Good morning. I'm Doug Krisner and I'm Brian Curtiz. Here are the stories we're following today. Saint Louis FED President Jim Bullard has stepped down from his post as head of the bank effective today. Bullard said that he would fully depart on August fourteenth to become the inaugural dean of Produced Business School. Wellard, who doesn't vote on rates, this year, has been seen as a bellweather because his
views have sometimes foreshadowed FED policy changes. We heard earlier from Bloomberg's Kathleen Hayes.
Coming out of the pandemic, Jim was one of the first people who made it clear that the FED was going to have to get much more aggressive. He was the one one of the first to start talking about needing to front load interest rate hikes.
I'm going to have to move more.
Going to have to move faster, rates are going to have to be higher, and continuing to push in that direction. He obviously, in the end isn't the only one. But again, Jim has been I think a big monetary policy thinker, and in terms of actual policy steps, he has been a major for all the.
Saint Louis FED said that Bullard will remain at the Bank in an advisory capacity over the next month. The Bank also said that Bullard has recused himself from his monetary policy role and also other related duties, and he has ceased all public speaking.
Well.
A court ruling today that is being widely hailed as a victory for the crypto industry and that story from Bloomberg's and Kates.
A federal judge has ruled that a Ripple Lab's token is a security when sold to institutional investors, but not the general public. The Securities and Exchange Commission has been
aggressively targeting crypto firms for allegedly selling unregistered securities. Whether cryptocurrencies are securities had long been a major question hanging over the industry, which has argued it is not subject to the jurisdiction of the sec and other regulators in Washington and Kate's Bloomberg day Break Asia all Right.
The US Federal Trade Commission has asked a California judge to temporarily block Microsoft from closing on its deal at sixty nine billion dollar takeover of Activision Blizzard, and it comes as the Agency of pearls a lower court ruling that greenlighted the deal in the US. The ruling had found that the deal would not thwart competition in the markets for gaming, and it would also not harm consumers.
But the former FTC chair, William Kovacik, tells US that the regulator concerns over the deal aren't going away anytime soon.
As organizations and institutions of this kind grow and grow dramatically, you start to wonder whether they become manageable even on their own terms. That is, to what extent do the managers of the large enterprises as they grow, as they move quickly, are they fully able to manage effectively what they're doing even with the best based efforts to manage effectively.
That's William Kavasik, a former chair of the FTC. The FTC said that it would it would seek emergency action by the Ninth Circuit Court to stop the Microsoft deal from closing, as if its request to pause the deal is denied. Barring court act, Microsoft and Activision can complete the deal. As of eleven fifty nine pm in San Francisco on July fourteenth.
Well US Treasury Secretary Janet Yellen is traveling to India and Vietnam next week with a goal of strengthening some economic ties. Yellen will first head to India for a meeting of G twenty finance ministers and central bankers. Now, the US Treasury says that Yellen will be pushing for reforming global engzing institutions to boost their scope of their firepower. Basically, Yellen is also going to be looking to advance talks
on easing the burden of debt in poorer nations. Up next, after India, it's onto Vietnam, where she will be meeting with senior government officials and private businesses currency and trade. While those will be among the topics for discussion, the stated goals of the trip pretty simple. Improving ties with both India and Vietnam. The less obvious goal well perhaps smoothing the path of those supply chains away from China.
And China is taking a friendlier approach now towards artificial intelligence. That story from Bloomberg's Joan Wong.
China has loosened some of the guardrails that proposed for chat GPT like surfaces. Some twenty four guidelines have just been finalized, though go into effect on August fifteenth. They suggest more flexible regulation than in the initial draft back in April. The document is the products of months of consultation between the government and the industry. The hope is to ease concerns over who takes responsibility for governing AI content on the platforms. The revised rules seem to balance
that responsibility between the regulators and the platform operators. The goal is to regulate AI but not stunnest development in Hong Kong. I joined Wong Bloomberg Day Brigasia.
I'm Brian Curtis in Hong Kong along with Doug Prisner in New York. And Doug we have two major developments here stoking gains in risk assets. We've talked about this more benign inflation readings that we've seen of late in the past few days in the US, and then also Chinese policymakers clearly reaching out to the private sector. Both of these trends can be fickle, but at the moment the green light is flashing.
Most definitely here in the States. One of the things that it has produced a much weaker dollar. I think for the four days that we have had of dollar trading, we're down about two point eight percent. If you look at the Bloomberg dollar spot index. Later today in China, this is going to be very interesting. There's going to be a press conference at ten am Beijing time, hosted
by Deputy Governor of the PBOC Luk Wao Chung. Basically, it's going to be a look at a look at some of the financial data that we have seen for China in the first half of the year. Now we know there have been a number of challenges. All you have to do is to look at the trade data that we had yesterday, a twelve point four percent decline in exports for the month of June. Brian, you and I have talked about the disinflationary or deflationary trend when
it comes to factory gate inflation in China. So based on a lot of the data that we've been looking at, there is a lot to be concerned about Bloomberg economics. I think I pointed this out earlier as expecting Beijing to do a lot more in terms of recharging growth.
The way the market is looking at this, Doug is not so much the data, and not so much even you know, the ins and outs of the stimulus. It's really more the approach of policymakers. You asked me a couple of days ago, and I said, well, it really does seem to have the policymakers approach seems to have changed. It's a much different attitude. It's like all of a sudden the light went on that the way that they can get the animal spirits back is to stimulate the
private sector. So we've seen a number of these developments who today we talk about balancing the approach to AI regulations that it's a little bit friendlier. We talked about the meeting between the premiere and the big tech companies and the relaxing or the loosening of some of the payback restrictions on property developers. It's more about the approach, which then it is the actual data here at the moment.
That's why you had bad data yesterday. But look at the CSI three hundred is up one point four percent. The Hangksng Tech index was up three point eight percent. This is what investors are really feasting on.
So perhaps it's a combination of both I hope for more stimulus and un understanding now that Beijing has come to the realization that the entrepreneurial class really needs to be embraced if you're going to recover an economy.
Absolutely it sets up well, but as I mentioned, it's fickle. We don't know. We've got fed speak out there that's still very hawkish, But I think the market, the way the market's looking at that, perhaps you agree, is well, we expect them to do this for now.
Perhaps perhaps I think one of the things that's going to be very interesting going forward here in the US is what we hear tomorrow from some of the big banks right the degree to which they're going to be positive or not on the trajectory for the American economy, because one of the things I think the data show in on the trade side for China, the recovery in the global economy, as tricky as it's been right now, if it's not there in a robust form, it's going
to be even more difficult for China to recover, don't you think?
Yeah?
Absolutely, And we can put a lot of this Nancy Davis, Who've got her coming up in a few moments. Nancy Davis's founder in CIO at Quadratic Capital Management. Now it's time for global news. Actors and performers have decided to join writers on strike, saying it's an issue that will affect all elements of US labor that Baxter has Global News from the nine to sixty News from in San Francisco.
Ed, Yeah, they make it a societal issue for sure, Bri and they go out tonight. The two main issues sided by union lead negotiator Duncan Crabtree Ireland streaming and AI actors.
Deserve a contract that reflects the changes that have taken place in the industry. Unfortunately, the current streaming model has undercut performers residual income and high inflation has further reduced our members' ability to make ends meet.
Now SAG after President Franz Rusher says they had no choice.
If we don't stand tall right now, we are all going to be in trouble, we are all going to be in jeopardy of being replaced by machines.
Dresher says this is important in every field in society because what's being done to them will be done in all fields of labor, AI and automation. This action will shut down most all productions. Some game shows, reality shows have been able to go on, but this well should dent them as well. China has issues has issued a statement telling the US and it needs to stabilize ties after meeting between Wang Yi and US Secretary of State Anthony Blink and China. Statement says the US needs to
stop suppressing China's economic, trade, and technology development. Wang also urged the US to end sanctions against China and says channels of communication should be broadened. The statement also reiterated china stance over Taiwan Now. The US statement specifically aimed at the alleged China hacking of government offices, including the State Department and the State Department Secretary of Commerce office, and other businesses using Microsoft business software impacted by that hack.
White House spokesman John Kirby says the government did act swiftly.
We took it very very seriously, and we took actions immediately after to try to mitigate the effects of it. We're obviously taking a fresh look at our systems and our cloud computing capabilities to make sure we can be more resilient in the future.
He says systems are now secure. US President Joe Biden says Russia cannot sustain years of war in Ukraine. Biden says it is taking extraordinary economic and political toll on Russia.
What agreement is ultimately reached. Depends upon pud and what he decides to do, But there is no possibility of him winning the war in Ukraine, and he's already lost that.
War, he says, for two reasons. One, Russia cannot maintain resources to go on fighting.
Number Two, I think that there is going to be a circumstance where eventually prison Food is going to decide it's not an interest of Russia economically, politically, or otherwise to continue this war.
Biden says, when the war is over, Ukraine will enter NATO.
Oh.
By the way, Biden had an off the cuff suggestion for Wagner Group, a chief progotion quote, I'd be careful what I ate. Global News powered by more than twenty seven hundred journalist and analysts in over one hundred twenty countries. In San Francisco, I'm Ed Baxter, and this is Bloomberg.
I'm Brian Curtesy in Hong Kong, along with Doug Prisner in New York. Our guest is Nancy Davis, founder in CIO at Quadratic Capital Management. Nancy, thank you very much for joining us. One of the bullish trends that we've seen here just of late is that inflation is coming down while wages tick up, and that is strengthening consumer buying power. How does that work its way into the bond market and your approach.
Well, definitely, the inflation expectations have been hugging two percent in the future for quite a while. We're having realized CPI data come in lower with the PPI this morning and the CPI print yesterday at three percent, so but still future inflation expectations are all right around the two
percent level when you're looking at break events. So we do think the market is really pricing in this two percent level, and inflation protected bonds actually look pretty attractive right now because the real yield that you can get, so that's a yield beyond inflation. For instance, on a five year inflation link bond some of one nine percent of real yield, So higher real yields has really hurt the tips market. You saw that in twenty twenty two.
In this year, we do think it's an interesting time for investors to say, look, you know, the data has been strong, but the said, you know, are the raid hikes really working? Because even though the CPI and PPI have been coming down, I don't know about you Doug and Brian. But I still feel a lot of inflation in my day to day life.
Yeah.
I mean in terms of what we learned yesterday from that CPI print, I think we had a core rate of what four to six and then if you look at four eight, we look at four to six when it's the core PCE. Here we have this idea that there is the long and variable lag. Do you have a sense of how much tightening has yet to be felt by the economy.
Nancy, I think no one in twenty twenty one was really expecting the Fed to hike you know, to five over five percent in about a year. It was very surprising the speed and the rate at which they hiked rates. I think the question is is we still have you know, to your point with four point eight core? Is it really working?
Is it enough?
And the market The interesting thing is all markets move off of teacher expectations, and future expectations for inflation are well below both the PPI and the CPI. The US yield curve is near its all time levels of inversion since the eighties, so in the last you know, forty
plus years. You can look on your Bloomberg terminal at the twos tens, sofur swap curve for instance, that is currently negative one hundred and four basis points, so it's near all time lows, even lower than it was in the late eighties.
We were over one hundred basis points and spread between twos and tens, and now in the eighties it's not a lot. It's only maybe twenty basis points. But you seem to be saying that won't continue.
Well, it's perplexing, right, because if you think about it, you can buy a T bill, for instance, you could buy a one month T bill and get paid you know, five twenty five thirty, or you can lend money to the US Treasury for ten years and get paid. Three point seventy six right now is the current yield on the ten year treasury. So it's a little bit bizarre. Like normally, when you win money longer, you get paid more, and you're actually getting a negative term premium. That's what
the inverted yield curve means. It means loaning money in US dollars for longer you get paid less. And so that's really the deflation disinflation that's being priced into markets. As you and Brian Doug were talking about earlier on the show.
You know, Brian and I were talking on the pre show call and he reminded me to take a look at a note today from Barry Banister over at Steefel and mister Banister is predicting that inflation is going to be more sticky than many are counting on, and he is also talking about the risk of recession for twenty four. You seem to be somewhat in that camp. I mean,
I'm sensing a little bit of defensiveness. Maybe the tactic here is going to be a little different, But are you adverse to taking a position long the equity market right now?
Well, I think the position that I'm taking is more about owning inflation protection as part of core portfolio. It's not so much a call on the equity markets. Equities have obviously had a pretty good year in the US and twenty twenty three, and that's coming off of the sixty to forty portfolio had one of the worst years ever in twenty twenty two. Bonds of really traded sideways
for the most part. But I think the thing that is very compelling to me is that inflation is not it's not a trade, it's not like, do you think it's going higher or lower. It's something we have in our day to day lives. We live in a real world. We have a limited amount of savings, we have hopefully some investments, but at the end of the day, everybody has the cost of living and exposure to real inflation.
And I think the opportunity that the market is giving investors that inflation expectations in the future are priced right around two and whether you think that's going higher or lower, the market is very confident that the Fed's interest rate hikes are going to cool future inflation expectations. And we could talk that way.
We could talk a lot longer on this, but I wanted to pivot quickly to China. We're seeing policymakers there in the process of adjusting attitudes a little bit, and they're still tweaking their approach to stimulus. Do you do you have like a rosy view of this or a cautious view of this, or how you assessing it.
I do think if you look at the private capital markets, whether it's private equity, private credit, those have been very, very good for the economy and for the credit mechanism to translate. Policy makers whatever they're doing in interest rates and in currencies into the real economy, and so I do think it's very hopeful to have more capitalism in the private markets and more extension of credit in markets in emerging markets and China as well. So I do
think that's a positive. And I think the more policymakers can employ, you know, the entrepreneurialism that we have with companies and growing businesses, the better it is for everyone.
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 podcasts.
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And I'm Doug Krisner. Us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak, Asia
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