China's Plan To Circumvent US Chip Sanctions

surprise visit to Ukraine. China publishes a report on what it says is the US plan to dominate global public opinion. Turkey hit by another large quake. 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, and just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App, and everywhere you get your podcasts. Good morning, I'm Brian Curtis and I'm Dak Krisner. Here are the

stories were following today. Very interesting to take a look at BHP group. Here the world's biggest minor. It is slashing its dividend. Let's get the story from Bloomberg's Richard Salama, BHP will pay out ninety cents per share. That's down from last year's record of one dollar fifty. This comes as BHP commodities like iron, ore and copper slumped during the second half of the year. This drove a decline

in b HP's half year profit. Prices were impacted by China's economic slowdown and hawk is policy from central banks. The world's mining giants have also been hurt by cost inflation on energy, labor, and other inputs. Even so, b HbCO Mike Henry says he's positive about demand looking ahead, Henry saying he's expecting strengthening activity in China to be a major driver in Hong Kong. I'm Richard salamat the

Bloomberg day Break Asia. We go to China next, where some of the country's top scientists have outlined a plan to circumvent US sanctions on semiconductors. That's or from Bloomberg's Anabel Drulers. Senior academics Lord Jun Way and Lee shun Shin say Beijing should gather patents that govern the next generation of chip making. The patents would run from Nobel materials to new techniques. The scientists contributed their comments to

the Chinese Academy of Sciences. The article offers a rare glimpse into how Beijing approaches hostilities from the U S over semiconductors. It also hints at how Beijing might react in the future. So far, Chinese officials have refrained from discussing countermeasures to US actions, reportedly even in closed door meetings in Hong Kong. I'm Annabel Rulers Bloomberg Daybreak Asia Hong Kong is taking a major step toward its goal of becoming a crypto hub. That story from Bloomberg's yvon Man.

Hong Kong has outlined a plan to let retail investors trade larger digital tokens on exchanges licensed by the Securities of Futures Commission. In a consultation paper, the regulators said safeguards such as knowledge tests, risk profiles, and reasonable limits on exposed will be put in place. A consultation period on virtual asset trading regulation has begun and will end on March thirty one. The objective is to allow retail trading in the new licensing regime for crypto exchanges due

on June one. We hear Bitcoin and ether, the two biggest digital assets by market value, are likely to be listed by Hong Kong platforms. I mean on Man, Bloomberg, Daybreak Asia. Well. In the U S. A federal regulator has asked Tesla for more information about one of its vehicles being involved in a fatal crash in the San Francisco Bay area. We have more from Bloomberg Scott Car.

The U s National Highway Traffic Safety Administration reached out to Tesla after the incident in Contra Costa County this weekend. County fire officials say at Tesla hit one of its trucks that was blocking lanes while responding to an earlier accident, and it's not clear whether the driver, who was pronounced dad of the scene was using the Tesla's autopilot feature. The NHTSA or NITZA has spent the last eighteen months in investigating how Tesla's autopilot system handles crash scenes. It

has two active investigations into possible autopilot defects. Last week, Tesla recalled almost three hundred sixty three thousand cars that have full self driving beta software installed. The company says that its recall notice the feature could violate traffic laws before drivers are able to intervene. I'm Scott Carr, Bloomberg Daybreak Asia. From Home Depot to Walmart, The biggest US retailers are about to grab the earning spotlight. The story

from Bloomberg, Susanna Palmer. The results this week will provide investors with crucial insight into consumer demand, the path of economic growth, and Corporate America's profitability. The group doesn't have nearly the influence of big tech in terms of sway over the broader market, but the companies will be closely watched, as consumer discretionary shares are the year's top performing cohort in the SMP five hundred index, this after getting battered

in twenty two on rising inflation and smolen inventories. Susanna Palmer, Bloomberg Daybreak. Yeah, Bryan Curtis and Chrisoner Paul Allen coming up shortly, and we'll get to our guest, Chuck Camello in a few moments. From SX Financial Services, Doug, the b HP story is kind of interesting and that it might it might be a microcosm of what's happening with the global economy. Dismal second half last year, profits down thirty two. China was more or less closed, the central

banks were obviously quite aggressive, and commodity prices dropped. You know, we still have a bear market in commodities down the bloomberg of commodity index from last summer. But now China has reopened and that changes everything. Uh, And it's just it's just curious. We don't know how soon this will happen.

But does that restoke optimism and growth perhaps, But you have to look at the inflation component of what BHP is saying, they're dealing with rising cost and Brian I was struck by what ed Yar Denny of yard Any Research is saying he's got a fort chance of a soft landing in the US. I was struck by that are Denny saying that basically in this scenario, inflation moderates, which at this point seems hard to believe. Treasury bond yields remain below last year's peak. And get this, the

SNP five dred ends the year at a new high. Yeah, and he's widely followed obviously, Doug Um. It's a real conundrum here. Um. Even though growth looks a little better based on the data we've seen of late, it looks like it'll be interest rates higher for longer. There's no denying that inflation is serving as very sticky, and as mentioned, we'll put that to Chuck Camello. Coming up now, it's

time for Global News. US President Joe Biden's surprise visit to Ukraine is in the hopes of rallying new pledges of help from European allies for Ukraine. At Baxter has Global News in the newsroom at San Francisco ed, Yeah, that's a look forward, Brian. You're right, historic trip to mark one year of Russian invasion and to meet with

President of Avlatimer's landscape. Keith stands and Ukraine stands, the democracy stands, the Americans stands with you, and the world stands with you, saying Ukraine has captured a part of his heart, and he said Russia cannot be allowed to even win try to win the war. Young town of Russians are fleeing at tens of thousands, not wanting to

come back to Russia. Has Zelenski addressed the gathering, saying that he extended words of gratitude personally to President Biden and to his team to Congress and to all US people. Biden promised an additional sixty million dollars in military aid, and in Poland will meet with Eastern European leaders to make sure they're all on the same page. Now, there

is a large list of comments and responses. Today. In an interview with South China Morning Post, Lensky War in China of becoming allies with Russia against Ukraine, saying it would bring on a world war, and the e U s Joseph Burrows says that China Counselor Wang Ye and their meeting said Wang told him that China has no lands to arm Russia and that it will convince the

world it is a neutral actor and wants to broker peace. Shinhwa, meanwhile, is published a four thousand word piece criticizing the US and everything from war policy to culture, and saying it will write a plan for peace. The article called US Hedgemony and its Perils. Wang's next stop is Russia. The Kremlin says a meeting with President Vladim Raputin has not been excluded. Now. This leads US Secretary of State Anthony Blinkoln to repeat the warning about bringing lethal weapons in

to help Russia in the war. China understands what's uh, what's at risk, where to proceed with providing material support of that kind to to Russia and Blincoln says the concerns are real and in responds China's Foreign Ministry spokesman at Juan wam Band, saying that China won't accept any finger pointing from the US over its relations with Russia. Turkey has been hit by a new six point four

magnitude Earth Week today. It has killed three people injured more than two hundred in the same area that was devastated two weeks ago. USS Secretary of State Blanket in

Turkey surveying the damage there by helicopter. United States is here to support you in your time of need, and we will be by your side for as long as it takes to recover and to rebuild, pledging another one hundred million dollar aid package, and the Philippines and US will discuss a joint coastguard patrols in the South China. See writer's report says China's aggressive stance in the area

needs to be monitored. Global News powered by more than journalists and analysts and over one hundred twenty countries in San Francisco. I'm at Baxter and this is Bloomberg. This is Bloomberg Daybreak Asia. I'm Brian Curtis along with Paul Allen, and our guest is Chuck Cumello, President and CEO at Essex Financial Services. Chuck, how do you see the balance of risk shifting here? Where it looks like inflation will stay stay sticky, rates will stay up for a while,

but then growth will will be stronger as well. Well, yeah, thank you so much for having me. Um. Yeah, listen, it's we're We're at a really interesting time and just when the market was almost trying to convince itself that thought that the Fed made pause or even cut I think this month, which February, which you know is the shortest month of the year, but it's certainly punching above its weight in terms of economic and financial data that

we're getting this month. The data this month certainly puts a lot of cold water on that argument, and I think it will. And we've already seen the market react to the employment number, c p I, p p I, retail sales, etcetera. I think we're in for a more volatile ride, and I think the market is finally waking up. The rates are going to stay long higher for longer. Maybe we get a pause, but I don't think it

cut anytime soon. We had some commentary from Muhammad al Arian, chief economic advisor at Alians, is also a Bloomberg opinion columnist, but he was saying that this two percent inflation target for the FID just isn't realistic, that it's going to crush the economy. That does that need to be revisited

in your view? Yeah, So I was reading something today and it said three percent might be the new two percent um And you know, getting getting from peak inflation from where we were um to this, you know six point for um, you know number that we're at right now, give or take. Getting from that, you know that that might be the more easiest move if you if you will, not certainly pain free by any stretch, but getting from

six and change down to two, that's that's painful. And I think the FED at some point, especially if you start to see the impact to the jobs in employment situations in the United States, I think they may need to sort of revisit that and potentially again three is the new two. You call it a win and you move on. Yeah, it's one of those things where you don't actually change the target, but you just kind of

quietly adjust to it. I suppose one thing I'm curious about, Chuck that doesn't seem to fit for me is that I understand that retail sales look buoyant partially because inventories are high and retailers cut their prices. But they cut their prices, then why did inflation pop up? So is inflation not seasonal and sales are or what? Yeah, well soon the inflation number, Well, two things. One the January

retail sales number. There could be there's a lot of noise in that number, and I don't think you're going to see February be anywhere near what January was due to timing factors and um, you know, especially money that people have not spent in December but then push things into January. But inflation, you know, listen, it's the Fed raising rates has certainly impacted anything that needs to be financed, cars, houses,

You see that. You see that across the economy, but it hasn't really hurt services and wage inflation even when this last number came down a little bit but still

persistently high. So you know, inflation, it's going to be very sticky, and that's why the Fed is going to have such a hard job of trying to drive it down from here, Which goes back to the last point about is two even realistic with given what the market is dealing with, what the economy is dealing with, and there certainly are enough factors at play that you can

make the argument that again two is not realistic. Inflation is going to be with us longer, and the FED got us into this and they're going to have to get us out. And that's why you're seeing hearing more hawkish tones coming out, and that's why the market is going to react and has already started to react to this. This you know, I don't we even call it a new reality, but just the reality that rates are going to be higher and we're going to have to the

market's going to have to adjust. Yeah, has the market reacted that we got the SMP up six and a quarter percent so far this year despite all of that hawkish rhetoric. Is this a bit of a game of chicken being played here? I think I think a little bit of one, right, I mean, I think you've already you've certainly seen a nice bounce right in the SMP. I think it's six off its lows close Friday at

six and a quarter. Let's call it. Um. And and there is again that optimism UM that started the year off with a maybe we're going to get that pause or a cut later in the year. Again, I think you're gonna enter into a new volatile stretch here. And look, we haven't even talked about the debt ceiling coming up in June, which is you know, one of the biggest things we're starting to hear from clients. So I think

again we're going to be in for a volatile stretch here. UM. And I think coming off of Q four that was so so ugly and it was a tremendous amount of tax law selling, especially in Q four. You've seen this match, You've seen this bounce, and I think there's always sort of a natural optimism to a new year, and especially after the midterm elections being over. Um. But you know, we're running into the cold, hard phase of reality, which is higher rates and an inflation air environment, and that

is a really hard wall for the market to climb. Yeah, everything you outlined there is perhaps to wind down equities a little I suppose or to rationalize a bit. You like bonds here, So how how would you tinker with your portfolio as you know, as it relates to this

latest news. You know, well, bonds of you have gotten more into resting at these higher at these higher rates, I mean with equities again, you have seen a nice run up on some of the growth areas, So starting to take advantage of that little pop and trim a little bit there, especially if you haven't already done so adding more to the value side of someone's portfolio. And with fixed income, you know, we're we're up one call it one at a quarter on the egg so far

this year. And I was looking at my screen today and pretty much fixed income anywhere in on mutual founder et f land is up anywhere from call at one to three um, not including high yield. But the biggest change there, quite honestly, is you don't have to get to get too fancy and fixed income when treasury bills are paying you know, four and a half five percent

and money markets are paying four percent. This is Bloomberg Daybreak Asia, your morning brief on the story is making news from Hong Kong to Singapore and Wall Street look for us on your podcast feed every day, on Apple, Spotify, and anywhere else you get your podcast. You can also listen live each day on Bloomberg eleven three oh in New York, Bloomberg in Washington, Bloomberg one oh six one

in Boston, and Bloomberg nine sixty in San Francisco. Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa play Bloomberg eleven. Plus listen coast to coast on the Bloomberg Business app, Sirius XM Channel one nineteen, the I Heart Radio app, and on Bloomberg dot Com. 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