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Speaker 1: Let's get to our guest home and Lee is with

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Speaker 1: US Asia macro strategist at Lombard Odier. We're going to

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Speaker 1: take a look at some of the price action today,

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Speaker 1: a lot of volatility with first the news report from

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Speaker 1: a p that Russian missiles fired at Ukraine landed in Poland.

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Speaker 1: Markets seem to be pretty resilient. Do you think that

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Speaker 1: they are kind of under appreciating geopolitical risk right now? Well,

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Speaker 1: thank you for having me, doc. Obviously, it seems that

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Speaker 1: markets taking the view that this might have been a

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Speaker 1: an accidental strike on NATO territory, so it will lead

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Speaker 1: to the discussions within the within the NATO about what

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Speaker 1: to do in response. But I think there is a

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Speaker 1: bit of understanding here that both sides, given the stakes

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Speaker 1: of potential escalatory spiral UM more measured responses quite likely

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Speaker 1: and it just seems to be the market pustion now. UM,

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Speaker 1: it's very difficult to predict how this will evolve going forward. UM,

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Speaker 1: we really don't know apart from the distrike itself and

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Speaker 1: the casualties. Uh, you know what what the intent of

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Speaker 1: you know, the Russian side is. UM. So far they

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Speaker 1: seem to be denying UM that this was intentional, but

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Speaker 1: again we'll have to see, you know, we'll have to

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Speaker 1: you know, digesting you know, the news after the dust

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Speaker 1: settles down. For us UM, Europe is already adjusting for

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Speaker 1: the absence of Russian pipeline gas supply. So this is

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Speaker 1: done deal in our going forward that they're going to

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Speaker 1: depend more on gas from elsewhere. So for the energy

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Speaker 1: market maybe it's less of a factor unless you have

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Speaker 1: a massive escalation. But for the food UM, it's something

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Speaker 1: that we're watching very thoroughly because you know, so far

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Speaker 1: we have disruptions in the first chemical fertilizer induction UM

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Speaker 1: and of course the grain corridor deal that's still holding

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Speaker 1: at the moment, but it could go away. So you know,

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Speaker 1: if something happens on that front, it's going to be

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Speaker 1: pretty tricky, especially for emerging markets. But so far we

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Speaker 1: don't have any new development on that front, so that's

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Speaker 1: that's mildly encouraging. Well, let's stay with the geopolitical story.

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Speaker 1: Yesterday's meeting between Presidents Biden and she it seems as

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Speaker 1: though there was the hope of warmer ties or a

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Speaker 1: warmer relationship between these two superpowers. China now is is

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Speaker 1: making a move to support its economy. There is some

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Speaker 1: relief being applied to both the property sector and to

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Speaker 1: the COVID curbs. Are you more optimistic now that that

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Speaker 1: China is going to be able to recover maybe on

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Speaker 1: a better path than it would otherwise have been on

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Speaker 1: a couple of months ago. We're cautiously hopeful that we

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Speaker 1: can avoid the major escalation between the two countries in

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Speaker 1: the in the the term. Um. What's noteworthy is that

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Speaker 1: China began to talk to the US side despite the

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Speaker 1: recent expert controls on the semi conductor sector. So it

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Speaker 1: highlights the willingness to talk and maybe uh, you know,

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Speaker 1: reduced the tension a little bit. So because this appears

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Speaker 1: to be more of an initiative from the Chinese side,

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Speaker 1: we think there is a chance for this kind of

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Speaker 1: you know, a small approach mone to to hold between

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Speaker 1: the two countries in the pery near term. For the

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Speaker 1: long run, that will continue to do with the uncertainty

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Speaker 1: surrounding Taiwan straight and that you know, the tech competition

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Speaker 1: between the two countries. But at least in the near

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Speaker 1: term now there there seems to be a pretty decisive shift,

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Speaker 1: pragmatic shift on the Chinese side of the Pacific to

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Speaker 1: to focus more on the economy and basically avoiding avoid

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Speaker 1: you know, introducing new shops to the economy. So that

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Speaker 1: that's that modestly positive in our view. So away from geopolitics, hum,

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Speaker 1: and it's really about inflation and the response that central

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Speaker 1: banks have been kind of creating to fight it. We know,

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Speaker 1: it's not just a FED story. It's the Bank of

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Speaker 1: Korea as well, it's the Reserve Bank of Australia, so

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Speaker 1: a number of central bankers have been challenged to try

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Speaker 1: to get it right here. First, do you think we're

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Speaker 1: at the point of peak inflation? Are we past that? Maybe? Uh,

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Speaker 1: we are becoming more hopeful, um that the we are

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Speaker 1: past the peak inflation for key economies, you know, studying

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Speaker 1: with the US, but in some parts of emerging markets.

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Speaker 1: So and of course you know the we're dealing with

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Speaker 1: fairly tight labor markets, but the condition will change next year.

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Speaker 1: We're actually slightly more cautious on unemployment rate rejectory compared

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Speaker 1: to the consensus at the moment. So if you are

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Speaker 1: right in that protection, then uh, the macro rationale to

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Speaker 1: stop rate hikes will be pretty strong. In only two

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Speaker 1: dozen twenty three, and therefore we're looking for consequential pivots

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Speaker 1: in monetary policy in the middle of two three, because

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Speaker 1: you know, by the by the middle of it would

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Speaker 1: be very clear that there will be some damage for

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Speaker 1: the real economy. So uh, well, we are probably past

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Speaker 1: the peak inflation. We are approaching peak rates in a

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Speaker 1: few months time, and that will really shift the tone

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Speaker 1: in markets. We're not quite there yet. We still have

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Speaker 1: some recession risks and to your politalisks to digest in

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Speaker 1: the new term, but six to nine months from now, um,

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Speaker 1: we're pretty certain that the tonal market conversation will be

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Speaker 1: quite different. Holman, it really enjoyed the conversation. Thanks so

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Speaker 1: much for making time to speak with us here on

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Speaker 1: daybreak Asia home Man Lee is Asia macro strategist at

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Speaker 1: Lombard Odier