1 00:00:00,080 --> 00:00:07,560 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,160 --> 00:00:12,880 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 3 00:00:12,920 --> 00:00:15,640 Speaker 2: along with Doug Krisner. Join us each day for the 4 00:00:15,720 --> 00:00:19,080 Speaker 2: stories making news and moving markets in the Asia Pacific. 5 00:00:19,320 --> 00:00:21,720 Speaker 2: You can subscribe to the show anywhere you get your 6 00:00:21,760 --> 00:00:25,680 Speaker 2: podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 7 00:00:25,760 --> 00:00:27,120 Speaker 2: the Bloomberg Business App. 8 00:00:28,400 --> 00:00:31,080 Speaker 1: Well, the cost of living in the month of January 9 00:00:31,160 --> 00:00:33,760 Speaker 1: increased by more than estimates. We are talking about the 10 00:00:33,800 --> 00:00:37,479 Speaker 1: Consumer Price Index. We saw the headline figure up at 11 00:00:37,479 --> 00:00:40,040 Speaker 1: a rate of three point one percent. That's year over year. 12 00:00:40,400 --> 00:00:42,960 Speaker 1: Street was only looking for two nine. The core rate 13 00:00:43,080 --> 00:00:46,640 Speaker 1: also topping forecast, advancing at an annual rate of three 14 00:00:46,640 --> 00:00:50,080 Speaker 1: point nine percent. Earlier, I spoke with Daniel Hornung. He 15 00:00:50,280 --> 00:00:53,600 Speaker 1: is the Deputy Director at the White House National Security, 16 00:00:53,720 --> 00:00:57,040 Speaker 1: our National Economic Council. I started the conversation by asking 17 00:00:57,400 --> 00:01:00,680 Speaker 1: how the White House reacted to the CPI day this morning. 18 00:01:01,200 --> 00:01:03,760 Speaker 3: Well, you know, of course, I think the first reaction 19 00:01:04,120 --> 00:01:08,280 Speaker 3: was looking at that monthly core number coming in above expectations. 20 00:01:08,319 --> 00:01:10,319 Speaker 3: But I think, you know, as you kind of go 21 00:01:10,480 --> 00:01:14,160 Speaker 3: through the report, I think allowed us to take a 22 00:01:14,280 --> 00:01:17,039 Speaker 3: step back and you know, really realize that if you 23 00:01:17,720 --> 00:01:19,560 Speaker 3: look at the data, if you look at where we've 24 00:01:19,600 --> 00:01:23,400 Speaker 3: been over the last seven months or so, it's probably 25 00:01:23,440 --> 00:01:26,640 Speaker 3: not the case that much about this report changes the 26 00:01:26,680 --> 00:01:29,200 Speaker 3: overall trajectory of where we're going in terms of a 27 00:01:29,240 --> 00:01:33,039 Speaker 3: trajectory towards lower inflation while the job market and the 28 00:01:33,080 --> 00:01:37,520 Speaker 3: economy overall stay strong. So, you know, you wouldn't expect 29 00:01:37,600 --> 00:01:40,800 Speaker 3: disinflation to continue on a straight line. We've never expected 30 00:01:40,800 --> 00:01:45,400 Speaker 3: it would. There were likely some you know, factors related 31 00:01:45,440 --> 00:01:47,600 Speaker 3: to the start of the year at play here. Obviously, 32 00:01:47,640 --> 00:01:51,800 Speaker 3: we saw an unusual divergence between the CPI rent and 33 00:01:51,840 --> 00:01:54,680 Speaker 3: the CPI owner's equivalent rent that contributed to some of 34 00:01:54,720 --> 00:01:58,000 Speaker 3: the uptick that we saw. So I think, broadly speaking, 35 00:01:58,080 --> 00:02:00,960 Speaker 3: you know, doesn't change the overall trajectory, which, as I mentioned, 36 00:02:01,000 --> 00:02:04,080 Speaker 3: we really do think is an upbeat one towards lower inflation. 37 00:02:04,440 --> 00:02:06,720 Speaker 1: So much of the problem has to be addressed through 38 00:02:06,800 --> 00:02:09,960 Speaker 1: FED policy. Is there anything that the administration is talking 39 00:02:10,040 --> 00:02:12,600 Speaker 1: about as a way of addressing higher prices? 40 00:02:13,600 --> 00:02:16,040 Speaker 3: Sure, well, you know, I think it really starts with 41 00:02:16,080 --> 00:02:19,560 Speaker 3: what the president has done since he's come to office, 42 00:02:19,800 --> 00:02:24,200 Speaker 3: you know, things like passing legislation to lower prescription drug costs, 43 00:02:24,320 --> 00:02:27,840 Speaker 3: to lower healthcare premiums, to lower clean energy costs. He's 44 00:02:27,960 --> 00:02:31,239 Speaker 3: laser focused on implementing that legislation to make sure we're 45 00:02:31,280 --> 00:02:35,400 Speaker 3: able to continue to deliver cost relief for American families. 46 00:02:36,040 --> 00:02:39,760 Speaker 3: He's taken action where he can, where we have administrative 47 00:02:39,800 --> 00:02:42,480 Speaker 3: tools to do things like go after some of the 48 00:02:42,520 --> 00:02:46,920 Speaker 3: hidden junk fees that companies can use to increase prices 49 00:02:46,919 --> 00:02:51,520 Speaker 3: and reduce transparency and market transparency. So he'll continue to 50 00:02:51,560 --> 00:02:53,480 Speaker 3: look for actions that he can take and really be 51 00:02:53,560 --> 00:02:56,840 Speaker 3: focused on doing everything in his power to lower costs 52 00:02:56,840 --> 00:02:58,160 Speaker 3: for workers and for families. 53 00:02:58,440 --> 00:03:00,480 Speaker 1: Yesterday we heard from the head of the Ridge Fed, 54 00:03:00,520 --> 00:03:03,040 Speaker 1: Tom Barkin, and one of the things that he addressed 55 00:03:03,240 --> 00:03:06,960 Speaker 1: was the reluctance that many American companies may be feeling 56 00:03:07,000 --> 00:03:10,080 Speaker 1: to lower prices, and mister Barkin believes that that creates 57 00:03:10,120 --> 00:03:14,120 Speaker 1: then a real risk that there will be continued inflationary pressure. 58 00:03:14,200 --> 00:03:17,360 Speaker 1: Now I know over the weekend during the Super Bowl, 59 00:03:17,840 --> 00:03:22,720 Speaker 1: the President had a video where he was complaining about shrinkflation, 60 00:03:23,000 --> 00:03:25,960 Speaker 1: complaining about being ripped off for things like ice cream 61 00:03:25,960 --> 00:03:28,639 Speaker 1: and snack foods. Is there a way that the president 62 00:03:28,720 --> 00:03:31,600 Speaker 1: can use the bully pulpit to address this or is 63 00:03:31,639 --> 00:03:33,080 Speaker 1: that asking too much? 64 00:03:33,680 --> 00:03:36,000 Speaker 3: Well, I think you're absolutely right. One of the things 65 00:03:36,040 --> 00:03:40,640 Speaker 3: we saw during the pandemic is that as input costs 66 00:03:40,840 --> 00:03:45,720 Speaker 3: rose and supply disruptions really cascaded through the economy, we 67 00:03:45,760 --> 00:03:50,280 Speaker 3: saw some companies raise prices by more than their input 68 00:03:50,320 --> 00:03:53,560 Speaker 3: costs went up. And you would have kind of expected, 69 00:03:54,080 --> 00:03:56,600 Speaker 3: just based on the economic theory, the margins to come 70 00:03:56,760 --> 00:04:01,400 Speaker 3: down somewhat as those pandemic disruptions. We're behind us in 71 00:04:01,440 --> 00:04:04,400 Speaker 3: certain cases, we haven't seen that, and so you know, 72 00:04:04,440 --> 00:04:06,800 Speaker 3: to your point, the President, i think, is very focused 73 00:04:06,800 --> 00:04:11,280 Speaker 3: on calling out where he sees examples of places that 74 00:04:11,680 --> 00:04:14,800 Speaker 3: margins could come down so that consumers could see relief. 75 00:04:15,640 --> 00:04:17,960 Speaker 3: You know, that can happen in a range of We 76 00:04:18,040 --> 00:04:20,359 Speaker 3: know that you know, those price increases can happen in 77 00:04:20,360 --> 00:04:22,600 Speaker 3: a range of ways, either the traditional way that we 78 00:04:22,680 --> 00:04:26,000 Speaker 3: see inflation and price increases, or through the kind of 79 00:04:26,480 --> 00:04:29,320 Speaker 3: shrinkflation that the President was talking about, where the quantity 80 00:04:29,400 --> 00:04:31,800 Speaker 3: comes down but the price stays the same. And so 81 00:04:31,839 --> 00:04:35,640 Speaker 3: you'll see the President continue to call for companies where 82 00:04:36,000 --> 00:04:39,320 Speaker 3: the margins are quite elevated still to pass some of 83 00:04:39,360 --> 00:04:41,560 Speaker 3: the savings that they've seen onto consumers. 84 00:04:41,760 --> 00:04:43,400 Speaker 1: One of the things I think we can agree on 85 00:04:43,440 --> 00:04:45,359 Speaker 1: that happened as a result of the pandemic. With a 86 00:04:45,360 --> 00:04:49,600 Speaker 1: lot of the supply chain disruptions, inflationary pressure is simply 87 00:04:49,600 --> 00:04:53,159 Speaker 1: built up, and we've been talking about the possibility maybe 88 00:04:53,200 --> 00:04:55,520 Speaker 1: of seeing a little bit of disruption when it comes 89 00:04:55,600 --> 00:04:58,080 Speaker 1: to a lot of the conflict around the Red Sea. 90 00:04:58,200 --> 00:05:01,120 Speaker 1: Is this something that's top of mind for the administration 91 00:05:01,240 --> 00:05:04,279 Speaker 1: and trying to guard against supply chain disruptions in the 92 00:05:04,320 --> 00:05:05,039 Speaker 1: Red Sea area? 93 00:05:05,720 --> 00:05:09,000 Speaker 3: Sure, well, you know, it's obviously something that across the 94 00:05:09,040 --> 00:05:13,880 Speaker 3: administration we're monitoring very closely. You've seen the Department of Transportation, 95 00:05:14,080 --> 00:05:17,119 Speaker 3: the Navy, other entities across the federal government taking action 96 00:05:17,920 --> 00:05:21,600 Speaker 3: where appropriate to you know, make it easier for goods 97 00:05:21,600 --> 00:05:25,039 Speaker 3: to flow through that region. You'll see US continue to 98 00:05:25,080 --> 00:05:28,640 Speaker 3: take action where it's warranted. I think, you know, as 99 00:05:28,680 --> 00:05:31,000 Speaker 3: where we sit now in terms of the impact on 100 00:05:32,200 --> 00:05:36,039 Speaker 3: you know, overall accurate supply in the United States, you know, 101 00:05:36,080 --> 00:05:39,800 Speaker 3: we're not seeing major disruptions to the US economy, to 102 00:05:39,880 --> 00:05:42,560 Speaker 3: the US measured data, but as you point out, it's 103 00:05:42,680 --> 00:05:45,520 Speaker 3: it's it's certainly an area of focus and one that 104 00:05:45,560 --> 00:05:47,440 Speaker 3: we'll need to continue to monitor in the weeks and 105 00:05:47,480 --> 00:05:48,040 Speaker 3: months ahead. 106 00:05:48,160 --> 00:05:50,839 Speaker 1: So the President is in the early stages of a 107 00:05:50,960 --> 00:05:54,880 Speaker 1: presidential campaign, and I'm curious about the strategy when you 108 00:05:54,920 --> 00:05:57,760 Speaker 1: get onto the campaign trail with the president and you're 109 00:05:57,800 --> 00:06:01,800 Speaker 1: addressing the issue of inflation, the talking points that really 110 00:06:01,839 --> 00:06:02,640 Speaker 1: are agreed upon. 111 00:06:03,640 --> 00:06:06,600 Speaker 3: Well, you know, I can't comment specifically on the campaign 112 00:06:06,640 --> 00:06:08,360 Speaker 3: from here, but I will say that you know, the 113 00:06:08,400 --> 00:06:11,400 Speaker 3: President has been focused and will continue to be focused 114 00:06:11,440 --> 00:06:14,039 Speaker 3: on the fact that it's been a difficult few years 115 00:06:14,080 --> 00:06:18,360 Speaker 3: for the American people, the pandemic, the price increases that 116 00:06:18,360 --> 00:06:22,680 Speaker 3: folks experienced due to pandemic disruptions, due to supply chain 117 00:06:22,800 --> 00:06:26,080 Speaker 3: disruptions due to Putin's war in Ukraine. Obviously, we've seen 118 00:06:26,160 --> 00:06:32,240 Speaker 3: significant progress on bringing inflation down, in fact, more progress 119 00:06:32,279 --> 00:06:34,880 Speaker 3: in the United States than in any of our peer countries. 120 00:06:35,400 --> 00:06:38,960 Speaker 3: But the President will be very clear over the months 121 00:06:38,960 --> 00:06:42,919 Speaker 3: ahead and really conveying a message that he's doing everything 122 00:06:42,960 --> 00:06:46,279 Speaker 3: in his power, and he has additional legislative proposals on 123 00:06:46,320 --> 00:06:49,960 Speaker 3: the table that would work to lower costs for American families, 124 00:06:50,000 --> 00:06:53,040 Speaker 3: for the middle class, for American workers, and really draw 125 00:06:53,080 --> 00:06:57,000 Speaker 3: a contrast with Republicans in Congress, for example, who instead 126 00:06:57,040 --> 00:07:00,840 Speaker 3: of focusing on policies to lower costs for the middle class, 127 00:07:01,040 --> 00:07:05,800 Speaker 3: have prioritized as their economic approach tax cuts for the 128 00:07:05,839 --> 00:07:09,160 Speaker 3: wealthiest Americans and for the largest corporations. And so it's 129 00:07:09,200 --> 00:07:12,040 Speaker 3: a very different set of economic priorities and one that 130 00:07:12,120 --> 00:07:14,040 Speaker 3: I think you'll hear the President talk more about in 131 00:07:14,080 --> 00:07:14,800 Speaker 3: the months ahead. 132 00:07:15,120 --> 00:07:17,960 Speaker 1: We had just saw a recent survey that was sponsored 133 00:07:17,960 --> 00:07:21,120 Speaker 1: by the Financial Times in which former President Trump was 134 00:07:21,320 --> 00:07:25,040 Speaker 1: given kind of more trustworthiness in being able to deal 135 00:07:25,120 --> 00:07:28,960 Speaker 1: with economic issues than President Biden. Is this concerning to 136 00:07:29,040 --> 00:07:30,240 Speaker 1: the administration at all. 137 00:07:30,960 --> 00:07:33,040 Speaker 3: Well, one of the things we've seen in the last 138 00:07:33,280 --> 00:07:38,160 Speaker 3: few months in particular, is a real beginning of an 139 00:07:38,240 --> 00:07:41,920 Speaker 3: uptick and consumer sentiment and consumer confidence. We saw, you know, 140 00:07:41,960 --> 00:07:44,960 Speaker 3: in one of the surveys, a thirty percent increase over 141 00:07:45,000 --> 00:07:49,280 Speaker 3: a two month period. That's the largest increase in more 142 00:07:49,280 --> 00:07:53,360 Speaker 3: than thirty years. So I think as we're seeing wages 143 00:07:53,480 --> 00:07:58,680 Speaker 3: now on a sustained basis outpacing prices, you're starting to 144 00:07:58,720 --> 00:08:01,320 Speaker 3: see folks feel that are about not just their own 145 00:08:01,360 --> 00:08:04,400 Speaker 3: financial situation, but the direction of the economy as well. 146 00:08:04,760 --> 00:08:07,200 Speaker 3: And if you look at some of the surveys where 147 00:08:07,440 --> 00:08:11,320 Speaker 3: folks are asked questions about the President's economic policies, the 148 00:08:11,320 --> 00:08:14,640 Speaker 3: policies that he's passed that go directly at lowering some 149 00:08:14,720 --> 00:08:17,760 Speaker 3: of the key costs that families face. The proposals that 150 00:08:17,800 --> 00:08:20,360 Speaker 3: he's put on the table to reduce the deficit by 151 00:08:20,800 --> 00:08:23,760 Speaker 3: ensuring that the wealthiest Americans and the largest corporations are 152 00:08:23,800 --> 00:08:26,920 Speaker 3: paying their fair share, those are overwhelmingly popular. So I 153 00:08:26,960 --> 00:08:30,200 Speaker 3: think both in kind of making clear the work that 154 00:08:30,240 --> 00:08:33,079 Speaker 3: has been done to get this economy going and give 155 00:08:33,160 --> 00:08:35,600 Speaker 3: us one of the strongest economic recoveries of any of 156 00:08:35,640 --> 00:08:39,079 Speaker 3: the advanced economies, and in talking about the president's plans 157 00:08:39,080 --> 00:08:41,679 Speaker 3: to lower cost you'll see us increasingly focused on that 158 00:08:42,480 --> 00:08:43,760 Speaker 3: in the period going forward. 159 00:08:43,960 --> 00:08:46,200 Speaker 1: Daniel, thank you so much for joining us and sharing 160 00:08:46,200 --> 00:08:49,600 Speaker 1: your perspective on what we learned today. With consumer inflation 161 00:08:49,760 --> 00:08:52,280 Speaker 1: cooling a bit less than was expected in the month 162 00:08:52,320 --> 00:08:55,800 Speaker 1: of January. Daniel Hornung is the Deputy director of the 163 00:08:55,880 --> 00:08:57,160 Speaker 1: National Economic Council. 164 00:09:03,920 --> 00:09:06,760 Speaker 2: Our guests on the program Live with This is heb Chan, 165 00:09:07,280 --> 00:09:12,199 Speaker 2: market analyst at ig SO. The latest CPI numbers that 166 00:09:12,840 --> 00:09:15,360 Speaker 2: will cause a little bit of a disruption in kind 167 00:09:15,360 --> 00:09:18,160 Speaker 2: of the smooth flow of things in markets. However, it 168 00:09:18,200 --> 00:09:21,680 Speaker 2: may give some investors who missed out on the rally 169 00:09:21,720 --> 00:09:24,599 Speaker 2: and particularly in some of the biggest technology stocks, a 170 00:09:24,679 --> 00:09:27,120 Speaker 2: chance to get in lower levels. That's spying on the dip, 171 00:09:27,480 --> 00:09:30,360 Speaker 2: and it may also give investors a chance to buy 172 00:09:30,400 --> 00:09:33,160 Speaker 2: into the bond market with yields up closer to five 173 00:09:33,160 --> 00:09:35,920 Speaker 2: percent than they've been in the past couple of months. 174 00:09:36,720 --> 00:09:39,600 Speaker 2: Your picture now of the environment at the moment, He be. 175 00:09:41,640 --> 00:09:44,320 Speaker 4: Well, yes, I agree. I think yeah, let's CPI in 176 00:09:44,400 --> 00:09:47,600 Speaker 4: terms of number wise, it's a bit disappointment, but it's 177 00:09:48,000 --> 00:09:51,000 Speaker 4: for me what the market movement, the reaction to that 178 00:09:51,160 --> 00:09:53,960 Speaker 4: shows me that it's definitely more than that disappointment. It's 179 00:09:54,000 --> 00:09:57,560 Speaker 4: definitely sort of a aded checking for that sort of 180 00:09:57,679 --> 00:10:01,280 Speaker 4: overdone optimism that has been push market the past three months. 181 00:10:01,760 --> 00:10:04,800 Speaker 4: It can actually looking into sort of a reverse version 182 00:10:04,920 --> 00:10:08,240 Speaker 4: that what happened from the November the CPI is softer, 183 00:10:08,400 --> 00:10:11,120 Speaker 4: the markets start to picking up, but today it's more 184 00:10:11,160 --> 00:10:13,880 Speaker 4: of a reverse way of that, or seeing that the 185 00:10:13,920 --> 00:10:15,960 Speaker 4: CPI is a bit of a disappointment there and the 186 00:10:16,000 --> 00:10:18,520 Speaker 4: market start to coming back to checking the whether or 187 00:10:18,640 --> 00:10:21,360 Speaker 4: not that we've been sort of celebrate that too early, 188 00:10:21,400 --> 00:10:23,880 Speaker 4: even just before the first cut can be confirmed. So 189 00:10:24,320 --> 00:10:26,920 Speaker 4: it is a timing that we'll expect a bit of 190 00:10:26,920 --> 00:10:30,199 Speaker 4: a bumpy ahead, but over oh, I'm still quite positive 191 00:10:30,320 --> 00:10:31,000 Speaker 4: about the year. 192 00:10:31,040 --> 00:10:31,400 Speaker 2: The end. 193 00:10:32,160 --> 00:10:34,600 Speaker 4: I'll look for the US DOOC for can you tunyform. 194 00:10:34,720 --> 00:10:36,960 Speaker 1: I hear what you're saying about the market's enthusiasm, But 195 00:10:37,040 --> 00:10:39,600 Speaker 1: to be fair, at the December FED meeting, I mean, 196 00:10:39,600 --> 00:10:43,360 Speaker 1: even policy makers were optimistic that the worst of the 197 00:10:43,400 --> 00:10:47,080 Speaker 1: inflation story was behind them. Now maybe we're seeing a 198 00:10:47,120 --> 00:10:49,960 Speaker 1: bit of a stalling in the level or in the 199 00:10:50,080 --> 00:10:54,480 Speaker 1: rate of disinflation. But I'm wondering what it has done 200 00:10:54,640 --> 00:10:58,480 Speaker 1: to your predictions on the FED beginning to cut interest rates. 201 00:10:58,480 --> 00:11:00,760 Speaker 1: If you look at what the wapsmart market is indicating 202 00:11:00,840 --> 00:11:03,760 Speaker 1: right now, maybe the first rate cut doesn't happen until July. 203 00:11:04,280 --> 00:11:07,120 Speaker 1: Is that consistent with your thinking or are you seeing 204 00:11:07,200 --> 00:11:07,960 Speaker 1: things differently? 205 00:11:09,880 --> 00:11:10,160 Speaker 3: Well? 206 00:11:10,200 --> 00:11:13,040 Speaker 4: As I said, I think that market the reaction in 207 00:11:13,080 --> 00:11:15,280 Speaker 4: the market today, which that has already pushed up there 208 00:11:15,280 --> 00:11:17,800 Speaker 4: to the July it's a bit of the I would 209 00:11:17,800 --> 00:11:20,440 Speaker 4: say a bit of overdime for me. I still think 210 00:11:20,440 --> 00:11:22,560 Speaker 4: that GIN is on the table because I think that 211 00:11:22,640 --> 00:11:25,120 Speaker 4: before now and then there's quite a lot of dumb 212 00:11:25,240 --> 00:11:27,480 Speaker 4: data were coming through, including the PC by the end 213 00:11:27,480 --> 00:11:30,720 Speaker 4: of these months. But Also, on the other hand, if 214 00:11:30,720 --> 00:11:33,360 Speaker 4: you took looking at the psychological point that when the 215 00:11:33,400 --> 00:11:36,839 Speaker 4: market expecting the inflation will stay there, they will potentially 216 00:11:36,960 --> 00:11:41,000 Speaker 4: to slowing down the people that were spending, they will 217 00:11:41,000 --> 00:11:43,160 Speaker 4: potentially help the inflation. So I think there's a lot 218 00:11:43,160 --> 00:11:46,520 Speaker 4: of uncertainty that we're saying that we will see inflation 219 00:11:46,679 --> 00:11:51,959 Speaker 4: will stay high for another quarter. And yeah, and that's 220 00:11:52,000 --> 00:11:55,079 Speaker 4: why I still keep my door open for the cut. 221 00:11:55,480 --> 00:11:59,120 Speaker 2: Curious about your thoughts on Australia because you're talking to 222 00:11:59,240 --> 00:12:03,319 Speaker 2: us from Melbourne and we understand that the ASX two 223 00:12:03,400 --> 00:12:05,640 Speaker 2: hundred is close to an all time high. I think 224 00:12:05,679 --> 00:12:10,000 Speaker 2: it's on the fifth or sixth move on on seventy 225 00:12:10,120 --> 00:12:14,240 Speaker 2: six hundred, which is pretty interesting. That's been quite a barrier. 226 00:12:14,840 --> 00:12:17,679 Speaker 2: And inflation is still very high, even higher in Australia 227 00:12:17,679 --> 00:12:17,880 Speaker 2: than the. 228 00:12:17,960 --> 00:12:24,079 Speaker 4: US, right exactly, Yes, you're right. So ABA, the Reservement 229 00:12:24,120 --> 00:12:27,679 Speaker 4: of Australia, they are now the only one major center ban. 230 00:12:27,760 --> 00:12:30,800 Speaker 4: They still keep the door open for the hike. So 231 00:12:31,040 --> 00:12:33,640 Speaker 4: in the last week's statement they're saying that we're still 232 00:12:33,679 --> 00:12:38,120 Speaker 4: not doing out any hike, doing out any possibility there 233 00:12:38,160 --> 00:12:40,520 Speaker 4: and as you point out, the inflation still the highest, 234 00:12:40,559 --> 00:12:44,400 Speaker 4: we're still having about four percent. What the RBA, the 235 00:12:44,440 --> 00:12:46,480 Speaker 4: game they're playing is quite different to the fact of 236 00:12:46,640 --> 00:12:49,400 Speaker 4: what RBA trying to do. They's still quite a balancing 237 00:12:49,720 --> 00:12:51,800 Speaker 4: there on the big picture. They're saying that we're not 238 00:12:52,400 --> 00:12:54,240 Speaker 4: we still keep the door open for more hike. But 239 00:12:54,280 --> 00:12:56,640 Speaker 4: on the other hand, they sort of revised now the 240 00:12:56,679 --> 00:12:59,080 Speaker 4: expectation for the inflation for the next three and six 241 00:12:59,120 --> 00:13:01,720 Speaker 4: months time. So I think compared to the other central 242 00:13:01,760 --> 00:13:04,600 Speaker 4: bank they RBA the Australia, the central banks still trying 243 00:13:04,640 --> 00:13:08,680 Speaker 4: to sort of playing a safe game. They're not saying 244 00:13:08,679 --> 00:13:11,120 Speaker 4: that anything could happen, but they're not saying that anything 245 00:13:11,200 --> 00:13:14,400 Speaker 4: could not happen. And that's the that's the biggest picture 246 00:13:14,440 --> 00:13:17,840 Speaker 4: for the Austria's Central Bank at the stage. But what 247 00:13:17,960 --> 00:13:20,360 Speaker 4: the market is sort of taking this message more a 248 00:13:20,400 --> 00:13:22,600 Speaker 4: bit of a bias fee. They just wanted to listen 249 00:13:22,640 --> 00:13:24,720 Speaker 4: to what they're trying to listen they heard. They're saying 250 00:13:24,760 --> 00:13:28,040 Speaker 4: that okay, the inflation TAGI were moving down for the 251 00:13:28,040 --> 00:13:30,400 Speaker 4: next three and six months, which pushed up the Australian 252 00:13:30,480 --> 00:13:33,679 Speaker 4: stocks to its all time height at the end of January. 253 00:13:33,840 --> 00:13:36,800 Speaker 1: I think the latest economic analysis from the RBA was 254 00:13:36,840 --> 00:13:40,400 Speaker 1: predicting that services inflation will remain high and it's only 255 00:13:40,440 --> 00:13:44,120 Speaker 1: expected to cool gradually. Is this primarily a function of 256 00:13:44,200 --> 00:13:46,240 Speaker 1: higher labor cost or is there more to it? 257 00:13:48,280 --> 00:13:50,760 Speaker 4: Yes, right, labor course is one of the key components. 258 00:13:50,760 --> 00:13:54,040 Speaker 4: We're seeing that which grows pick up to its highest 259 00:13:54,080 --> 00:13:57,120 Speaker 4: level at the end of the fourth quarter twenty twenty three. 260 00:13:57,200 --> 00:14:00,240 Speaker 4: That's one of the things. But meanwhile we go to 261 00:14:00,280 --> 00:14:03,760 Speaker 4: have another unemploymentary data coming through tomorrow which was showing 262 00:14:03,800 --> 00:14:06,280 Speaker 4: that the unemployment ry were picking up to four percent, 263 00:14:06,360 --> 00:14:08,959 Speaker 4: and if that's the actual number, there will be the 264 00:14:09,040 --> 00:14:12,000 Speaker 4: highest numbered in over two straight years time. So we 265 00:14:12,120 --> 00:14:14,160 Speaker 4: definitely see a bit of a softening in terms of 266 00:14:14,200 --> 00:14:16,400 Speaker 4: the labor market, but it's still pretty tight. 267 00:14:17,520 --> 00:14:19,760 Speaker 2: We haven't talked too much about China over the past 268 00:14:19,800 --> 00:14:23,280 Speaker 2: many days, partly because of the holiday and partly because 269 00:14:23,320 --> 00:14:27,040 Speaker 2: investors just don't seem very interested in Chinese assets anymore. 270 00:14:27,240 --> 00:14:28,360 Speaker 2: Do you think that continues? 271 00:14:28,400 --> 00:14:33,680 Speaker 4: Hebe well, yes, most likely. I think the reason that 272 00:14:33,760 --> 00:14:37,000 Speaker 4: the investor seems to lose interest in Chinese market is 273 00:14:37,080 --> 00:14:42,120 Speaker 4: it becomes quite a tricky one. Yes, on data point 274 00:14:42,200 --> 00:14:44,680 Speaker 4: that you're seeing the Chinese stops jumping up five percent 275 00:14:44,720 --> 00:14:47,680 Speaker 4: before the Chinese New Year but many people, including myself, 276 00:14:47,720 --> 00:14:52,720 Speaker 4: believe that it's quite a bit of artificial rally, most 277 00:14:52,800 --> 00:14:55,120 Speaker 4: likely pushed by the National Team as people called it. 278 00:14:55,760 --> 00:14:59,320 Speaker 4: So the question is that even the China reopens next 279 00:14:59,360 --> 00:15:01,800 Speaker 4: week after this New Year, the big question is how 280 00:15:01,840 --> 00:15:06,320 Speaker 4: many investors were still bet on that the National team 281 00:15:06,320 --> 00:15:09,960 Speaker 4: will keep supporting the market sustainably and how many people 282 00:15:09,960 --> 00:15:12,960 Speaker 4: will bet on a fundamental change of the Chinese economy, 283 00:15:13,000 --> 00:15:15,400 Speaker 4: And they are the biggest challenge. That are the biggest 284 00:15:15,480 --> 00:15:19,080 Speaker 4: question that will remains that when the Chinese market returns 285 00:15:19,120 --> 00:15:20,040 Speaker 4: in the New. 286 00:15:20,240 --> 00:15:22,960 Speaker 1: Year of Dragon, and I'm wondering whether or not before 287 00:15:23,000 --> 00:15:25,680 Speaker 1: then we begin to get some high frequency data on 288 00:15:25,760 --> 00:15:28,680 Speaker 1: the Chinese consumer how they've been spending during the Lunar 289 00:15:28,760 --> 00:15:31,360 Speaker 1: New Year holiday. Do you have any early indications that 290 00:15:31,440 --> 00:15:32,000 Speaker 1: you can share. 291 00:15:34,080 --> 00:15:36,640 Speaker 4: I do see the couple of the you know, the 292 00:15:36,680 --> 00:15:40,080 Speaker 4: picture from social media that they have a quite strong 293 00:15:40,120 --> 00:15:43,560 Speaker 4: domestic traveling demand, but also see the data showing that 294 00:15:43,640 --> 00:15:47,200 Speaker 4: the outbound that people going overseas has dropping into the 295 00:15:47,200 --> 00:15:51,560 Speaker 4: lowest level even before the pandemic. So it looks like 296 00:15:51,680 --> 00:15:55,320 Speaker 4: they do have quite a big shifting in terms of 297 00:15:55,480 --> 00:15:59,400 Speaker 4: consumer behavior when they keep supporting the domestic consumption market. 298 00:16:00,080 --> 00:16:02,200 Speaker 4: Do have a question out there as we're seeing the 299 00:16:02,240 --> 00:16:07,320 Speaker 4: inflation data deflation, are pays dropping into lowest levels since 300 00:16:07,480 --> 00:16:11,120 Speaker 4: the financial crisis, So that's the most recent data we have. 301 00:16:11,600 --> 00:16:15,440 Speaker 4: Will the Chinese will change the picture fundamentally, I don't 302 00:16:15,440 --> 00:16:17,040 Speaker 4: think so. 303 00:16:17,040 --> 00:16:17,120 Speaker 5: So. 304 00:16:17,240 --> 00:16:20,080 Speaker 2: Japan and India are two other markets that have received 305 00:16:20,080 --> 00:16:23,320 Speaker 2: a lot of attention of late for investors that are 306 00:16:23,480 --> 00:16:26,640 Speaker 2: there are kind of newbies looking at at maybe deploying 307 00:16:26,640 --> 00:16:30,200 Speaker 2: some capital into those markets. How do you recommend they 308 00:16:30,200 --> 00:16:30,600 Speaker 2: do it. 309 00:16:32,920 --> 00:16:36,120 Speaker 4: Well? These too market. One of the reasons why seeing 310 00:16:36,160 --> 00:16:38,080 Speaker 4: that this two market is sort of atract quite a 311 00:16:38,080 --> 00:16:42,320 Speaker 4: little spotlight is partially because the investors or the capitals 312 00:16:42,400 --> 00:16:44,680 Speaker 4: is sort of outflow from China and are now looking 313 00:16:44,720 --> 00:16:47,360 Speaker 4: for the alternatives to the Chinese market. But both of 314 00:16:47,440 --> 00:16:50,400 Speaker 4: them have their bright spot and a bit of the 315 00:16:50,440 --> 00:16:52,440 Speaker 4: consent there. For the Japanese market, I think that the 316 00:16:52,520 --> 00:16:55,920 Speaker 4: economy does showing some of the of rebound, that recovery 317 00:16:56,000 --> 00:16:58,120 Speaker 4: since last year. But the thing is that I think 318 00:16:58,120 --> 00:17:00,960 Speaker 4: for the Bank of Japan's for the it's you're getting 319 00:17:01,000 --> 00:17:03,440 Speaker 4: at the very uncertainty level that have a bit of 320 00:17:03,480 --> 00:17:05,040 Speaker 4: back and forth, and I think that will be the 321 00:17:05,080 --> 00:17:08,240 Speaker 4: biggest uncertainty there. For the Indian market, I think they 322 00:17:08,240 --> 00:17:11,359 Speaker 4: do have quite a huge potential given that economic growth, 323 00:17:11,359 --> 00:17:15,760 Speaker 4: given the population there, But how much time would require 324 00:17:15,840 --> 00:17:18,600 Speaker 4: would be required for them you're getting the same level 325 00:17:18,640 --> 00:17:22,480 Speaker 4: of China. I think that's there's a risk that investors 326 00:17:22,520 --> 00:17:23,639 Speaker 4: have to take and think about. 327 00:17:24,480 --> 00:17:27,760 Speaker 2: Yeah, I mentioned that because in the Hong Kong market 328 00:17:27,760 --> 00:17:30,359 Speaker 2: here we have ETFs that you can buy, but the 329 00:17:30,440 --> 00:17:32,959 Speaker 2: bid ask spread is pretty big because there's not that 330 00:17:33,040 --> 00:17:37,320 Speaker 2: much liquidity in them and for some investors don't have access, 331 00:17:37,359 --> 00:17:40,640 Speaker 2: for instance, to ETFs in the United States, it could 332 00:17:40,680 --> 00:17:42,879 Speaker 2: be a little tricky. And by the way, we are 333 00:17:42,920 --> 00:17:44,840 Speaker 2: seeing a lot of weakness in the end that maybe 334 00:17:44,840 --> 00:17:48,040 Speaker 2: mitigating some of the losses in Tokyo. The NYK is down, 335 00:17:48,080 --> 00:17:51,800 Speaker 2: but it's only down eight tens of recent out performing today. Heb, 336 00:17:51,960 --> 00:17:54,080 Speaker 2: thank you so much for joining us, heb. Chan market 337 00:17:54,119 --> 00:18:05,439 Speaker 2: analyst that Ichi China says it opposes the European Unions 338 00:18:05,520 --> 00:18:09,439 Speaker 2: proposed trade restrictions on Chinese firms. Joining us now in 339 00:18:09,480 --> 00:18:12,440 Speaker 2: our studios in Hong Kong is Jenny marsh Wloomberg, team 340 00:18:12,520 --> 00:18:16,800 Speaker 2: leader for Greater China ECO gov. Well, this is interesting. 341 00:18:17,160 --> 00:18:21,160 Speaker 2: Banning European companies from doing business with these three firms. 342 00:18:21,560 --> 00:18:25,359 Speaker 2: It has to be approved. EU tried this last year, 343 00:18:25,400 --> 00:18:28,800 Speaker 2: but it didn't get approved. There was some pushback from 344 00:18:29,119 --> 00:18:31,679 Speaker 2: some of the members of states. What do we is 345 00:18:31,720 --> 00:18:34,000 Speaker 2: the environment different now, what do we expect? 346 00:18:35,400 --> 00:18:38,639 Speaker 5: That's right? So last year there was a reporting that 347 00:18:38,640 --> 00:18:40,760 Speaker 5: this had been proposed and that the Chinese officials had 348 00:18:40,760 --> 00:18:43,760 Speaker 5: given them reassurances, which sort of led to the Chinese 349 00:18:43,800 --> 00:18:47,280 Speaker 5: companies being taken off of the list that would lead 350 00:18:47,320 --> 00:18:50,840 Speaker 5: to trade restrictions. Now it seems three companies have made 351 00:18:50,840 --> 00:18:53,600 Speaker 5: their way back onto it. And this does come sort 352 00:18:53,640 --> 00:18:57,120 Speaker 5: of as tensions between China and the EU have been building. 353 00:18:57,160 --> 00:19:01,680 Speaker 5: You know, Brussels has this probe into to ev manufacturers. 354 00:19:02,680 --> 00:19:07,440 Speaker 5: Beijing announced anti dumping investigation into French brandy at the 355 00:19:07,520 --> 00:19:09,640 Speaker 5: at the beginning of the year. So, you know, the 356 00:19:09,640 --> 00:19:12,199 Speaker 5: EU and China are sort of very carefully balancing the 357 00:19:12,240 --> 00:19:14,399 Speaker 5: relationship right now, and you know it is in danger 358 00:19:14,440 --> 00:19:16,520 Speaker 5: of tipping into some kind of trade war if they 359 00:19:16,560 --> 00:19:19,480 Speaker 5: don't find a way of sort of managing ties without 360 00:19:20,119 --> 00:19:21,720 Speaker 5: without sort of escalating the rhetoric. 361 00:19:22,359 --> 00:19:25,000 Speaker 1: Is there a report or is there a way that 362 00:19:25,040 --> 00:19:28,320 Speaker 1: the EU was able to verify and kind of you know, 363 00:19:28,359 --> 00:19:31,640 Speaker 1: put some muscle behind these accusations. Is there some type 364 00:19:31,680 --> 00:19:34,399 Speaker 1: of investigation that has been conducted along these lines. 365 00:19:35,840 --> 00:19:37,760 Speaker 5: I mean, this is a proposal that Bloomberg has seen 366 00:19:37,800 --> 00:19:40,280 Speaker 5: and it's not a public document, so right now, you know, 367 00:19:40,320 --> 00:19:44,800 Speaker 5: the sort of the methodology is in a particularly transparent process. 368 00:19:45,040 --> 00:19:47,000 Speaker 5: But we do know that European officials are speaking to 369 00:19:47,160 --> 00:19:49,119 Speaker 5: Chinese officials and they seem to be acting, you know, 370 00:19:49,200 --> 00:19:52,760 Speaker 5: with sort of a degree of caution before they publish 371 00:19:53,119 --> 00:19:56,520 Speaker 5: these trade restrictions. So I imagine, you know, the various 372 00:19:56,520 --> 00:20:00,880 Speaker 5: sort of exchanges we've seen at diplomatic levels and with representatives, 373 00:20:01,160 --> 00:20:03,280 Speaker 5: this is something that's coming up along with you know, 374 00:20:03,359 --> 00:20:06,920 Speaker 5: assisting the European Union with its trade probes as well. 375 00:20:07,480 --> 00:20:09,840 Speaker 2: I feel that the environment is different now and that 376 00:20:10,080 --> 00:20:12,720 Speaker 2: you're definitely more in the area of a trade war 377 00:20:12,800 --> 00:20:16,720 Speaker 2: than we were last year, particularly because of this the 378 00:20:16,880 --> 00:20:21,880 Speaker 2: exchange of probes here on EV manufacturers, Chinese EV manufacturers, 379 00:20:21,880 --> 00:20:27,200 Speaker 2: and then China flipping around with the Kognak stuff. So 380 00:20:27,600 --> 00:20:29,640 Speaker 2: if it is a trade war, what does it mean 381 00:20:29,800 --> 00:20:32,199 Speaker 2: comes next? I mean, is it like, is it on 382 00:20:32,280 --> 00:20:35,560 Speaker 2: the order of the US and China or to a 383 00:20:35,680 --> 00:20:37,359 Speaker 2: much lesser degree. 384 00:20:37,800 --> 00:20:39,960 Speaker 5: I mean for China, the hard thing is how do 385 00:20:40,040 --> 00:20:43,359 Speaker 5: they fight back. You know, Europe is an important trade partner, 386 00:20:43,440 --> 00:20:45,320 Speaker 5: and there are areas that they could cover, they could 387 00:20:45,359 --> 00:20:48,320 Speaker 5: sort of they could target, such as sort of cosmetics, 388 00:20:49,080 --> 00:20:54,199 Speaker 5: there's some agricultural products and high end luxury goods, but 389 00:20:54,320 --> 00:20:56,640 Speaker 5: essentially that China is quite limited in how it can 390 00:20:56,680 --> 00:20:59,400 Speaker 5: respond if you're decided to really wrap this up. China 391 00:20:59,480 --> 00:21:02,520 Speaker 5: needs your as a market for many of its products, 392 00:21:02,600 --> 00:21:05,920 Speaker 5: so you know where it goes from this, We'll have 393 00:21:06,080 --> 00:21:09,440 Speaker 5: to see. But it's the dangerous environment for China because 394 00:21:09,480 --> 00:21:12,200 Speaker 5: you know, you've got Trump out there looking increasingly good 395 00:21:12,240 --> 00:21:15,480 Speaker 5: on the campaign trail and threatening sixty percent tariffs on 396 00:21:15,640 --> 00:21:18,480 Speaker 5: Chinese goods if he's elected, and then you have the 397 00:21:18,600 --> 00:21:22,160 Speaker 5: EU sort of turning up the temperature around the trade 398 00:21:22,200 --> 00:21:25,080 Speaker 5: deficit as well. So you know, it's just putting increased 399 00:21:25,119 --> 00:21:27,760 Speaker 5: pressure on Beijing at a time when the economy is 400 00:21:27,800 --> 00:21:29,639 Speaker 5: already under a lot of strained domestically. 401 00:21:30,160 --> 00:21:32,560 Speaker 1: So two dozen firms in total, from what I understand, 402 00:21:32,560 --> 00:21:35,040 Speaker 1: are on this list, and including the three based in China, 403 00:21:35,119 --> 00:21:37,000 Speaker 1: do we know the nature of their business? And I'm 404 00:21:37,040 --> 00:21:39,480 Speaker 1: curious are any in the banking industry. 405 00:21:39,160 --> 00:21:39,560 Speaker 4: Do we know. 406 00:21:41,760 --> 00:21:42,040 Speaker 2: Little. 407 00:21:42,480 --> 00:21:45,040 Speaker 5: I actually don't know too much about the specifics of 408 00:21:45,160 --> 00:21:49,119 Speaker 5: the companies. I understand that they're believed to be essentially 409 00:21:49,240 --> 00:21:53,960 Speaker 5: importing goods and then re exporting them to Russia and 410 00:21:54,119 --> 00:21:57,680 Speaker 5: sort of goods that are deemed useful to Russia's military efforts. 411 00:21:58,400 --> 00:21:59,920 Speaker 5: But in terms of the companies that they're not sort 412 00:21:59,920 --> 00:22:02,359 Speaker 5: of of brands that we would have heard of. So 413 00:22:02,480 --> 00:22:04,760 Speaker 5: I think, you know, digging into who those companies are 414 00:22:05,160 --> 00:22:07,239 Speaker 5: and what their exposure is to the European market as 415 00:22:07,280 --> 00:22:08,959 Speaker 5: well would be would be interesting. 416 00:22:09,480 --> 00:22:12,920 Speaker 2: And Hong Kong has some companies on the list too. 417 00:22:13,520 --> 00:22:16,960 Speaker 2: I haven't actually seen the list of companies and we 418 00:22:17,040 --> 00:22:20,280 Speaker 2: didn't actually name them in our reporting on this. But 419 00:22:20,640 --> 00:22:23,800 Speaker 2: to what degree is Hong Kong kind of involved? 420 00:22:25,520 --> 00:22:27,760 Speaker 5: Like you said, there are includes firms in Hong Kong. 421 00:22:28,840 --> 00:22:31,680 Speaker 5: When Hong Kong firms were exposed to this previously, I 422 00:22:31,760 --> 00:22:34,920 Speaker 5: think there was some concern that they weren't actually sort 423 00:22:34,920 --> 00:22:37,800 Speaker 5: of traditional sort of Hong Kong firms, that they were 424 00:22:37,880 --> 00:22:41,320 Speaker 5: shell companies for other firms sort of that have an 425 00:22:41,560 --> 00:22:44,720 Speaker 5: office listed in Hong Kong, but they're not sort of 426 00:22:44,840 --> 00:22:47,520 Speaker 5: Chinese companies if you like, Hong Kong is sort of 427 00:22:48,080 --> 00:22:50,600 Speaker 5: famous for sort of being a base for a lot 428 00:22:50,640 --> 00:22:53,159 Speaker 5: of shell companies, so it could be that, you know, 429 00:22:53,600 --> 00:22:57,600 Speaker 5: Hong Kong sort of registered companies, but actually not Chinese 430 00:22:57,680 --> 00:22:58,320 Speaker 5: firms as such. 431 00:22:58,760 --> 00:23:01,200 Speaker 1: So we had the news of the proposed new trade 432 00:23:01,240 --> 00:23:07,120 Speaker 1: restrictions yesterday, Beijing today pushing back and calling this plan 433 00:23:08,160 --> 00:23:11,280 Speaker 1: really illegal sanctions. I'm wondering do we have a sense 434 00:23:11,320 --> 00:23:13,320 Speaker 1: of what the next step may be very quickly? 435 00:23:14,640 --> 00:23:17,080 Speaker 5: I mean, I imagine the next time we have meetings 436 00:23:17,119 --> 00:23:19,520 Speaker 5: between European tires officials, this is going to come up. 437 00:23:19,520 --> 00:23:22,119 Speaker 5: We've already seen the Chinese officials on lobbying behind the scenes, 438 00:23:23,240 --> 00:23:25,280 Speaker 5: so I imagine this is going to be another area 439 00:23:25,359 --> 00:23:27,840 Speaker 5: of discussion between the two sides when they do. 440 00:23:28,000 --> 00:23:31,520 Speaker 2: Meet and when they talk about illegality in what sort 441 00:23:31,560 --> 00:23:35,119 Speaker 2: of jurisdiction is that in the in the eyes of 442 00:23:35,200 --> 00:23:36,920 Speaker 2: the international community or what. 443 00:23:37,680 --> 00:23:39,920 Speaker 5: It's an interesting phrase, it's a standard Chinese phrase. And 444 00:23:40,000 --> 00:23:44,560 Speaker 5: how they sort of refer to the sanctions it's terrible 445 00:23:44,760 --> 00:23:46,119 Speaker 5: except when China imposes them. 446 00:23:46,960 --> 00:23:49,840 Speaker 2: Yeah, absolutely, Okay, Jenny, thanks very much for joining us 447 00:23:49,880 --> 00:23:53,359 Speaker 2: here on the program Live. Jenny Marsh Bloomberg, team leader 448 00:23:53,840 --> 00:23:57,760 Speaker 2: for Greater China Economic and Government Material. 449 00:23:57,840 --> 00:23:58,520 Speaker 4: This is Bloomberg. 450 00:24:00,520 --> 00:24:03,399 Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you 451 00:24:03,520 --> 00:24:06,560 Speaker 1: the stories making news and moving markets in the Asia Pacific. 452 00:24:07,119 --> 00:24:10,240 Speaker 1: Visit the Bloomberg Podcast channel on YouTube to get more 453 00:24:10,280 --> 00:24:13,840 Speaker 1: episodes of this and other shows from Bloomberg. Subscribe to 454 00:24:13,920 --> 00:24:17,640 Speaker 1: the podcast on Apple, Spotify, or anywhere else you listen 455 00:24:17,800 --> 00:24:20,879 Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the 456 00:24:20,920 --> 00:24:22,000 Speaker 1: Bloomberg Business app.