This is Bloomberg day Break Asia for this Monday, April twenty fourth in Hong Kong, Sunday April twenty third in New York, and coming up.
Today, President Chichinping pledges support for China's innovative firms to counter the US. The Bank of Japan is said to be planning a review of its policies over the past few decades at its next meeting. Bed Beth and Beyond files for bankruptcy, and the retailers planning to shut its stores.
Nations pull diplomats from Sudan, US conducts daring Special Forces rescue mission. Chinese diplomat lights furer when he says ex Soviet bloc countries currently cannot claim sovereignty. McCarthy says he'll get his debt bill passed this week. I'm at Baxter with.
That's All straight Ahead on Bloomberg day Break Asia, the business news you need to start your day in 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 Doug Krisner. Here are the stories we're following today.
Another busy week, and even for earnings. Let's get a preview on that from Bloomberg's Charlie Pillett.
Technology. We'll be in focus when we hear from Microsoft, Meta Platforms and Alphabet. Investors are continuing to sift through corporate earnings looking for comments about pricing, power and the outlook. Lisa shout Out is chief Investment Officer for Wealth Management at Morgan Stanley.
So far, earnings have been mixed at best. I think that you know, certainly we've had a sector mix issue here that you know has prevented a material meltdown, but we've had some big names missing and missing on fundamental things like demand, like pricing, like margins.
This week, we hear from a wide range of companies including General Motors, Caterpillar, x On Mobile, Ge, MasterCard, Visa, PepsiCo, Ubs and Ups in New York. Charlie Pellett, Bloomberg, Daybreak, Asia, Bed Bath and Beyond his file for Chapter eleven bankruptcy. The retailer will close stores and liquidate after its turnaround plans failed. The story from Bloomberg Susanna Palmer, the.
Retailer that sells all kinds of stuff for your home will begin liquidating its three hundred and sixty bed Bath and Beyond its stores and one hundred twenty Buy Buy Baby shops. This while also searching for a buyer for some or all of its assets. Bed Bath and beyonds crisis got worse this year, starting in January, when it
floated the idea of restructuring its debts. A last minute lifeline from the hedge fund Hudson Bay Capital Management and an effort to sell more shares in the company didn't help. A unit of six Street Partners is providing bed Bath and Beyond with a two hundred and forty million dollar loan to help it fund itself in bankruptcy. Suzannah Palmer Bloomberg Daybreak Asia.
US Treasury Secretary Jennet Yellen has announced a proposal by the Financial Stability Oversight Council that would revise the way non bank firms are designated. These include changes to Trump era guidance that had made it difficult to tag non bank firms as systemically important institutions. Here's Yellen speaking on Friday at an FSOC meeting in Washington, DC.
The existing guidance, issued in twenty nineteen created inappropriate hurdles as part of the designation process.
These additional steps.
Are not legally required by the Dodd Frank Act, nor are they useful or feasible.
Top Us regulators hope that their new proposal will address threats to financial stability. The FSOC proposed a new framework for financial stability risk identification as well as assessment and then the response areas under the proposal could attract scrutiny. Those include from insurers, from private equity players, hedge funds, mutual fund firms, as well as some newer industries such as crypto.
President Chi Jinping is encouraging Chinese companies to break technological barriers to counter what he sees as containment by the West. She stressed the role of enterprises in innovation and he says that's key to realizing high level technological self reliance. And it was on Friday she told a Communist Party meeting, it's important to remove institutional barriers that impede competition. Beijing, as we know, has been grappling with US efforts to
curb China's access to key technologies, particularly advanced semiconductors. The Chinese president also stressed the importance of reforming state owned enterprises. She said this would help insure national economic security.
The Bank of Japan is said to be planning a review of policies taken over the past decades at its upcoming meeting. We get that story from Bloomberg's Joan Wong.
The BOJ what examined whats worked well for Japan's economy in the past. It will be done with hopes that the central bank can come up with effective policies under newly appointed Governor Kazuo. That's according to the sign Key newspaper. The BOJ is expected to consider the past quarter century of Japan's deflationary economy, and the report said the review could go back as far as about thirty years, when
Japan's bubble economy burst. The BOJ has employed unconventional tool since adopting a zero interest rate policy in nineteen ninety nine. Earlier this month, Weda said in his inaugural speech as governor that the bank's yield curve control and negative interest rates were appropriate for now, but he added that he was open to the idea of a longer term policy review.
The Bank of Japan's next policy meeting will be on April twenty seventh and twenty eighth in Hong Kong, Joan One, Bloomberg, Dave Braagaisia.
I'm Brian Curtis, along with Doug Krisner and Rashad Salama will join us in a few moments, so Doug. I know this runs a little counter to conventional wisdom, but volatility has quietly dropped out of both the stock and bond markets. Last week. We had yields on the two year and the ten year finish up the week roundabout world where they were on Monday. And as for the
stock market, the Vicks is under seventeen. It may not stay that way, and perhaps it's a common head of the storm, but it's a good question for guests is what has brought that on.
That's a good point. At the same time, when we consider the fact that we're still in the earning season early innings, yes, but the results so far have been coming in strong enough to lead some on Wall Street to wonder maybe they were too pessimistic. Twenty percent, roughly speaking, of the companies in the S and P have posted their results so far, seventy seven percent have been better than expected. And you highlighted earlier, Brian, it's going to
be a key week for big tech earnings. Oil producers will also be key in the week ahead.
Yeah, I think it's smart that you highlight the earnings because that's one of the reasons I suppose that the macro scene has kind of quieted just a little bit. And it's not like we haven't seen volatility in the stock market. It's just that overall we are where we are, but there's been a lot of individual stories where stocks have either gained a lot or.
Dropped a lot.
I wanted to offer a quick comment about China and the policy that you just mentioned in our a block there, that it runs a little counter to what we saw back in twenty twenty one and twenty two, because at that time China was regulating and raining in the private sector, and now shi Jinping wants to stimulate the private sector and thinks that there are a lot of things that they can do to remove some of these institutional barriers.
And some might call that a reversal of policy, but it might end up being good for the private sector and thus the stock market in China. Something we'll be watching.
And as long as we're talking about China, I want to ask you to keep your eye on the Chinese traveler. We're going into the Golden Week holiday next month, and I saw data from JP Moore and Chase saying that jet fuel demand so far is up about seventy five percent of pre pandemic levels. That in the latest survey week, which I think wrapped up up on the fifteenth, So we know that Chinese travelers are returning to the sky.
If you're talking about the macro in China, maybe things are on the up and up.
I think definitely in terms of small items travel and restaurants and bars and that sort of thing, that's going very well in the recovery. We're still waiting to see whether the big ticket items cars and houses really start to move. We've seen some encouraging activity in the housing market, but it hasn't translated to big numbers just yet. All right,
it's time now for global news. Many nations are moving to evacuate consular workers from Sudan this weekend at Baxter has Global News from the nine to sixty news room in San Francisco, Ed.
Yeah, exactly right, Brian, Both UK and US for example, managed to airlift their diplomats to safety. Prime Minister Rishusunak saying the operation was a total success, imit a significant escalation of violence and threats to embassy staff. Meanwhile, the US flew hundreds of Special Service members by helicopter under the protection and the hazard of dark.
Anytime you're flying at one hundred knots very close to the ground in pitch black, there's certainly some risk there.
Lieutenant General dasim the operation was fast and clean, with service members spending less than an hour on the ground and cartoon. Meanwhile, work is underway to get hundreds of aid workers out as well. Senator Mark Warner on ABC has heard here on Bloomberg says many countries are involved.
We are working with a lot of international partners in this case, partners from them at least even believe working with China and Europeans to say those aid workers, we need to find a safe way to get them out.
Warner says one path is to establish a corridor to evacuate them. Meanwhile, Italy and France also coordinating evacuation plans as we speak. European states are reacting with fury to a Chinese envoy who's questioning the independence of former Soviet Union countries. Chinese ambassador to France lu Chau saying that ex Soviet Union countries do not have effective status under
international law as a sovereign nation. The diplomatic firestorm threatens to overshadow China's attempts to portray itself as a peacemaker in Russia's war in Ukraine. House Speaker Kevin McCarthy says the House will pass his one point five trillion dollar debt ceiling increase plan this week.
When we send this to the Senate, we're showing that, yes, we're able to raise the debt ceiling into the next year. But what we're doing is we're being responsible fiscally and bringing our house back in order. It doesn't solve all our problem, but it gets us on the right path, and Churtis gets us to the negotiating table.
McCarthy on Fox did dodge when asked whether he has the two hundred and eighteen Republican votes he needs. He says they are about five members who can still sink it, but he thinks the Conference will pass it along. The race for the Republican nomination in the United States is in full swing. Ron Dea Santis and Utah.
Republicans need to shake the culture of losing that has developed in recent years.
Others in Iowa, Tim Scott, Joe.
Biden and the radical left has created a blueprint on how to ruin America.
I gotta tell you not on my watch, Mike Pence.
They also want a new brand of leadership, but at least has the possibility of bringing our country together around the major challenges that we're facing.
And Donald Trump, we will make America great again. Yes, that was this weekend Global News, powered by more than twenty seven hundred journalists and analysts and over one hundred twenty countries. In San Francisco, I met Baxter. This is Bloomberg.
I'm Brian Curtis, along with Rashad Salomon. Our guest is Priamsra, global head of rate Strategy at TD Securities.
Bri.
I mentioned there that at least last week we had a drop in volatility in the bond market. Is that just temporary or do you think that we've sort of come to a point where we understand, at least in the short term, what the Fed will do and where rates will move.
Sure, thanks for having me on. I think in the near term, yes, we're almost priced for a twenty five hike in May. We do expect the FED to hike twenty five but I think really volatility is likely to pick up after that because we're not hearing much from the FED about the meeting after that or how long are they going to pause, or when are they going to cut What is that threshold of pain at which point the FED will start to cut rates? And I think the data is turning. We're getting mixed data. We're
seeing the slowing. It's not obvious whether we're heading into a recession or is this a soft landing. So I think there's enough uncertainty on the economic outlook as well as how the FED might respond, So I think volatility will go back up. But in the next week or two, as we're heading into the May FED meeting, I think we can stabilize because we're sort of well priced, and I think the Fed might be happy with the way the market's price just now.
How closely do you think they're watching events in Congress right now with regards to the budget, etc. And the debt ceiling.
I think they have to be watching it closely, but they have to be very careful not to influence it or not to make it explicitly influence their policy because it is up to Congress to raise the dead ceiling, which I really hope happens. I think it's going to go down to the wire and thatmanship is going to tighten financial conditions, which then impact growth, and the FED would respond to that, but I don't think they want to respond preemptively or do anything that would make the
dead ceiling passage more difficult for Congress. So I think they watch it for the impact that it has on financial conditions and on growth. I also think if there are spending cuts and that's the way we get the
dead ceiling raised, that's our base case view. That's negative for growth because then you have fiscal tightening at the same time as credit channel tightening, which we think is happening with the Bank and the lagged impact of Montrey policy, So then you're setting up for a bigger slowdown later this year. But that's only if there are these spending cuts. So I think they have to be watching it, but not maybe comment on it until something actually happens.
In trying to make that assessment about whether or not we have a soft landing or a mild recession, or indeed something worse come. So what's the most important set of metrics to watch.
It's tricky. We're watching everything, but I would say the high frequency metrics. So we're looking at high frequency measures of the employment situation. We're also watching high frequency spending, consumer spending. I think that's the early read. Labor market, inflation are all pretty lagging indicators. But let's see how the consumer's shaping up.
Okay, well, then that's just the thing that the consumer seems to be doing fine. And you know, we used to talk about the indefatigable American consumer. They're proving to be just that for the time being at least, But there are some cracks emerging.
They're not there are I think ISM services showed a big slowdown. That's the early read on consumer demand for services. Now the pmis were okay, but that ISM services was a little bit concerning. I think consumption is slowing on services, and so we're watching things like that. We're watching consumer confidence. There are cracks, as you pointed out, and I'm also
watching the consumer savings buffer. You know, the consumer still has savings, which is why they've continued to spend the labor market strong as that savings buffer runs out and you can't take out another credit card because banks are tightening. I think that's when the consumer can slow down more sharply, and that's what we're looking to see in the second half of the year.
PRIA, how nervous are you about the rapidity with which markets react? And if you go back to two thousand and eight, even the stock market for instance, and even the level of the vics, we're pretty well contained and pretty in a nice position, actually only say three weeks before or just completely going haywire. Is that something that as someone who analyzes markets, troubles you or does it? I mean, it's just a fact of life.
I think it is a fact of life. Now the markets are more fragile. I think part of it is regulatory changes posts two thousand and eight have made banks and dealers less able to take risk. So I think that warehousing capacity on the dealer side is just not there, so you're going to react more. And then, frankly, the FED has a lot less policy flexibility now with inflation that high. Even if growth starts to slow down, I think the FED will struggle to cut rates that fast,
which they had that flexibility. I think for the last twenty years because there was no inflation fear. So I think there's good reason for the fragility. But I think that is something I'm glad you brought it up. That something every investor should keep at the back of their mind, and that means you should have liquid assets just to prevent fire sales because market's going to overreact. We went from earlier in the year no landing to hard landing to soft landing, all in a spate of four months.
We've talked about literally every possibility in the economy, and that just tells you the market's very quick to price in a certain outcome we should be. I think that's the new normal trend.
Maybe it's a good thing. Maybe it forces on people a little bit of more conservatism instead of looking at the stock market as a casino. I mean, I'm not sure. I mean, it's there for everyone to use the way that they see fit. That's the way the system works. But maybe a little conservatism is a good thing.
Now, that's fair and appreciating the importance of liquidity and a diversified portfolio. Bonds are giving you five percent four percent depending on which bond you're picking, interest rates and is likely to be less volatile than risk acids, So making sure you've got something in your portfolio when the stock market's struggling, or making sure you've got enough liquid assets. I think we have to think about portfolio construction differently now with the market that's a lot more volatile.
Well something okay, and you know you look at the yield curve and you'd say that perhaps the best place to invest is obviously short duration, given more juice there. But it's a bit new on stemoniums and that isn't it. I mean, where would you be going on this given further price appreciations, perhaps down the road.
So I'm going to be a little contrading here. I think the front end it's very attractive with these high rates, but it's a very short term view. If you think a little longer term in the FT's cutting rates. You know, we can debate whether they cut rates this year or next year, but five to five and a half on FET funds is not normal. They're going to have to cut rates down to two and a half three percent
in the next few years. So I actually think the long end, the tenure, is a better investment for the long run rather than the front end because with the front end, you've got reinvestment risk. When the Fed starts to cut rates, you're going to reinvest it at much lower rates. So I actually like the tenure. I want to keep some in the front tend for yield and flexibility, and some in the long end for price appreciation because
that's where that's your hedge. If the economy heads into a recession, those long end rates are going to decline very quickly, and that's where you want to be.
Yeah, let me ask you a dumb question. Does the ordinary investor trade treasuries a lot? For instance, the scenario you describe is, you know, if we have ultimately those yields going slightly lower, which would reward you for having bought at this higher position, that you get capital appreciation on the bond. Do do people trade treasuries a lot?
Increasingly they do.
Yes.
I think ladder portfolios are popular ETFs on the long end. There are different ways you can position in the long end. You can set up a treasure direct account and buy treasuries which the Treasury issues every second week. So yes, I think retail and institutional and in participation in longer end treasuries has started to pick up as treasuries are giving you some yield.
Finally, 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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I'm Brian Curtis 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