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Speaker 1: This is Bloomberg Day Break Asia for this Wednesday, May

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Speaker 1: tenth in Hong Kong, Tuesday May ninth in New York,

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Speaker 1: and coming up today.

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Speaker 2: Markets track efforts to break a stalemate over the US

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Speaker 2: debt ceiling.

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Speaker 1: US equity slump ahead of a critical inflation report that

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Speaker 1: may provide clues on the Fed's rate hiking path.

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Speaker 2: South Korean e commerce giant Coupong reports sales above estimates

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Speaker 2: after capital spending pays off.

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Speaker 3: Debt ceiling meeting ends without much movement. Senate Minority Leader

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Speaker 3: Mitch McConnell says there will be no default. Donald Trump

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Speaker 3: held libel for sexual assault. I'm at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Asia, The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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Speaker 4: and everywhere you get your podcasts.

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Speaker 2: Good morning, I'm det Chris and I'm Brian Curtiz.

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

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Speaker 5: Well.

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Speaker 1: Lisa Shallatte, the chief investment officer at Morgan Stanley Wealth Management,

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Speaker 1: says the future spending cuts resulting from any debt ceiling

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Speaker 1: deal could threaten economic growth here Shalllotte speaking earlier with Bloomberg.

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Speaker 6: It matters, you know, to forward looking expectations of growth

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Speaker 6: in terms of what is cut. Those things have been

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Speaker 6: a support to growth, and if we need to take

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Speaker 6: that out of the forward forecasts, that is going to

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Speaker 6: dampen economic growth.

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Speaker 1: Shalotte said possible rollbacks related to the Inflation Reduction Act

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Speaker 1: and various infrastructure projects could dampen growth. As mentioned, President

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Speaker 1: Biden met today with House Speaker Kevin McCarthy and other

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Speaker 1: congressional leaders on the debt ceiling. McCarthy said he has

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Speaker 1: not seen any movement on the negotiations. Treasury Secretary Janet

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Speaker 1: Yellen has warned lawmakers that the Treasury's ability to stay

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Speaker 1: within the debt limit could be exhausted.

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Speaker 5: As soon as June first.

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Speaker 2: There was some FED speak today. We heard from the

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Speaker 2: head of the New York Fed, John Williams. He says

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Speaker 2: that he is monitoring how the strains across the banking

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Speaker 2: sector will affect the American economy, and at the same time,

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Speaker 2: he left the door open to leave interest rates on

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Speaker 2: hold next month. Here's Williams speaking at an event with

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Speaker 2: the Economic Club of New York.

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Speaker 7: I will be particularly focused on assessing the evolution of

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Speaker 7: credit conditions, and there are effects on the outlook for growth, employment,

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Speaker 7: and inflation.

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Speaker 8: We're going to get a lot of data between now

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Speaker 8: and our June meeting, that is.

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Speaker 2: New York Fed President John Williams. He went on to

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Speaker 2: say a rate cut is not his baseline forecast this year.

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Speaker 2: You'll remember last week the Fed heightd its key rate

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Speaker 2: by a quarter point, bringing the target on that benchmark

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Speaker 2: rate above five percent. It was back then that Fed

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Speaker 2: Shair J. Powell hinted maybe this could be the last

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Speaker 2: increase for the time being. He did, though, leave the

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Speaker 2: door open for the Fed to do more if inflation

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Speaker 2: remains high. Remember that CPI data is due tomorrow morning.

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Speaker 1: Brian, Yeah, that's exactly what we're going to talk about here.

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Speaker 1: Let's take a closer look a preview from Bloomberg's Michael McKee.

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Speaker 9: Higher interest rates have helped cut inflation in half over

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Speaker 9: the past nine months. Now, he kind of must say,

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Speaker 9: for the hard part, rents and rising wages for hard

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Speaker 9: to find employees, particularly in the service sector, will break

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Speaker 9: progress towards the Fed's goal of an average two percent

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Speaker 9: inflation rate. The central bankers think progress will continue if slowly,

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Speaker 9: they will leave rates high to ensure that happens, and

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Speaker 9: not worry too much about month to month inflation data

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Speaker 9: unless it unexpectedly jumps. The question is what will investors think.

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Speaker 9: Will they have the patients of Fed officials, or will

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Speaker 9: we see a big rate reaction to the inflation data.

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Speaker 9: Michael McKee, Bloomberg Daybreak Asia.

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Speaker 2: After the bell, we heard from Rivian Automotive. The company

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Speaker 2: reported a narrower than expected loss to begin the year.

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Speaker 2: A commedy says it lost a dollar twenty five per

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Speaker 2: share on an adjusted basis in Q one. Now, the

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Speaker 2: street was looking for a loss of a dollar fifty

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Speaker 2: six revenue for the period six hundred and sixty one million.

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Speaker 2: That was pretty much in line with straight expectations. The

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Speaker 2: electric truck maker has been working to cut cost and

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Speaker 2: ramp up production. Here's Bloomberg's Ed.

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Speaker 10: Ludlow simplifying everything. Going back to basics is working. Production

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Speaker 10: drops sequentially quarter on quarter, but that was only in

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Speaker 10: the van that Rivian builds for Amazon, the consumer car.

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Speaker 10: They ramp production and now they're just being disciplined.

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Speaker 5: Bloomberg's Ed Ludlow.

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Speaker 2: There, Rivian also reaffirmed plans to build fifty thousand vehicles

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Speaker 2: this year. You might recall last year the company fell

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Speaker 2: just shy of its own target at twenty five thousand evs.

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Speaker 2: At the same time, Rivian said it's now targeting profitability

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Speaker 2: in twenty twenty four. Shares and Rivian up five percent

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Speaker 2: in late US trading.

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Speaker 1: And let's take a closer look at some earnings here

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Speaker 1: in Asia. South Korea's e commerce giant Coupong has reported

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Speaker 1: sales that beat estimates in the March quarter. We get

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Speaker 1: the story from Bloomberg's Juan Wong in Hong Kong.

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Speaker 8: Revenue rows thirteen percent to five point eight billion dollars,

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Speaker 8: exceeding the estimate of five point six billion. Operating profits

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Speaker 8: was more than one hundred and six million dollars an

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Speaker 8: active customer group five percent to nineteen million. That's as

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Speaker 8: the company's core delivery business grew exponentially during the pandemic.

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Speaker 8: Coupon also managed to sustain growth in the post pandemic period.

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Speaker 8: That's in part thanks to US fast delivery service, known

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Speaker 8: for promises of don delivery. Kupa is reportedly looking to

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Speaker 8: expand market share among new initiatives, It's expanding its delivery

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Speaker 8: business in Taiwan and Hong Kong. Joan one Bloomberg Day

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Speaker 8: Brigaisia and I'm Brian Curtis along with Doug Grisner.

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Speaker 1: I thought Lisa Shalatt made some interesting comments there. And

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Speaker 1: basically what it comes down to is from a market

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Speaker 1: point of view, if you do get an agreement, and

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Speaker 1: that agreement means a cut in spending, that may not

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Speaker 1: be good for markets because it could hurt growth. And

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Speaker 1: if there's no agreement, well, the consequences of that are

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Speaker 1: almost unmentionable.

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Speaker 2: Yeah, it's interesting to try to figure out how much

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Speaker 2: the market discounted the economic jolt from the Inflation Reduction

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Speaker 2: Act and if some of that now is in doubt,

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Speaker 2: perhaps you're right, Brian, that there is a real cloud

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Speaker 2: when it comes to growth. And speaking of growth concerns,

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Speaker 2: we can talk a little bit now about the disappointing

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Speaker 2: read on Chinese imports last night. That was a pretty

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Speaker 2: dramatic number negative what eight percent the street was looking

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Speaker 2: nearly street was looking for something only two tenths of

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Speaker 2: one percent in terms of contraction.

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Speaker 1: Yeah, it really speaks to stumbling in domestic consumption. And

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Speaker 1: we'll have to see whether that picks up. We have

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Speaker 1: been saying all along that with the recovery there that

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Speaker 1: people on the street, they're cautious because they were locked

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Speaker 1: in for a long time. They don't have the same

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Speaker 1: sort of support system and government transfer payments that we

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Speaker 1: do in the United States, and so you know, it's

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Speaker 1: not easy to let go and to do that revenge spend.

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Speaker 1: They have been doing it to a certain degree in

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Speaker 1: restaurants and bars and that sort of thing, but it's

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Speaker 1: on a lower level. It hasn't fed through yet into

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Speaker 1: the bigger ticket items and among them. We just saw

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Speaker 1: that express in the exports down seven point nine percent.

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Speaker 1: Even the export number was pretty good at eight point

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Speaker 1: five percent, but that's such a low base of comparison

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Speaker 1: when there was very little business activity at all last

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Speaker 1: year during this period because.

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Speaker 5: Of the lockdowns in Shanghai.

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Speaker 2: And if you look at what the market is telling

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Speaker 2: us right now, as measured by the Nasdaq Golden Track

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Speaker 2: in China index, the ADRs that trade here in the States,

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Speaker 2: we are down five point seven percent so far this yere.

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Speaker 2: So the market's not expecting a lot.

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Speaker 1: And I got a great line for you. It might

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Speaker 1: even get the great Doug Krisner to chuckle a little bit.

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Speaker 1: And here it is because this is also weighing on markets.

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Speaker 1: With Europe and China, we might have hit the point

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Speaker 1: where the rubber meets the built in road. You know,

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Speaker 1: it's pretty stark what we heard from two leaders in

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Speaker 1: Europe overnight. Italy is signaling, at least to the US,

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Speaker 1: it's not confirmed yet, but it's signaling it intends to

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Speaker 1: pull out of the Belton Road initiative. So that's a

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Speaker 1: pretty big deal, the only country in the G seven

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Speaker 1: that was taking part. And then you had all Off Schultz,

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Speaker 1: the German Chancellor, really talking about China as a rival

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Speaker 1: now and not a partner.

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Speaker 2: Yeah, and also Germany's foreign minister who is kind of

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Speaker 2: applying a little bit of pressure, you would think, on

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Speaker 2: Beijing to do more to try to bring some type

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Speaker 2: of end to war in Ukraine.

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Speaker 5: Yep.

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Speaker 1: And we know that that doesn't appear to be happening

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Speaker 1: anytime soon. But now it's time for global news and

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Speaker 1: speaking of the debt ceiling discussions, well, the summit there

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Speaker 1: has apparently ended with no agreement and no real movement.

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Speaker 1: Ed Baxter has the story from the nine to sixty

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Speaker 1: News from in San Francisco ed.

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Speaker 5: Yeah, Brian had a lot more rhetoric. For sure.

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Speaker 3: We will be sharing that as the program goes on.

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Speaker 3: About while we're able to grab Joe Matthew, the host

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Speaker 3: of Sound on Unbalance of Power. We're going to tie

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Speaker 3: him up and get some analysis here. So surprise, no surprise, Joe.

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Speaker 3: They came out with swords drawn, didn't they. Yeah, I'm

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Speaker 3: not the thing, and that wasn't a lot of fun

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Speaker 3: in there. I didn't see any new movement, speaker McCarthy

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Speaker 3: told reporters in the stakeout position there in the driveway,

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Speaker 3: And of course Democrats came out.

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Speaker 5: They didn't seem very happy either.

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Speaker 11: Chuck Schumer, hawking, Jefferies, everyone speaking very passionately about how

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Speaker 11: nothing happened. The meeting lasted about an hour, which is

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Speaker 11: not a great sign, but this is clearly an opportunity

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Speaker 11: for everyone to kind of start from scratch with their positions.

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Speaker 11: We know that the staff will on both ends of

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Speaker 11: Pennsylvania Avenue will keep talking tonight, and they did set

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Speaker 11: another meeting for Fridays, so that's very important here. If

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Speaker 11: that hadn't been done, if we didn't know where this

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Speaker 11: was going, this would feel a lot less comforting than

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Speaker 11: even this does now. And it seems like everyone was

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Speaker 11: really positioning themselves ahead of what would be the second meeting.

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Speaker 3: Yeah, and this we expected they would come out and

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Speaker 3: be preaching to the base, which apparently did happen. But

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Speaker 3: Chuck Schumer did say that the budget appropriations process could

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Speaker 3: begin tonight. That is a good sign, is it not?

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Speaker 5: Well, I suppose that's true.

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Speaker 11: It's just that they can't even agree on top lines,

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Speaker 11: never mind on the actual nuts and bolts of a budget.

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Speaker 5: I mean, we really don't have a budget yet.

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Speaker 11: There's when the President dropped the bill that Speaker McCarthy

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Speaker 11: had passed in the House a couple of weeks ago.

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Speaker 11: Addresses the debt ceiling. It addresses top line issues, but

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Speaker 11: doesn't kind of go through the budgeting process of drilling

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Speaker 11: down on what each department in the government needs.

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Speaker 5: There are a lot of concerns though.

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Speaker 11: About the calendar tonight, you know, knowing that going into

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Speaker 11: this meeting, both sides McCarthy and the White House said

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Speaker 11: they are not entertaining the idea of a short term solution,

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Speaker 11: either suspending or extending the debt ceiling, for instance, till

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Speaker 11: the end of September to coincide with the fiscal year.

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Speaker 11: At a lot of people that suggested that this was,

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Speaker 11: in fact what was going to happen ahead of this meeting.

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Speaker 11: Both sides say, it's not even on the table. That's

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Speaker 11: a little bit concerning, knowing that we have so little

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Speaker 11: time to figure this out between now and as early

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Speaker 11: as the first of June. I'll be very curious to

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Speaker 11: see what the market reaction is tomorrow morning after all

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Speaker 11: of this.

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Speaker 3: Now the leaders are saying there'll be no default. I mean,

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Speaker 3: I mean Mitch McConnell came up and that's the first

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Speaker 3: thing that he said coming out of How does this

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Speaker 3: square with what Janet Yellen is saying out akashould beginning

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Speaker 3: of June.

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Speaker 11: Well, look, he's saying that because he thinks that they

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Speaker 11: in fact can cut a deal between now and then.

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Speaker 11: The thing that we were lacking though, was really a

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Speaker 11: sense of optimism. When Kevin McCarthy came out of the

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Speaker 11: meeting at the beginning of February with President Biden, he said, look,

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Speaker 11: we don't agree on a lot of things, but we

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Speaker 11: know now that we can find common ground. That spirit

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Speaker 11: was really not in his remarks or the answers to

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Speaker 11: questions from reporters today, it was, you know what, we

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Speaker 11: don't like anything that we just heard, and we are

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Speaker 11: not on the same page. That's going to start trickling

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Speaker 11: into the stock market at some point soon. It's not

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Speaker 11: just Janet Yellen. The Bipartisan Policy Center, which we follow

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Speaker 11: closely on matters like this in Washington, they crunch numbers

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Speaker 11: on their own and they agree that this is likely

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Speaker 11: mid June, as early as the first of June. And

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Speaker 11: it really does not give the folks at the table here,

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Speaker 11: whether it's the President or the speaker, much time to

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Speaker 11: figure this out.

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Speaker 3: Yeah, what they got right today was a time period

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Speaker 3: about two weeks. Joe, thank you so much. Joe Matthew,

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Speaker 3: the host of Sound On and Balance of Power here

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Speaker 3: on Bloomberg Radio and Television, Global News powered by more

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Speaker 3: than twenty seven hundred journalists and analysts in over one

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Speaker 3: hundred twenty countries in San Francisco.

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Speaker 5: I'm Ed Baxter, and this is Bloomberg. Let's get to

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Speaker 5: our guest.

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Speaker 1: Dana Peterson, chief economist at the Conference Board, will join us,

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Speaker 1: as does Rishad Salamet with me Brian Curtis here in

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Speaker 1: our Hong Kong Studios. So we made the comment Dana

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Speaker 1: about whether or not there is an agreement on these

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Speaker 1: debt ceialing negotiations, that that might mean a cut in spending.

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Speaker 5: I'm sure you've looked at this.

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Speaker 1: How bad might that be for markets and growth in

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Speaker 1: the economy.

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Speaker 12: Well, I mean the cuts in spending would likely be

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Speaker 12: over a period of five to ten years, so it

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Speaker 12: wouldn't necessarily be an immediate effect, but certainly because they're

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Speaker 12: going to pull that forward and say, well, this is

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Speaker 12: a negative for the economy. But we have to remember

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Speaker 12: debt is really outsize in the US. It's just under

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Speaker 12: one hundred percent. It's going to two hundred percent of

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Speaker 12: GDP in thirty years, and so that's not really the

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Speaker 12: scenario that's good for the economy. So there needs to

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Speaker 12: be some addressing with respect to some fiscal discipline here.

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Speaker 12: Will it be painful, yes, but it's necessary in order

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Speaker 12: to make sure that the US remains a competitive economy,

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Speaker 12: not only in financial markets but globally data.

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Speaker 7: But you know, the thing is being the having the

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Speaker 7: world's reserve currency, you can print as much of it

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Speaker 7: as you like, so it doesn't really affect the US

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Speaker 7: as badly as it does other countries.

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Speaker 12: I think the US doesn't go around printing money necessarily

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Speaker 12: in the way that you might think that there's this

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Speaker 12: machine that's pumping out cash. But the thing is that

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Speaker 12: the US rides itself on paying its debt right and

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Speaker 12: also fiscal responsibility, and that certainly comes under question every

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Speaker 12: time you have a debt ceiling debacle, and certainly their

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Speaker 12: concerns that debt as a share of GDP is going

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Speaker 12: to get so out of control it's going to erode

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Speaker 12: the government's ability to invest in things that actually do

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Speaker 12: produce growth, or if there is some other crisis or

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Speaker 12: a big recession, there will be no fiscal space. It

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Speaker 12: also crowds out private investment because if you're a private investor,

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Speaker 12: would you prefer to spend or invest in a high

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Speaker 12: yield corporate bond with a lot of uncertainty or something

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Speaker 12: that might be perceived as a safe haven, which is

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Speaker 12: US treasuries. And if all that's called into doubt, then

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Speaker 12: we certainly have a big crisis on our hands, not

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Speaker 12: only in the US, but certainly for global financial markets.

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Speaker 5: Also.

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Speaker 1: In listening to trader comments, I mean, we've talked a

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Speaker 1: little bit about the complacency in markets with this debt

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Speaker 1: ceiling discussion, because we've got another three weeks to go

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Speaker 1: before we get to the deadline period, so this is

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Speaker 1: probably going to play out over the next three weeks.

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Speaker 1: But we do have the CPI report coming tomorrow, and

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Speaker 1: I was about to say that in kind of listening

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Speaker 1: to what traders have been saying and kind of testing

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Speaker 1: the waters, generally, it doesn't seem like the looming CPI

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Speaker 1: is causing a lot of angst in markets.

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Speaker 12: Why well, I guess because people are just waiting for

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Speaker 12: it to come out and it's either going to show

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Speaker 12: material improvement or not much at all. Right, So we

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Speaker 12: have seen headline PPI come off, and that's because gasoline

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Speaker 12: prices have gone negative, But it's that core measure excluding

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Speaker 12: food and energy, where you still have a lot of

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Speaker 12: pricing press pressures from housing which reflects which is really rent,

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Speaker 12: which reflects what happened eighteen months ago in the housing market,

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Speaker 12: and also very strong demand for services and insufficient supply

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Speaker 12: of workers causing labor shortages and higher wages that are

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Speaker 12: getting passed on to the consumer. So this is the

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Speaker 12: same story that we've been dealing with. So I think

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Speaker 12: markets probably only be really surprised if we saw material

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Speaker 12: improvement in that core measure. That might cause the FED

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Speaker 12: to take a look.

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Speaker 5: Dan, you know, how are you.

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Speaker 7: At the moment assessing what's happening with the American consumer?

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Speaker 7: We should always refer to the US consumers being indefatigable.

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Speaker 5: Is that consumers still that.

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Speaker 8: Well.

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Speaker 12: We do actually ask consumers worth they're thinking, and in

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Speaker 12: the short run that continue to say that they are

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Speaker 12: doing okay. That's because most consumers are working and or

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Speaker 12: they saw a modest and treats in their wages. But

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Speaker 12: when it comes to the six month outlook, consumers continually

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Speaker 12: say over the last year that they expect a recession

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Speaker 12: on the way, and they're becoming more concerned about the

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Speaker 12: business outlook, their own personal finances and certainly the jobs outlook.

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Speaker 12: And so consumers have already started pulling back on buying

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Speaker 12: durable goods, and that's because you have higher interest rates.

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Speaker 12: It costs more to finance that car, that furniture, or

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Speaker 12: that house. But consumers they're also saying they're cutting back

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Speaker 12: on highly discretionary services and really just focusing on the basics.

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Speaker 1: But Dana, if people don't lose their jobs. Can you

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Speaker 1: really see that dramatic of a pullback in spending.

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Speaker 12: Well, we've already seen spending pull back for durable goods,

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Speaker 12: and so the last piece of the puzzle really is services.

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Speaker 12: And if people think that they might lose their job,

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Speaker 12: even though they probably won't, but if they believe that,

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Speaker 12: then they will pull back on spending. And I think

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Speaker 12: that's really the last shoot to drop in terms of

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Speaker 12: softening the economy to help bring down inflation.

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Speaker 1: Right, we just came through an earning season that held

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Speaker 1: up pretty well even with the cutback and spending. The

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Speaker 1: cut back and durable goods that you mentioned. Is that

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Speaker 1: something that can continue and would they just shift to

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Speaker 1: smaller items like we talked about what we're seeing in China.

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Speaker 12: Well, I think when you look at earnings, it really

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Speaker 12: depends upon the industry. Certainly, the tech sector is not

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Speaker 12: doing very well. We're hearing of ominous soundings from transportation

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Speaker 12: warehousing because people are not purchasing as many goods as

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Speaker 12: they were purchasing, and so that means there's less the ship.

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Speaker 12: We're also seeing angst in the real estate market, certainly

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Speaker 12: as housing activity has fallen off consistent with higher interest rates.

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Speaker 12: So we do think consumers are saying to us that

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Speaker 12: they're going to shift to cheaper forms of services instead

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Speaker 12: of going to the movies, they're going to stream. So

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Speaker 12: we do think that's going to happen.

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Speaker 1: Okay, Dana, excellent stuff.

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Speaker 5: Always a pleasure to have you on the program.

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Speaker 1: Thanks very much for joining us. Dana Peterson, chief economist

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Speaker 1: at the Conference Board, And if anybody knows consumers, it's

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Speaker 1: the Conference Board. This is Bloomberg Daybreak Asia, your morning

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