A Weak IMF Outlook and Apple's Computer Problems

and DJ investigate the leak of highly classified intelligence. White House elevates the effort to gain release of Wall Street Journal reporter from Russia. I'med 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 Apples, Spotify, the Bloomberg Business app and everywhere you get your podcasts. Good morning, I'm de Prisoner and I'm Brian Curtis. Here are the stories we're

following today. In the latest World Economic Outlook, the IMF argued that rates in the United States and other industrial countries will revert will go back to those ultra low levels that prevailed prior to the pandemic. It sees the so called natural or neutral rate comfortably below one percent in the United States in the coming decades. The IMF said that this will make it easier for some countries to handle elevated government debt levels that came out of

the pandemic. Debt interest rates in geopolitical risks will be in focus as both the IMF and the World Bank kick off their Spring meetings this week now in Washington.

Managing Director Krystallina Gorgieva one that the IMS five year outlook for global economic growth is the weakest in more than three decades, despite the remarkable resilience of consumer spending in the United States in Europe, despite the uplift from China's reopening, global growth would remain below three percent as we projected it earlier this year, and what is more concerning, it would remain around three percent for the next five years.

Gorgieva cited Russia's invasion of Ukraine and also economic fragmentation caused by geopolitical tensions as major factors limiting growth. The IMF plans to release a more detailed World Economic Outlook report tomorrow and a new sign that the banking crisis may be easing. That story from Bloomberg's Denise Pellegrini, we're hearing the amount of emergency debt the Federal Homelan Bank System issued the last week of March was thirty seven

billion dollars. All that might seem like a lot, but it is way down from the more than three hundred billion dollars two weeks earlier. The fhlbs are essentially a backstop for the banks. They were created during the depression to boost mortgage lending and community investment, and at thirty seven billion dollars in FHLB for the week, that's still elevated, but the declines in advances and debt issuance are seen as assigned banks need for cash has either met or dropping,

as many depositors apparently stopped pulling their money out. Denise Peloguni, Bloomberg Day Break Asia. New Bank of Japan Governor Kazuo Ueida said that the current yield curve control program and also negative interest rates are appropriate policies because of the current economy. It signals that any significant changes to the boj's monetary policy of Framework may be unlikely for the time being. Here's Uida speaking at his inaugural news conference

as the governor of the BOJ. If we suddenly normalize policy when we realize that the economy will reach two percent in a sustainable and stable manner, the market and the economy will have to make a very large adjustment. I think we have to make an appropriate judgment in advance so that such a thing does not happen. Uida also said that he's open to the idea of a policy review from a longer term standpoint, but he said that he'd like to discuss it with other board members

before any decision. And Doug, it's one of the reasons we saw that broad weakness in the end again, dali En one thirty three sixty. We go to Apple next. The company's MAC shipments were down in the first quarter by forty and a half percent. You know, this is the worst decline since the fourth quarter of two thousand. The figures, by the way, come from the International Data Corporation. Apple was hit by sluggish demand along with an industry

wide glut. All PC makers were affected. Now, if you're looking for a silver lining it, maybe this cooling demand may give some of these companies the opportunity to overhaul production and diversify their supply chains. Bloomberg's Anoragrana said that Apple may have more time to explore options outside China. They don't mind being exposed to China, but they don't want to be hundred percent exposed to China. I see.

You know, let's say over the next decade, you know, you could see perhaps half of their production coming from China and half from somebody where else. That would be a combination a bunch of countries. It's impossible for them to truly diversify away from China, but they have to do it. Bloomberg's on a rock Grana there By the way, we are hearing that Apple is reading some new models that could help spur demand. This would include the next

slate of laptops and desktops, including a new iMac. Those products are expected to be launched later this year. Meantime, Taiwan Semiconductor missed sales estimates for the second consecutive quarter. It's a sign of continued weakness in global electronics demand. We heard from Joan Poene at Advisors Capital Management. For those exposed to the consumer PCs and smartphones. It's certainly a demand decline right after the surge and purchases during

the works of the pandemic. Right we're seeing them digest that and wait till they need to upgrade their PCs and their smartphones. So I think demand is largely driving what's going on both at Apple on TSMC and had already gone on at the other PC manufacturers. Joan Poeni Advisors Cap Management. TSMC also slashed its capital spending plans for the year to a range of thirty two to thirty six billion. That's down from the thirty six point

three billion that we saw last year. Separately, rival Samsung announced last week it would cut memory chip production to a meaningful level. It's a move that competitors had been waiting for after a pile up of inventory hurt pricing and profits. And we did see Samsung up more than one percent as mentioned yesterday, and in the socks in the session today, DOUG was up one point eight percent.

It's interesting because that runs a little counter to some of the negativity that we've seen in the bond market, and we can get to that in a moment, but I wanted to mention this very interesting non consensus call by the IMF to go back to very low interest rates. There will be a lot of debate, and it's good fodder for us on this show today to talk about that because it really does mean a different outlook going forward if the IMF is right, I would say dramatically,

so wouldn't you, Brian. I mean, in order for for us to see rates kind of revert back to these ultra low levels that we've known, there would have to be a great deal of economic weakness. You know, it's easy to argue that that's not going to be the case because of deglobalization, so called friend shoring that raises costs in the United States is a lot more expensive to produce there than all around the rest of the world, geopolitics, which we've seen a lot in the last year with US,

China and Russia Ukraine. It just seems like there's also long wave trends that would suggest it when moving into a higher interest rate environment. So yeah, that's up a great debate, no doubt about it. And in terms of the data, you're talking about interest rates directionally remaining at elevated levels because inflation is still running hot. We've got the CPI data later in the week here in the US, and as you know later today in China both CPI and PPI. But in the case of China, when it

comes to wholesale inflation, it's a story of deflation. Yeah, absolutely, one of the things though that was interesting about on that and also looking at why cyclicals did so well today. I mean, we know the socks was higher because of the Samsung call at least, and Micron moving up as much, but Chinese provinces boosting spending on major construction projects this year. There's a lot of money. This is one point eight

trillion dollars. It's a twenty percent gain, might be one of the reasons, and it does kind of go against the deflation and the low levels inflation that we've seen so far. So sets up for a very interesting debate. It is now time for Global news. Taiwan's foreign minister says three days of China's military drills in the Straits the Taiwan Straits are similar to how Beijing acted after Nancy Pelosi's visit. Ed Baxter has Global News in the

nine sixty Newswoman San Francisco ed, Yeah, that's right. Brian Minister Joseph Wu says the intensity is about the same. PLA says US concluded the drill says its stands ready to fight at any time and crush separatist activities and foreign interference. Meanwhile, from French law makers are planning to visit Taipei, WHO saying that they are showing support for Taiwan and that the visit will be very soon. Ukraine has been for USD to alter some of its counter

offensive plans. CNN reporting a leak of classified documents is hitting too close to home. Meanwhile, in the US, A Pentagon now says the Department of Justice and Pentagon are looking into those leaks. We don't know who's responsible for this, and we don't know if they have more they intend to post, so we're watching this and monitoring it as best. Spokesman Admiral John Kirby asked whether it was a concern,

said they darn well are. The US officials have been in touch with the relevant allies and partners over the last couple of days at very high levels. I'll leave it at that. And Bloomberg's Larry Liebert says this league has a Pentagon very very worried highly sensitive classified informations is a very serious risk to national security made public in this league of documents. He says. Allies may already know much of it, but at the very least, it's

very embarrassing. The mind Administration has formally issued a statement saying that it is determined that the Wall Street Journal reporter Evan Gershkovitch has been wrongfully detained, and that elevates it now to the state Department to leave the effort

to gain its release. United States leaders responding in some force today over the Texas judges ruling to strip the FDA of oversight of so called abortion pill Massachusetts Governor Mora Healy it harms patience, undermines medical expertise, and takes away freedom. It's an attempt to punish the shame, to marginalize women. It's unnecessary, It's terrible, and Bloomberg's Rick Davis

says the implications are wide. You're going to have a patchwork quilt of laws that nobody's really going to understand how to abide by. We see reports that doctors are leaving states that are banning abortion or fear that they're going to have their practice attack by the courts. I mean it's really a dislocation and of healthcare. And also on sound on Bloomberg, Jeanie Schanzano says this can very well go to the US Supreme Court. I do think we'll see a stay of the Texas Judge's order in

the Fifth Circuit. But when you have competing rulings like this, conflicting rulings, the Supreme Court verywell may have to step in and politically both agree. It puts Republicans in a very tough spot because this is a very issue that can galvanize Democrats. Another mass shooting in the US today, Five people, including the shooter, have lost their lives at a bank in Louisville. Seven others are being treated at hospitals. Kentucky Governor Andy Bascher has a personal connection to some

of the victims today. I have a very close friend that didn't make it today, and I have another close friend who didn't either, and one who's at the hospital that I hope is going to make it through. So when we talk about praying, I hope people will government. Reportedly, as a former bank employee, Global News Power by more than twenty seven hundred journalists and analysts and over one hundred and twenty countries in San Francisco. I'm at Baxter

in This is Bloomberg. This is Bloomberg day Break Asia. I'm Brian Curtis along with David Inglis. Our guest is belie to own chairman of Dalton Investments. So blie to where a daily news show. We have to rope in some of the big stories so the day. What do you make of this IMF call for going back to very low interest rates? I find it quite surprising because the fact is that inflation has increased and is still with us despite the fence raising interest rates by five

percent or almost five percent in short order. And I don't see how the federal lower interest rates very quickly unless there's some sort of a dramatic economic accident. So it's puzzling and it's something I have to think about more. But it's it's not something that makes a lot of sense to me at this point. To David here, that's a very diplomatic way of putting that doesn't make sense. Okay, well, okay, let's look ahead then to this main meeting of the

FED coming up. This changes daily. Obviously, the probability is like they probably will move um. I don't like those odds, but perhaps the broader question to you is the market correct as who may likely is the last hike of the cycle. Yeah, obviously I don't know, but twenty five basins points and may seems like a reasonable outcome if there are no huge surprises in the CPI and PPI numbers this week. And the reason I say that is

because of credibility. The Fed governors have already said that they want to increase rates further and pause, so that seems to be a reasonable outcome given what they've already said, and they've basically done what they've said, so I would believe they're comments. The bulls would would hope for a pause in interest rates, but not necessarily cut. Often hear analysts come on and say, well, you know, I don't see a cut later this year, and the Feds certainly

not saying it. That's not what the what the real bulls really want. What they probably want is the pause, because when you get signs of a cut, it means there's a reason for it. I agree, I'm not seeing a cut, but I have heard many other people forecast a cut by the end of this year. It's that's surprising to me too, but it seems to be a common view that we will answer a recession in the second half of the federal cut interest rates. It's not what I believe, but it's what I hear. Okay, Belieita,

let's talk strategy. How are your friends doing? Our friends are doing fine. This year. It's been an exciting time for us in Asia, especially in Japan because the government is really ramping up its corporate government's reforms, and especially because they just provide details of the listing requirements and a headline for meeting those requirements or the companies will be booted down from the prime to the standard section or even delisted all together. So finally something's happening there

that we think it's very positive for stocks. You know, we mentioned at the top that Chinese provinces will boost spending this year. It's one of the stories that we're featuring on the terminal, and that might mean a lot of business for foreign companies. And we did see a spike in cyclicals today. Industrials, materials, and energy all seem to do well, and it runs counter to what the bond market seems to be saying. Can you figure out a way to play China correctly this year. We don't

really invest in China currently. We have a specific way of investing, which is that we're a value investor. We look for good companies, good cash flows, and also importantly, we look for companies that are run by managements whose interests are a line with shareholders. And there's less and less of that in China, one because there are a lot of SOEs and two because truly successful entrepreneurs have been punished, so the environment for entrepreneurs is becoming less welcoming.

On top of which, um, you know, we think there a lot of headwinds facing China this year and even going forward. So we're not that positive on China to begin with, and the sort of anti capitalistic atmosphere there hinders are enthusiasm. Okay, Well, talk to us in about other opportunities you've you've talked about Japan, if you if you would like to lay out some names there and why,

or perhaps other markets that career or time one. I believe, of course you're looking at some companies there too, sure, just to finish up one in Japan, you know, I just want to mention that Warren Buffett is apparently talking about raising another bond offering in Japan. Yes, and with

that he'll probably buy more stocks again. So clearly Warren Buffett's thinking that this might be a good time to add to his existing positions, because if we recall a while back, he had bought a bunch of trading companies,

and he might do that again, you know. And we're seeing from our visits with companies and other investors that there are, actually, there's actually now for the first time in over a decade, large investment management firms setting up offices in Japan, and we're getting more visits from other investors as well, from clients and other investors to Japan.

So clearly the interest in Japan is rising, and I believe it's because it seemed to be a safe place to be because there are good companies that are cheap, and corporate governance is making an impact on the stock market. But the problem with Japan always has been that for the last thirty years, if you just overweighted Japan, you lost money relative to the index. So it's a difficult psychological hurdle to overcome. And there is one major trend

that may happen. It seems that Kazua is talking about maintaining Corona's policies for a while, but a lot of people in the market think that will change, and if so, will that attract repatriation of yen back to Japan and would that really benefit domestic companies. I think that's clearly a upside possibility. That's very little downside because how much further can you go than zero? And they've tried, and

they actually have gone below zero. But I don't think that's sustainable because it costs a lot of money to maintain the Yeo curve control that they have for so long. And we are seeing some increase in wage in wages, so there is the possibility that you might get an appreciation in yen as well, on top of the stock market doing better. Yeah, believe I was going to ask you, how did dollar investors approach the hedging situation on the end or is that something you're not worried about. We

hedge when we're given the opportunity to hedge. Often our clients do the hedging themselves. But where we have the opportunity, we hedge when we think that there might be weakness in the yen. But at this point we're not hedged, because we think that's upside. This is Bloomberg Daybreak Asia, your morning brief on this story's making news from Hong Kong to Singapore and Wall Street. Look for us on your podcast feed every day, on Apple, Spotify, and anywhere

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dot Com. I'm Brian Curtis and I'm Doug Prisoner. Join us again tomorrow for all the news unique to start your day right here on Bloomberg Daybreak Asia