Daybreak Asia: January 19, 2023

is ahead. China's censors about a wipe away gloomy emotions fighting in Ukraine's Dome Boss described as ferocious. I'med Baxter with Lobal news and injured top seed raffiadell is ousted at the Australian Open on Dan Schwartz been I'll have

that story more coming up in Bloomberg Sports. That's all straight ahead on Bloomberg Daybreak Asia on Bloomberg eleven and three on New York, Bloomberg on Washington, d C, bloom one of those SIGs one Boston Bloomberg nine sixties and Francisco Sirius x M one nineteen and around the World on Bloomberg Radio dot com and via the Bloomberg Business App. Good morning, I'm Dad Prisoner and I'm Brian Curtis. Here

are the stories we're following today. So let's talk a little bit about what we had in market action today. We had a lot of weakness in the equity market today. Some weak economic news seemed to confirm this idea that things are slowing down, and it calls into question the outlook not only for growth, but for earnings as well.

Retail sales below forecast. We also had a separate report indicating the production of business equipment slumped, and then if you look at the inflation story, producer prices down again. In the month of December, we were off about a half of one percent. And what I thought, curious, Brian, is the Fed's own survey I'm talking here about the

Beige Book indicates moderating US price growth. So the conventional wisdom seems to be if you look at the data in and of itself, Hey, the Feds got room to down shift um policy and at least in terms of interest rate story that would normally be a positive for risk access today that's not what we saw. Yeah, I think it's very much a battle now between the Fed

and the markets. They have very different views and and the FED has made it's it's point very clear, and I think the market is now realizing this that they're going to stay aggressive. Jim Bullard talking about getting up to five and a quarter to five and a half percent by the end of the year, and Cleveland Fed President Lurettemester also saying a good ways to go. And even if you look at the softer approach from Patrick Harker and also Lori Logan calling for twenty five basis

point cuts, think about it. If they go a hundred basis points, that's four meetings, that's six months of raising interest rates into a weakening economy. Well, the other thing we have to remember is that in the background we have the unwind of the balance sheet happening. I think we were ust under nine trillion dollars back in April, So in that ninth month period, the FED has effectively retired about five hundred billion dollars worth of money that

was put into the system during the pandemic. That's been essentially eradicated at this point. Look what happened to the yield curve today? We were down big across the curve. A tenure that was down seventeen basis points, massive move. We're trading right now in the tenure at four A check that three thirty six, a two year at four zero eight, So in that case a loss of about eight basis points alone, and then speaks to that go aheads to that that contention that the market and the

Fed are in very different places. But I think that the Fed may suspect that things are slowing, and I think that maybe we can expect a little bit of moderation. But the one thing I think that we can agree on is the Fed does not want the market to take away that message and run with it. So that accounts for the weakness that they think we had today and risk assets with a down down about one eight percent. So at the top of the news, and we'll get

to this in a few moments. The meeting between US Treasury Secretary Janet Yellen and China's vice primarily or her that seems to have a good news angle to it, and also the China reopening that could also spur the global economy and change that that situation for the FED as well. I'm Brian Curtis along with Vonnie Quinn, and we will take a look at some of the top

stories here. Let's start off with this one. Microsoft and Amazon cutting a total of twenty eight thousand jobs today, both companies saying that the painful measures are necessary to offset slowing sales and possible recession. Let's get more from Bloomberg's Ed Ludlow. I think there's kind of this unraveling

of pandemic era demand. You know, there's not quite semis, but you know, Microsoft CEO such An Adela basically said that the technology industry is entering this period where there is a normalization demand, and so the industry needs to react to that and kind of be a bit leaner. You know. The similarity of Amazon is that they're kind

of unwinding what was basically pandemic era bloating, right. They invested heavily in fulfillment centers and staffing to handle what was a shock to the system in terms of demand. At Ludlow, Microsoft says it's still plans to hire people in strategic competitive areas such as artificial intelligence. In the meantime, Amazon said that it would continue investing meaningfully in growth areas as well, They include groceries, Amazon's business to business

sales program, services for third party sellers, and healthcare. Meanwhile, Bryan, there's been a flurry of diplomatic activity with US Treasury Secretary John at Yellen under Chinese counterparts planning to hold key meetings. Let's get more from Bloomberg's Denise Pelagreni. Planning is underway for a series of high level diplomatic meetings. It's all part of an effort to ramp up face

to face engagement and improved ties. And Yellen will be meeting with her Chinese counterparts in Beijing and in Washington as part of this. The announcement coming after a meeting in Zurich today between Yellen and China's Vice Premier Lieu. And this would be Yellen's first trip to China's Jerry secretary and would likely come after a visit plan for early this year by Secretary of State Anthony B. Lincoln. The used team indicating concern about US trade and technology policies,

and both sides are calling today's meeting constructive. Denise Pellegrini Bloomberg day Break Asia Time for Global News. China's President Shi Jinping is calling for more efforts in fighting COVID, while at the same time saying that the dawn is just ahead and batched it with Global News in the nine six news room. And I guess it's a fair question Brian to ask, can you have it both ways,

because they seem divergent paths. In a rare video speech addressing citizens directly President, she says he's especially worried about epidemic control in rural areas, especially with a lunar New Year holidays approaching. Now. She says the fight against COVID is in a new stage and the dawn is just ahead.

So some foreign institutions have opposite views. Their Affinity, for example, says there is one longer, more severe COVID wave ahead and China's sensors are vowing to wipe away gloomy emotions over the holiday. That is their statement, gloomy emotions. Cyberspace Administration says it will increase the rectification of epidemic related online rumors, focusing on rumor mongering behaviors in such areas

as the economy and people's livelihoods. Maderna CEO Stefan Bazzell, by the way, says he is not overly concerned about a global impact from any variant that may come out of China. Even with the lack of current data, our team believe that the risk is not high that there is a CV and mutense coming out of China. It's possible because it's it's a large number of people, but we don't think there is is high because the very

resistance to VOUS affecting people. Van Sella Davos on Bloomberg says that that day's, especially in the United States, level of vaccination any variants should not be severe. He says that is subject to change, though Van sell says the globe needs to plan ahead for future pandemics by bill manufacturing hubs in every continent. The U s Department of Justice says it has broken up cryptocurrency money laundering operation.

Assistant Attorney General Lisa Monico says Hong Kong based Blazazzo was in operating iter nationally fits Lato facilitated the transmission of hundreds of millions of dollars in illicit funds, fueling darknet marketplaces and laundering the proceeds of ransomware attacks, yeah, Monico says. Blazzo says that Antonio Legamotiv is a Russian national living in China who was arrested in Miami. Monico says the arrest puts a major net in international crypto fraud.

Fighting in Ukraine's Dombus region is ferocious today. Ukraine's President Vladimer Zelenski says there is desperate need for the promised tanks and air defense systems now to be delivered. It supplies a wisdom. Tanks must out peace. Another invasionble Russian tags there's a reason security and peace in Ukraine muscle out peace Russ's text on security and peace in all the converce. Zelinski says the security of other nations as at risk, as well as his own and Biden administration.

It's considering Striker armored vehicles and it's next package of aid. The new package of schedule to be revealed Friday in San Francisco. I'm Ad Baxter. This is Bloomberg. I'm Brian Curtis, along with Vonnie Quinn, and our guest is Nancy Dowd, private wealth advisor at amery Prise Financial. Nancy, thanks very much for joining us. Doug and I were just discussing about the possibility we have this new mindset here that

that bad news is is bad news now. And prior to this, we've we've had equity prices moving up because whatever bad news seemed like it would get the Fed to take a softer approach. But everyone knows now that that's not what the Fed has in mind for this year. So when we see bad news, it's an indicator to sell and maybe good news as an indicator to sell as well. Yeah, I mean the bad news has been

there all along, and the Fed has been very consistent. Um. I think it was lovely that we had some optimism at the beginning of the year, uh, with the inflation number being down to six percent, but the reality is it is still higher year over year and we're still not there yet as far as looking inflation so to speak. Uh. And the said goal is to get to five percent,

north of five percent as of today. Actually they were staying five percent before, but now it's north of five percent in the ten year treasury before they will pull back on raising rates. So I fully expect the Feds to raise rates again in January and in February, and I think the first part of the year is going to still be quite plumpy. Maybe not quite as volatile as it was all of last year, but I think that we're still we're still not quite there or not

where we want to be yet. How much of your portfolio, what percentage of your portfolio should you this year having bonds? Well, I think that varies with every investor and their risks, tolerance and profile. Sure, but generally we talked about a sixty portfolio. Does that change this year because bonds are becoming more attractive, Well, bonds are certainly getting more attractive, and cash investments are getting more attractive, which is very,

very good to us in this environment. So there's very nice opportunities in the fixed income market. Um, But if you're a moderate investor yet, it's still at about thirty five. Yeah, I'm interested in in this lag that we've been talking about. So I think the point I made at the beginning and your point that we can have six six rough

months here actually are are pretty consistent. The point is that I wonder whether the market is coming to the grips here that we're not going to see the other side of this anytime soon, and therefore some of the buying we saw in the first two weeks of January may be misplaced. Well, absolutely, you know, like I said, there was misplaced optimism. Um. And and it's a good thing, you know, that's not such a bad thing, because when it's doom and gloom all the time, then it just

virals downwards even further. Um. But I don't think we are finished with this yet. And uh, we can expect more interest rate hikes. The corporate earnings reports show the beginning of a decline in profit margins, which is certainly expected. I mean, at some point inflation and higher costs and and uh and higher interest rates are going to take a toll on corporate profits and we're just beginning to see it. The job market is still pretty tight, um,

although we're seeing some layoffs. The reports and the data is landing and until those reports come out, we will not see the subsiding of um action on the pit part. So now saying what parts of the market are you looking specifically as in terms of opportunity right now? Well, as I said, um, the good news of all of this is that there are nice opportunities in the fixed income market where there was virtually none uh. And cash was certainly worthless. Uh, you know, as far as an

earn interest rates. But now there's a nice opportunity with cash and fixed income investments. UM, as long as you're very careful, as long as you're very careful about credit quality, which is going to become more and more important. UM. But and also watch the duration, but much more small focused on credit quality and the other opportunity. I'm sorry, no,

you go ahead. But the other opportunity in the equity markets will certainly be in the energy and industrial sector because out of anything, of all, corporate profits are starting to show a decline, but those are the two sectors that are still showing us increasing. Do you think, though, Nancy,

that another option would be Asia? And I say this because if we do have the FED raising interest rates for the next six months, as the economy is, you know, grinding down, some money will find its way to China, where they're in a hurry to try to restoke growth, and equity markets have been running pretty positive here. Do you see that shift happening? Well, I think if you're very speculative, that may happen. But I'm in the business of meeting clients long term goals, so that would be

a little too speculative on our part to do. UM. I think that would fixed income being very attractive here in the US. Why would wait, wait, sorry, China is the second biggest China's the second biggest economy in the world, so obviously there are opportunities there. Are you saying that any investments in China is purely speculative? Not long, that's

not what saying. I'm just saying that it is more speculative than in pounds than not to mention the strength of the dollars still that's still a factor, although it's showing some signs of weakening. Um. I think the dollar, the strength of the dollar is there is a big factor in any outside the US investing. Nancy, it's been a tough couple of years. What kinds of returns are you targeting now? What has become the normal? There's nothing

that was ever normal? Well, eight percent was considered sort of reasonable, right, eight percent a year? Um? Well, I think it depends on a eight percent used to be an acceptable return. Um. However, with inflation being at six percent, that's not really a very good return. So it really all have to do with cost of living and purchasing power. Um. So we had a great year in one, but not such a great year in twenty two, and that's very, very normal in stock markets or in the markets in general.

We're always going to see up or down and it's never the same, and these are things that have to be built into every portfolio. So time frame is certainly always the biggest consideration, how long do we in it for? And then the not so solid consideration that it's harder to predict, and that's how much appetite for risk do we have, and that varies by each individual. With that in mind, let's talk a little bit about Japan. Uh,

And I fully understand your comments on China. You could have pushed back at me and say, look, with the inconsistency of policy there, I do consider it speculative. But anyway, that was an interesting exchange. But on Japan, so we had the b O J in a sense surprise traders but not economists, and the end is almost back to where it was before. So it's hard to get a read on this. Your take, Yeah, I mean there's certainly

a lot of tensions. Just going back to your previous comments, in addition to UH, you know, try them being expeculative. There's there's a whole lot of tensions between the events in China right now, and there's there's a lot of geopolitical risk in my opinion, so um, but it's it's really the whole Asia market in my opinion. Uh, we're just going back right now. This is Bloomberg Daybreak Asia, your morning brief on the stories 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 thirty plus listen coast to coast on the Bloomberg Business app, Sirius XM Channel one nine team, the I Heart Radio app, and on Bloomberg dot Com. I'm Brian Curtis and I'm Doug Prisoner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak Asia.