by the fires themselves, losing their own homes.
Speaker 9: Volunteers delivery made by fishing boat on jet skis.
Speaker 7: He is going to be there on Monday, with President
Speaker 7: Biden hosting the leaders of Japan and South Korea tomorrow
Speaker 7: and North Korea being a prime topic for conversation. It
Speaker 7: is one of the major topics and was the topic
Speaker 7: of conversation today at the UN Security Council, Human Rights
Speaker 7: Chief Vulgar Turk telling the Council human rights are very
Speaker 7: much being abused.
Speaker 10: The people of the DPRK have endured periods of severe
Speaker 10: economic difficulty and at other times severe repression of their rights.
Speaker 10: Currently they appear to be suffering both.
Speaker 7: Turk says people are becoming increasingly desperate. Los Angeles Area
Speaker 7: has put together a task force made up of Los
Speaker 7: Angeles Police, La County Sheriff's Office, Burbank and Glendale police
Speaker 7: departments to crack down on retail theft. The flash mobs
Speaker 7: hit luxury stores, they're in and out. LA Mayor Karen vass.
Speaker 8: To Angelino's our message is clear, those who commit these
Speaker 8: crimes will be caught, they will be held accountable, and
Speaker 8: we will work to address this issue.
Speaker 7: And La County Sheriff Robert Luna says it will be multifaceted.
Speaker 11: We're not only focused on the individuals who are walking
Speaker 11: into these stores and committing the crimes that we see
Speaker 11: on video. But if you are supporting them logistically, either
Speaker 11: by being a driver, harboring them, buying merchandise, selling merchandise,
Speaker 11: you're in this chain.
Speaker 7: Yeah. The task Force says it has to stop global
Speaker 7: news powered by more than twenty seven hundred journalists and
Speaker 7: analysts in over one hundred and twenty countries. In San Francisco,
Speaker 7: I'm Ed Baxter, and this is Bloomberg.
Speaker 1: This is Bloomberg Daybreak Asia. I'm Brian Curtis in Hong Kong,
Speaker 1: along with Vonni Quinn in New York. A guest is
Speaker 1: Joy Young, head of product management Market Vector Indexes. Joy,
Speaker 1: thank you for taking out the time to be with us.
Speaker 1: So we've seen this repricing in the bond market, but
Speaker 1: yields have gone up a lot more at the long
Speaker 1: end than they have at the short end, which might
Speaker 1: suggest that investors don't really see a lot of big
Speaker 1: changes coming to FED policy. Hence, is this correction that
Speaker 1: we're seeing in the stock market Is that more about
Speaker 1: valuations than perhaps fears about sharply high interest rates from the.
Speaker 12: FAT I mean interesting question because we look across markets
Speaker 12: and we see equity markets are also down, so I think,
Speaker 12: you know, it could be that people are just now sensitive.
Speaker 12: We thought August was going to be quiet, but it
Speaker 12: hasn't turned out that way. You know, when we look
Speaker 12: at where we came from at the beginning of the year,
Speaker 12: you know, we were looking at very diversient opinions with
Speaker 12: the market trying to price them both rate hikes and
Speaker 12: rate cuts, and the VIX the measure of fear and
Speaker 12: uncertainty in the markets was quite high above twenty five.
Speaker 12: We got to July and we thought we were getting
Speaker 12: confident building consensus. Everybody thought rate hikes were nearing the end.
Speaker 12: Markets were optimistics, and then we're here in August reading
Speaker 12: the Fed minutes, and now we've had kind of a
Speaker 12: reversal of opinion because the Fed is saying that, you know,
Speaker 12: inflation is not over. There is still a risk of inflation,
Speaker 12: so we're we may be looking at more interest rate hike.
Speaker 12: So I don't think this is just repricing. I think
Speaker 12: there is you know, gener you know, kind of fear
Speaker 12: again back in the markets, with the vicks crawling back up,
Speaker 12: equity markets down, the bond market is still inverted. Yields,
Speaker 12: so I think that's looking quite fragile still.
Speaker 13: Joy are we shaving up for some kind of perfect
Speaker 13: storm with everything that's happening in China as well? It
Speaker 13: seems like everything is coming to a head right now.
Speaker 12: It's interesting because I think we do need to look
Speaker 12: around the world, not just focused on the US market.
Speaker 12: We're seeing this fragility in the Chinese market. The you know,
Speaker 12: kind of reawakening hasn't happened, and we're looking at really
Speaker 12: like numbers coming out every day that don't look good.
Speaker 12: And we look across to the UK markets, you know,
Speaker 12: we're seeing inflation has weird its head again, Labor markets
Speaker 12: are quite strong. So those are indicators of what maybe
Speaker 12: happening or spreading across the world.
Speaker 1: Well, the vicset seventeen isn't all that high historically, and
Speaker 1: five percent correction in stocks is not a huge amount,
Speaker 1: but it seems like, you know, for a lot of investors,
Speaker 1: they see the kind of growth that you get from
Speaker 1: the Atlanta GDP now, and you know, seeing some of
Speaker 1: the data well supported for the economy, they they're not
Speaker 1: that nervous you say they should be.
Speaker 12: So, you know, but I think, you know, this is
Speaker 12: where I think we also need to look beyond the headlines,
Speaker 12: beyond aggregate market numbers and look, you know, kind of below,
Speaker 12: you know, look into the details. And we know that
Speaker 12: this is a market that's been led by just a
Speaker 12: few you know, big macro tech stocks. You know, we've
Speaker 12: been calling them the Magnificent seven and they've been slowly
Speaker 12: reducing to maybe just the Magnificent one with Nvidia. But
Speaker 12: you know, if you look at what's happened since me,
Speaker 12: some conductors have been flat. Oil, you know, is up
Speaker 12: thirty percent oil service companies, whereas you know, at the
Speaker 12: beginning of the year, oil service companies were down and
Speaker 12: semiconductors were up almost fifty percent. So I think we're
Speaker 12: seeing this rotation and it may be masked on a
Speaker 12: high level aggregate number.
Speaker 13: So joy at Market Vector, you published once a month
Speaker 13: the best performing indexes, and you know, perhaps unsurprisingly, in July,
Speaker 13: it was things like bond indexes and digital assets indexes.
Speaker 13: How does that flip for August and September, given that
Speaker 13: we saw bitcoin in the twenty five thousand dollars range.
Speaker 12: Today, Yeah, so I mean bitcoin has you know, kind
Speaker 12: of fallen back again, but I think, you know, we
Speaker 12: still have this application process, which spot bitcoin ETF in
Speaker 12: the filing, and you know, that's a big that's going
Speaker 12: to be you know, big opening for bitcoin should it
Speaker 12: be passed. And I think just being filed, you know,
Speaker 12: is an indication that institutions are looking at this space
Speaker 12: and that so.
Speaker 13: Many have been rejected on so many are still file.
Speaker 12: But I think this is you know, this may be
Speaker 12: you know, a long term process, but I think it's
Speaker 12: showing that we're you know, people are looking at the
Speaker 12: space and that they're giving it credibility and that there
Speaker 12: are different investors coming in to give it a diverse
Speaker 12: you know kind of market.
Speaker 1: Joey, you're sounding pretty cautious here. So are you somewhere
Speaker 1: between a soft landing and hard landing or do you
Speaker 1: actually believe we will get that sort of full blown recession.
Speaker 12: I think investors should be cautious, always cautious. So I
Speaker 12: think if you look at what's happening with banks, you know,
Speaker 12: we also do follow top ten banks. You know, should
Speaker 12: rates hold for longer higher, then that's going to spill
Speaker 12: over to credit risk. It's going to spill over to
Speaker 12: default risk, it's going to spill over to refinancing. Risks.
Speaker 12: So we're looking at banks, we're looking at reeds, you know,
Speaker 12: and those haven't been moving up at all, and they've
Speaker 12: been moving down.
Speaker 13: So where are the flows into your indexes?
Speaker 12: Well, semiconductors here to date are still strong. But you know,
Speaker 12: I think investors shouldn't be chasing flows. They should really
Speaker 12: be thinking about their macro views and really either being
Speaker 12: diversified or being nimble. And ETFs are a good structure,
Speaker 12: but some of those flows may be moving very quickly,
Speaker 12: and that's the point. They're liquid instruments, so they are
Speaker 12: good tools for investors to use in this in this environment.
Speaker 1: How about emerging Marcus, it seems like with China all
Speaker 1: that's going on there that that would be dragging them down.
Speaker 1: And I note that EEM has been down pretty solidly
Speaker 1: here for the past two weeks overall. What's your thoughts on.
Speaker 12: Emergency interesting because we have a Vietnam index as well
Speaker 12: as India index and those have been pretty strong as
Speaker 12: well as Brazil. Seeing that, you know, you know, although
Speaker 12: China will have a significant impact on emerging markets overall,
Speaker 12: that these individual markets have been quite resilient and maybe
Speaker 12: prepared for divergent performance.
Speaker 13: What's the number one question you get asked by clients
Speaker 13: these days.
Speaker 12: Good question, but you know, we're getting a lot of
Speaker 12: digital asset interests, so people are asking about how to
Speaker 12: think about price in this market. And you know, that's
Speaker 12: one of the big concerns for the SEC filings is,
Speaker 12: you know, how do we think about rigorous pricing with
Speaker 12: a market that's so fragmented with so many exchanges.
Speaker 1: You know, you know, we've only got about forty seconds left.
Speaker 1: So perhaps the final question about where yields are heading,
Speaker 1: particularly at the short end. We haven't seen you know,
Speaker 1: such a big balance in the two year yield. Where
Speaker 1: do you see that, say, over the next six months.
Speaker 12: Yeah, so I don't have a crystal ball here that
Speaker 12: you know. I think investors should be prepared for more
Speaker 12: volatility in both the bond market and the equity market.
Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on the
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Speaker 2: And I'm Doug Krisner. Join us again tomorrow for all
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Speaker 2: on Lumberg day Break Asia.
Speaker 4: Mhmm