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Speaker 1: Good morning. I'm Brian Curtiz.

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

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Speaker 1: US treasure Secretary Jenney Yellen saying that US China ties

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Speaker 1: are on what she called a surer footing after the

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Speaker 1: direct talks that she had with Chinese leaders in Beijing.

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Speaker 1: Although on the military side there's been no resumption of

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Speaker 1: bilateral communications will set that side for a moment. On

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Speaker 1: the economic side, the high profile visit by Yellen suggests

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Speaker 1: that there is some hope for guardrails. Yellen said she

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Speaker 1: sought to convince China's newly installed economic team that the

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Speaker 1: US is not bent on seeking economic advantage against the country.

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Speaker 1: It comes as the Biden administration has ramped up controls

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Speaker 1: on key exports and is considering curbs on American companies

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Speaker 1: outbound investments in China. It could further restrict Beijing's access

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Speaker 1: to advanced technology. She discussed this on CBS's Face the Nation.

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Speaker 3: If we go forward with these they will be indeed

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Speaker 3: very narrowly targeted and not should not be something that

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Speaker 3: will have a significant impact on the investment climate between

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Speaker 3: our two countries.

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Speaker 1: Yellen said that no final decision had been reached on

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Speaker 1: the investment curbs. Separately, Yellen was asked about the state

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Speaker 1: of the US economy. She said she would not rule

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Speaker 1: out the threat of recession. Yellen also said that it's

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Speaker 1: appropriate and normal for growth to moderate and that inflation

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Speaker 1: remains too high.

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Speaker 2: Well, that takes us to the FED speak and comments

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Speaker 2: from Chicago President Austin Goolesby. He said that policymakers can

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Speaker 2: ease price growth without triggering a recession. Goolesby's remarks come

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Speaker 2: after we had that job state on Friday showing a

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Speaker 2: slowdown and what does remain a very strong American labor market.

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Speaker 2: Here is Goulesby speaking with CNBC.

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Speaker 4: I think this was a very strange business cycle, and

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Speaker 4: what the Fed's overriding goal right now is to get

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Speaker 4: inflation down. We are going to succeed at it, and

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Speaker 4: to do that without a recession would be a triumph.

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Speaker 4: And that's the golden path, and I feel like we're

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Speaker 4: on that golden path.

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Speaker 2: Chicago Fed President Austin Goulesby, by the way, he does

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Speaker 2: vote on policy this year. He did stop, though short

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Speaker 2: of endorsing a rate hike at this month's meeting. Goules

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Speaker 2: be said official still have a couple of more weeks

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Speaker 2: of data to assess before their next meeting.

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Speaker 1: Right, and some might say it could be time to

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Speaker 1: duck and cover again because US inflation related data will

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Speaker 1: be coming out this week. Let's get the story from

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Speaker 1: Bloomberg's Denise Pellegrini.

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Speaker 5: The Consumer Price Index for June comes out Wednesday in Washington.

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Speaker 5: Economists expect it will show inflation continued to soften, but

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Speaker 5: not fast enough for the FED. The CPI is forecast

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Speaker 5: to have climbed three point one percent from a year ago.

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Speaker 5: That would be the smallest events since March of twenty

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Speaker 5: twenty one, thanks mostly to lower pump prices, But once

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Speaker 5: volatile energy and food costs are stripped out, core CPI

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Speaker 5: is seen rising five percent from a year ago. That's

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Speaker 5: more than double the FEDS goal based on a different

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Speaker 5: inflation metric, so probably no happy ending yet for inflation fighters.

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Speaker 5: Denise Pellegrini, Bloomberg day Break Asia.

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Speaker 2: Well Ali Baba is said to be considering selling shares

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Speaker 2: in Ant. This would be a part of the fintech

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Speaker 2: company's plan stock buyback program. We have more from Bloomberg

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Speaker 2: savon men in Hong Kong.

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Speaker 6: And group at Sell proposed buying back up to seven

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Speaker 6: point six percent of shares. The news comes after China

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Speaker 6: impose one billion dollars in fines on tech giants, including Ant.

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Speaker 6: It could signal an end to China's clap down on

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Speaker 6: the tech sector. The three year crackdown costs and in

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Speaker 6: Ali Baba more than eight hundred and fifty billion dollars.

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Speaker 6: The length of time the saga may make it difficult

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Speaker 6: for the group to rebuild trust with investors in Hong Kong.

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Speaker 6: I'm von Mann Bloomberg Day Break Asia.

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Speaker 1: And another story here that might have a big impact

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Speaker 1: on the markets today is this one. A Chinese industry

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Speaker 1: body of automakers has retracted a pledge not to resort

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Speaker 1: to abnormal pricing practices. Bloomberg's Bonnie Au has more from

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Speaker 1: Hong Kong.

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Speaker 7: The China Association of Automobile Manufacturers is deleting one of

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Speaker 7: four commitments signed last Thursday. The pledge was seen as

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Speaker 7: an effort to end a price war in the country's

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Speaker 7: ev market. Sixteen companies, including Bid and x Punk, had

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Speaker 7: initially signed the four point pledge. Tesla also signed, and

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Speaker 7: it was the only foreign brand involved, but the body

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Speaker 7: later set. The reference to pricing in the pledge was inappropriate,

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Speaker 7: and that's in breach of a principle in the nation's

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Speaker 7: antitrust law in Hong Kong. I'm Bonnie L. Bloomberg Day

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Speaker 7: Break Asia.

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Speaker 1: I'm Brian Curtis Long with Doug Chris. Let's go back

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Speaker 1: to the Ali, Baba and Sagas story. It's not all

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Speaker 1: that often got a buyback story on a company that's

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Speaker 1: not even public makes this biggest splash. It's a great

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Speaker 1: story by Lu Luchen because it's complicated. If you add

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Speaker 1: that to the ending of the fines on Ant and

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Speaker 1: ten Cent overall, you finally get a sense that there

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Speaker 1: can be a beginning, middle, and end to a regulatory

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Speaker 1: nightmare type of story in China. Closure, even at a

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Speaker 1: billion dollars can be a good thing.

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Speaker 2: Particularly when you look at the entrepreneurial spirit. The sentiment

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Speaker 2: that we've been talking about here has been quite disappointing,

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Speaker 2: and I think maybe this paves the way for a

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Speaker 2: return of positivity. There have been a lot of different

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Speaker 2: threads to this story. Ant has had to overhaul its

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Speaker 2: business model. It's going to pull back from some very

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Speaker 2: sensitive sectors of the Chinese economy, including competition with a

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Speaker 2: couple of the big state banks, and the ripple effect here,

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Speaker 2: I think is really in addition to the entrepreneurial spirit,

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Speaker 2: investor confidence has been eroded. Before the IPO was canceled.

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Speaker 2: I remember reading that the valuation on ANT alone was

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Speaker 2: envisioned at around three hundred and fifteen billion, and I

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Speaker 2: think now we're in the vicinity what seventy eight billion dollar?

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Speaker 2: That's pretty dramatic.

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Speaker 1: Absolutely, And so this this buyback, ANT would be buying

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Speaker 1: back shares not only from Ali Baba, so Alibabi would

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Speaker 1: be selling shares to ANT, but it would also be

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Speaker 1: buying back shares from other investors in ANT. And when

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Speaker 1: you're not even a public company and a buyback generates

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Speaker 1: this much heat, you know, it's it's pretty exciting. But

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Speaker 1: as we talked about, the big question is will it

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Speaker 1: really bring investors back? This has been very costly. That

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Speaker 1: figure eight hundred and fifty billion, I mean, think about that,

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Speaker 1: eight hundred and fifty times. The fine is the lost

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Speaker 1: value in these companies and it's not something that investors,

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Speaker 1: you know, will take.

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Speaker 8: Lightly.

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Speaker 2: Hat tip to the guys over at our China Today

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Speaker 2: column on the Bloomberg Terminal. They cite data from Goldman

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Speaker 2: Sachs Prime Services. Hedge funds sold Chinese equities in June

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Speaker 2: for a fifth consecutive month, and that if you look

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Speaker 2: at the flip side, capital is being deployed to Japan instead.

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Speaker 1: Yep, it's been very popular. That's been a popular trade

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Speaker 1: for sure, long Japanese talks. Just a quick word on

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Speaker 1: the US. This kind of drift toward recession type of

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Speaker 1: theme may rattle markets here, even though you had kind

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Speaker 1: of a Goldilocks type of jobs report.

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Speaker 2: Yeah, but I think if we can agree that the

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Speaker 2: Fed is talking about rates being higher for longer. Even

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Speaker 2: though Goules be pushed back against the notion of recession,

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Speaker 2: Yellen is clearly thinking that's a distinct possibility, which brings

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Speaker 2: the earnings into focus now this we're going to get

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Speaker 2: the second quarter numbers underway this week. Guidance is going

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Speaker 2: to be a critical factor here, So for looking for

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Speaker 2: some slowing now from the corporate side, and then there's

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Speaker 2: a lot to be concerned about.

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Speaker 1: Now it's time for global news. US President Joe Biden

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Speaker 1: has spoken with Turkey's president Chef taiev Ardowan in a

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Speaker 1: call ed Baxter has that story and the rest of

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Speaker 1: the news from the nine to sixty news from said

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Speaker 1: Francisco ahead.

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Speaker 9: Yeah, that's right, Brian. The issue potential for Sweden to

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Speaker 9: be allowed entry into NATO, at least that's a topic. One.

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Speaker 9: The readout is the two discussed arrange of issues that

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Speaker 9: included Sweden support for Ukraine, efforts to strengthen bilateral ties.

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Speaker 9: It also says they discussed the purchase of F sixteen fighters,

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Speaker 9: which is part and parcel of what Erdowon is pressing

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Speaker 9: to vote to allow Sweden NATO membership. So we'll see

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Speaker 9: how that plays. Biden is in London en route to

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Speaker 9: NATO summit beginning Tuesday, set to meet King Charles Willet

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Speaker 9: also meet with UK Prime Minister Rishi Sunak. The White

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Speaker 9: House says strengthen relations there. Regarding Ukraine, President of Vladimir

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Speaker 9: Zelenski on ABC has heard here on Bloomberg says Ukraine

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Speaker 9: should also be part of the NATO discussions.

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Speaker 10: It's still a matter of political wills just to find

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Speaker 10: the proper warding and invite Ukraine. It would be an

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Speaker 10: important message to say that NATO is not afraid of Russia.

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Speaker 1: Yeah.

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Speaker 9: Through a translator, and President Biden by the way of

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Speaker 9: saying that they're theres no unanimity on any kind of

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Speaker 9: NATO offer to Kievs, so that will not happen this session. Meanwhile,

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Speaker 9: as Lenski says, he also welcomes the delivery of the

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Speaker 9: cluster bombs to continue his counter offensive, and the National

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Speaker 9: Security Council spokesman in US John Kirby is defending that

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Speaker 9: decision today on ABC. Has heard here on Bloomberg.

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Speaker 11: Well, Russia is using them in Ukraine in an aggressive

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Speaker 11: war on another country and indiscriminately killing civilians. Ukrainians will

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Speaker 11: be using these cluster munitions, obviously, which have a very

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Speaker 11: low dud rate, but they'll be using them to defend

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Speaker 11: their own territory, hitting Russian positions.

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Speaker 9: And Kirby says, Ukraine is using the more conventional munitions

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Speaker 9: faster than they can be manufactured.

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Speaker 11: They are using artillery at a very accelerated rate, many

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Speaker 11: thousands of rounds per day. This is literally a gunfight

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Speaker 11: all along from the Dambos, all the way down towards

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Speaker 11: Zeprizi and Kerson, and so they're running out of.

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Speaker 9: Inventory, but there is descent. Congressman Barbara Lee on CNN.

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Speaker 12: So I'm hoping that the administration would reconsider this because

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Speaker 12: these are very dangerous bombs. They're dangerous weapons, and this

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Speaker 12: is a line that I don't believe we should cross.

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Speaker 9: At least says over one hundred countries have signed onto

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Speaker 9: an agreement not to use cluster bombs. China looms large

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Speaker 9: at NATO as well. South Korean President yunsuk yol will

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Speaker 9: meet with Japan's Prime Minister Fumio Kishi on the sidelines

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Speaker 9: of NATO. Japan's plan to release treated water from Fukushima

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Speaker 9: also be on the agenda. Yun will also visit Poland

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Speaker 9: as well. Leaders from Australia New Zealand will also be

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Speaker 9: at the summit. NATO alliance has been split on what

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Speaker 9: exactly policy should be regarding China. Meanwhile, China diplomats say

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Speaker 9: NATO outreach in Asia is not welcome. Global News powered

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Speaker 9: by more than twenty seven hundred journalists and analysts in

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Speaker 9: over one hundred and twenty countries. In San Francisco, I'm

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Speaker 9: at Baxter in this is Bloomberg.

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Speaker 1: I'm Brian Curtis along with Doug Krisner, and our guest

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Speaker 1: is Dennis Gartman. Chairman of the U S University of

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Speaker 1: Akrons Endowment Investment Committee and the retired editor and publisher

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Speaker 1: of the Gartment letter which was widely followed, Dennis, thank

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Speaker 1: you very much for joining us your evening and early

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Speaker 1: Monday morning here in Asia. You heard me mention a

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Speaker 1: few moments ago that I was querying whether or not

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Speaker 1: we might be in this drift toward recession, whether that

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Speaker 1: theme might take hold in markets. It's not a good

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Speaker 1: combination to be doing that when you've got a higher

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Speaker 1: for longer FED and I note that you're a little

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Speaker 1: bearish and as surprised as as many of us were

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Speaker 1: at the performance in the stock market so far this year.

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Speaker 1: Do you think we are drifting towards recession?

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Speaker 8: I think we are drifting towards the session. I don't

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Speaker 8: think there's any question about it. All of the data

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Speaker 8: that I follow, the leading economic indicators, for example, have

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Speaker 8: turned negative numbers. All the data that I look at,

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Speaker 8: it tends to be deleterious to the economy. The numbers

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Speaker 8: that came out on Friday I think were quite as prize,

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Speaker 8: especially after the higher than expected number from the ADP,

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Speaker 8: which I think was a number and nothing more. Than that.

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Speaker 8: The ADP has tended to be lower than the non

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Speaker 8: farm payrolls number for months and months and months at infinitum,

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Speaker 8: and I think they were just catching up to get

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Speaker 8: back to square one. The non farm payrolls number on Friday,

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Speaker 8: I think was quite a surprise to be to be honest,

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Speaker 8: and the fact that much of the increase in the

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Speaker 8: non farm payrolls numbers for the past six months had

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Speaker 8: been predicated upon very high numbers from the BIRD, the BLS,

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Speaker 8: the BLS's birth death numbers. We had a ninety three

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Speaker 8: thousand jobs last month two hundred and fifty thousand jobs

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Speaker 8: of the previous month, and the non farm payrolls numbers

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Speaker 8: were revised one hundred thousand, so I think that we're

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Speaker 8: almost at the cusp of recession. I think the Fed

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Speaker 8: has been probably a little too aggressive in its monetary

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Speaker 8: policies thus far for the past year and a half.

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Speaker 8: When they began to change monetary policy two years ago,

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Speaker 8: I then said that they would take greats farther and

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Speaker 8: for a longer period of time than anybody wants to anticipate.

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Speaker 8: I thought they'd get to five and a half where

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Speaker 8: for all intention and purposes, we're at five and a

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Speaker 8: half of the overnight de funds rate, but it'll be

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Speaker 8: a long period of time, probably into well into twenty

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Speaker 8: twenty four before the SAD begins to ease monetary policy.

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Speaker 8: Inflation continues to be a little bit higher than the

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Speaker 8: Fed wants to see, but I think we're heading for recession.

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Speaker 8: I think we're probably going to look back and say

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Speaker 8: when the BLS, actually, when the NBER actually makes it

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Speaker 8: releases its data on whether we are intercession or not,

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Speaker 8: we'll find out that in the second quarter this year

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Speaker 8: we actually were. It'll be some time before before that occurs,

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Speaker 8: but I think we're intercession already.

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Speaker 2: So the earning season gets underway this week, Dennis, and

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Speaker 2: I'm curious to get your take on what we might

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Speaker 2: hear from corporate to America. Everything that you're describing here,

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Speaker 2: how might that show up in guidance.

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Speaker 8: We'll probably have one more period of time when when

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Speaker 8: earnings are better than expected, but I think that the

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Speaker 8: management will end up saying looking forward that the best

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Speaker 8: is probably behind us. That they'll argue with with the

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Speaker 8: earnings actually coming down a little bit over and of

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Speaker 8: course in the next quarter or two, but the best

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Speaker 8: of earnings is probably behind us at this point. I

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Speaker 8: can't imagine we're going to end up having any exuberant

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Speaker 8: earnings numbers coming out. The only place that I find

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Speaker 8: myself turning quietly bullish is the small banks, but that's

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Speaker 8: because they've been hurt so badly with the invertedy. Yo Kirk,

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Speaker 8: I think the worst of news for banking is probably

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Speaker 8: behind us. But as far as earnings for corporate America,

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Speaker 8: I think we've seen the have for a long period

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Speaker 8: of time.

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Speaker 1: It's interesting that you think that the FED is on

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Speaker 1: the precipice of perhaps making a mistake going too far.

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Speaker 8: I think the FED has gone too far already thus

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Speaker 8: far well. Times shall tell, of course, but it'll be

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Speaker 8: a long period of time before the that begins the

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Speaker 8: process of easing monetary policy. I think that five and

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Speaker 8: a half percent will be the apex of overnight said right,

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Speaker 8: but it'll be at least in twenty twenty four, maybe

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Speaker 8: late into twenty twenty four before we see that sad

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Speaker 8: begin the process of easing monetary policy. Patience will be

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Speaker 8: required for a long period of time.

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Speaker 2: So I'm looking at a two year right now with

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Speaker 2: a yield just under five percent. I'm going to guess

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Speaker 2: that you think that's a screaming buy.

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Speaker 8: I think that's a screaming buy. In my own account,

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Speaker 8: eighty percent of what I own is two year notes,

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Speaker 8: and I'm very comfortable with sitting there at very near

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Speaker 8: five percent for the next year and a half. For

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Speaker 8: two years, I think, yes, without I think it's a

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Speaker 8: screaming by two year notes a percent, no question about that.

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Speaker 1: Dennis. In your role as chairman of the Endowment Investment Committee,

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Speaker 1: I'm just curious, have you gotten some pushback from the

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Speaker 1: university and from stakeholders that you've been as cautious as

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Speaker 1: you have been while the market's been running to the upside?

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Speaker 8: Not yet, I let's go out to the next Not yet,

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Speaker 8: but time shall tell. We had our last meeting just

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Speaker 8: a month ago, and we were very comfortable. We actually

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Speaker 8: ended up taking a goodly a nice position two and

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Speaker 8: three and four percent of our portfolio, and then the

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Speaker 8: gold two years ago that has turned out to be

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Speaker 8: a wonderful investment for us. We've been very comfortable with that.

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Speaker 8: I haven't had any pushback thus far, time shall tell,

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Speaker 8: although I get pushed back in the next with the

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Speaker 8: next meeting in August. But right now I seem to

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Speaker 8: be fending off that pushback. Time shall tell I've been

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Speaker 8: very fortunate.

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