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Speaker 1: This is Bloomberg Daybreak Asia for his Friday February twenty

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Speaker 1: fourth in Hong Kong, Thursday February twenty third in New

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Speaker 1: York and coming up today. US equities rebound in a

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Speaker 1: jittery session in front of tomorrow's inflation data. Ali Baba

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Speaker 1: posts its first quarterly growth since twenty twenty, but the

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Speaker 1: stock trades down and the European Commissions has spend staff

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Speaker 1: from using TikTok over security concerns. How concerned is the

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Speaker 1: US about China helping Russia? Alex Murdov begins testifying his

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Speaker 1: own defense, while Pete Budaji finally visits these Palestine, Ohio.

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Speaker 1: On Dan Schwartzman, I'll have news and sports coming up.

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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, and just one

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

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Speaker 1: App and everywhere you get your podcasts. Good morning, I'm

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

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Speaker 1: following today, JP Morgan Chase CEO Jamie Diamond saying that

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Speaker 1: there's still a chance that the US economy could reach

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Speaker 1: a soft landing. Here's Diamond speaking with CNBC the US

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Speaker 1: A kind right now. I was doing quite well. Consumers

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Speaker 1: have a lot of money, they're spending it. Jobs a plentiful.

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Speaker 1: I think it's fabulous. By the way, the wages are

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Speaker 1: going up to the low end. And so you know

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Speaker 1: here our minimum wages something like the forty percentile of

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Speaker 1: all Americans, and they get mental, dental, and medical and

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Speaker 1: things like that. But it's wonderful that's today out in

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Speaker 1: front of us. There's some scary stuff, and you and

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Speaker 1: I know there's always uncertainty. He talked about those obstacles

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Speaker 1: being the US economy facing FED rate hikes, the war

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Speaker 1: in Ukraine, energy, and also China. And he also echoed

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Speaker 1: comments that he's made in recent months on the Fed's

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Speaker 1: fight on inflation. He predicted the FED will have to

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Speaker 1: pause rate hikes, but then he said it might ultimately

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Speaker 1: have to resume the hikes to rein in inflation. We

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Speaker 1: go to Ali Baba next. The company posted its first

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Speaker 1: quarterly profit growth since twenty twenty. Even so, its US

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Speaker 1: listed shares were down today by nearly seven tenths of

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Speaker 1: one percent. We have more from Bloomberg's Von Man ali

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Speaker 1: Baba's profits surged sixty nine percent in the December quarter.

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Speaker 1: The online retailer cut costs aggressively and narrowed its losses abroad.

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Speaker 1: Net income was forty six point eight billion yen or

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Speaker 1: six point eight billion dollars, that beat the thirty five

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Speaker 1: billion yen analysts estimate. Ali Baba's ADRs initially traded six

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Speaker 1: percent higher in New York, but eventually closed down about

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Speaker 1: seven tenths of a percent. Overall revenue was only up

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Speaker 1: two point one percent, and adding to that, some investors

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Speaker 1: worry that a sustained recovery in China's consumer spending will

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Speaker 1: take some time. In Hong Kong, I'm ivon Man Bloomberg

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Speaker 1: Daybreak Asia. Meantime, privacy regulators in Canada are launching an

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Speaker 1: investigation into TikTok. We get the story from Bloomberg's David

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Speaker 1: in Glaze. Four regulators have gotten involved, from the federal

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Speaker 1: government to three provincial agencies. They're pro TikTok's collection, use

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Speaker 1: and disclosure of personal information. Regulators are also investigating whether

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Speaker 1: TikTok is complying with laws governing young users access now Elsewhere,

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Speaker 1: there was more tight scrutiny the European Commission suspended its

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Speaker 1: staff from using TikTok and employees were ordered to delete

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Speaker 1: the app from their mobile phones and corporate devices. In

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Speaker 1: Hong Kong. I'm David Ingless bloom Brick Day, brig Asia.

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Speaker 1: While President Biden will nominate former MasterCard CEO J Bonga

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Speaker 1: to be the next President of the World Bank. Now,

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Speaker 1: this election comes as Washington pushes the lender to expand

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Speaker 1: its financial fire power and confront global issues things like

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Speaker 1: climate change in public health. Here's Bloomberg's Michael McKee on

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Speaker 1: Bogna's qualifications. He's been a co chair of the Partnership

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Speaker 1: for Central America, where he worked closely with Vice President

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Speaker 1: Kamala Harris on efforts to bring business and development to

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Speaker 1: Central America to try to stem some of the refugees

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Speaker 1: flowing north to the United States. But he's also worked

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Speaker 1: very closely with micro finance. He was a city group

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Speaker 1: heading their strategy a micro Finance for a number of years,

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Speaker 1: so he's familiar with the whole process of poverty reduction

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Speaker 1: and economic development and at the same time has a

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Speaker 1: lot of management experience in his time at a Mastercart.

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Speaker 1: That is Bloomberg's Michael McKee now. If approved, j Bongo

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Speaker 1: would succeed current President of the World Bank, David Malpass.

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Speaker 1: Malpass was nominated by former President Trump. In the last week,

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Speaker 1: Malpass unexpectedly announced he's planning to leave his post by

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Speaker 1: the end of June. Well Boeing has paused deliveries of

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Speaker 1: its seven eighty seven Dreamliner over a documentation issue with

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Speaker 1: a fuselage component. The story from Bloomberg's Charlie Billett. Boeing

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Speaker 1: says production of the seven eighty seven is continuing while

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Speaker 1: deliveries are halted. The airplane maker also sees no change

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Speaker 1: to twenty twenty three production or delivery targets. Boeing said

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Speaker 1: the issue is related to a supplier analysis error. The FAA,

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Speaker 1: meanwhile says it is working with Boeing to determine any

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Speaker 1: actions that might be required for recently delivered airplanes in

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Speaker 1: New York. Charlie Pellett Bloomberg Daybreak Asia, Well, Doug, it's

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Speaker 1: a very uncertain time in markets, and I know we

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Speaker 1: have the personal consumption expenditures deflator due tomorrow and that

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Speaker 1: is expected to show an uptick in inflation. I think

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Speaker 1: Michael Shall put it pretty well at marketfield asset management,

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Speaker 1: that investors are kind of caught here between welcoming the

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Speaker 1: good economic news while at the same time fearing that

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Speaker 1: any resilience in markets will cause a stern reaction from

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Speaker 1: the Fed. Yeah. I think that's a fair statement. We

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Speaker 1: also tomorrow we'll have a personal income and spending data

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Speaker 1: for the month of January. And as a part of

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Speaker 1: the conversation that Larry Summers had with our David Weston,

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Speaker 1: mister Summers is seeing worrying signals that we could see

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Speaker 1: a potential sharp pivot to some economic weakness, so that

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Speaker 1: any change ancient growth may be kind of an abrupt thing. Brian.

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Speaker 1: Right now, the descent, I think we can agree has

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Speaker 1: been pretty gradual. Yeah. Absolutely, it's time for global news.

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Speaker 1: Let's get to Dan Schwartzman in New York. Brian. The

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Speaker 1: US concerned that China may help arm Russia in its

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Speaker 1: worth Ukraine continues to grow. A Secretary of State Anthony

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Speaker 1: Blinken accusing Chinese firms of helping Russia by giving them

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Speaker 1: non lethal items that could be used for military and

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Speaker 1: civilian use. There has been some non lethal dual use

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Speaker 1: type support coming from quote unquote Chinese companies that almost

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Speaker 1: certainly was approved by the state because there's really no difference.

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Speaker 1: Blincoln was speaking at an event hosted by The Atlantic magazine.

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Speaker 1: US officials have previously expressed displeasure with China giving Russia

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Speaker 1: diplomatic and economic support. China state broadcaster CCTV says that

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Speaker 1: so far, six people are dead and forty seven still

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Speaker 1: missing after coal mining collapse in northern China. Six people

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Speaker 1: have been rescued so far since the open pit mine

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Speaker 1: collapsed on Wednesday. The top official in the region, Sun

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Speaker 1: Shao Cheng, says regulators will begin to roll out safety

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Speaker 1: inspections across all mines in the region. Chinese President Hijinping

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Speaker 1: has called for a probe into the disaster, as well

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Speaker 1: as an all out rescue effort. Transportation Secretary Pete Boutijage

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Speaker 1: finally visiting East Palestine, Ohio today, the site of the

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Speaker 1: toxic train wreck, which occurred on February third. Federal investigators

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Speaker 1: in a preliminary reports say that the crew tried to

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Speaker 1: slow the train down after being alerted about an overheated

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Speaker 1: wheel bearing. Secretary Boutijage says the community will be getting

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Speaker 1: needed help. They're gonna have support from US when it

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Speaker 1: comes to holding Norfolk Southern accountable. They're gonna have support

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Speaker 1: from the EPA when it comes to making sure they

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Speaker 1: get accurate information about the safety of their air, water

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Speaker 1: and soil, and I think they can have support. They

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Speaker 1: ought to have support from whole country that has seen

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Speaker 1: what they've been through. Singer r Kelly has been sentenced

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Speaker 1: to twenty years in prison for child sex crimes. The

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Speaker 1: three time Grammy winner is already serving a thirty year

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Speaker 1: sentence for racketeering and violating a sex trafficking law, and

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Speaker 1: will serve nineteen of the year's concurring with the first sentence.

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Speaker 1: Prosecutors had recommended a twenty five year sentence to run

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Speaker 1: consecutively to the thirty years. A Palestinian man from Syria

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Speaker 1: has been convicted by a German court of committing a

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Speaker 1: war crime and murder after launching an anti tankarnade into

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Speaker 1: crowded civilians in line for food and Damascus back in

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Speaker 1: twenty fourteen, killing four and seriously wounding two others. The

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Speaker 1: fifty five year old was arrested in Berlin after living

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Speaker 1: in the city as a refugee. Sirious crimes committed abroad

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Speaker 1: are allowed to be prosecuted in Germany due to the

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Speaker 1: country's application of the rule of universal jurisdiction. If you,

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Speaker 1: like many others, watched the blockbuster film Top Gun Maverick,

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Speaker 1: you probably admired the FA eighteen Super Hornet flown by

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Speaker 1: star Tom Cruise. Well Boeing says they will stop manufacturing

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Speaker 1: the fighter plane in late twenty twenty five, after handing

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Speaker 1: over the final plane to the US Navy. The first

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Speaker 1: Hornet was entered into active duty back in nineteen eighty three,

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Speaker 1: before the larger, more powerful Super Hornet began service in

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Speaker 1: nineteen ninety nine. Global News twenty four hours a day,

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Speaker 1: powered by more than twenty seven hundred journalists and analysts

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Speaker 1: in over one hundred and twenty countries. I'm Dan Schwartzman,

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Speaker 1: and this is Bloomberg. This is Bloomberg Daybreak Asia. I'm

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Speaker 1: Brian Curtis along with Bloomberg's Paul Allen, and our guest

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Speaker 1: is Danielle Polly, diversified income fund co portfolio manager at

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Speaker 1: oak Tree. Danielle, when you see risk assets hold their

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Speaker 1: own on a daylight today, ahead of certain data, or

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Speaker 1: on let's say, certain types of data, it does make

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Speaker 1: you wonder how much is fully priced in markets. It

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Speaker 1: seems that everyone knows that inflation is proving sticky now

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Speaker 1: and that the FED is really committed to the job,

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Speaker 1: yet you have modest gains today. How do you read

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Speaker 1: this current environment, Bryan Paul, thank you so much for

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Speaker 1: having me on today. I think this is a very

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Speaker 1: difficult economy to read right now. There's lots of cross currents.

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Speaker 1: And what I mean by that is job growth, Retail sales,

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Speaker 1: and service sector activity of all ex accelerated recently, but

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Speaker 1: things like consumer savings have declined, while credit card openings

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Speaker 1: and balances are up. At the same time, company inventories

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Speaker 1: are building and forward guidance from the companies that were

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Speaker 1: monitoring for demand and thus output is down, especially relative

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Speaker 1: to high payroll headcounts. So looking down the road, there's

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Speaker 1: a lot of uncertainty, but I think the market seems

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Speaker 1: to be brushing that off, and it's probably because of

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Speaker 1: the weakness we saw over the last two weeks, which

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Speaker 1: we think was tied a lot to market sentiment around

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Speaker 1: the possibility of a FED pivot. You know, one of

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Speaker 1: our biggest concerns coming into this year was the market

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Speaker 1: anticipating an event that wasn't likely to happen. That these

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Speaker 1: bad news bowls were interpreting economic data like slowing job growth,

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Speaker 1: dismal economic survey data, and falling property values as evidence

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Speaker 1: that a pivot was near. But what was really missing

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Speaker 1: from that they've converged now, right, the market has more

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Speaker 1: or less converted with the FED that will be up

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Speaker 1: in the low fives by the time the terminal rate

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Speaker 1: or is all said and done. Yeah, that's that's right,

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Speaker 1: you know. I think the derivatives market had had showed traders,

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Speaker 1: you know, expecting the rate the summer to be around

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Speaker 1: five and a quarter and a month ago they were

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Speaker 1: betting that to be less than five. The current policy

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Speaker 1: is four and a half to four point seven five.

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Speaker 1: So I think the market is realizing that rates are

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Speaker 1: probably going to be higher for longer. So if for

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Speaker 1: rates are higher for longer, that does present other opportunities elsewhere.

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Speaker 1: I know, you like credit, right, where are you looking? Then? Yeah,

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Speaker 1: you're you're right. We're very excited about credit. We think

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Speaker 1: it's attractive for investors today, and with short term rates

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Speaker 1: approaching around five percent, floating rate assets in particular offer

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Speaker 1: attractive income generation. So, for example, a floating rate asset

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Speaker 1: with a spread of around four hundred basis points that's

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Speaker 1: almost nine percent and income to and a four hundred

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Speaker 1: basis point spread feels reasonable to us. It's not reflective

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Speaker 1: of a highly risky company. And of course there's other

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Speaker 1: assets like clos where you can earn even higher potential returns.

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Speaker 1: And you feel defaults who will stay more or less

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Speaker 1: under control, Well, I think we could see defaults tick

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Speaker 1: up slightly. Floating rate and higher rates. It's a double

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Speaker 1: edged sword. It does increase the interest burden for these companies,

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Speaker 1: but we do feel that it's a higher quality sub

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Speaker 1: investment grade market than it was ten years ago, having

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Speaker 1: gone through kind of the COVID pandemic period. It was

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Speaker 1: somewhat of a cleansing event with the worst companies defaulting,

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Speaker 1: some of the better companies falling into our market, fallen

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Speaker 1: angels from investment grade and in the high yield market,

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Speaker 1: for example, the percentage of double B s, I mean

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Speaker 1: it's over fifty five percent, it's up you know, at

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Speaker 1: a ten year peak. So just a generally higher quality market,

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Speaker 1: though there may be you know, individual companies an outliers

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Speaker 1: that face higher interest rates, and our job is really

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Speaker 1: to avoid those and let the winners take care of themselves.

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Speaker 1: And how about consumer strength. I know we here from

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Speaker 1: Jamie Diamond a little bit earlier on saying consumers to

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Speaker 1: have a lot of money. They're spanning at jobs are plentiful.

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Speaker 1: Are you optimistic on this front? Well, you know, savings

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Speaker 1: are declining. There were trillions of fiscal and monetary stimulus

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Speaker 1: that helps support consumers during the pandemic, but what we've

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Speaker 1: seen is those savings are largely depleted now. In turn,

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Speaker 1: credit card balances and new openings are up significantly this year,

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Speaker 1: so it's a different venue for them to spend. Delinquency

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Speaker 1: rates are not so bad, but in the US the

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Speaker 1: average interest rate on credit card debt is twenty two percent,

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Speaker 1: so over time that could present some challenges I think

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Speaker 1: for consumers at least to kind of keep up the spending.

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Speaker 1: And you do see some companies with building inventories signaling

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Speaker 1: slowing demand. When I hear you talk about the conditions

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Speaker 1: for credit, it makes me think that you think conditions

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Speaker 1: on the ground are actually not so bad. Now, if

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Speaker 1: that doesn't translate to equity or additional equity exposure, is

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Speaker 1: that because of valuations or because of something else, you know,

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Speaker 1: I think that's right. You know, earnings have thus far

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Speaker 1: been okay in the high yeld and leveraged loan market.

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Speaker 1: There's still a number of companies that need to report.

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Speaker 1: I mean, we're credit focused, we're not equity investors, but

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Speaker 1: I think more than ever, we're excited about the value proposition.

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Speaker 1: You know, US equity earnings expectations are not down a lot.

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Speaker 1: In fact, the current pe on the SMP five hundred

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Speaker 1: is over its five year average of eighteen, so probably

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Speaker 1: around twenty today, and I think for a slowing economy

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Speaker 1: that should be around fifteen or sixteen, which implies that

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Speaker 1: the SMP has a decent amount of downside, perhaps ten percent.

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Speaker 1: I just think that in this market, to be able

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Speaker 1: to invest in credit and lock in an equity like

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Speaker 1: return with a contract actual payment is a way for

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Speaker 1: investors to lower their risk profile yet still not give

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Speaker 1: up income, which I think will be very powerful this

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Speaker 1: year as we navigate potentially higher rates very quickly. Danielle,

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Speaker 1: you mentioned the slowing economy. Do you see a contracting

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Speaker 1: or as a soft landing your base case? It's so

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Speaker 1: hard to say, you know, entering this year, so many

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Speaker 1: were in the recession camp over the next twelve to

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Speaker 1: eighteen months, and recently it seems many are considering a

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Speaker 1: soft landing or no landing as a potential outcome. But

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Speaker 1: I think there has to be more volatility ahead and

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Speaker 1: some of the trends that we are seeing that I

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Speaker 1: mentioned around consumer sales falling and inventory building may lead

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Speaker 1: to uncertainty in the next few quarters. This is Bloomberg

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