Good morning. I'm Brian Curtis.
And I'm Doug Prisner. Here are the stories we're following today.
President Biden is vowing to retaliate after another attack on a US military base by Iran backed militants, and Baxter has this story and more in San Francisco. Ed.
Yeah, right, you're right, Brian attack and Jordan killed three military wounded twenty five others. It was a drone attack, the official line from the White Houses and officials are still gathering details and will act pharmacy. A senior operations officer, Daryl Blocker tells ABC this is not really new.
The administration has been dealing with this for over a decade.
I know it seems new in the sense of the.
Hamas kind of angle to it now, but our forces and our partners in the region have been fighting this and dealing with this issue for a long time.
Yeah.
The new chair of the Joint Chiefs of Staff mean while General C. Q. Brown says, the questions in the Middle East boiled down to deterrens conflict.
Do you want us in a full scale war?
And that's the goal is to turn them and we don't want to go down the path of greater escalation that drives to a much broader conflict within the region.
Yeah, Brown says, a constant balancing act. President Biden's Energy Secretary Security Advisor Amos Hawkstein on CBS has heard on Bloomberg says the impact of who the rebel attacks on commercial ships in the Red Sea is limited and that any impact in the US economy will be very his word muted, but says we should all be concerned.
We want to do everything we can to prevent an escalation of that lower level conflict into an all out conflict that would drag US further into war and risk civilian lives on both sides. And that's what we're trying to do, is to avoid that.
SA says cost pressures have been more logistics than on energy commodities. That reports out of DC that the Senate negotiators are making progress toward an immigration compromise bill. One of the architects is Republican James Lankford, and on CBS has heard on, Bloomberg says, very high hopes.
Everyone's looking to be able to read the bill at this point.
That's the key aspect.
We're working the final aspects of it to try to be able to get it out so everyone can get a chance to read it. Right now, they're all functioning off of Internet rumors of what's in the bill, and many of them are false. Yeah, and he says people want to go through it and look at it for themselves. Donald Trump, meanwhile, as you know, said he doesn't want it passed. And Democrat Tim Kaine says, that makes no sense to.
Know that fentel is coming over the border for Mexico, largely through ports of entry.
This bill will help us deal with that. And that's why when a President Trump says vote no, wait for a year, wait for two years, people can't wait.
Biden is endorsing it. The House will be another matter, and Fentanel also an issue for US China relations officials is set to meet in Beijing this week to talk about China clamping down on the trafficking of the deadly drug. It marks the first person discussion of a group set up following the November meeting between Presidents Biden and she. It was twenty four hours a day, whenever you want it with Bloomberg News Now in San Francisco. I'm Ed Baxter, and this is Bloomberg Brian.
Ed thanks very much the time. Now six minutes past the hour, it's now time to take a look at the top business stories of the hour. Well Wall Street is looking ahead to an extremely busy week for earnings news, specifically by big technology companies, and the expectations are high. Natty Level is senior US equity strategist at UBS Financial Services.
We do expect tech to be able to deliver on the earnest some ab out early checks are already pointing to that, so we think that this market can continue to be a grind high. Now in fantis, you know, the market is not too far from our base case scenario for five thousand on the S and P five hundred.
Among the companies Alphabet, Microsoft, AMD, General Motors, Starbucks, UPS, and Pfizer. And that's all in the Tuesday session alone. And by the way, if you're tracking this, communication and tech are the two top sectors in the S and P five hundred this year.
So the Biden administration is set to announce massive subsidies for the chip makers by the end of March. Now, these companies obviously include names like Intel, even Taiwan Semiconductors on the list. The grants you may know, are central piece of the twenty twenty two Chips in Science Act. Thirty nine billion dollars has been earmarked as a way
of revitalizing the American chip industry. Intel has said in the past the grants will determine how quickly the company can progress with expansion projects now that would include projects in Arizona and Ohio. The grants are aimed at rebalancing what is seen in Washington is a dangerous concentration of production in East Asia. It's also a key pillar of mister Biden's economic message as he heads to the November election.
Right well, China will halt the lending of certain shares for short selling beginning today. Boom Berg's Joan Wong as the story from Hong Kong.
The China Securities Regulatory Commission is moving to support the country's slumping stock markets. Strategic investors will not be allowed to lend out shares during lock up periods. Authorities are taking measures following an alarming slide in Chinese stocks. The MSCI China Index has lost sixty percent from a twenty twenty one high. The CSRC also filed yesterday to crack down on other lock up restrictions, including the timing of
the stock lending in Hong Kong. Joan Wong, Bloomberg Radio and one of the other.
Big stories today in Hong Kong will be Evergrand back in court here in Hong Kong. It's been eight weeks since the big developer was given some extra time to try to come to a deal with creditors, and what we're hearing from investors and from those creditors, no deal really has been made, and so it'll be very interesting to see what the judge decides today, whether there's another delay or whether or not perhaps we move forward towards liquidation. Well.
Joining us now on the program is principal senior portfolio manager and head of few Income at New Edge Wealth, Ben Emmons. So Ben a lot to talk about. I know we've got the refunding coming tomorrow, so that's one thing. Let's talk a little bit about the FED and inflation. First. The FED may be close to a pivot, and I think people are sensing that. That's one of the reasons
we've seen some buoyancy in the markets. But one of our featured stories on the terminal is has a restaurant that's saying, look we've kept prices steady for a couple of years, but we don't think we can continue. Is the public feeling the slowdown inflation?
Hey, Brian, It's very mixed picture on the ground here because as much as that cored PC datash is very encouraging and it shows that so all these annualized measures are actually at or even below the target. Now, you know, it's still a bifurcation in terms of as you mentioned bank, if you go to any kind of restaurant here, you're not really seeing those three or six month anualized inflation rates being below two percent, right, You're paying triple of
that type of inflation. And that still has a lot to do with I think the shock out of Ukraine from twenty twenty two, but still to an extent reverberates, you know, through food oils and other types of processing of foods that has left food prices is more elevated. So it's not so simple, but there is in that sense in the broad picture, let's say the progress that the fact can look at saying we'll have pretty restrictive rates in their mind, and inflaces moving really towards the
target quicker. So there's a case here for reducing that rate, I think sometime in the second quarter. But as we just went through the top headlines, we already have new challenges coming at us, like, for example, what's happening in the Middle East. There's energy prices, right, So it's all not that clear cut to me. The fact can move so quickly, so fast on rad us here.
So, Ben, do you think that we're going to be looking at a situation where it's higher for longer, maybe the third quarter of the year, not the second.
Quarter would be more out of you, Doc, I mean, we were certainly not subscribing to view of a March cut because that means that any data until then would really see like a significant weakening. And it's actually the opposite that's happening, even though inflation is moving down and if this economy holds up and it's still getting essentially
stimulus from so to speak, moderating inflation. Yeah, and you're looking at a high for longa into the well into the summer, and that's I think very possibility.
You know, we have this values in the bond market. It seems to be getting absorbed pretty well. We haven't had all that much pain. I can refer to the two year yield the start of the year at about four twenty five and we're only at four thirty four now, so and it seems like investors are interested in loading up here at these high rates before they eventually start to move down. Is that is that right? Should they feel that way?
Yeah, it's a very conditioned view, right in terms of like where we came from pre pandemic. And again, if all those annualized measures of infration show we're at pre pandemic levels, that's what incentivizes those investors say I'm not going to wait and I'm going to buy the bonds now because we're going to get there one way or
the other. Right, And therefore, I think, as you mentioned the refunding coming up this week, but maybe more supply and more in the long antem we knows, you know, the end of the day, there seems to be a better demand picture here. We cautioned though, that the last number of auctions have shown challenges. There's getting it properly covered, with primary dealers still taking down a lot of the supply in that auction. So it's not entirely I think
a healthy picture. But let's say this, I think, Brian, we probably have reached some level of peak and treasury yields last year, and we may go back towards that peak temporarily given the strength of the economy. But to see six seven percent yields that will probably be more about a physical crisis or a major energy crisis, which neither of that is happening right now.
Yeah, and as we speak, I mean, we've got crude oil around just under a seventy nine a barrel. That's w TI. You made a point a moment ago where you said you think that the Fed's view on rates
is that they're pretty much restrictive at this point. And I'm wondering as we head into the remainder of this year and then look out to twenty twenty five and the amount of debt that has to be rolled over essentially and refinanced, whether the FED is cognizant of that, and that would the FED would be inclined to try to get to rate cuts sooner rather than later. If inflation is at the Fed's back because of the awareness of how much financial stress may be building in the system.
I think we cannot ignore that. Indeed, the doctor, you know, if you just step back a year less than a year ago about the banking crisis that suddenly erupted, which wasn't effect of well, one hand interstate risk, but the other hand is the fact that we have death in the system that's causing fiction. Yes, the role of commercial real estate death and of utter corporate debt and high yield is major and including government that so there is
indeed a relief of rates to an extend needed. How we got it already from the October high at five oh four the TENNA to as low as as a three three eighty five or so recently, but we probably need someone more stability from here to get indeed that rollover sufficient of without major disruption, so to an extent. The fact has the inflation went in his back could probably get that break up. We do think it will happen, but maybe later this year, so before the election, but
sometime in the late summer and in the fall. Keeping that financial conditions effect from that rollover, that that certainly in mind.
Yeah, But Ben, I mean the layman would say, look, corporate America and individuals, particularly homeowners had fifteen years of refinancing and getting their loans, you know, into a pretty affordable rate, and that's the lions share. What you guys have just been talking about is just a sliver over the past short period when rates were high, Right.
That's true. I think that, you know, if you look back before the pandemic happened, all that refinancing then at that low rate and determining out of that. That's part of the reason why we haven't had any problems so far with high rates affecting the economy's We generally acknowledge now that potinki corporations, including households, have been able to weather the interest rate storm, so to speak. Right, they're interest rate average interest cosses is low, the the market
rates are currently. The reset of that interest rate cost is what the concern is, and it's a bit difficult to point exactly how much it will be, but there are groups of companies out there that have to refinance starting this year in the next year, and that's the issue. So I don't think if that keeps it in mind, but it's obviously all about financial conditions and that type of analysis for them to consider the death rollover.
And before we let you go, we got to talk China. You and I were kind of a trading email earlier. One of the things that you highlighted was this piece in the Washington Post on president former president Trump reportedly weighing options for a new economic attack on China and reading between the lines, it's pretty apparent what the strategy
would be. Let's let's jock up tariffs. What do you think that net impact on the American economy would be Imagining a world where we're looking at higher tariffs on Chinese goods, Yeah, it will be very disruptive.
I think I would agree with the articles premise because you bring fans economy with terrors. The theory is that you will get the producers of the all our competition to raise prices, right they don't have any foreign competition, you know, in theory, it's not that straightforward. But I do think that domestic production will be costs much higher going forward if I given the tariff impacts, and you know, we are guaring me getting very gentle deflation phone check
once again, and this is helping our economy. Really if you think think of all the categories of goods that are now much lower in price than they were a year ago or two years ago. So I think the traff is once again in a very disruptive measure, and it has shown from different you know think tanks, independent think tanks here, So let the job also.
Yeah, so is a vote for Trump, you know, get ready for more inflation kind of vote.
Yeah, it's a bit political mcbrian, But I think that the impact of pairs one inflation has been sort of mixed from the previous situation. How this will be with a universal part, Maybe it will be higher inflation definitely will affect econy negatively. I would say that's the vote.
Yeah, because one analysis says that he's planning or thinking about ten percent on all countries for tariffs. I know that's not just China, and that would make a huge, huge difference. Ben, thanks very much for joining us. Ben Emmons from New Edge. Well, 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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