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Speaker 1: This is Bloomberg Daybreak Asia, but it is Tuesday, March

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Speaker 1: seventh in Hong Kong, Monday March sixth in New York

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Speaker 1: and coming up today, markets look to FED Chair J

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Speaker 1: Powell's testimony to Congress for hints on the Fed's rate

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Speaker 1: hike path. The Reserve Bank of Australia may hike interest

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Speaker 1: rates for a tenth straight meeting as inflation remains elevated,

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Speaker 1: and UBS lifts its growth forecast for China as the

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Speaker 1: firm sees a rapid rebound in consumer spending. Legislation to

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Speaker 1: be introduced in the US to ban or prohibit some

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Speaker 1: Chinese tech. Taiwan's president will now meet the US House

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Speaker 1: Speaker in the US rather than Taiwan call for investigations

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Speaker 1: of global bio lapps. I'm at Baxter with Global News.

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Speaker 1: That's all straight ahead on Bloomberg Daybreak Asia, the business

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Speaker 1: news you need to start your day in just one

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Speaker 1: fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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Speaker 1: and everywhere you get your podcast. Good morning, I'm de

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Speaker 1: Prisoner and I'm Brian Curtis. Here are the stories we're

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Speaker 1: following today. Tomorrow we may get hints on the Fed's

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Speaker 1: rate high path. As the Chair J. Powell testifies before Congress,

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Speaker 1: Bloomberg's Michael McKee has a preview. Timing is everything, and

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Speaker 1: the FED chair doesn't seem to have it. Officials have

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Speaker 1: been saying they are data dependent, yet three of the

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Speaker 1: biggest data releases that will influence the FEDS decisions don't

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Speaker 1: come until after he testifies Tuesday and Wednesday. Powell is

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Speaker 1: likely to point out the labor market remains very tight,

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Speaker 1: a judgment they hang on the Jolts report out Wednesday.

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Speaker 1: FED officials have forecast job growth will slow and unemployment

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Speaker 1: rise as rates go up, but the job's numbers aren't

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Speaker 1: out until Friday. Of course, their focus is on inflation,

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Speaker 1: but the latest data on consumer prices don't come out

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Speaker 1: until next week. Given that Powell is likely to stick

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Speaker 1: to the FEDS working script, rates still need to go

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Speaker 1: higher and stay up longer, but he won't be able

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Speaker 1: to tell Congress how high or how long. Michael McKee,

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Speaker 1: Bloomberg Daybreak agient. We go to Jamie Diamond, next to

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Speaker 1: the CEO of JP Morgan Chase. He has two main

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Speaker 1: concerns in his outlook. We heard from earlier today at

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Speaker 1: a conference in Miami. I think I'm worry the most

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Speaker 1: about if you go, it's Ukraine, it's oil gas, so

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Speaker 1: the leadership of the world and you know our rel

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Speaker 1: asia with China. I mean that is much more serious

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Speaker 1: like the economic vibrations you all have to deal with

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Speaker 1: on a day to day basis. Jamie Diamond there, the

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Speaker 1: CEO of JP Morgan Chase. He went on to say

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Speaker 1: overall trends in the global economy are inflationary. Even so,

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Speaker 1: he thinks the American economy could still achieve a soft landing.

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Speaker 1: And he went on to say there's a good chance

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Speaker 1: that inflation will come down but not enough by the

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Speaker 1: fourth quarter. And Diamond thinks the Fed may actually have

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Speaker 1: to do a little bit more in terms of tightening. Brian, Yeah,

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Speaker 1: the market is expecting three more twenty five basis point

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Speaker 1: to hike, so up around five and a half percent.

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Speaker 1: What will be key is whether or not Powell hints

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Speaker 1: at something more being necessary. Well, let's switch to China here.

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Speaker 1: China wants consumption to play a bigger role in driving

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Speaker 1: the economy this year. That story from Bloomberg's Yvon Man.

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Speaker 1: The National Development and Reform Commission said it would take

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Speaker 1: measures to help support spending. The NDRC wants to stabilize

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Speaker 1: the buying of big ticket items and expand rural consumption.

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Speaker 1: The Commission also plans to raise household income and support

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Speaker 1: demand for better housing, for electric cars, and elderly care.

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Speaker 1: The recovering consumer spending has been rapids since the country reopened.

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Speaker 1: As a result, UBS lifted its GDP outlook for China

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Speaker 1: from four point nine percent to five point four percent.

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Speaker 1: Earlier on Sunday, China announced a growth target of around

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Speaker 1: five percent, less ambitious than many economists expected. In Hong Kong.

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Speaker 1: I'm Ivan Man Bloomberg Day Break Asia, and we are

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Speaker 1: expecting a policy decision from the Reserve Bank of Australia

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Speaker 1: at ten thirty pm Wall Street time. We have a

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Speaker 1: preview now from Bloomberg's Annabel Jewelers. Australia's central banker set

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Speaker 1: to raise interest rates for a tenth straight meeting. All

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Speaker 1: economists in our survey expect the RBA to hike its

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Speaker 1: cash rate by quarter percentage point to three point six percent.

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Speaker 1: That would be to a level not seen since May

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Speaker 1: of twenty twelve. Australian policymakers are grappling with elevated inflation,

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Speaker 1: slowing growth, and rising unemployment. Traders will be focus on

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Speaker 1: whether RBA Governor Philip Lowe continues with his guidance of

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Speaker 1: further hikes ahead. Lowers struggled to maintain a consistent message.

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Speaker 1: The RBA considered a pause in December and toured hawkish

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Speaker 1: in February following strong consumer price data. Now, money markets

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Speaker 1: are pricing a peak rate of four point two percent

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Speaker 1: this year, suggesting at least three more quarter point hikes

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Speaker 1: to come. In Hong Kong, I'm Annabel Ruler's Bloomberg daybreak Asia.

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Speaker 1: Back in the United States, a major airline deal may

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Speaker 1: end up in court, with action taken as early as Tuesday.

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Speaker 1: Bloom Breaks and Kate's reports, the Justice and Transportation Departments

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Speaker 1: planned to block Jet Blues nearly four billion dollar with

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Speaker 1: Spirit Airlines. Officials with Justice are expected to file an

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Speaker 1: antitrust law suit in federal court, alleging that the combination

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Speaker 1: of the two carriers would increase airfares and decrease options

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Speaker 1: for travelers. The Transportation Department will begin a parallel proceeding

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Speaker 1: to block the transfer of Spirits airline certificate as incompatible

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Speaker 1: with the public interest. Something the agency has not done

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Speaker 1: since the airline industry was deregulated in nineteen seventy eight

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Speaker 1: in Washington and Kate's Bloomberg day Break Asia. So, Doug,

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Speaker 1: the bond market made a pretty big move last week,

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Speaker 1: the stock market not so much. We've sort of chopped

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Speaker 1: around here for the S and P five hundred between

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Speaker 1: thirty eight hundred and forty two hundred, going back for

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Speaker 1: five or six months or so. We've got four big

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Speaker 1: events coming up, so you've got about well potentially thirteen

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Speaker 1: days of angst before the Fed pulls the trigger. Yeah,

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Speaker 1: we mentioned the Powell testimony and the employment report at

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Speaker 1: the end of the week. Let's push your the end

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Speaker 1: to next week, Brian, because that's when we get the

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Speaker 1: US Consumer Price Index data. I don't know if you saw.

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Speaker 1: The Cleveland Fed puts out an inflation model, and this

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Speaker 1: has been remarkably accurate in predicting price pact pressures. And

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Speaker 1: one of the things this model suggests is that headline

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Speaker 1: CPI in the US will rise in the month of

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Speaker 1: February by six point two percent from last year. Core

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Speaker 1: would be up five and a half percent. So, to

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Speaker 1: go back to the Powell story, inflation in the States

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Speaker 1: remains very, very hot, and I think there is a

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Speaker 1: risk that rates do remain higher for longer. Right now,

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Speaker 1: I think we can agree the market's expecting maybe a

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Speaker 1: terminal rate of five and a half percent. Maybe it

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Speaker 1: does get closer to six. Who knows. Yeah, it just

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Speaker 1: sort of feels in our gut that it's going to

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Speaker 1: go up a little bit more, but that will have

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Speaker 1: to wait and see. Meantime, we've got Chinese export data today,

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Speaker 1: and if those exports a week as expected, a Bloomberg

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Speaker 1: survey is estimating exports will have dropped nine percent in February.

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Speaker 1: It could be that that means that the strong pmis

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Speaker 1: that we had that a lot of that is domestic

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Speaker 1: grow and so that would be very welcome news for

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Speaker 1: an economy that is struggling to get going. Yeah, and

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Speaker 1: particularly welcome news for leadership that would like to see

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Speaker 1: the Chinese economy less dependent on the rest of the world.

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Speaker 1: I think that's fair. Yeah, they really are pushing for

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Speaker 1: domestic consumption. Alright, it's time now for global news. Two

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Speaker 1: US senators plan to introduce legislation this week aimed at

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Speaker 1: regulation of technology products from China. Ed Baxter has global

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Speaker 1: News and Ed. Does that read TikTok Oh. Yeah, they're

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Speaker 1: calling it the piktok bill exactly, Brian. The aim is

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Speaker 1: letting the US ban or prohibit the use of Chinese tech.

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Speaker 1: Bloomberg's Kaylee Lyons says Senator Mark Warner is a co sponsor.

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Speaker 1: He has two concerns here, one about the potential propaganda element,

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Speaker 1: the other about data security, because as we're all squirling

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Speaker 1: on TikTok our data is being collected in the concern

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Speaker 1: is that by Dance being a Chinese company, then would

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Speaker 1: have that data being shared with the Chinese government and

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Speaker 1: would give the US a right under national secure concerns.

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Speaker 1: It may be as early as tomorrow. We're seeing now

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Speaker 1: a report today that US House Speaker Kevin McCarthy says

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Speaker 1: he's going to change plans for meeting with Taiwan President Siang.

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Speaker 1: When McCarthy plans now to meet in his home state

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Speaker 1: of California rather than traveling to Taiwan, Financial Times reports

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Speaker 1: he hopes to avoid any aggressive response from Beijing, so

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Speaker 1: I will visit both California New York in early April

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Speaker 1: as part of a trip that includes Central America. Focus

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Speaker 1: on the origins of the COVID pandemic are changing a

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Speaker 1: bit to say the globe needs to set up systems

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Speaker 1: from monitoring global biolabs like the one in Wuhan, China.

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Speaker 1: Democratic Congressman Jake Auchincloss of Massachusetts on Bloomberg sound On says, Yeah,

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Speaker 1: it's time to move. We know that we need to

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Speaker 1: be preparing for zoanatic diseases by increasing R and D

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Speaker 1: and infectious disease aid to developing nations. We also know

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Speaker 1: that we need to be on guard for ME and

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Speaker 1: meat diseases by increasing our biodefenses. And Bloomberg's Rick Davis

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Speaker 1: has time to make some major decisions. And why aren't

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Speaker 1: we investigating these labs. We do it with people who

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Speaker 1: refine nuclear material, but that COVID has killed more people

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Speaker 1: than nuclear material has since it was invented. Rick says

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Speaker 1: it will show how serious that the globe wants to be.

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Speaker 1: Concern is being expressed today. The US is not interested

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Speaker 1: in global trade. Suzanne Clark is a US Chamber of

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Speaker 1: Commerce president and CEO, and here on Bloomber do you

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Speaker 1: think about the fact in the last ten years the

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Speaker 1: US hasn't signed a single trade agreement. Well, the rest

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Speaker 1: of the world is inked a hundred. It's clear that

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Speaker 1: we are being left behind. We are pushing this administration

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Speaker 1: to get us out of the time out box on

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Speaker 1: trade and back in the playing field. And Clark says

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Speaker 1: that frameworks have been laid with nations like UK and

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Speaker 1: Kenya and have not been done. She says no explanation

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Speaker 1: other than they are anti trade. Iran Supreme Leader is

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Speaker 1: now saying the reported poisoning of hundreds of Iranian girls

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Speaker 1: in recent this is an unforgivable crime. He says he

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Speaker 1: has started an investigation. Meanwhile, White House spokes when Karine

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Speaker 1: Jean Pierre is calling for an independent global investigation. The

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Speaker 1: continued poisoning of schoolgirls across Iran is uncastionable. There must

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Speaker 1: be a credible, independent investigation, accountability for those responsible, she says,

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Speaker 1: shameful and unacceptable. Global news powered by more than twenty

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Speaker 1: seven hundred journalists and analysts and over one hundred and

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Speaker 1: twenty countries. In San Francisco, I'm at Baxter and this

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Speaker 1: is Bloomberg. I'm Brian Curtis along with Richard Salama. Our

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Speaker 1: guest is Gary Schlossberg, a global strategist at Wells Fargo

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Speaker 1: Investment Institute, Gary. We're always trying to read the message

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Speaker 1: of the market. I mentioned that we've been range bound

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Speaker 1: here on the SNP between thirty eight hundred and forty

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Speaker 1: two hundred or smack dab in the middle here. What

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Speaker 1: is the message of the market at the moment? I

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Speaker 1: think it's caution bordering on apprehension at the reserve, a

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Speaker 1: concern that while the economy continues to hold up well,

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Speaker 1: the upside to Fed policy rate increases has certainly risen

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Speaker 1: a bit. We, like most others, are looking for a

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Speaker 1: five and a half percent terminal rate on the upside,

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Speaker 1: but there's every possibility that it could move higher if

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Speaker 1: both the activity data and the CPI numbers out over

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Speaker 1: the next couple of months remain elevated. So you know,

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Speaker 1: this is the question to ask quite a few of

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Speaker 1: our guests, which is what is the divorce between the

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Speaker 1: markets thinking and the message from the Federal Reserve. Well,

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Speaker 1: I think the market feels that the Federal Reserve is

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Speaker 1: toward the end of its tightening cycle. It will be

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Speaker 1: raising rates several more times, but the increases themselves have

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Speaker 1: tapered off to twenty five basis points. I think that

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Speaker 1: could be a little bit of a jolt if the

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Speaker 1: FED decided, given the economic data, to resume those half

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Speaker 1: percentage point increases. We don't expect that, but I think

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Speaker 1: the market would be kept off guard as well. And

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Speaker 1: you know, against that backdrop, the economy continues to do well,

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Speaker 1: and so the market tends to look through the potential

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Speaker 1: for those moderate increases in interest rates going forward. The

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Speaker 1: net of it is a reasonably good economic environment. But

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Speaker 1: the downside to that is that if the FED moves

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Speaker 1: more aggressively, or there's any sign of the loss of

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Speaker 1: momentum by the then we could see an advertise reaction

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Speaker 1: by the market. Well, at the moment, the market's estimate

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Speaker 1: of the terminal rate is higher than the Feds. So

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Speaker 1: right now, whatever you see in the bond market in

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Speaker 1: the stock market, it is based on the market reading

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Speaker 1: of the terminal rate of five and a half percent.

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Speaker 1: The last reading we got on the dot plots was

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Speaker 1: back in December, and now that may go up now

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Speaker 1: above five point five percent. But it seems like they're

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Speaker 1: sort of all understanding that it's the data that will

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Speaker 1: drive this. You can't make the decision what is going

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Speaker 1: to be like in three months. You have to live

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Speaker 1: through it. What I'm curious about is what is the

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Speaker 1: intersecting line between you know, your estimate of when we

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Speaker 1: see inflation actually peeking and disinflation taking over. We're moving

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Speaker 1: down in a convincing fashion. Where does that connect with

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Speaker 1: the FED saying it it pauses? Well, I think we're

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Speaker 1: really going to have to wait until we're into a recession.

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Speaker 1: We expect inflation's ride to be a bumpy one going forward.

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Speaker 1: We could see some upside bias for a time, but

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Speaker 1: that sustained move lower, and we think that the downside

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Speaker 1: potential is there, but not there until the recession really

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Speaker 1: begins to bite and excess capacity opens up and the

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Speaker 1: pullback and spending is sufficient enough to allow inflation to

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Speaker 1: come out with the boil. We're looking for the recession

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Speaker 1: in the second half of the year, but that intersect

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Speaker 1: may not come until late summer early in the fall.

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Speaker 1: To me, something here as well, when you look at

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Speaker 1: markets themselves and trading here to you know, one gets

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Speaker 1: a feeling. In fact, this efectually PHAs elicidated this better

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Speaker 1: than I have, and that is that something might break

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Speaker 1: as you've got these very attractive high short term yields

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Speaker 1: out that you've got quantitative tightening as well, and all

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Speaker 1: of that can tries to get it to suck the

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Speaker 1: liquidity out of everything else. He's seeing a problem with liquidity,

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Speaker 1: not just yet. If the former chairman Greenspan was sitting here,

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Speaker 1: he I think would probably call it, as he put it,

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Speaker 1: a conundrum. If you look at the real or effective

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Speaker 1: said funds rate, the better measure of the bite to

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Speaker 1: monetary policy on economic activity, you could argue it still

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Speaker 1: remains quite low. It's still running below the inflation rate.

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Speaker 1: In the run up to the global financial crisis, which

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Speaker 1: some people consider more normal times, it was a positive

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Speaker 1: one and a half percent. Having said that, the view

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Speaker 1: on liquidity I think is mixed. We are seeing a

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Speaker 1: tightening bank credit standards are tightening up quite a bit.

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Speaker 1: Money growth has turned negative for the first time and

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Speaker 1: at least the last sixty sixty five years, so there

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Speaker 1: is evidence that it is tightening up. But it is

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Speaker 1: against the backdrop of a sizeable amount of money relative

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Speaker 1: to GDP. The stock amount of liquidity is still considerable,

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Speaker 1: which puts with that relatively real FED funds written a

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Speaker 1: moment on China, we're getting the trade data today. What

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Speaker 1: are you expecting? Do you like China? Are you cautious?

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Speaker 1: Where do you go? Well? I think we're less cautious

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Speaker 1: than we were, say a month or so ago. It's

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Speaker 1: clear that the economy is coming back a bit following

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Speaker 1: the withdrawal of that zero COVID policy. The nature the

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Speaker 1: mix of economic growth may be less beneficial, of course,

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Speaker 1: to the global economy that it might have been otherwise.

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Speaker 1: The Chinese government over the weekend set that five percent

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Speaker 1: growth target for twenty twenty three and did say that

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Speaker 1: the focus would be more on the consumer that tends

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Speaker 1: to be less important tensive than an investment driven policy.

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Speaker 1: The traditional growth in in China more important. Nson, This

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Speaker 1: is Bloomberg Daybreak Asia, your morning brief on the stories

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Speaker 1: making news from Hong Kong to Singapore and Wall Street.

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