Good morning.
I'm Doug Prisner and I'm Brian Curtis. Here are the stories we're following today. Minutes from the fed's June meeting revealed that officials were somewhat less united than their unanimous decision had suggested. Some participants indicated that they favored a quarter point rate increase, but they went along with the move to leave policy unchanged. Those favoring high excited, tight labor markets, and relatively few signs that inflation was slowing
slowing towards that goal of two percent. Now, traders are betting that the FED will likely hike rates in the meeting later this month. Heard from Evercore ISI founder Ed Hyman.
At this point, the one more is baked in the Kate. I think anything from now is a mistake. They're just creating a deeper recession or the more likelihood of a recession. But at five and a quarter, with the banial at three eightyretty much done and inflation slowing.
FED officials will get to analyze two key US economic reports before the next decision. We'll get the June employment report on Friday and readings on consumer prices on July twelfth. The FED meets next on July twenty fifth and twenty sixth.
Well, US Treasury Secretary Janet Yellen will be visiting China at a time when tensions between Beijing and Washington are very high. We have more from Bloomberg's and Kates.
Yellen's goal is to find common economic ground and open communication channels between the US and China, and it's the first major test of a policy she outlined in April that is geared toward defending US national security without trying
to hold China back economically. Yellen's trip comes days after China imposed restrictions on exporting two medals that are crucial to key technology industries, and a mission comes exactly five years after the Trump administration imposed tariffs on the first wave of more than three hundred billion dollars worth of goods from China. In Washington and Kates Bloomberg Day Break Asia.
The People's Bank of China is mixing its muscles on options regarding the slide in the Yuan. Bloomberg z von Mann has the story from Hong Kong.
The commentary in the PBOC backed Financial News says China has ample tools even if the Yuen enters a panic slide. It's part of a campaign to reassure investors. The tools include the Ford Exchange Risk Reserves ratio, banks FX deposit reserve ratios, and so called counter cyclical factor that's used in determining the pboc's daily reference rate. The Chinese currency has recently slid towards as weak as level in fifteen
years against the dollar. The commentary says China's yen market is resilient and that fox levels are stable in Hong Kong. I'm von Mann Bloomberg Day Breakasia.
We go to Ali Baba next. The company is looking to work with its home province of Jijeong to develop artificial intelligence and the digital economy. Ali Baba's CEO Daniel Joan, saying that digital economy has entered a new age with artificial intelligence sweeping the world this year, and that Ali Baba wants to help build Chijiong into a world class digital economy cluster. There are not many details here on what the plan would be other than to create a
better business environment. However, the agreement does show a degree of official backing for Ali Baba's efforts, and that may provide a little bit of a boost to investors. Sentiment. On that front, the company is pushing back against the perception that regulators were out to restrict Ali Baba's growth.
Brian Well Back in the United States, there are signs of a big comeback in auto sales after the just completed second quarter. That story from Bloomberg's Tom Busby.
After a few rough years, the auto industry is now back. All the major automakers posting their June and second quarter sales data this week, and so far, despite inflation and higher sticker prices, blowout sales thanks to pent up demand
and dealership lots that are full again. Sales to General Motors up nearly nineteen percent from a year ago, on big sales of the Chevy Suburban and the trail blo At Toyota they were up seven percent on demand for cameras and rap fours, and at Stilantis up six percent thanks to Ram pickups and Jeep Grand Cherokees. FOD is that with its second quarter figures on Thursday, I'm Tom Buzby Bloomberg Daybreak Asia.
Doug. I don't know if the auto market can serve as a microcosm for what's happening with the consumer, but you look at at loan rates, there be like six to ten percent to buy a car, and it is not stunting the demand. Look at these sales that we've seen and if you look at the stock of you know, everybody crows about what Tesla has done, but even General Motors has gone from thirty two to thirty nine just here in about the last month or so. So you're
talking more than a twenty percent gain. Let me just get the exact gain for the last month. It is over the last month up sixteen percent in the market. So it shows you that there are parts of the economy, maybe not manufacturing, but parts of the economy that are working pretty well well.
And you didn't even mention the story on byd in China, right, the incredible sales growth that company is seeing on the mainland, which then kind of takes us to the visit of Janet Yellen to Beijing. It's going to start a Thursday, we know. I think we can agree, Brian that the relations are frayed. I think the US and Europe as well have both realized the vulnerabilities of the dependency that the West is created in dealing with China. The question now is how much decoupling is really possible.
Yeah, I mean, I think finding common ground is easy because the relationship has so many layers to it. But how do you turn the aircraft carrier around? That is going to be I would say nearly impossible. But you get a sense that investors will appreciate the effort. It won't be easy. But Yellen is pretty you know, she's pretty good on this type of level. She's a pretty good communicator. She's a bit like Leoha on the Chinese side, you know, not exactly sharp elbow.
Interesting comment from David Loveinger today over TCW. He was saying, it's to him at any rate, talking how little the US and Chinese governments have been speaking at all levels, and he kind of pointed to the fact that key economic officials in both countries really don't know one another all that.
Well. Yeah, absolutely, it ebbs and flows. It feels like it needs to go into a period where it flows a little bit. But anyway, very nice segue from the car talk to the China talking. I'll have to be on my toes to keep up with you today. All right, now it's time for global news. US President Joe Biden, expressing his full support of Sweden for NATO admission at backs to with Global News in the nine to sixty newsroom in San Francisco.
Ed'll right, Brian Wright at their bilateral meeting today at the White House, Biden expressing that support you mentioned, and Prime Minister Christensen saying that his full desire is to be a full contributing member Sweden that.
Is going to make our alliance stronger and as the same value set that we have in NATO and really looking axiously looking forward for your membership.
We do seek common protection, but we also do think that we have things to contribute with to be a security provider for the whole on.
NATAS Now that next NATO summit is next week in Lithuania and Turkey's rebuffed US attempts to link a request to buy F sixteen warplanes to Sweden membership. The deadlock has continued for more than a year, and Turkey has downplayed Sweden acceptance as a possibility next week. It's being reported today that China's President Jihiping personally warned Russian President
of Vladimir Putin against using nuclear weapons in Ukraine. Telegraph reporting it happened in their face to face meeting in March. A report says it indicates underlying Chinese misgivings about the
Russian invasion. Despite public tacit approval for two days in a row now, measures used by climatologists say the record for hottest day ever recorded on Earth has been broken two days in a row, Monday first, then Yesterday even warmer, and they say today worldwide could even be warmer still Now Noah has not seemed deemed it official as of yet, but says likely the hottest in several hundred years and
probably more and maybe ever. Experts on global warmings say they are alarmed but not surprised, and the warmer weather could be contributing to five shark attacks in New York over the holiday weekend. This more than half the number of total attacks in all of last year. George Gorman, the Long Island Regional Parks Director, says the coast has become a new feeding ground.
We've seen bait and bunker fish, which are the feet of fish for the larger fish, all along the.
Shoreline, and he says they have to boost oversight.
You've increased the amount of drones we have on the beaches at Long Island State Park, beaches as well as wave runners or jet skis, so that we have lifeguards in front of the water is patrolling.
He says, it appears to be the new normal. Hong Kong's National Security Police arresting four men who'd been members of the now disbanded political group Demostosis CMP, reporting concerted effort to keep pressure up on the now defunct protest movement. New Jersey Governor Phil Murphy is touting his fifty four point three billion dollar budget is having the largest safety
net on the state's history. In an exclusive Bloomberg Radio and television interview today, he says it prepares for the future.
The fact of the matter is, I do expect that the economy will soften, and when you look at our big drivers of revenue corporate business tax, personal income tax, sales tax, we monitor those literally on a daily basis, and we think we've got a big enough surplus and enough latitude of this budget that we'll be able to withstand a softness and frankly come out the other side of that stronger than ever before.
Murphy also said he'll continue to participate in the fight to get Washington, DC to do something about the salt tax battle, saying it punishes New Jersey, New York and California disappropriately. Global News powered by more than twenty seven hundred journalist and analysts over one hundred and twenty countries. In San Francisco, I'm Ed Baxter, and this is Bloomberg.
Hi, Brian Curtis in Hong Kong, alongside Rashad silamat. Our guest is Chuck Camello, President and CEO at Essex Financial Services. Chuck in looking at the US economy, We've seen a little bit of a change in the last month, particularly as relates to the market. I just mentioned you probably heard us chatting there, Doug and I about the auto market GM up sixteen percent over the past month, the
queues only up four percent. Yet everybody all they're talking about what a great first half it was, and there's no doubt about that. The NASDAK and the Nasdaq one hundred have soared over the first half of the year. But in the last month things have changed. Does that continue?
Yeah, well, thank you so much for having me, and I think that what you just described is what we've been hearing and sort of seeing about this broadening of the market where you know, obviously with NASDAK finishing the first half up over thirty two percent, and the S and P five hundred up you know, close to seventeen. But you know, the equally way did S and P five hundred was just up about a little over seven.
So I think what you're seeing over the past month, especially also even in small caps, is starting to see a more broadening of the market, which generally should be a healthier thing looking into hopefully a good second half of twenty twenty three. But there certainly are a lot of headwinds and a lot of obstacles in the way, Chuck, I.
Mean, there was very little breadth in the markets. I mean there's only five stocks which drove in there as like one hundred to where it's got to this year, So I mean, there's no point chasing this surely. Unlet's I suppose you ignore those five.
I think you probably ignore those five at your own peril, given you know their historical performances, and obviously they had a really, really tough last year in twenty twenty two and twenty twenty three, with you know, AI and everything else you know, technology wise behind them. But true, I think there's a lot of other areas you can allocate assets to, especially in given the very vast difference in
valuation of small cap versus large cap value versus growth. Listen, those the the tech stocks, whether it's five, seven or nine, you know that we all know the names of you know there they can they're great companies to look at Meta today, you know up again I think three percent with their with their you know they're planning on rolling out of competitor to Twitter. But I mean it's it's really just, you know, a pretty wild time to be
in technology. But again, I think the market also gives you other really interesting areas to invest in that haven't had this kind of run that you've seen.
Away from the market as a reflection of the economy, what what tells the more apt story what's happening in the auto market, as we mentioned a few moments ago, versus manufacturing.
Well, I think they're intertwined, to be honest, and I think, you know, you still have a very strong US consumer that's able to you know, to look with, especially whether you're looking at new autos, used autos obviously talking about new, but you know the other thing that's out there is there are some really attractive financing rates. I mean, yes, depending upon your credit and depending on what you're buying.
But you know, I've seen rates for financing as low as point nine percent for three years and one point seven or one point nine percent on new GM trucks. So I mean there is a market out there, and
the US consumer continues to be extremely resilient. And I think what you just mentioned about autos is another great example of the resiliency of the US economy because even in the face of higher rates, autos, anything that's financed is generally the first thing that's going to bear the brunt of the SPED increases.
That's my point is you'd think that autos would be suffering with these high interest rates, and if you look at manufacturing, it really is suffering. I mean, the pmis have been in the mid to low forties. If you look at Chicago, if you look at the broader ism that was just out a few days ago, it seems to be a completely different story than what you see in some consumer.
Activity one hundred percent. And that's the biggest conundrum, right it's this economy has been so resilient, but it's if you look at different parts of it, it tells a different story, which again I think is what's complicating FED and their decision. And again I think with this decision in June to pause to sort of see what the impacts are. But you know, every week with a different numbers, a lot of them are telling two different stories, you know.
So you've got some good news on inflation with this expectation as consumers look forward. The most recent report that just came out said people expect inflation to be backed down around twenty nineteen levels, which with the FED is a great thing, but the numbers don't bear that out. So it's really a fascinating period of time that we're in, but one that makes it very difficult for the FED, which in turn makes it very difficult for the markets.
Well, Chuck, I mean, you know, this is the conundrum which is facing all these Western economies, essentially for central banks. And what it is is that, you know, you've got this economic resilience in the face of the cost of borrowing continually rising, which means that they're going to have to go even higher, which is not exactly a helpful backdrop for equity.
Surely, No, that's one hundred percent correct. That is the biggest challenge, right, So I think without a doubt personally, I think the Fed's going to you know, they're going to increase rates in July. We got that coming up. I think, you know, twenty fifth, twenty sixth, I think in July is the next FED meeting. And listen, that is the big conundrum in that they have one tool to apply, and that is to crush demand. And you know, really the other thing that's making their life very very
difficult is the labor market. You know, employment and the job's picture is extremely strong and given the importance obviously to each individual consumer's pocketbook in terms of their job, that picture is extremely strong. So yes, the market, though,
I think, realizes what the future may look like. They've baked some of these FED increases in even these the meeting minutes that just came out really weren't a huge surprise to I think people that were paying attention, you know, in terms of what that last meeting was like and where they wound up in more importantly, how they got there, right.
I mean, it was unanimous decision at the end, but there were obviously some people there would have been very comfortable raising rates a quarter of a point and quite candidly, probably had good reason too.
Let's switch to another discussion US China. There's a lot of I think there's a huge gap between de risking and decoupling. But every time the US says d risk, China says, you mean de couple.
Uh.
Do you expect much out of the Yellen meetings this week?
Yeah, That's that's one of the biggest wildcards I think going forward when you look at geopolitical risks. I mean, you know, our you know, our relationship with China is so important on a lot of different levels, but so fraught with problems on every other level. I personally don't expect an awful lot, you know, from the Yellen visit.
I think it's good that it's happening, but these issues with you know, the US obviously restricting supply of chips, and you know, with ASML, now with the Dutch, you know, and China's reaction in terms of limiting materials and minerals coming out of China that support you know, obviously chips, and national events and things of that nature. That is
a very very difficult not to try to untie. And you know, it's it has a lot of ramifications I smarter people than me hopefully can figure it out, but it seems like a very very intractable problem right now. Which is is I think one of the biggest headwinds going into the rest of this year.
Jack.
I know we say this every few days before that, the first Friday of every month, and I'm talking about the jobs report. How important will this one be?
I think it's I think it's incredibly important, and to your point, it's always important. You know, the last job's number was what I think it was, three hundred and thirty three hundred and thirty nine thousand new jobs past prior months were raised upwards of one hundred thousand jobs. It's I think it's the biggest It's absolutely the biggest
thing that's going to be happening. And honestly, when you look at all the talk about recession, the one missing piece of that is labor and is employment, and that just hasn't happened. So I don't know. I think it's going to be another strong number. Personally, we'll see what Friday brings us, but it's going to be a huge bell weather for to make the Fed's job a lot harder or a lot easier and I think it's probably going to make it harder.
Okay, thirty second elevator pitch, give me your number one call at the moment.
Boy, So I would say. I would say the number one call at the moment is to take advantage of areas of the market that haven't performed well, the vast disparity and valuations between small caps and large caps value versus growth. And again, be choosy when we're talking about value, not regional banks and things that might still have some problems. But I certainly think looking at small caps value and some international exposure, given how far the markets run, would
be a very nice addition to someone's portfolio. And again, if your technology stocks have run, there's nothing wrong with trimming some winners. It seems to be something we forget to do. I would take a little bit of money off the table attack.
This is Bloomberg Daybreak Asia, your morning brief on the story's making news from Hong Kong to Singapore and Wall Street.
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And I'm Doug Chrisner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg day Break Asia