This is Bloomberg Day Break Asia for this Wednesday, May tenth in Hong Kong, Tuesday May ninth in New York, and coming up today.
Markets track efforts to break a stalemate over the US debt ceiling.
US equity slump ahead of a critical inflation report that may provide clues on the Fed's rate hiking path.
South Korean e commerce giant Coupong reports sales above estimates after capital spending pays off.
Debt ceiling meeting ends without much movement. Senate Minority Leader Mitch McConnell says there will be no default. Donald Trump held libel for sexual assault. I'm at Baxter with Global News.
That's all straight ahead on Bloomberg Daybreak 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 det Chris and I'm Brian Curtiz.
Here are the stories we're following today.
Well.
Lisa Shallatte, the chief investment officer at Morgan Stanley Wealth Management, says the future spending cuts resulting from any debt ceiling deal could threaten economic growth here Shalllotte speaking earlier with Bloomberg.
It matters, you know, to forward looking expectations of growth in terms of what is cut. Those things have been a support to growth, and if we need to take that out of the forward forecasts, that is going to dampen economic growth.
Shalotte said possible rollbacks related to the Inflation Reduction Act and various infrastructure projects could dampen growth. As mentioned, President Biden met today with House Speaker Kevin McCarthy and other congressional leaders on the debt ceiling. McCarthy said he has not seen any movement on the negotiations. Treasury Secretary Janet Yellen has warned lawmakers that the Treasury's ability to stay within the debt limit could be exhausted.
As soon as June first.
There was some FED speak today. We heard from the head of the New York Fed, John Williams. He says that he is monitoring how the strains across the banking sector will affect the American economy, and at the same time, he left the door open to leave interest rates on hold next month. Here's Williams speaking at an event with the Economic Club of New York.
I will be particularly focused on assessing the evolution of credit conditions, and there are effects on the outlook for growth, employment, and inflation.
We're going to get a lot of data between now and our June meeting, that is.
New York Fed President John Williams. He went on to say a rate cut is not his baseline forecast this year. You'll remember last week the Fed heightd its key rate by a quarter point, bringing the target on that benchmark rate above five percent. It was back then that Fed Shair J. Powell hinted maybe this could be the last increase for the time being. He did, though, leave the door open for the Fed to do more if inflation remains high. Remember that CPI data is due tomorrow morning.
Brian, Yeah, that's exactly what we're going to talk about here. Let's take a closer look a preview from Bloomberg's Michael McKee.
Higher interest rates have helped cut inflation in half over the past nine months. Now, he kind of must say, for the hard part, rents and rising wages for hard to find employees, particularly in the service sector, will break progress towards the Fed's goal of an average two percent inflation rate. The central bankers think progress will continue if slowly, they will leave rates high to ensure that happens, and not worry too much about month to month inflation data
unless it unexpectedly jumps. The question is what will investors think. Will they have the patients of Fed officials, or will we see a big rate reaction to the inflation data. Michael McKee, Bloomberg Daybreak Asia.
After the bell, we heard from Rivian Automotive. The company reported a narrower than expected loss to begin the year. A commedy says it lost a dollar twenty five per share on an adjusted basis in Q one. Now, the street was looking for a loss of a dollar fifty six revenue for the period six hundred and sixty one million. That was pretty much in line with straight expectations. The electric truck maker has been working to cut cost and ramp up production. Here's Bloomberg's Ed.
Ludlow simplifying everything. Going back to basics is working. Production drops sequentially quarter on quarter, but that was only in the van that Rivian builds for Amazon, the consumer car. They ramp production and now they're just being disciplined.
Bloomberg's Ed Ludlow.
There, Rivian also reaffirmed plans to build fifty thousand vehicles this year. You might recall last year the company fell just shy of its own target at twenty five thousand evs. At the same time, Rivian said it's now targeting profitability in twenty twenty four. Shares and Rivian up five percent in late US trading.
And let's take a closer look at some earnings here in Asia. South Korea's e commerce giant Coupong has reported sales that beat estimates in the March quarter. We get the story from Bloomberg's Juan Wong in Hong Kong.
Revenue rows thirteen percent to five point eight billion dollars, exceeding the estimate of five point six billion. Operating profits was more than one hundred and six million dollars an active customer group five percent to nineteen million. That's as the company's core delivery business grew exponentially during the pandemic. Coupon also managed to sustain growth in the post pandemic period. That's in part thanks to US fast delivery service, known
for promises of don delivery. Kupa is reportedly looking to expand market share among new initiatives, It's expanding its delivery business in Taiwan and Hong Kong. Joan one Bloomberg Day Brigaisia and I'm Brian Curtis along with Doug Grisner.
I thought Lisa Shalatt made some interesting comments there. And basically what it comes down to is from a market point of view, if you do get an agreement, and that agreement means a cut in spending, that may not be good for markets because it could hurt growth. And if there's no agreement, well, the consequences of that are almost unmentionable.
Yeah, it's interesting to try to figure out how much the market discounted the economic jolt from the Inflation Reduction Act and if some of that now is in doubt, perhaps you're right, Brian, that there is a real cloud when it comes to growth. And speaking of growth concerns, we can talk a little bit now about the disappointing
read on Chinese imports last night. That was a pretty dramatic number negative what eight percent the street was looking nearly street was looking for something only two tenths of one percent in terms of contraction.
Yeah, it really speaks to stumbling in domestic consumption. And we'll have to see whether that picks up. We have been saying all along that with the recovery there that people on the street, they're cautious because they were locked in for a long time. They don't have the same sort of support system and government transfer payments that we do in the United States, and so you know, it's not easy to let go and to do that revenge spend.
They have been doing it to a certain degree in restaurants and bars and that sort of thing, but it's on a lower level. It hasn't fed through yet into the bigger ticket items and among them. We just saw that express in the exports down seven point nine percent. Even the export number was pretty good at eight point five percent, but that's such a low base of comparison when there was very little business activity at all last year during this period because.
Of the lockdowns in Shanghai.
And if you look at what the market is telling us right now, as measured by the Nasdaq Golden Track in China index, the ADRs that trade here in the States, we are down five point seven percent so far this yere. So the market's not expecting a lot.
And I got a great line for you. It might even get the great Doug Krisner to chuckle a little bit. And here it is because this is also weighing on markets. With Europe and China, we might have hit the point where the rubber meets the built in road. You know, it's pretty stark what we heard from two leaders in Europe overnight. Italy is signaling, at least to the US, it's not confirmed yet, but it's signaling it intends to
pull out of the Belton Road initiative. So that's a pretty big deal, the only country in the G seven that was taking part. And then you had all Off Schultz, the German Chancellor, really talking about China as a rival now and not a partner.
Yeah, and also Germany's foreign minister who is kind of applying a little bit of pressure, you would think, on Beijing to do more to try to bring some type of end to war in Ukraine.
Yep.
And we know that that doesn't appear to be happening anytime soon. But now it's time for global news and speaking of the debt ceiling discussions, well, the summit there has apparently ended with no agreement and no real movement. Ed Baxter has the story from the nine to sixty News from in San Francisco ed.
Yeah, Brian had a lot more rhetoric. For sure.
We will be sharing that as the program goes on. About while we're able to grab Joe Matthew, the host of Sound on Unbalance of Power. We're going to tie him up and get some analysis here. So surprise, no surprise, Joe. They came out with swords drawn, didn't they. Yeah, I'm not the thing, and that wasn't a lot of fun in there. I didn't see any new movement, speaker McCarthy told reporters in the stakeout position there in the driveway, And of course Democrats came out.
They didn't seem very happy either.
Chuck Schumer, hawking, Jefferies, everyone speaking very passionately about how nothing happened. The meeting lasted about an hour, which is not a great sign, but this is clearly an opportunity for everyone to kind of start from scratch with their positions. We know that the staff will on both ends of Pennsylvania Avenue will keep talking tonight, and they did set
another meeting for Fridays, so that's very important here. If that hadn't been done, if we didn't know where this was going, this would feel a lot less comforting than even this does now. And it seems like everyone was really positioning themselves ahead of what would be the second meeting.
Yeah, and this we expected they would come out and be preaching to the base, which apparently did happen. But Chuck Schumer did say that the budget appropriations process could begin tonight. That is a good sign, is it not?
Well, I suppose that's true.
It's just that they can't even agree on top lines, never mind on the actual nuts and bolts of a budget.
I mean, we really don't have a budget yet.
There's when the President dropped the bill that Speaker McCarthy had passed in the House a couple of weeks ago. Addresses the debt ceiling. It addresses top line issues, but doesn't kind of go through the budgeting process of drilling down on what each department in the government needs.
There are a lot of concerns though.
About the calendar tonight, you know, knowing that going into this meeting, both sides McCarthy and the White House said they are not entertaining the idea of a short term solution, either suspending or extending the debt ceiling, for instance, till the end of September to coincide with the fiscal year. At a lot of people that suggested that this was, in fact what was going to happen ahead of this meeting.
Both sides say, it's not even on the table. That's a little bit concerning, knowing that we have so little time to figure this out between now and as early as the first of June. I'll be very curious to see what the market reaction is tomorrow morning after all of this.
Now the leaders are saying there'll be no default. I mean, I mean Mitch McConnell came up and that's the first thing that he said coming out of How does this square with what Janet Yellen is saying out akashould beginning of June.
Well, look, he's saying that because he thinks that they in fact can cut a deal between now and then. The thing that we were lacking though, was really a sense of optimism. When Kevin McCarthy came out of the meeting at the beginning of February with President Biden, he said, look, we don't agree on a lot of things, but we
know now that we can find common ground. That spirit was really not in his remarks or the answers to questions from reporters today, it was, you know what, we don't like anything that we just heard, and we are not on the same page. That's going to start trickling into the stock market at some point soon. It's not just Janet Yellen. The Bipartisan Policy Center, which we follow closely on matters like this in Washington, they crunch numbers on their own and they agree that this is likely
mid June, as early as the first of June. And it really does not give the folks at the table here, whether it's the President or the speaker, much time to figure this out.
Yeah, what they got right today was a time period about two weeks. Joe, thank you so much. Joe Matthew, the host of Sound On and Balance of Power here on Bloomberg Radio and Television, Global News powered by more than twenty seven hundred journalists and analysts in over one hundred twenty countries in San Francisco.
I'm Ed Baxter, and this is Bloomberg. Let's get to our guest.
Dana Peterson, chief economist at the Conference Board, will join us, as does Rishad Salamet with me Brian Curtis here in our Hong Kong Studios. So we made the comment Dana about whether or not there is an agreement on these debt ceialing negotiations, that that might mean a cut in spending.
I'm sure you've looked at this.
How bad might that be for markets and growth in the economy.
Well, I mean the cuts in spending would likely be over a period of five to ten years, so it wouldn't necessarily be an immediate effect, but certainly because they're going to pull that forward and say, well, this is a negative for the economy. But we have to remember debt is really outsize in the US. It's just under one hundred percent. It's going to two hundred percent of GDP in thirty years, and so that's not really the
scenario that's good for the economy. So there needs to be some addressing with respect to some fiscal discipline here. Will it be painful, yes, but it's necessary in order to make sure that the US remains a competitive economy, not only in financial markets but globally data.
But you know, the thing is being the having the world's reserve currency, you can print as much of it as you like, so it doesn't really affect the US as badly as it does other countries.
I think the US doesn't go around printing money necessarily in the way that you might think that there's this
machine that's pumping out cash. But the thing is that the US rides itself on paying its debt right and also fiscal responsibility, and that certainly comes under question every time you have a debt ceiling debacle, and certainly their concerns that debt as a share of GDP is going to get so out of control it's going to erode the government's ability to invest in things that actually do produce growth, or if there is some other crisis or
a big recession, there will be no fiscal space. It also crowds out private investment because if you're a private investor, would you prefer to spend or invest in a high yield corporate bond with a lot of uncertainty or something that might be perceived as a safe haven, which is US treasuries. And if all that's called into doubt, then we certainly have a big crisis on our hands, not only in the US, but certainly for global financial markets.
Also.
In listening to trader comments, I mean, we've talked a little bit about the complacency in markets with this debt ceiling discussion, because we've got another three weeks to go before we get to the deadline period, so this is probably going to play out over the next three weeks.
But we do have the CPI report coming tomorrow, and I was about to say that in kind of listening to what traders have been saying and kind of testing the waters, generally, it doesn't seem like the looming CPI is causing a lot of angst in markets.
Why well, I guess because people are just waiting for it to come out and it's either going to show
material improvement or not much at all. Right, So we have seen headline PPI come off, and that's because gasoline prices have gone negative, But it's that core measure excluding food and energy, where you still have a lot of pricing press pressures from housing which reflects which is really rent, which reflects what happened eighteen months ago in the housing market, and also very strong demand for services and insufficient supply of workers causing labor shortages and higher wages that are
getting passed on to the consumer. So this is the same story that we've been dealing with. So I think markets probably only be really surprised if we saw material improvement in that core measure. That might cause the FED to take a look.
Dan, you know, how are you.
At the moment assessing what's happening with the American consumer? We should always refer to the US consumers being indefatigable.
Is that consumers still that.
Well.
We do actually ask consumers worth they're thinking, and in the short run that continue to say that they are doing okay. That's because most consumers are working and or they saw a modest and treats in their wages. But when it comes to the six month outlook, consumers continually say over the last year that they expect a recession on the way, and they're becoming more concerned about the business outlook, their own personal finances and certainly the jobs outlook.
And so consumers have already started pulling back on buying durable goods, and that's because you have higher interest rates. It costs more to finance that car, that furniture, or that house. But consumers they're also saying they're cutting back on highly discretionary services and really just focusing on the basics.
But Dana, if people don't lose their jobs. Can you really see that dramatic of a pullback in spending.
Well, we've already seen spending pull back for durable goods, and so the last piece of the puzzle really is services. And if people think that they might lose their job, even though they probably won't, but if they believe that, then they will pull back on spending. And I think that's really the last shoot to drop in terms of softening the economy to help bring down inflation.
Right, we just came through an earning season that held up pretty well even with the cutback and spending. The cut back and durable goods that you mentioned. Is that something that can continue and would they just shift to smaller items like we talked about what we're seeing in China.
Well, I think when you look at earnings, it really depends upon the industry. Certainly, the tech sector is not doing very well. We're hearing of ominous soundings from transportation warehousing because people are not purchasing as many goods as they were purchasing, and so that means there's less the ship. We're also seeing angst in the real estate market, certainly as housing activity has fallen off consistent with higher interest rates.
So we do think consumers are saying to us that they're going to shift to cheaper forms of services instead of going to the movies, they're going to stream. So we do think that's going to happen.
Okay, Dana, excellent stuff.
Always a pleasure to have you on the program.
Thanks very much for joining us. Dana Peterson, chief economist at the Conference Board, And if anybody knows consumers, it's the Conference Board. This is Bloomberg Daybreak Asia, your morning brief on the story is making news from Hong Kong to Singapore and Wall Street.
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