Good morning.
I'm Brian Curtis and I'm Doug Prisner. Here are the stories we're following today.
Well, a new medical emergency for the British monarchy. Let's get to Dan Schwartzman in New York with more.
Dan Hey.
Brian Buckingham Palace says that King Charles is being treated for an unspecified form of cancer and will be stepping back from public duties. The cancer was discovered late in January while the seventy five year old was in the hospital being treated for an enlarged prostate. The pass only has said that the cancer is not related to that prostate condition. President Biden has expressed his concern and says he will reach out to the king, whom he met
back in July. Charles has only been king since September after the death of his mother, Queen Elizabeth. Northern California is trying to dig out from the storms. Southern California is still under emergency warnings. Bloomberg's Had Baxter reports from San Francisco.
Four days of the atmospheric river weather conditions were the worst coming over the weekend. Some Bay Area peaks got one hundred mile per hour winds, not that high for most of US, and the power outages were widespread. At one point, as much as half of Silicon Valley customers lost power at our home eighteen hours without power of things of ease now hopefully, although tragically two people did
die from falling trees. The focus now has gone to southern California, where there is flooding and power outages, as well as landslides in the Hollywood Hills and Santa Monica Mountains. There are still evacuation orders in place and several rescues have had to happen in San Francisco. I'm at Baxter Bloomberg.
Radio thanks Ed.
Secretary of State Anthony blinkoln has kicked off his fifth visit to the Middle East since Samasa's attack of Israel back in October, and he started it with a meeting with Saudi Arabia's Crown Prince Mohammed bin Salman. Blincoln will
visit Egypt cutter in Israel also on this latest trip. Meanwhile, ceasefire talks continue, with the US cutter in Egypt drawing up a proposal that would see a stop in hostilities for several weeks, the phased release of remaining hostages Both House Republican leaders and GOP presidential frontrunner Donald Trump have rejected a bipartisan Senate deal to impose new border restrictions while tying in billions of dollars of aid to Ukraine. Speaker Mike Johnson has called the deal quote dead on
arrival and a wasted time. Both Senate leaders Chuck Schumer and Mitch McConnell back the bill, which allows the Department of Homeland Security to start turning away asylum seekers whenever encounters reached four thousand daily for a week. The bill would also tough in qualifications to seek asylum in the country. Johnson and other Republicans are pushing for much stricter immigration policies in exchange unlocked tens of billions of.
Dollars of aid to Ukraine.
The Wall Street Journal reports that Republican presidential candidate Nikki Haley has requested Secret Service protection after receiving threats. Haley's campaign has not detailed what threats led to the request. The Secretary of Homeland Security has the authority to grant a protective detail after consulting with a Congressional advisory committee. Haley has previously talked about a swatting episode that occurred back in December that sent law enforcement to her South Carolina home.
The former governor, though was not home at the time.
Global News twenty four hours a day and whenever you want it with Bloomberg News.
Now. I'm Dan Schwartzman, and this is Bloomberg Brian.
Dan, thanks very much. Six minutes past the hour. It's time now for the top business stories of the hour. China is said to be tightening trading restrictions on domestic institutional investors and some offshore units. Bloomberg Yvon Mann has more on this story from Hong Kong.
We hear Chinese officials have imposed caps on some brokerages cross border total return swaps with clients. This is a channel that can be used by Chinese investors to short Hong Kong stocks. At the same time, Chinese brokers who use a channel to buy mainland shares for their offshore units were told not to reduce their positions. Also, we hear some hedge funds have been banned from placing cell orders completely, and still others have been barred from cutting
stock positions in leverage funds. Economists say this could provide some short term relief, but may be counter productive as investors worry about their ability to exit the market in Hong Kong. I'm von Mann Bloomberg Radio.
Well here in the States, we mentioned a moment ago how strong the economic news of the day was US services expanding by the most in four months during the month of January. Now that follows last Friday's surprisingly strong jobs report. Both of these data points kind of spoil the notion of a federate cut in March. We heard today from the head of the Chicago FED, Austin Goulesby. He was saying, it's important to consider all aspects of the data.
We just got to be mindful in seeing these big strong jobs numbers and big GDP numbers that they do not have to mean overheating in the traditional sense, if the supply side is moving around.
That is Austin gouls me the head of the Chicago FED. He went on to say that he will not commit to any specific decision on rate policy before the Fed's March meeting.
Bright Well, US and Chinese officials are set to meet in Beijing for another round of talks on economic issues.
That's coming up this week.
We hear a five person delegation from the US Treasury, we'll meet with Chinese counterparts. The discussions mark another round of the Economic Working Group that was established last year. The talks will cover topics including the macroeconomic outlook the two countries, investment screening regimes, and coordination on debt and climate change. Let's get to our guest now in the studios with US Live. It's Eric jew a Bloombery economists covering China and Hong Kong. Eric, thanks very much for
sneaking into our studios here with us this morning. So look, I mean, we all know that the stock market is not the best barometer for judging what's happening with the Chinese economy, but it is still a useful indicator. Small cap stocks hit very hard. The CSI one thousand index is down twenty seven percent for the year. Now that's an extraordinary number. The benchmark is only down three percent, and we all know that the benchmark.
Itself has been down.
But we're thinking that perhaps if you don't have support from the so called national team, then you hit even harder, like we see with that.
Twenty seven percent figure. And what does that tell us about the economy?
Yeah, I think I think you're partly right that saw market not the you know, the best parameter you know to to to see what's going on in China. But I think at least it's a good parameter of what's a sentiment, especially I'm shore China. I think there used to be a joke saying the only two things which is still telling the truths in China is stom market
and the football China soccer team. So yeah, so you see, so yeah, I mean it's it's a it's kind of a real time you know, monitor of the sentiment in China, and I think that the tumble is very much telling the truth that actually invest at least the investor investors are increasing being disappointed on how the government irresponding to the economy, to the you know confidence and yeah, the national team is probably giving some hands, but we don't
see that's a long term solution. It's probably helping to you know, stabilize a bit in short term, but they're not going to last long, right. We have seen last week so after Premier League Chance said something about stabili in the market, we see a few days of stabilization,
but too quickly, you know, renew the tumble again. So I think they such measures the national team, it's not really addressing the fundamental underlying issue why it's calling in the low sentiment in China, and unless a government they're really you know, doing something to addressing those issues, I don't think we're going to see a sustainable rebound in the stock market.
It's very interesting you make that point. I was looking at a piece citing Goldman Sachs data. Actually the firm estimates the amount of stock buying that we have seen on the part of the national team at about seventy billion YU one. That would work out to be maybe just under ten billion US over the last month. But Goldman is going on to say that we're only about a third of the way there, that you need a total of about two hundred billion you want in buying
just to stabilize the market. I mean, and I'm wondering about the message that that type of aggressive buying would send.
Yeah, as I said, I don't think that's a long term solution. Right. You can buy by today, you can buy a tomorrow, you can buy next week, but you cannot buy forever.
Right.
So yeah, let me counter that though with you know, your own team at Bloomberg Economics says that economic activity is actually accelerating a little bit in January. It's a rebound in production and construction. And you're citing high frequency indicator indexes and that it's not quite at the pre pandemic levels, but it is rising. And you say that the Bloomberg now cast points to GDP expanding five point five percent year on year annualized in the first quarter.
Now that's up from five point two percent growth.
But is it just too short a time for that to actually filter through the sentiment?
Yeah, and also bear in mind, so we need to read this data with question because it could be that you know, factory that just Russian before trying to new your holiday in early February, so they just guessing is done before the holiday. So we do expect you you're going to see more weakness in February, and that's natural because a long disruptions from the holidays. So I think a better gauge is that we have to combine the
first two months. You know, probably we get more hard data in much that will give us a better picture. But for now, yeah, some pick up in general, but I think it's too early to be careful.
We had a guest on the program yesterday saying, when I asked a question about trying to turn around sentiment, the answer was very blunt. I mean, deregulate the economy.
Is there?
Do you think on the part of government officials an experiment happening, a thought experiment on ways to to change regulation as a way of fundamentally shifting sentiment.
Well, I think that's the expectation by the markets or by some investors, But we are not sure if that's what the government is thinking, because the government is thinking you if you recall President She last week talk about the high quality growth and stuff, So what's in his definition? What's the high quality growth? Probably he's more focusing on national security or you know, toughening some regulation even in those financial sectors, trying to make it more equal among society.
So I think our excitation is probably different from what she or what's the top officials a vision for China. So that's that's the key. I think the key uncertain right now at the moment.
Is President She channeling his inner mouth?
I don't know, but obviously he has a big ambition right trying to be if not the most.
I mean I asked that, because it's it's really the essence of that is is ideological trumping practical.
Yeah, yeah, I think it's You're true, it's he's more you're not talking about ideolgical. But for many in Chinese I think they're increasingly frustrated because it's for ordinary people. For some people, it's just looks like you're calling black white right, and you're not really telling the truth. Let's just be honest what's going on in the country. Let's everybody from top government to the bottom, everybody just being honest. What's the problem we're facing now, So you don't have
to we don't buy ideology of those stuff. It's it's just calling black white right when we don't know.
So, Eric, you referenced the Lunar New Year holiday. Do you have expectations about how well the Chinese consumers will hold up during this period? I mean, are there pretty high expectations that there's going to be a fair amount of spending.
I think the issue on that too, if I can just put something on the back of Doug's question, is that you know, normally you see a little bit of a slowdown during the Chinese New Year because the factory.
Shut down, people go home.
But I understand that Chinese leaders that they recently the Ministry of Industry and Information Technology gathered provincial leaders and so let's not shut down as many factories. Let's let's get the factories running because we need this for the country.
Is this a sort of new line.
But it's hard to run those factory in China. New holiday, right, and I think, I guess this year we're going to see a very substantial travel across the country because it's it's probably the first year, you know, people can totally freely travel, you know, during a Chraining new period. Last year it's open, reopened, but still many people got sick because of the COVID. So I think this year we're
going to see a big traveling across country. But on the consumption side, we don't expect a very strong number this year, so as we have seen in past holidays. Yeah, people are traveling, but they're not really spending so much money, right so because the income got hit, their jobs got hit, so everybody just you know, uh, just keeping the minimum spending.
But of course they want some home gathering, so want to see their parents for for so many years, So I think we're going to see lots of travel, so probably they'll travel related to some tourism related business. Are going to see some booster during the holiday. But I think overall consumption good consumption, probably won't be so strong.
We talk a lot about kind of deflationary forces that work in the economy. So at the retail level, I mean, are people going to be dealing with much lower prices as they consume?
I think I read something. You know, even the pop prices haven't increased a lot this year around before the China New Year, So that's another, you know, bad sign, not a good sign of the deflation part. I think, yeah, but it's it's it's it's just demand not there. It's it's cheap. But even it's cheap, probably people don't have that so much money to spend like before. I think that's thesue.
Let's go back to the slightly more or optimistic read that I mentioned from Bloomberg Economics. You say we'll have to get really two full months in to be able to gauge that. But let's say that things are actually improving a little bit through here. What would be feeding that? You know, what's driving the pickup? We mentioned production and construction, but can that continue.
It's more the strengths.
I think in the past a couple of months we have seen quite strong reading on the construction PMI, so that's probably suggesting some physical stimulus was feeding into you know, some construction part, but it's mostly still infrastructure investment. That's a traditional way the government're trying to boost an ecoloony.
Of course the efficiency is probably decreasing, but it's still, you know, I can have some impact on the economy, at least I think in the first quarter, because they they frontload some fiscal stimular in the end of last year.
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