A OPEC+ Output Cut and Bullard Sees Higher Prices

McCarthy is on for Wednesday. Pentagon says China spy balloon did get some intelligence. I'm at Baxter with Global News. That's all straight ahead on Bloomberg Daybreak Asia. The business news you need to start your day in just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App and everywhere you get your podcasts. Good morning, I'm

Bonnie Quinn and I'm Dog Prisoner. Here are the as we're following today, some oil analysts saying crude prices could reach one hundred dollars a barrel this after OPEC plus unexpectedly cut production. On that list is Goldman Sachs Bank of America also said the unexpected supply cut could add as much as twenty five dollars a barrel to the price of Brent crude. However, Morgan Stanley broke away from

other major banks. Morgan lowered its forecast from ninety five dollars a barrel to eighty seven fifty by the fourth quarter of this year, and City Groups said the oil market is nowhere near a rally that could produce a hundred dollars a barrel oil Here's City Groups, ed Morris, the global head of Commodities Research. To get to one hundred dollars oil, we'd have to have significantly more oil taken out of the market and have a lot of uncertainty based on that oil taken out of the market.

That is to say, it would come from a destruction to supply in countries such as it Ran, A rat would be in Nigeria altogether at the same time, and we would have no sense because of the domestic situation in those countries of and that oil could come back into the market. Meantime, Saint Louis FED President Jim Bullard says it's not yet clear what higher oil prices could mean for monetary policy. Here is Bullard speaking exclusively with Bloomberg.

This was a surprise that OPEC decision, But whether we'll have a lasting impact, I think is an open question. Oil prices fluctuated around. It's hard to track exactly. Some of that might feed into inflation and make our job a little bit more difficult. Bullets said that even without OPEC pluses production cuts, oil prices were still likely to rise. The FED chief said he expected higher prices with China reopening sooner than expected, Europe skirting recession, and strong economic

data in the United States well. The Reserve Bank of Australia will meet later today after the FED and the ECB pushed ahead with tighter restrictions on monetary policy. Question now is what will the RBA do? We have Paul Allen with a preview. Economists divided over whether the RBA will hike interest rates for an eleventh consecutive or pause its most aggressive tightening cycles since nineteen eighty nine. Nineteen economists survey by Bloomberg forecast the RBA will stand pad

at three point six percent, as do money markets. Eleven economists, though see a quarter point hike to three point eight five percent. Economists favoring in RBA pause site. The faster than expected easing of inflation in February more subdued consumer spending, as well as wiries about bank stresses becoming systemic. Economists calling for a rate high can argue that inflation at six point eight percent in February is still well above the RBA's two to three percent target and the job

market is very tight. We'll get a monetary policy decision from the Reserve Bank of Australia at two thirty pm Sydney time. I'm Paul Allen Bloomberg Day Breacasia and Chinese authorities have warned a crackdown on corruption in the finance industry is far from over. Let's get more from Bloomberg's at Joanne Won. Regulators and inspectors called in top executives from at least six large state owned banks. The meeting took place just as the investigation of the Bank of

China's former chairman Liu Niango was announced. This came just about a month after he was abruptly removed as the party chief of the nation's fourth biggest bank. Liu was said to be suspected of quote serious voulations of discipline and law. We hear. Chinese officials said the bankers should draw lessons from Liu and that staff must comply with laws and regulations and strength and self discipline. The latest

warning asked to evidence the Chinese president in Chijing. Ping's antigraphic campaign continues to pick up steam in Hong Kong. I'm join Wang Bloomberg Day Brigasia Well. HSBC senior executives faced off with the bank's largest investor base in Hong Kong at a shareholder meeting. Chairman Mark Tucker said he regrets cutting a dividend payments during the height of the pandemic, calling it a highly unusual event. Tucker told investors HSBC

has now substantial dividend distribution capacity. Also said the bank is set for the best returns in a decade this year. Executives at the bank also repeated their opposition to a push by HSBC's top shareholders to spin off the company's Asian operations. Ping On Insurance Group has been waging a battle largely behind the scenes, asking HSBC to deepen cost cuts and be open to some other suggestions. However, Tucker told those investors in Hong Kong restructuring the bank would

create uncertainty and it would also destroy value. So the big story, obviously is the rally that we had in crude oil today and the question mark it puts over FED policy. Bloomberg Economics today currently with a baseline for the FED to hike another twenty five basis points at the main meeting to bring the FED funds target to around five and a quarter percent and then hold it

there for the remainder of the year. But now Bloomberg Economics is saying, with a banking turmoil somewhat subsiding the tight US labor market, China reopening, adding to global demand, and the risk of higher inflation as a result of the elevated oil prices, the prospect for a pause on the part of a FED on the FED, I should say, looks less certain. Vonnie, all right, well, it is also a big story here in New York. Donald Trump arriving in New York to face being processed under reigned tomorrow.

Let's get a Baxter. He's got global news for US. Yea, it is definitely history, Vonnie. You're right, it's called from major demonstrations which have not yet materialized. Bloomberg Xamer Hordern was at Trump Tower a bit earlier today. On the west side of the street. It is a long lane of reporters, camera crews, lenses everywhere you look. It was very confusing, Joe, I have to say, for some of

the tourists that just wanted to see Fifth Avenue. Then the other side there were Trump supporters, but definitely the journalists outnumbered them. Yeah. Police Chief Keachan Sewell says very large police force will keep the peace as well. Violence and destruction are not part of legitimate lawful expression and it will never be tolerated in our city. Meanwhile, the MAGA campaign says the indictment has been very good fundraising.

It says seven million dollars since the indictment not verified yet. The meeting between Taiwan President Sion When and Kevin McCarthy is on for Wednesday in Los Angeles. Bloomberg's Dan Flatley says both sides are defending the meeting in the wake of China protests, with some statements from the President of Taiwan and the White House sort of talking about the right of the President of Taiwan, Kingwen to meet with whoever she chooses to meet with here in the US

a free country. Taiwan says no room for China comment, but of course China will fire. Foreign Ministry says China will take resolute measures to safeguard the sovereignty and the territorial integrity. Meanwhile, the Pentagon is saying that that China spy balloon was able to get some intelligence this while investigation continues. Pentagon Deputy Press Secretary Sabrina saying, we do know that the balloon was able to be maneuvered and purposely driven along its track, but not going to get

into specific sights it was able to hover over. She does say the US was able to take mitigation operations once it did reach the US though. Finland becomes a full fledged member of NATO tomorrow, and Secretary General Yan Stoltenberg says the process is moving forward for Sweden as well. We agreed on that he could move forward on finalizing the Swedish accession, and the president on the Turkish Parliament

National gun Desamblas delivered on that. So that's the reason why we are we are now with Finland full members from tomorrow. Stoltenberg says both have followed through on their commitments. And just of note, Russia today started its monthly turn as head of the UN Security Council. Global News powered by more than twenty seven hundred journalists and analysts and over one hundred twenty countries. In San Francisco, I'm at Baxter. This is Bloomberg. Let's get to our guest. David Waldell

is with us. He as the CEO also the chief investment strategist at Waddell and Associates. He's on the line from Nashville. David, thanks for being with us. I'm curious what did you make of today's price action in the face of the spike and crude oil. Well, it was good for beating up energy names, so that was helpful. I just think we're in a noisy market right here.

The deck is being reshuffled, so you see. You know, once the banking panic took hold, that sort of knocked off the MidCap trade and the small cap trade, it knocked off the value trade, and so the markets in sort of chern mode, just trying to hold on to any short term trend line it can, and so you got that in energy today. But it was certainly a lukewarm response. You know, two of the indussees worked, one didn't, and really the participation was pretty lame, so it was

just kind of an ugly tape. Today, in my opinion, the market is so strange these days. There are so many coals that are bearish, and the latest being James Morgan's Marko kolonoish warning that stocks are in a calm before the storm type mode. Is that how you see it. I love bearish sentiment, right because that's what's required to

provide the fuel for rallies to go up. I mean, people have been bearish all year long for a variety of reasons, and yet here we are up seven percent on the SMP and actually the international stocks are outperforming the domestic stocks. So you know, bearish sentiment is a good thing because it's the conversion of the skeptics which

provides the fuel for rallies. In terms of a really determinant catalyst, I believe people are looking past twenty twenty three, they're looking into twenty twenty four, and they're seeing all of these cloth cutting efforts that we read about every day that seemed depressing in the now, are going to be really great relief in the future. And then you add you know, some technology advances into that and you

could have serious margin expansion in twenty twenty four. So if you think we're going to be in a garden variety recession, I do. Even if you think there's going to be a crisis, POWE will put is back in play and so that neutralizes. So the sentiment can be barished. But if you walk forward, you know, just a series of months from now, you're back into sort of, you know,

a nice earnings environment. Why not participate in advance of that. Well, that's a very interesting point, and it runs counter to what we heard today from Chris Harvey over at where Else Fargo. Given the possibility of a recession that seems to look a little more certain these days. Harvey was saying the upcoming earning season maybe the first of several difficult quarters, and he puts his finger as you did, on margins being compressed. So it's kind of the opposite

of what you're saying. Aren't you not at all concerned about the possibility of recession and what that made due to the bottom line for US corporates. I just think we're out of sequence, right, So we're gonna have a recession this year and we priced that in last year because earnings were good last year, up four percent overall, and you know, the economy was a nimic, but it grew. Typically, that's not an environment where you see a big negative

year in the talk market. So we get recession returns for this year last year, and we're going to get recovery returns for next year this year. So I really think it's a sequencing issue. I agree with him. By the way, earnings are projected to be down from the high ten percent already, so they topped out in June of twenty twenty two, and you know for this quarter, based upon today's estimates, they'll be down eleven percent from

that point. So maybe they go down fifteen percent, which wouldn't be out of the range of a normal recessionary environment. My point is we've already baked it in. Everybody knows this, so everybody knows we're going into recession. Everybody knows earnings are going down ten to fifteen percent, and yet here we are up seven percent. So the market's looking past it, and I think correctly so so are you in the Compson that sees rate cuts before the end of the year.

I mean, if I was running the FED, you'd see rate cuts before the end of the year. I do think disinflation has taken hold. You know. I talked to bankers just like everybody else, and I don't know anybody out there who's really aggressively making loans right now because the small banks are seeing outflows, which isn't encouraging, and the large banks are seeing cash sorting, which is the same thing. So nobody's really interested, I think, in extending

a bunch of loans right now. So finally, the yield curve that's been dramatically inverted is starting to bite. So if it were me running the FED, I'd let that play out because they may have raised twenty five basis points last month, but the tightness and the credit market might have added another fifty to seventy five basis point. So if you factor in and do dynamic modeling, how much further do you really need to go? It's already

one of the fastest rate hike regimes in history. Why not let it just play out for a little bit. So are you seeing opportunities then? Given what you just said, are you seeing opportunities in fixed income at all? You know, I mean the yields are nice, and so you can buy short term paper and get big yields and then if you think their rate cuts coming in the future. You know, the spreads haven't really blown out, so the credit spreads are not indicating distress the way you know

the stock market gyrating round might indicate. So even with the move index high and things kind of nutty, the credit spreads will still remain tight. So I don't know if if those will blow out a little bit. I think you can just be in duration sort of yield positions and be fine because you'll probably see a drift lower.

You know. I look at like the five year break even year five year forwards, those are all benign at two point three percent, etc. So the bondom market actually is a lot calmer than the short term paper makes it appear. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and wool Street. Look for us on your podcast feed every day on Apple, Spotify and anywhere else you get

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