Good morning. I'm Brian Curtis and I'm Doug Krisner. Here are the stories we're following today.
US service sector activity rising to a six month high in August. It was boosted by a pickup in new orders and hiring. We heard from ISM Services PMI chair Anthony Navis.
I think this is actually better than what we've seen historically. We see usually a field waning in the summer months as people are on vacation. There's not as much hiring until September, which is typically the pivotal month of going into the last quarter. And what we see now is this is even better than what we've seen pre pandemic levels at that August threshold.
Today's services reading put the pressure on US stocks, the S and P five hundred closing below forty five hundred, the Nasdaq one hundred falling about one percent.
We go to the Fed next and the latest Beige Book survey on the economy. It shows modest growth now in terms of the labor market, while the survey indicates a bit of slowing not too surprising in July and August, and at the same time, many businesses saying they expect wage growth to ease broadly in the near term. So what does this mean for the Fed's path. Well, Former Saint Louis Fedbank president Jim Bullard says the inflation fight isn't over yet.
It's probably wise from a risk management perspective, and probably necessary based on.
The data that we've gotten, that they keep that extra rate hike in there.
That is Jim Bullard. Meantime, the head of the Boston FED, Susan Collins, was saying more tightening may be needed and policymakers must be patient as they assess the data.
Now.
The FED next gathers September nineteenth and the twentieth Brian Well.
Authorities in China and Japan are stepping up efforts to defend their currencies against the surging US dollar. We've heard from Bloomberg's Eddie vanderwaldt we've.
Seen the dollar rally something like four and a half percent from the middle of July right and the dollar straights really coming back. That will reverberate across markets. Means
that people are looking for some sort of haven. I think at the moment, though, the driving falls behind the narrative is that that we were starting to see the risk of inflation coming back, you know, with oil prices and so on, and that's feeding through into Asian currencies in particular, and it's forced the Bank of Japan to talk up the risks of you know, the potential for intervention, and it's it's forced in China, you know, a lower fixing than people had expected.
Bloomberg's Eddie vander waht the yen has slumped by nearly eight percent versus the greenback since the middle of July, and yue is down more than six percent since May. Trading here for the offshore at seven thirty two oh four and Doug that's getting pretty close to the monthly low of about seven thirty four. The PBOC doesn't say too much, but you know that they're feeling it a bit.
Most definitely, we've moved to the Chinese trade data next. Exports and imports probably both fell in the month of August, as China experienced a lot more in the way of pressure on growth. Bloomberg's has more from Hong Kong.
Economists say exports likely fell nine point nine percent year on year in the months. That would be a narrower decline than the fourteen and a half percent drop in July. Analysts say it's largely due to a lower base of comparison from last year, when exports started to slow visibly. Meanwhile, a steeper decline in imports is expected because of softening
domestic demand, and that's likely being squeezed by the housing slump. Overall, across the board, weakness and trade would underline the need for broader and more forceful policy support in Hong Kong and joined one Bloomberg Radio Well.
Apple suffered its worst stock decline in a month, dropping three point six percent in this latest session. It followed a report that the Chinese government is barring staff from using the company's iPhones at work. We get more here from Bloomberg's ed La blow the.
Wall Street Journal reporting that some central agencies in China have issued directives via chat rooms and in meetings that they should replace their mobile device in the event it is a foreign device, not just an Apple iPhone, but
a non domestic device. I would say remember that Bloomberg reported in May of last year that Beijing offered a two year deadline or term limit for state corporations and indeed government agencies to swap out their foreign brand personal computers for a domestic brand, so this is not necessarily an unprecedented move.
That's bloomberg ed Ludlow. Apple's iPhones are among China's bestsellers and are common in both the government and private sector. And if you missed it, as we mentioned, Apple shares down more than three and a half percent in New York.
Well state side of US lawmakers is saying Chinese chip makers SMICK may have violated sanctions by supplying components to Huawei. The story from Bloomberg's Baniau in Hong Kong.
US Congressman Michael McColl says SMIC Warren's investigation. This news comes after s SMIC and Huawei recently built a seven nanometer processor to power Huawei's latest smartphone. Existing rules require any company that intends to supply Huawei with US technology to get approval from Washington. It's unclear whether SMIC has a US license to supply Huawei in Hong Kong. I'm Bonnie Al Bloomberg Radio.
I'm Brian Curtis along with Doug Christner and Rashad Salama will be joining us in a few moments, so Doug in that service's data the price is paid component moving up a couple of points there, so that wasn't too
pleasing to investors. If you put that together with the higher oil price, all of a sudden you've got these new concerns now about whether this will nudge the FED off of hold So that's something we can talk about with Steve Matthews coming up in a few moments, Bloomberg's Economics Reporter.
The other thing you have to consider is whether or not these higher rates are going to add more stress to the financial system, and there was an interesting piece from Bloomberg Intelligence indicating that US regional banks may need to raise significant amount of additional debt to comply with new regulatory requirements. We're talking about sixty three billion worth.
This would be new holding company debt on the part of eighteen regional lenders, and this extra capital might not be enough, in the words of bi to prevent future failures.
Yeah, it's very interesting, and it also brings me back to that story you mentioned yesterday about the reduction in the Fed's balance sheet by more than a trillion dollars. That's also something we talked to to Steve about a couple of other stories that we'll get to a little bit later. Morgan Stanley is now returning to its parish view on emerging markets, particularly em currencies, and of course
it's citing China. Another story. Sources say Great Wall Motor is looking to sell at stake in Smult Energy Technologies that's a battery maker, and its IPO might be delayed, and that's part of the broader story, Doug, that China is slowing IPOs to try to help its markets.
And you pointed out on our production call earlier, Brian, that Oak Tree Capital Management co founder Howard Marx was expecting more companies to default on their debt. That's interesting as well.
Yeah, absolutely, time now for global news. Asian leaders have expressed disappointment over the absence of President Joe Biden at the summit. Let's get to head boxer in San Francisco in the nine sixty newsroom ed.
Yeah, that officially will appear in the statement released after the summit. Meanwhile, the US has sent Vice President Kamala Harris saying economic growth in the region is paramount.
You have made it a priority for Asian to deliver concrete results with a particular emphasis on economic growth, and you have been a strong partner as we work to restore ian Mar's.
Path to plagcy and Chinese primarily. Chang highlighted China's strong ties with Southeast Asia during the meetings, saying asion has
challenged by isn't challenged by increasingly complicated geopolitical landscape. He also saw some talk about the differences between China and Japan on the release of the treated wastewater from Fukushima, Japan's Prime Minister of Fumio Kishita saying the utmost attention of safety is being paid, and Chinese President Lee saying that Japan needs to consult more closely with neighbors regarding
safety and feelings in the region. It looks very much as if US President Joe Biden is cleared ahead of the G twenty and India tomorrow. White House spokesman Kareein Jean Pierre here with the latest COVID test.
The President tested negative for COVID nineteen this morning, following negative tests on Monday night and also yesterday. He is not experiencing any symptoms, which of course is a good thing.
First, Lady Jill continues to recover from COVID in their home in Delaware. A group of voters in Colorado is suing to block Donald Trump from state ballots in twenty twenty four because of his efforts to overturn the results of the election in twenty twenty. They say it is a constitutional issue. A federal judge has ruled that Donald Trump is liable is liable for defeidning E Jean Carroll
while he was president. What this means is that on damages will be decided only in the jury trial in January. Mean while in Georgia, Judge McAfee has denied a request to separate co defendants Kenneth Chesbro and Sidney Powell and ordered them to stand trial together.
So, based on what's been presented today, I'm not finding the severance from mister Chesboro or Powell is necessary to achieve a fair determination of the guilty innocence for either defendant in this case.
So the date sat. October twenty third. Justice Department is planning to file charges against Hunter Biden Bloomberg's Nancy Lyons as the update.
An indictment of Hunter Biden is expected by the end of the month. That's according to documents filed in a Delaware court by Special counsel David Weiss. Biden the son of President Biden, had agreed in principle to plead guilty to federal tax charges and enter a pre trial diversion agreement related to a gun charge, but that plea deal collapse back in July. Prosecutor have not specified what charges they intend to file against the president's son. Nancy Lyons Bloomberg Radio.
All right, thank you, Nancy. Global News powered by more than twenty seven hundred journalists and list in over one hundred and twenty countries. In San Francisco, I'm Had Baxter, and this is Bloomberg.
This is Bloomberg Daybreak Asia, normally hosted out of Hong Kong and New York, but today Los Angeles and San Francisco, with our Doug Prisner there and Rashad Salama in Hong Kong joining us now in the program. And our guest is Steve Matthews, Bloomberg Economics reporter Steve O. Wise one.
I know that there are thousands of tiles in this FED mosaic, but all of a sudden now, I mean, even with the complexity, it seems like with the prices paid component in the services data, with the oil price ticking up, that it looks like the FED pause may be threatened.
Is that the case, Well, the pause is definitely not threatened for September. I think they have clearly signaled that they're on pause this month. I think the real question is what happens in November. And there's still a lot of time to go. So, yes, you're going to get
some higher inflation figures with higher oil prices. Uh, you know, and there is considerable worry, as you quoted Jim Bullard of the formerly the Saint Louis FED earlier saying, you know, they might pencil in one more rate hike, and that seems to be very plausible. I mean, they had one more hike in when they did the last set of forecasts in June, and they may want to keep that
option open for November. And the rate rate markets have suggested that there's a higher possibility of a hike in November than there was even you know, in the last few days, because you've just been getting really strong data, including today's im services data which showed you know, the services sectors looking pretty strong.
Yeah, but Steve, you know, with every bit of data, you get something which contradicts it.
And as to a certain extent, the Fed base book did that.
Yeah, you you are absolutely correct. I mean the base book is kind of a puzzle because it's like, you know, if you look at economic surprise indexes, which measure is the economic data the real data coming in, you know, higher or lower than expectations. It's coming in strong, way better than expectations. And you know, you have the Atlanta Feds GDP tracker suggesting that you could get five percent
or more growth. You know, it's early in the quarter, so it could could easily and almost certainly come down, but you know, it's consistent with a very strong quarter. And then the base book comes out and which is basically just anecdotal reports from the twelve districts of the
Fed banks, and it's pretty downbeat. It's you know, the growth is modest, and consumers are under pressure, and you know, wages are headed lower, so all of the if it was just the basebook, it would be very consistent with a dubbish outcome and no more hikes. But the real data is coming in stronger.
So if we see stronger news is good news now bad news for markets, both the stock and bond markets.
I'm not sure it's that clear because I think what in the end, what they're really targeting is inflation. There is a belief among the FED leadership that it's going to take below trend growth to get inflation back to their two percent target. However, you know, that's just a tactic if they if inflation comes down on its own, And you know, there are a lot of economists who believe that inflation was artificially lifted by COVID and the responses to COVID and all the fiscal spending which is
all kind of winding down. You know, there's entirely a possibility that maybe they don't need to go higher, maybe they just keep at a high level for longer. So I think there's a clear debate. And when you listen to the Fed officials, you know, on the one hand, you have people like Boston Goolsby and the Chicago and Rafael Bostik of Atlanta, who are pretty clearly saying, not go so fast, we don't necessarily need to do more. And then there's an entire another element.
Yeah, there is that other element. But I was surprised to see yesterday and we played the comments from Christopher Waller quite a bit that he's crossed over to perhaps pausing and assessing. Steve, thank you for joining the Steve Matthews Bloomberg Economics Reporter. This is Bloomberg Daybreak Asia, your morning brief on the story's making news from Hong Kong to Singapore and Wall Street.
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