BoJ Policy Decision, Fox Corp. Chair Steps Down

Good morning. I'm Brian Curtis.

And I'm Doug Krisner. Here are the stories we're following today.

US equities posting the biggest drop in six months. The market is adjusting here to a world where rates will be higher for longer. Here's Shanaide Colton Grant, Global head of Investors Solutions at bny MELON Wealth Management.

Investors are working through very unusual inflation environments, much tighter central bank policy, and we're reacting to new information. So I would say earlier in the year there was actually probably too much optimism about potential FED rate cuts that then got priced out of markets. We've now consolidated, We've built a better base to move forward.

Bn Y Melon's Shinade Colton Grant.

So we heard today from the former head of the Saint Louis FED, Jim Bullard. He was saying the Fed may need to raise rates even further as a way of avoiding a reacceleration in inflation. Here is Bullard speaking earlier to Bloomberg.

Earlier this year, there was White's prediction that there would be a recession, and in the second half of twenty twenty three that recession isn't materializing. So to the extent you thought that a recession would produce extra downward pressure on inflation that had to be taken back out. So you've got you ended up with a higher for longer message here. I think that makes a lot of sense.

Former Saint Louis Fedbank President Jim Bullard. Now, yesterday we were talking about the Fed holding rates steady at that twenty two year high for the FED funds in a range now between five and a quarter to five and a half percent. Most policymakers at the Fed also signaled they would favor one more rate hike this year, and in new production of predictions, officials trimmed estimates for the number of rate cuts next year from one hundred basis points all the way down to fifty basis points.

Brian well Doug a changing of the guard at Fox and his parent company, At least on paper, we had the story from Bloomberg Steve Roppaport.

Rupert Murdoch is stepping down as chairman of Fox's parent company and his news Court media holes, but the ninety two year old will maintain a presence as chairman emeritus of both companies. Fox says Murdoch's son Lachlan Murdock will ascend to chairman of News Corp and retain his role as Fox Corps CEO. Lachlan, in a statement, expressed gratitude that his father will stay on to provide counsel for

Big Tech tild deal.

Today, Cisco Systems has agreed to buy the software developers Splunk. It's a twenty eight billion dollar transaction and it is Cisco's biggest acquisition to date. This move really highlights Cisco's massive push into software and AI powered data analysis. Here's Bloomberg's Ed Ludlow.

This is so in line with Chuck Robbins right, a networking gear seller like Cisco adding the software services in complement to that. Splunk is a data indexing business. Basically, you can monitor network users in real time. It has a cyber security element. For those investors or Cisco and Splunk investors out there. This deal will not impact Cisco's previously an out shared by back program.

Bloomberg zed Ludlow. There By the way, Cisco will be paying one hundred and fifty seven dollars a share cash that represents a thirty one percent premium to Splunk's closing price on Wednesday. By the way, the cost of the transaction represents roughly ten percent of Cisco's market value.

Brian, and here is something you alluded to earlier, Doug.

The Bank of Japan expected to keep monetary stimulus unchanged at its meeting today. Investors will be focusing on any remarks by Governor Kazu Ueita on negative rates or the yen that says the end trades near a ten month low, although we did get a pop today. As Doug mentioned, at the moment dollar yen one forty seven fifty five traders are on alert for possible intervention, with one fifty

For a rate hype.

Ryan Curtis and Doug Critisner Rashad Saloma will join us in a few moments. Doug, as journalists were naturally cynical.

I can give you example.

We were waiting for a hawkish pause from the Fed, and we got it. But the thing is, we were waiting for a douvish hawkish pause, and we got a hawkish hawkish pause, So go sell. That's kind of the way the market reacted. And I see that as just the skiddest nature to all of this.

Could be right about that. And let's talk about a case of bad timing now, because the latest data from ep FR Global shows that investors plowed in about twenty six point four billion dollars into US equities in the most recent week, that was last week. That level is the most that we've seen since March twenty twenty two. And if you look at what was put into tech alone, about one point three billion. So timing maybe not the best.

So what's troubling, And this goes to the first part of your comment is it doesn't look like now investors are quite prepared to buy the dip on megacap tech, at least at the moment.

We don't know, but that's the signal that we saw today.

But also what could be troubling to others is that you had a pullback in everything, particularly in cyclical consumer cyclical areas. The only thing that reasonably performed well was healthcare, particularly managed care. That might be a standout going forward. I wanted to mention one other story that we will be looking at a little bit later. China is loosening capital control measures, and this is to make it easier for foreigners in Beijing to move their wages and their investments,

Bill Gros said today that bond markets are headed for an unprecedented third year of losses because of sticking inflation and widening government deficits.

And wouldn't that be amazing. I can't even remember the last year. Last time we had three years of losses. We should we should look that up. Now it's time for Global News.

US House Speaking, Kevin McCarthy has sent members home for the weekend after his funding proposal was blocked at Baxter's. On top of that, has Global News from the nine to sixty news room in San Francisco.

Ed, Yeah, that's right. Brian McCarthy's efforts to get a government funding bill have blown up, at least for now, as he got ambushed by two ultra Conservatives who voted even against bringing the bill up for a vote, dissidents Eli Crane and once loyal supporter Marjorie Taylor Green.

We should be passed in appropriation bills right now, and I've been very clear about take the Ukraine money out of the defense bill and put it in a separate funding bill so that members.

Like me can vote know and others can vote yes if they want. Now, McCarthy has sent members home until Tuesday, shortening the working time frame, and still saying there is time though.

No it's not pretty, but this country's too great to quit on. And so what we are going to do. And remember what this is, it's not a cr it's the funding of government for the next thirty days to get our work done.

But the reality is he can't get any work done within his own party. Democratic House Leader Hakim Jeffrey's other side of the aisle is scolding the mega Republicans and Republicans in general for that matter.

Need the extreme mega Republicans to get their act together in the civil war that's happening on the Republican side of the isle, that's paralyzing Congress. Get your act together so we can handle the business of the American people and solve problems on their behalf.

The deadline is September thirtieth, as you probably know, let's see Tuesday when they come back is the twenty sixth WOW. And Bloomberg's Laura David this says almost an impossible job right now.

Kevin McCarthy is still thinking at how can I keep my job? How can I keep my right flank happy? So they're trying all sorts of different things. They voted on this defense bill earlier in the day. It failed for the second time this week, a surprised to McCarthy. Now they're looking at okay, can we go one by one and pass all these government spending bills. They're going to have to do some sort of shut stop gap

Nine days and they're gone for three. Meanwhile, McCarthy has met with Ukrainian President of Vladimir Zelensky. He says some of his questions were answered, but all of the presidents wishes could not be met.

So let's get.

Asked for a joint session.

We just didn't have time.

He's already given joint session.

So what we're doing for for Zelenski is exactly the same thing that we did for the Prime Minister of the UK the Prime Minister of Italy. We're putting the bipartisan group of members together to meet with him.

So continued aid from Congress continues to be a question for Zelenski. Chinese President Shi chiampiing well meet with Sirius Bashara Salud Assad, I should say on the sidelines of the Asian Games this week, as Assad makes his first trip to China in nearly twenty years, and the Indian Parliament has approved a bill a reserve a third of lawmaker seats for women. Prime Minister Noarendra Motives says, a

This is Bloomberg Daybreak Asia. I'm Brian Curtis here in Hong Kong. My colleague Rishad Saloma is here in the studio with me, and our guest is Kim Forrest, founder in io of Book Capital Partners. So just a few moments ago, Kim, we were musing over what was causing some of this nervousness in risk assets, like to get your take on it.

Sure, well, I agree with your view, both of your views, that it's a lot of things, and I also think the third quarter is always kind of tricky and I have to see it through my old cell site analyst goggles, which says, oh, the third quarter is where a lot of companies are unsure of whether or not they've made their quarter because of vacations throughout the northern hemisphere. Everybody's on vacation and it's just hard to get big deals done. So that just adds a layer of uncertainty to this

Yeah, I think that makes a lot of sense. It depends on your time horizon, and the short term looks like choppy waters. I wonder whether some investors are fearful here that this is more than just seasonal weakness and that it could morph into a little bit more of a selloff on the idea that you have this inversion of the yield curve that's telling us that something is out there that is likely at least to happen at a time when the FED is pretty firmly committed here to higher for longer.

Sure, but I do think that what we're really missing here is that this is a data driven FED, and what they saw was data that inflation is persistent and higher than they want. So they're saying, the job number one is inflation, you know, getting that under control.

Now.

Remember America is really kind of unique with respect to them mandates of their central bank. They have two of them, which is full employment and steady pricing. But just because they have two of them doesn't mean they can ignore one, but they can wait one more than the other. And right now, inflation is what they're trying to conquer. Now, if they see, you know, the economic conditions changing, guess

Yeah, see what happens certainly, So you know, are we going to be seeing a slow down? I mean I'm not talking about styflation, recession or anything quite that drastic, but actually a meaningful slow down in the pipeline. And will that, as you've been alluding to, be evidenced in the data we get out of what you say, the earnings reports that we get. And where does that leave you with your portfolio?

Well, I think we may see that. I think that is a very likely thing that probably in the next year, some that the economy of the US is going to slow. I don't think it's going to stall. I don't think stackflation. But again, this could give you the ability to pick up a good stock at a reasonable price, or maybe even an extra reasonable price. I keep coming on your show and saying, bad things happen, for sure, and you should know what they could be. But good things happen too.

Yeah, there's been quite a sell off in some of the high flying megacap tech stocks, more than ten percent in some cases. In fact, what's interesting about nvidio. Remember when it came out with its earnings, the stock pop from three hundred to four hundred, and then it went further up after that, but now it's back to four to ten, So it's given up almost all the gains except for that one day repricing following the earnings. So you can imagine that some people might be enticed by that.

Yeah, I mean that always is the default answer for a lot of investors, and that's because tech and especially chips have been tied at the hip to global growth, if not a region growth. Right, So if you think that the global growth is going to slow even more than it has now looking at China and Europe. I would say those are slow growing, if not negative growing places.

I mean, everybody mentions it now, that's the thing. And it's so reminiscent of the dot com boom. I mean, it does seem as though it's going to be the panacea for the all the world's evils. The way it's going right now, do you think people have just essentially just gone a bit too far as they did in the late nineteen nineties.

Absolutely, that is a great analogy. But look where we are at the time. We thought ordering dog food online was the miss thing on earth, and yet you know, here we are ordering a whole lot of other dumb stuff and depending on it for a lot of you know, our daily needs. But it does work its way into your life. It just doesn't play out the way you think at the beginning of an investing cycle. And I think that should be the lesson for us. All Let's keep our eyes open and not just guess, oh, it's

Us a theme that you can really bank on, and maybe just talk about portfolio construction before we finish.

Well. I kind of like to not overweight or underweight sectors because as we are finding out again this year, oil's taking off and if you knew, if you look at the beginning of the year, I don't think anybody would have thought that, right. So I like maintaining the sector weighting of whatever your benchmark is, but then trying to find companies that are going to outperform their peers

Okay, Kim, really good session.

Thanks so much for joining us, Kim Forrest, founder and CIO of Book Capital Partners. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street.

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I'm Brian Curtis.

And I'm Doug Chrisner. Join us again tomorrow for all the news you need to start your day, right here on Bloomberg day Break Asia.