WEBVTT - Fed Raises Rates and Meta Earnings Beat

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<v Speaker 1>Good morning. I'm Doug Krisner and I'm Brian Curtiz. Here

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<v Speaker 1>are the stories we're following today. The FED raised interest

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<v Speaker 1>rates to the highest level in twenty two years. The

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<v Speaker 1>benchmark FED funds rate was lifted to five and a

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<v Speaker 1>half percent from five and a quarter FED share at

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<v Speaker 1>Jay Powell said that additional hikes will depend on incoming data.

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<v Speaker 2>We're going to be going meeting by meeting, and as

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<v Speaker 2>we go into each meeting, we're going to be asking

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<v Speaker 2>ourselves the same question. So we haven't made any decisions

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<v Speaker 2>about any future meetings, including the pace at which we'd

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<v Speaker 2>consider hiking, but we're going to be assessing the need

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<v Speaker 2>for further tightening that may be appropriate. You read the

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<v Speaker 2>language to return inflation to two percent over time. It

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<v Speaker 2>is certainly possible that we would raise funds again at

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<v Speaker 2>the September meeting if the data warranted, and.

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<v Speaker 1>He also said that the future data could justify holding

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<v Speaker 1>interest rates steady at that meeting. He said the FED

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<v Speaker 1>would also take into account the cumulative tightening of monetary policy,

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<v Speaker 1>and he added that the FMC will assess how the

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<v Speaker 1>lags affect economic activity and inflation.

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<v Speaker 3>We heard from meta platforms after the bell, the company

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<v Speaker 3>reported better than expected revenue for the second quarter, and

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<v Speaker 3>it gave a rosy forecast for the current quarter, Meta

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<v Speaker 3>saying that sales will be between thirty two to thirty

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<v Speaker 3>four and a half billion. That's above analysts projections. It

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<v Speaker 3>seems to be assigned. Meta is succeeding in migrating advertisers

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<v Speaker 3>to its short form video service called Reels. Meta has

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<v Speaker 3>been betting on Reels as a way of drawing more

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<v Speaker 3>attention to its social networks. Meta also recently introduced a

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<v Speaker 3>competitor to Twitter. It's called Threads. The company is hoping

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<v Speaker 3>it will boost business longer term. We heard from Scott

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<v Speaker 3>Kessler earlier. He's at Third Bridge.

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<v Speaker 4>I think a lot of people are really interested to

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<v Speaker 4>see progress when it comes to Reels and then monetization

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<v Speaker 4>plans as it pertains to Threads. Particularly we're in the

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<v Speaker 4>summer now, but soon enough, folks are going to be

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<v Speaker 4>planning for the holiday shopping season. There's a great opportunity

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<v Speaker 4>for Meta to do something with Threads along those lines.

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<v Speaker 3>There over at Third Bridge. By the way, Meta is

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<v Speaker 3>also investing heavily in artificial intelligence, and it's using the

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<v Speaker 3>technology to make recommendations for both content and advertising. The

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<v Speaker 3>hope here is for both to be more tailored to

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<v Speaker 3>the interest of users, and right now, if you look

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<v Speaker 3>at Meta shares and late trading hire by nearly eight percent.

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<v Speaker 1>Brian the Pentagon is seeking new supply of a mineral

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<v Speaker 1>that's used in semiconductors and military radar systems that would

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<v Speaker 1>be denied by China. Let's get the story from Bloomberg's

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<v Speaker 1>and Kates.

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<v Speaker 5>The Pentagon plans to issue a first time contract to

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<v Speaker 5>US or Canadian companies by year end to recover gallium

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<v Speaker 5>after China curbed exports this month. The Pentagon does not

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<v Speaker 5>have reserves of gallium and wants to focus on recovering

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<v Speaker 5>the mineral from existing waste streams of other products. Gallium

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<v Speaker 5>is used in navy radar, on vessels for air and

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<v Speaker 5>missile defense, and by the Army and Marines in ground

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<v Speaker 5>based radar. In Washington and Kates Bloomberg Day Break Asia.

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<v Speaker 3>We go to Volkswagen next. The company is planning to

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<v Speaker 3>envest seven hundred million US in the Chinese ev maker

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<v Speaker 3>x Pong. We have more from Bloomberg's Juan Wong in Hong.

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<v Speaker 6>Kong Voltswagens that would jointly develop EVS in China with

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<v Speaker 6>x Pong, and with the investment, it'll hold about a

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<v Speaker 6>five percent stake in the Chinese company. Two new battery

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<v Speaker 6>powered models are being planned. The first is due to

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<v Speaker 6>arrive in twenty twenty six. Voltswagen's EV sales in China

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<v Speaker 6>dipped in the first half of this year. In the market,

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<v Speaker 6>the crew twenty percent in Hong Kong. I'm joined wog

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<v Speaker 6>Bloomberg day Brikasia.

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<v Speaker 3>Meantime, the CEO of Stilantis, Carlos Tavares, says he is

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<v Speaker 3>happy to be downsizing in China. He said Volkswagen, along

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<v Speaker 3>with General Motors and other foreign car makers, are under

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<v Speaker 3>pressure as local competitors slash prices.

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<v Speaker 1>Right, Yeah, not just the foreign makers, but listen to

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<v Speaker 1>this one. China's everground NEV has reported eleven point seven

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<v Speaker 1>billion dollars of losses that were accumulative over the past

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<v Speaker 1>two years. Bloomberg's Bonnyao as the story from Hong Kong.

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<v Speaker 7>The EV unit suffered a NETLOK close to four billion

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<v Speaker 7>dollars last year and nearly double that the year before.

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<v Speaker 7>The company also warned of its ability to continue as

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<v Speaker 7>a going concern. The Everground unit had initially aimed to

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<v Speaker 7>take on Tesla and at one time had a greater

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<v Speaker 7>market value than Ford Motor, but it was weepped up

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<v Speaker 7>in a dead crisis that engulfed its parent. The company

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<v Speaker 7>said it delivered about one thousand vehicles from October through May.

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<v Speaker 7>It was originally targeting one million units by the end

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<v Speaker 7>of twenty twenty five. The company said it's negotiating with

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<v Speaker 7>banks about renewing existing borrowings and corporate bonds that were

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<v Speaker 7>mature by the end of the year. In Hong Kong,

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<v Speaker 7>I'm Bonnie ol Bloomberg Day Break Asia.

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<v Speaker 1>I'm Brian Curtis here in Hong Kong along with Doug

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<v Speaker 1>Krisner and our colleague Rishad Salama will join us in

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<v Speaker 1>a few moments. So, Doug, just looking here at the

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<v Speaker 1>FED decision today. I think the focus will switch pretty

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<v Speaker 1>quickly to earnings. But anyway, from the meeting, it seems

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<v Speaker 1>like the FED is just buying some time here, hoping

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<v Speaker 1>or waiting to see if the data eventually backs up

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<v Speaker 1>what most markets are assuming that the FED is getting

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<v Speaker 1>pretty close to the end of the hiking cycle.

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<v Speaker 3>Yeah, I think you're right the swaps market right now,

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<v Speaker 3>indicating there's only a fifty percent probability of one more

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<v Speaker 3>twenty five basis point hike between let's say now in

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<v Speaker 3>the end of the year. And I thought one of

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<v Speaker 3>the most hawkish things that I heard today Brian is

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<v Speaker 3>Powell saying he doesn't see inflation returning to the Fed's

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<v Speaker 3>two percent goal until twenty twenty five. That's a long

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<v Speaker 3>time away.

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<v Speaker 1>Yeah, that's one of his theories, and that has been

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<v Speaker 1>I think in the market. He's been pushing that line.

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<v Speaker 1>There are plenty of FED policymakers though, that are looking

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<v Speaker 1>at possibly seeing some FED cuts next year. And it

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<v Speaker 1>was also telling when he was asked the question about

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<v Speaker 1>do you keep on hiking all the way down to

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<v Speaker 1>two percent, and he more or less said no, and

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<v Speaker 1>that getting that balance right is really what the sort

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<v Speaker 1>of decision will be is when do they start adjusting

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<v Speaker 1>as they see inflation coming down?

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<v Speaker 3>Yeah, and FED staff not predicting a recession at this point.

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<v Speaker 3>That's a bit of a change. And so Powell seems

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<v Speaker 3>to support the idea that the FED can be successful

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<v Speaker 3>and engineering a soft landing.

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<v Speaker 1>Yeah, we've got Dennis Lockhart, the former president of the

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<v Speaker 1>Fed Bank of Atlanta coming up to discuss this, and

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<v Speaker 1>of course, as mentioned, the focus really will switch back

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<v Speaker 1>to earnings quite aggressively during this very busy period, and

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<v Speaker 1>we'll get you more on that all throughout the morning.

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<v Speaker 1>Now it's time for Global news. US Secretary of State

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<v Speaker 1>Anthony Blincoln is continuing to take aim at China's global ambitions.

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<v Speaker 1>At Baxter has Global News from the nine to sixty

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<v Speaker 1>news room in San Francisco.

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<v Speaker 4>Ed.

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<v Speaker 8>Yeah, right, Brian, He's the latest on Tonga and spoken

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<v Speaker 8>very stern terms about Beijing's military and economic ambitions. There

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<v Speaker 8>has been some, from our perspective, increasingly problematic behavior, including

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<v Speaker 8>at the same time, the assertion of unlawful maritime claims.

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<v Speaker 8>Lincoln says the Indo Pacific must stand up to the

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<v Speaker 8>blatant expansionism unexpected twists and turns. In the Hunter Biden

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<v Speaker 8>tax trial, after an initial agreement with prosecutors to plead

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<v Speaker 8>guilty to misdemeanor tax charges, the judge said she needed

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<v Speaker 8>to look at how far ranging the deal was, with

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<v Speaker 8>implication to gun charges that are still being investigated against Biden.

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<v Speaker 8>Biden then came back to plead not guilty until the

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<v Speaker 8>deal can be more fully examined. White House Press Secretary

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<v Speaker 8>Korean Jean Pierre says that the Biden administration estayed clear

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<v Speaker 8>of the whole.

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<v Speaker 9>Proceeding Hunter Biden is a private citizen and this was

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<v Speaker 9>a personal matter for him. As we have said, the President,

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<v Speaker 9>the first Lady. They love their son and they support

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<v Speaker 9>him as he continues to rebuild his life.

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<v Speaker 8>It might be noted the outstanding tax bill has already

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<v Speaker 8>been paid, but the issue remains political. House Speaker Kevin McCarthy.

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<v Speaker 1>There shouldn't be two justice systems in America, and hopefully

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<v Speaker 1>today that's what's being to do.

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<v Speaker 8>And Bloomberg's at Julie Fine with balance of powers, Joe

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<v Speaker 8>Matthews says, useful for Republicans, evanence or.

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<v Speaker 9>Not, whatever they do, they get to keep the issue alive,

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<v Speaker 9>and it's alive during a campaigns or not.

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<v Speaker 7>This is Washington City.

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<v Speaker 8>Yeah, so we're ready for another year. Taiwan's Foreign Minister

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<v Speaker 8>Joseph Wu says China has been stepping up what he

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<v Speaker 8>calls cognitive warfare leading up to the election. He says

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<v Speaker 8>China is trying to influence people into thinking that the

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<v Speaker 8>US is not trustworthy. Well, Wu sites. Conspiracy theory is

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<v Speaker 8>that the US wants to ruin Taiwan's semiconductor industry. Wu

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<v Speaker 8>tells Bloomberg China that China is trying to play a

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<v Speaker 8>role in the election, and that quote, I think they

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<v Speaker 8>should try their own democratic elections inside China. As Senate

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<v Speaker 8>Republican leader Mitch McConnell started a news conference at the

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<v Speaker 8>Capitol Day, he abruptly stopped in frozen place for about

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<v Speaker 8>twenty seconds. It's been good by Barzan cooperation and a

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<v Speaker 8>strain of.

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<v Speaker 1>Now.

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<v Speaker 8>His aids led him away after about two twenty seconds,

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<v Speaker 8>but he returned minutes later to say he was fine.

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<v Speaker 8>His aides refused to answer questions. McConnell earlier this year

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<v Speaker 8>suffered a concussion and a broken rib because of a

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<v Speaker 8>fall at a fundraiser. He was off work for about

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<v Speaker 8>a month. Global News powered by more than twenty seven

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<v Speaker 8>hundred journalists and analysts in over one hundred twenty countries.

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<v Speaker 8>In San Francisco, I'm Ed Baxter, and this is Bloomberg.

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<v Speaker 1>This is Bloomberg Daybreak Asia. I'm Brian Curtis here in

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<v Speaker 1>Hong Kong, along with Rashad's Salamat in London and joining

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<v Speaker 1>us now is Dennis Lockhart, former president of the Federal

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<v Speaker 1>Reserve Bank of Atlanta, to take a closer look at

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<v Speaker 1>the FED decision. Mister Lockhart, thanks very much for being

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<v Speaker 1>with us. So a very highly anticipated result today, really

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<v Speaker 1>not all that much new. What did you find the

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<v Speaker 1>most telling in share palace comments?

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<v Speaker 10>I thought he he didn't tell us a lot new.

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<v Speaker 10>Quite frankly, he repeated the mantra that we've heard many

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<v Speaker 10>times before, and that is meeting by meeting, data dependent,

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<v Speaker 10>no preordained or predetermined path or pace. This was to me,

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<v Speaker 10>quite frankly a ho hum press conference and result of

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<v Speaker 10>the meeting, the twenty five basis point move, as you

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<v Speaker 10>pointed out, was very highly anticipated, and he kept his

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<v Speaker 10>options open. He really didn't commit or even give guidance

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<v Speaker 10>as to what would happen at the September meeting or

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<v Speaker 10>the October November meeting.

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<v Speaker 11>Mister Lockott, he has a lot to contend with in

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<v Speaker 11>the sense he's got pressure from all different sides. What

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<v Speaker 11>would you have said.

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<v Speaker 10>Well, let me throw j. Powell a bouquet. I think

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<v Speaker 10>he speaks in simple and straightforward terms of very pragmatic

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<v Speaker 10>kind of tone to what he has to say it's

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<v Speaker 10>not technical. He doesn't sound all that much like a

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<v Speaker 10>central banker, and I thought he communicated well the situation

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<v Speaker 10>they're in, and that is that they've had some encouraging

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<v Speaker 10>inflation data, but relatively recently, and it's not enough to

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<v Speaker 10>bank on, and they are simply going to proceed and

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<v Speaker 10>let the data tell them what the situation is. He

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<v Speaker 10>did point out in the press conference that they will

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<v Speaker 10>receive a number of reports between today and the September meeting,

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<v Speaker 10>which will mean they'll have a little bit more of

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<v Speaker 10>a rich set of data to look at, and that

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<v Speaker 10>could help them determine what they want to do either

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<v Speaker 10>at that meeting or at the October November meeting.

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<v Speaker 1>In some ways, it's actually very convenient that they've got

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<v Speaker 1>eight weeks here. Normally they have six weeks in between meeting,

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<v Speaker 1>but this one stretches on a little bit and it

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<v Speaker 1>gives them a lot more data to look at. The

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<v Speaker 1>comment that I made to my colleague Doug Prisner earlier

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<v Speaker 1>was that it would seem that the Fed assumes it's

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<v Speaker 1>going to get data that will back up what both

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<v Speaker 1>the bond and stock market seem to be anticipating, and

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<v Speaker 1>that is that they're getting pretty close to the end

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<v Speaker 1>of the hiking cycle.

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<v Speaker 10>Yes, but I think, as you pointed out earlier in

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<v Speaker 10>the early part of the program, and this was to

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<v Speaker 10>some extent news I think are a little bit surprising.

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<v Speaker 10>He said that their current projection suggests that they're not

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<v Speaker 10>going to reach the target until twenty twenty five, and

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<v Speaker 10>that could therefore spell a fall all of twenty twenty

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<v Speaker 10>four with rates remaining at their current level or higher.

0:12:57.160 --> 0:13:02.319
<v Speaker 10>So that was a little bit of an insight into

0:13:02.400 --> 0:13:06.559
<v Speaker 10>their thinking. The other thing that I thought was important

0:13:06.640 --> 0:13:12.760
<v Speaker 10>in the chair pal's commentary was that he emphasized that

0:13:12.800 --> 0:13:16.000
<v Speaker 10>they're not going to necessarily wait for a final outcome.

0:13:16.080 --> 0:13:21.000
<v Speaker 10>In other words, hitting two percent the ultimate target, they

0:13:21.040 --> 0:13:24.080
<v Speaker 10>are going to anticipate. They're going to be looking forward

0:13:24.760 --> 0:13:30.160
<v Speaker 10>and either pausing or even conceivably cutting in anticipation that.

0:13:30.520 --> 0:13:33.160
<v Speaker 1>Yeah, yeah, that's what I think comment I thought, That's

0:13:33.160 --> 0:13:34.800
<v Speaker 1>why I tried to say to Doug. I don't think

0:13:34.800 --> 0:13:37.920
<v Speaker 1>it came out quite as intended, but you know, the

0:13:38.000 --> 0:13:41.560
<v Speaker 1>FED he mentioned that they are not going to hike

0:13:41.640 --> 0:13:43.760
<v Speaker 1>interest rates all the way up until you get to

0:13:43.800 --> 0:13:46.280
<v Speaker 1>the target, because at some point you see that the

0:13:46.320 --> 0:13:48.600
<v Speaker 1>process is there and you know, if you go all

0:13:48.600 --> 0:13:51.280
<v Speaker 1>the way to two percent, that you will have gone

0:13:51.320 --> 0:13:53.960
<v Speaker 1>too far. And he said that in the meeting. So

0:13:55.160 --> 0:13:58.880
<v Speaker 1>the inflation getting to two percent will happen after the FED,

0:13:59.400 --> 0:14:02.240
<v Speaker 1>well after the FED stops hiking rates. And I think

0:14:02.280 --> 0:14:04.800
<v Speaker 1>he did put that pretty well in the in the briefing.

0:14:05.559 --> 0:14:09.199
<v Speaker 10>Yeah, but it does. It does beg the question how

0:14:09.280 --> 0:14:14.400
<v Speaker 10>will they become convinced that the path is pretty certain

0:14:14.720 --> 0:14:19.280
<v Speaker 10>to two percent? And again, I think sometimes the markets

0:14:20.200 --> 0:14:24.960
<v Speaker 10>look at a shorter list of criteria than the FED does.

0:14:25.840 --> 0:14:28.640
<v Speaker 10>I think the FED is going to look for a

0:14:28.760 --> 0:14:35.240
<v Speaker 10>series of consistent disinflationary reports that are bringing the year

0:14:35.280 --> 0:14:39.040
<v Speaker 10>over year as well as other measures of inflation down

0:14:39.440 --> 0:14:46.200
<v Speaker 10>toward target. And you know, no anomalous reports, but clearly

0:14:46.360 --> 0:14:50.800
<v Speaker 10>month after month progress. And that suggested me take some

0:14:50.960 --> 0:14:53.280
<v Speaker 10>time before they are that convinced.

0:14:54.760 --> 0:14:58.400
<v Speaker 11>Look, and why is the whole medicine taking so long

0:14:58.520 --> 0:15:00.680
<v Speaker 11>to actually act? I mean, this seems to be much

0:15:00.680 --> 0:15:02.480
<v Speaker 11>longer than it would do normally. That's one part of

0:15:02.480 --> 0:15:04.960
<v Speaker 11>my question. And you know, just going to and I

0:15:05.000 --> 0:15:06.960
<v Speaker 11>don't want to be flippant here, but you know, we

0:15:07.040 --> 0:15:10.960
<v Speaker 11>could see that we're going through a disinflationary moment, could

0:15:11.000 --> 0:15:15.760
<v Speaker 11>it be disinflationary in a transient senses it were.

0:15:17.680 --> 0:15:20.760
<v Speaker 10>Yes, I mean there has been the fear of transient

0:15:21.400 --> 0:15:26.000
<v Speaker 10>disinflation or transitory disinflation using the T word that everybody

0:15:27.200 --> 0:15:30.360
<v Speaker 10>wanted to distance themselves from a year or so ago.

0:15:31.480 --> 0:15:34.520
<v Speaker 10>That a sort of false dawn from a point of

0:15:34.600 --> 0:15:39.960
<v Speaker 10>view of disinflation. You can't rule that out because there

0:15:40.200 --> 0:15:44.840
<v Speaker 10>can be global shocks that affect prices, and some of

0:15:44.880 --> 0:15:49.280
<v Speaker 10>the prices in particularly energy and food, are terribly important

0:15:49.280 --> 0:15:53.520
<v Speaker 10>to the ultimate inflation result. So you really can't rule

0:15:53.560 --> 0:15:59.760
<v Speaker 10>that out. The go great, I'm sorry.

0:15:59.640 --> 0:16:02.480
<v Speaker 1>Well, I was going to say. Another interesting line was

0:16:02.480 --> 0:16:05.880
<v Speaker 1>that he's still pretty confident that they can pull off

0:16:05.960 --> 0:16:09.000
<v Speaker 1>a so called soft landing. And he was asked by

0:16:09.440 --> 0:16:11.960
<v Speaker 1>one of the participants about what the staff's view was,

0:16:12.560 --> 0:16:14.480
<v Speaker 1>and he said, well, the staff, you know, is very

0:16:14.520 --> 0:16:19.520
<v Speaker 1>different from the FOMC policymakers, but they too now are

0:16:19.560 --> 0:16:22.400
<v Speaker 1>not calling for recession. So that was pretty interesting.

0:16:23.160 --> 0:16:27.200
<v Speaker 10>Yeah, that is interesting because we don't see necessarily right away,

0:16:27.280 --> 0:16:30.600
<v Speaker 10>we see in the minutes three weeks from now what

0:16:30.640 --> 0:16:34.600
<v Speaker 10>the staff projection is. And in the last two meetings,

0:16:34.640 --> 0:16:40.080
<v Speaker 10>I believe the staff have actually projected or forecast a

0:16:40.160 --> 0:16:44.560
<v Speaker 10>mild recession later this year, and that is that was

0:16:44.600 --> 0:16:48.680
<v Speaker 10>not aligned with what the chair was saying or what

0:16:48.760 --> 0:16:53.560
<v Speaker 10>most of the FMC members were saying. Apparently they've pulled

0:16:53.600 --> 0:17:00.360
<v Speaker 10>back on that. The staff is pulled back on that aswer.

0:17:00.360 --> 0:17:01.960
<v Speaker 11>The first part of my question is why is it

0:17:01.960 --> 0:17:05.480
<v Speaker 11>taking so long to see the effects of tighter monetary policy?

0:17:05.520 --> 0:17:06.400
<v Speaker 11>It seems unusual.

0:17:08.440 --> 0:17:12.960
<v Speaker 10>Well, I think we first we have a resilient economy.

0:17:13.000 --> 0:17:16.760
<v Speaker 10>That's the term that's used so often, meaning that there's

0:17:17.280 --> 0:17:20.840
<v Speaker 10>quite a bit of strength. And the most important factor

0:17:20.880 --> 0:17:24.040
<v Speaker 10>in my mind is that we were in a full

0:17:24.400 --> 0:17:28.879
<v Speaker 10>full employment state with the demand for labor exceeding the

0:17:28.880 --> 0:17:33.840
<v Speaker 10>supply of labor, and therefore workers have confidence in their

0:17:35.040 --> 0:17:39.480
<v Speaker 10>earnings outlook and their employ their employment prospects. That then

0:17:39.600 --> 0:17:44.600
<v Speaker 10>leads to pretty good consumer activity because they spend money

0:17:44.640 --> 0:17:49.080
<v Speaker 10>when they're sure of their future employment, and the consumer

0:17:49.119 --> 0:17:54.800
<v Speaker 10>activity drives the US economy. So those factors, I think,

0:17:55.640 --> 0:17:59.600
<v Speaker 10>why do we have that set of circumstances. Partly it

0:17:59.720 --> 0:18:03.200
<v Speaker 10>was the conditions coming out of COVID, and then the

0:18:03.240 --> 0:18:08.960
<v Speaker 10>consumers themselves were helped by fiscal policy, probably some savings

0:18:09.040 --> 0:18:14.000
<v Speaker 10>during the period as well, and so we have this

0:18:14.240 --> 0:18:20.439
<v Speaker 10>unusual labor market that we have not seen before recent years,

0:18:20.840 --> 0:18:25.280
<v Speaker 10>in which almost anyone who wants a job in America

0:18:25.560 --> 0:18:26.480
<v Speaker 10>can find one.

0:18:27.680 --> 0:18:30.480
<v Speaker 1>This is Bloomberg Daybreak Asia, your morning brief on this

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