This is Bloomberg day Break Asia for this Monday, May twenty ninth in Hong Kong, Sunday May twenty eighth in New York, and coming up today, Asian stocks may rise after US negotiators agreed to a tentative deal on the debt crisis. Another hot inflation reading in the US may persuade the Fed to hike interest rates again, and Boeing is said to be in talks to land its second major deal in Saudi Arabia this year.
President Biden and House Speaker Kevin McCarthy both sounding optimistic Congress will approve their plan to raise the debt ceiling Russia, wards of escalation in Ukraine and surprise reelection for Turkey's President Erdawan. I'm Denise Pelygrinny with Global Neews.
One top ten player gets eliminated in the first round of the Front Open, Dan Schwartzman, I'll have that story more coming up in Bloomberg Sports.
That's all straight ahead on Bloomberg day Break Asia, the business news you need to start your day, and just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App, and everywhere you get your podcast.
Good morning, I'm Richard Salava and I'm Brian Curtiz.
Here are the stories we're following today.
Right Well, White House and Republican negotiates did reach a tentative compromise late Saturday. That's what we've been reporting, and is all designed to raise the debt seating. The Chicago Fed President Ofustin Goldsby tell CBS has faced the nation that the last minute deal is quote a little dangerous.
As Chair Powell has stated from the beginning, we must raise the debt ceiling.
Now.
The fiscal decisions, of course, are between Congress and the President, and however they sort it out is good by us. But if you did not do that, the consequences for the financial system and for the broader economy would be extremely negative.
That's Austin goals we heard here on Bloomberg. Golesby said that the recent debt impass couldn't have come at a worse time, saying uncertain centering around recent bank failures and the anticipation of a default has already been impacting financial markets. Law Makers happen to the fifth of June for the debt deal to pass through both houses of Congress. That's when Treasury section for Janet Yellen has said her department is expected to run out of cash to keep paying its bills on time.
In the meantime, rish more disappointing inflation news could help to persuade Fed policymakers to high rates again. US Commerce Department figures on Friday showed the Personal Consumption Expenditures price index rose a faster than expected zero point four percent. In April, we heard from Bloomberg's Michael.
McKee, this is going to be a problem for the Fed. This is their indicator. This is the one that they watch and then they base policy on, and it is going the wrong direction. Now it's not that they didn't think that would happen. They expected some volatility and lumpiness in the numbers, but about half of them are more said in the minutes and have said in speeches since then that they're going to probably need to raise rates more.
So then the question becomes do they do it in June or they do it in July, And this kind of moves up the timetable one would think perhaps June.
Michael McKee. Fed officials have raised rates already by five full percentage points in the past fourteen months. In an effort to lower inflation, and the FED Chief J Powell has said that policymakers could afford to watch the upcoming data and see how inflation evolves. They'll get an additional read on employment and consumer prices. Prior to the fed's next meeting in the middle of June.
We hear that Boeing is working to land it's second major deal in Saudi Arabia this year. The US planemaker in talks to sell at least one hundred and fifty of its seven three seven Max jetliners to the startup real THEA air Till, the newcarrier owned by Saudi Arabia's Sovereign Wealth Fund, is shopping for about three to four hundred single aisle jets in total, including options. Talks are complicated,
with timing and structure still in flux. We hear a possible announcement could be made at the Paris Air Show in the middle of June.
And in the meantime, A Maid in China Aircraft has flown its maiden commercial flight with China Eastern Airlines. This is a jet that is set to rival Boeing and Airbus. Bloomberg's Joan Wong has more from Hong Kong.
China Eastern Airlines said the flight took off from Shanghai and lend it safely in Beijing. Comak, manufacturer of the C nine to nineteen aircraft, first delivered the jet to China Eastern in December. China is looking to disrupt the dominance of Boeing and Airbus and commercial jet manufacturing. Both Airbus and Boeing have a full order book through to the end of the decade. It means that any carrier wanting narrowbody jets sooner may need to find an alternative.
As of now, the C nine nineteen remained certified only to fly within China and so far Comak has garnered more than one thousand orders for the new jet in Hong Kong. Join Wang Bloomberg Day Brigaisia.
And coming up in a few moments, we will be talking with Steve Soznik, chief strategist at Interactive Brokers. You get the latest on how the market will Interpresse interpret this tentative deal done on the debt ceiling, and also we want to remind you that the swamps market is now projecting a nearly seventy percent chance of a rate hike in June. We'll talk with Steve also about whether or not Kevin McCarthy will actually be able to get
this deal through. We didn't have any big China scheduled for release today the data there, but we will get the PMIS on Wednesday. And as mentioned earlier, we did get industrial profits out over the weekend with a relatively disappointing reading. So that's all coming up. Seven minutes now past the hour, it's time for world news. Rising tension between Japan and North Korea, Russia, warning of escalation in Ukraine.
And as we've been reporting, a debt ceiling deal could be official quickly or it could possibly still fall apart. Let's get to Denise Pellegrini and the Bloomberg newsroom.
Denise, Yeah, Brian, the official response is positive. President Biden says he's hopeful Congress will pass that deal to raise the debt ceiling. Voting could take place Wednesday. Porters asking the President about possible snags none, none, No sticking points, Spiden says. Biden also says he believes he and House Speaker Kevin MacArthur are in quote a good place. McCarthy says he expects their plan to raise the dead ceiling to pass with support from both sides of the aisle.
I think at the end of the day, people can look together to be able to pass this in the House and the Senate together.
Now we're still learning what's in this deal. McCarthy says. It cuts the IRS budget by almost two billion dollars that is, though much less than many GOP lawmakers want. It also fails to overhaul energy industry permitting. That's another thing Republicans wanted, and Bloomberg White House reporter Gregory Courty says the timing of the deal may have been good, but on the other hand, the fact that this is a holiday weekend, well, he says that could backfire.
Yeah, a holiday weekend actually probably made this deal easier to reach in principle, because you know, all of the hardliners on both sides were out of town, back in their districts and allowed the negotiators from the White House and Speaker McCarthy to to sit down without any distractions
and hammer out a deal. But that also means that, you know, it's the members are going to be hearing from their constituents about this deal over the weekend at Memorial Day parades or Picnics or wherever they are, and if the news gets out and people don't like it, then then they could The members could be returning to Washington on Tuesday inclined not to support this deal.
Yeah, and Cordie also says watch for what the more extreme members of both parties say about this deal. We're tracking it all for you here on Bloomberg day Break Asia in Turkey, Pasada as defying the naysayers and sealing a re election victory. This could mean more friction though with Western governments, and also more certainty uncertainty for investors. North Korea announcing plans to launch a spy's satellite as soon as this Wednesday. That's according to Kyoto, Japan's prime minister,
calling on North Korea not to do it. Russia's ambassador to the UK warning of an escalation to the war in Ukraine, has Britain, another Western allies, commit increasingly advanced weapons to aid Kievan. Speaking on the BBC, the diplomat says the actions of NATO countries, especially the UK, risk lengthening and triggering a new dimension to the war. Ukraine says drone attacks on Kiev are intensifying and in Texas, A g Ken Paxton has been impeached by a Republican led state House.
They've been one hundred and twenty one hours and twenty three days to present, non voting three absent.
The resolution is adopted.
N Paxton's ulster is temporary, depending a Senate vote on a permanent removal the House charging in with bribery and other offenses. Paxton is a champion of far right GOP legal fights over guns. In twenty twenty, you remember he's the one who asked the Supreme Court to overturn Joe Biden's presidential victory. Global News twenty four hours a day on aired on Bloomberg Quick Take Power by more than twenty seven hundred journalists and analysts in more than one
hundred and twenty countries. In the news, Romim Denise Pelgriny. This is Bloomberg.
I'm Brain Curtis along with Rishad's Salama. Our guest is Steve Sasnik, chief strategist at Interactive Brokers. Steve, thanks for the double duty on spending some time with this on your Sunday evening. So we're getting some positive sounds out of Joe Biden and Kevin McCarthy about about the deal, the tentative deal that has been struck. Should we assume that this does get through or do we need to be mindful that that the Freedom Caucus they're always there and you never know.
Good morning, Brian. Yeah, I think we I think I would say that this will this should be bipartisan enough to get over the finish line, but not without some drama. You know, I wrote earlier in the week that you know, if we even if we saw Biden and McCarthy come out holding hands and singing kumbayad, there would still be people yelling at them and having problems that the deal would get done. But I think it does. I think you'll get people, You'll get some people falling off.
On the right.
I think they'll be they'll just be impossible to win over the progressive caucus. They made some noise you know, on some of the Sunday shows this morning, some of the more progressive numbers. But I think you'll get enough down the middle who really don't want to see the US government, you know, drive off the cliff to get the deal across, to get the deal across the.
Table now here, Steve, you know, we've got at least one fedificial usin goals. We're just saying that, you know, whatever they'll they'll work with whatever the federal government actually comes up with. But ultimately, how are they going to.
Look at this?
Well, I mean it's probably it's probably enough of a status quo that it's not going to change things too too much. We're not getting you know, I guess on the good side, it doesn't look like there's huge amounts of spending cuts, which would present a problem for the Fed and present a problem for the market for markets quite frankly, because you know, if you have big spending cuts, that's a fiscal headwind, sort of reverse Keynesianism as it were.
But the Fed, you know, that would present a problem for the Fed because you don't necessary only want to see them aggressively tightening at the same time fiscal policy is tightening. But this seems like a very modest tweak to fiscal policy, which is why the which is why the Freedom Caucus is going to have a huge problem with it. But as a result, I don't think it changes things very much for the FED.
As a result, if we look at data weakness and equity equity futures in Asia also spemis. It looks like we will get a relief rally here. I think there was some people that were thinking, maybe, you know, there's always a chance that you would buy the sell the rumor and buy the fact or vice versa, and in this case it looks like we will rally. Would you prefer in this environment that the FED would actually raise in June and then pause or should they pause now and assess?
I you know, at this point, I think they should do what the market thinks they should do. The bottom line is I think as long as if they if they've can convince the markets that twenty five basis points is coming sooner rather than later, then just do it. If they're not, I think what the market really doesn't like from the Fed are surprises, and so if you've got a seventy percent chance that it's going to happen shortly and they're going to do it anyway, we'll then
just do it. Because I think I think what happens is if you start to get consensus that they're going to raise rates and then they end up not raising rates, people start to wonder, what do they see that we don't, And so I think just if your whole point is to be transparent and guide the market with your thinking.
Then do that now, by the way, just about Biden room or selling the news, I don't think that this initial reaction takes to sell the news reaction off the table, because remember we were we really were not pricing in much of the chance of default the least stocks were, and certainly they'll be parts of the curve. But that also there also could be an interesting reaction in the bond market because it means the treasury is going to be free to raise a lot of money and need to.
So you could actually see some reactions in that regard spilling over intequities beyond the initial you know, happy news, which it is good news.
Yeah, I mean, you know, ultimately, Steve, is the old adage that markets hate uncertainty, but the reverses they couldn't live without and they wouldn't be a market. Now, Steve, what are you looking at aside from this? How does the you know, where where do you find yourself as a strategist?
Well, I mean I wrote something the other day which at this point it's it's in Vidia's world and we're all living in it or investing in it, and that. You know that to me, the the in Vidia being the poster child of the AI craze. You know, we're starting to get into Internet land, Internet ninety nine land. We're not there yet they did. The valuations are nowhere close.
But you know, one of the interesting parallels to me is think about when you think back to back then everybody would get excited because company X, y Z would say, oh at their confort school, oh, we're announcing a website. Well, well they're now spend you know, all saying we're spending money on AI to figure out how AI works in our business. Now, AI has been out there for a while.
It's not something brand new, but you know, the beneficiary is like you know, the beneficiaries and Vidia, Marvel Technology, et cetera. They're benefiting because companies are just throwing money at the problem. And so that not well not the problem at at the at the topic. And so that's really the theme to watch right now is can this carry over and can this select group of stocks which are which are carrying the broad indices, will that spill over?
Will we get a rotation into into a broadening rally which right now has remains very very thin.
Yeah, That's where I wanted to go with this. If by chance people slow down on big tech and say, wow, that's been a powerful rally year to date, and if by chance they were to peel back a little or to go sideways, could you see cyclicals or let's say the even weight index of the S and P benefit from that.
You could and that, you know, that would be the natural rotation trade. But I don't know that it would be enough to compensate at this point because of the top heaviness of the indices and because we don't really see we're not getting this broad based economic pull pull from you know that would that would lift a lot
of the cyclicals higher. We certainly didn't hear great news from the vast majority of retailers, which is telling you the consumer is a bit nerved unnerved right now, I should say, And so it would be it would be nice to see that rotation. I would love to see it happen, but I think you need a little more consensus that the economy remains solid and that consumers remain enthusiastic for full rotation to take place without causing damage to the broader market.
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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