China Seeks Foreign Investment, US Retail Earnings This Week

Good morning.

I'm Brian Curtiz and I'm Doug Krisner. Here are the stories we're following today.

Higher bond yields affecting markets generally right around the globe. We had also the US government reporting producer prices rising more than expected in July. Service costs were up the most in nearly a year. The benchmark tenure yield, the baseline for the broader financial system, has been pushing back toward last year's highs of about four and a quarter percent. As mentioned, we're at four point fifteen as we get

You know, if you had one hundred and thirty five basis points to two and a half or even three percent on FED fund check, you get to a point where we are now. And that suggests that all of the bulls on treasuries, on the tenure and maybe even on the long run, I think their arguments are a little misplaced.

In the coming week, markets who will be analyzing minutes from the Fed's July I'm meeting for clues on where rates might be headed. In the following week, the focus will shift to the fed's annual gathering of global Central bankers in Jackson Hole, Wyoming.

Well, some of the biggest US retailers are about to grab the earning spotlight in the week ahead. We'll hear from Walmart, along with Home Depot and Target. They are all scheduled to report quartal results. One question is on how middle income American consumers will have responded to higher prices. Here's Joe Feldman, senior analyst at Telsey Advisory.

Middle is kind of squeezed right now, and that's where we're seeing that middle has been trading down, That aspirational customer has traded down a little, and middle has traded down. So I think that still positions Target and Walmart pretty well.

That is Joe Feldman speaking on the Bloomberg Surveillance podcast. By the way, last quarters, some retailers like Target and Macy's were very cautious, but now with recession calls fading. Here's one analyst, Andrea and Yee over at Barclay. She is forecasting the US retail shares will outperform next year. Ran well.

US Steel is exploring multiple offers now as it rejects a buyout offer from its rival Cleveland Cliffs. Let's get the story from Bloomberg's Denise Pellegreeni.

Manufacturer Cleveland Cliffs offering to buy the iconic Pittsburgh based steelmaker and a cash and stock deal as it looks to create one of the world's largest steel makers. Cleveland Cliffs offering to pay seventeen dollars fifty cents a share in cash and one point two to three of its own shares for each US steal stock, and says that applies a value of thirty two bucks fifty three cents per share as of Friday's clothes, and that would be a forty three percent premium to US Steel's last closing

And again, as Denise mentioned there, Cleveland Lifts was flat of the session on Friday, but we did have a very modest gaining US deal, as she mentioned, up about one percent to twenty two seventy two.

We go to China next, where the government is issuing a plan to attract more foreign investment. The story from Bloomberg's Juan Wong in Hong Kong.

China State Council is encouraging foreign companies to set up research and development centers here. The plan will help accelerate work on foreign projects in the biofarm and telecom sectors. Will also increase fiscal and tax support for foreign businesses. The goal is to improve the business environment as China seeks to bolster ris economy. So far, the economy has shown few signs of a rebound. New stress and the property market and deflation are threatening the growth outlook in

Chinese developer Country Garden says it will suspend trading in nearly a dozen onshore bonds. Six yuan denominated corporate bonds issued in twenty twenty one and twenty two will be suspended from trading today. That's according to five links to the Shenjen Stock Exchange. Three additional bonds will be subject to suspension on the Shanghai Exchange. It comes after Country Gardens said he would report a multi billion dollar loss

It's interesting with the weakness that we're seeing in China's economy. Even so, Bloomberg Economics is expecting the PBOC to hold its one year medium term lending facility rate steady this week. That's a two sixty five This would mark the second month of what Bloomberg Economics is essentially calling a tactical pause.

It's such a cautious, piecemeal approach. It's just really surprising. People are looking for something dramatic, something that's in the shock and aw category, but we're not getting it.

Yeah.

I wanted to mention Neil Ferguson as well. I don't know if you saw his pride, but he's not a kid anymore, doesn't believe in Santa Claus, the tooth Fairy and soft landings. I thought it was great. He said if pilots had the same success rate as the Fed, none of us would fly. And he gets Humpty Dumpty and Goldilocks and Ulysses in there as well. I guess you know, he's maybe not so far away from what Bill Gross is saying, and that he sees too hot

Up from here.

On the other side, I want to point out what the economist over at Goldman Sachs are saying. They are expecting the Fed to begin lowering interest rates by the end of next June, you know.

And there was an interesting piece that Neil put in there. I didn't see this in the Wall Street Journal, but I know you really read the newspaper, so you might have seen this from James Macintosh that if the US measured inflation the way Europe does, then inflation and core inflation would already be down to two point three percent. Apparently Europe doesn't use owner's equivalent rent. Yeah, so that's quite interesting.

It's a good point.

Right now, it's time for Global news. The Maui wildfire is now the deadliest in the US in one hundred five years. At Baxter as Global News from the nine sixty newsroom in San Francisco.

D Yeah, that's right, Brian. The death troll now stands at ninety three for the fires. But my police chief, John Pelletier says the search and recovery efforts are at a very early stage.

We're going as fast as we can, but just so you know. Three percent, that's what's been searched with the dogs. Three percent. We got twelve more dogs on the way today. We just made that. I made that request, FEMA made that happen. They're on their way. But think about how hot and how humid it is, and we can only go as fast as that animal can go.

But tongress Jill Takuda on CBS has heard here on Bloomberg, so she understands people want to get back into the area to see if there's anything left or to recover, but that it's too dangerous and that the sanctity of the people who didn't make it out must be observed. She did, though, visit Lihinatown herself, to.

Still see fires smoldering in the distance, to see cars literally melted into the puddles that have hardened over on the road, x's on buildings and cars, to say that it has been searched, signs of casualties or even life.

Meanwhile, Governor Josh Green says the state will investigate why the emergency siren systems were not activated and whether life and property could have been protected.

We have doubts that much could have been done with a fiery, fast moving fire like.

That, but he says that it's caused by climate change and hurricane passing through producing winds now. One thing he does say interesting, he knows for sure Maui needs to protect itself from outside interest moving in and buying up any land that could be abandoned.

We will, through whatever emergency powers we have to use, prevent this land from going outside of state ownership.

Now four days on, still remains unclear the cause, although Hawaiian law firm says it is going to look into the possibility that down power lines could have triggered at least one of them. China's Foreign ministries criticized Taiwan's Vice Premier Lai Chang tay stopover in the US. Official statement says,

We've been saying this over and over again. We counted the ballots three times. He lost this state, and he continued to say he didn't lose it. And it's just creating a lot of tension and a lot of chaos.

Which Sterling says could lead to violence.

Somebody will be motivated by some of this kind of language at some point and do something stupid. It's not me an organized thing. It's not going to be a bunch of conspirators together. It's mean one probably mentally unstable individual who's going to be radicalized to this process.

And the Grand Jury is due to meet on Tuesday, and oh no, no, it looks as if the Musksuck cage fight is not going to happen. Mark Zuckerberg says it's time to move on from the speculation. He says, quote, if Elon ever gets serious about a real date and official event, he knows how to reach me. Otherwise, time to move on. I'm going to focus on competing with people who take the sports seriously well. Global news power by more than twenty seven hundred journalists and analysts in

This is Bloomberg Daybreak Asia. I'm Brian Curtis along with Vonnie Quinn in New York, and a guest is Walter Todd, President and Chief investment Officer and managing director at Greenwood Capital. Walter, So we can talk about higher yields, and we can talk about possible soft landings and such. I wanted to point out that we've now seen Nvidia, Broadcom, Microsoft and Apple all selling down now about ten to thirteen percent.

Yeah, well get evening from the US. Yeah. I think it's probably a little bit of each of those things. Quite honestly. I mean, I think when you look at the reactions that stock so far I've gotten from earnings, it's they've been pretty quote unquote violent, but in both directions. And I think the super micro computer SMCI last week could be a potential playbook for Nvidia. You really good earnings,

We have been seeing breath improved just a little bit in the S and B five hundred.

Does that give you any hope that maybe we are not in for a correction?

Yeah, it is, you know, encouraging to see more than more than seven days participating, for sure, But you're still you still see a pretty you know, dramatic spread between the SMP and the equal weight SMP almost a little over nine hundred basis points there on a year to date basis, So it's still pretty narrow from from that perspective, I think, you know, if you look at the past year, we've had two kind of eight to nine percent corrections, one in December of twenty two, one in February March

So we have still a lot of bears around, although many have capitulated. But in the bear camp you have some that think that inflation will rear its ugly head again and the FED has to just get on steroids once again. And then you have others that say, no, they've already done too much, and you know you've got recession coming and there's really no way to avoid it. How do you actually see the full picture at the moment.

Yeah, it's very complicated, honestly. Right now, I keep going back to this Mark Twain quote, is it ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. And that feels like that captures the moment right now. So I do think it's going to be tough to get inflation down from three percent to two. So if the FED is truly intent on getting there in a hurry, then I think they're going to continue to raise race and

Got a question. I hate to cut you off, and I got a question and we got a sneak itting, which is, I'm a little bit confused because we hear a lot that recessions are usually caused not by what you know, and you just mentioned that by some sort of exogenous occurrence. And yet many people really believe in the in the inversion of the yield curve as a signal that you have to have recession. I mean, they can't both be right.

No, I agree, that's what makes it so complicated. I mean, that's what everyone knows for sure. I mean myself in the same camp. I mean, I'll look at the history and what these signals are. You know, I've told you in the past, and they're not working at this point. I think a lot of that has to do with the distortion coming out of COVID and some of the dynamics there with the labor market and all the excess

This is Bloomberg Daybreak Asia, your morning brief on this story's making news from Hong Kong to Singapore and Wall Street.

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