Good morning. I'm Brian Curtis.
And I'm Doug Prisner. Here are the stories we're following today.
Now In the top stories, China has told its state owned banks to boost support for the yuan, the Chinese currency. Bloomberg's Joan Wong has the story from Hong Kong.
The request came as the yuan fell towards seven point three five per dollar. China is now in a push to prevent a search in yuon volatility. Senior officials are also considering cutting banks forign exchange reserve requirements, and they're checking whether domestic companies helped accelerate yuan declines by conducting speculative trades against it. A sense of gloom has descended on China's markets, even though Beijing sawt to bolster sentiment
was an interest rate cut. The banks will release their lone prime rates on Monday next week. In Hong Kong, I'm joined Wang Bloomberg Day Brigasia Well China.
Evergrand Group is seeking Chapter fifteen bankruptcy protection in New York now. Chapter fifteen protects a company's US assets while restructuring arrangements are worked out in foreign jurisdictions. This type of filing is routine in cases involving a restructuring of debt held internationally. Now, Evergrand has been working for months
to finalize an offshore debt restructuring plan. Back in April, you may recall Evergrand disclosed it did not yet have the level of credit or support needed to implement the plan.
Now.
Today's petition here in New York references proceedings being carried out by Evergrand in both Hong Kong and the Cayman Islands.
Right Hines's police officers went to the homes of people who invested in Jongjur's trust unit and told them to avoid public protests. People all the way from from Beijing to Sichuan to jung Su received these visits, which they did refer to as cordial. But it's the latest sign that authorities are worried about unrest. Fears of financial contagion have grown since the company Jongrong International Trust, which is
not Jongjur Unit, missed dozens of high yield products. This week, group gathered briefly at the Beijing offices of General to demand payment on these financial products.
Well back here in the States, President Biden will host the leaders of Japan and South Korea. This will happen at the Camp David Presidential Retreat. It's in rural Maryland, and that will get underway tomorrow. The president is looking to strengthen ties and open up lines of communications with both countries. We spoke earlier with Bloomberg's Jack Fitzpatrick.
North Korea will be on the dock at Nuclear non proliferation is something they have said they're going to talk about, and the latest there is that South Korean experts have told our colleagues that North Korea may actually time the test launch of a missile that can deliver a nuclear warhead to the US mainland to coincide with that summit.
That is Bloomberg's Jack Fitzpatrick, by the way, was back in June that the US, Japan, and South Korea all agreed to share real time information on North Korean missile launches, and they have since conducted several joint anti submarine and missile defense exercises.
Right we hear Goldman Sachs Doug is planning to hire several hundred new staffers to help address concerns raised by banking supervisors. We get more from Bloomberg's Studhart Notrogen.
Over the past year. We understand that there has been ramped up FED scrutiny from their banking supervisors that are trying to remediate what they see as lapses. We of course know that their consumer business, their credit card practices have been looked at by the CFPB and other government agencies, and we know that the FED had been asking questions on that.
Goldman's hiring spree is notable in a year in which the firm has been shrinking headcount because of a market slowdown. Unclear is what deficiencies Goldman is seeking to address with this. The firm largely abandoned an effort to build out a consumer bank that may have set off some questions from the FED.
Last year, well after the bell here in the States, Applied Materials gave a bullish forecast for the current quarter. We have that story from Bloomberg's Charlie Pellett.
Applied is the largest American maker of chip making machinery, and its forecast indicates that an industry slump maybe fading. CEO Gary Dickerson says a shift toward artificial intelligence computing and the rise of Internet connected devices are helping bolster results. Applied Materials said fiscal fourth quarter sales will be about
six point five one billion dollars. That compares with an average analyst estimate of five point eight eight billion in New York Charlie Pellett, Bloomberg Daybreak as and shares in Applied Materials right now higher by more than two percent in late US trading, Brian, So what.
Struck me is interesting about that? Hence my tongue in cheek comment about dazzling you with some brilliant So is this? You know, We've had a lot of companies actually who've had pretty solid earnings in the stocks have traded down.
But it's different with Applied Materials. I think simply because the time went on and this stock sold down from the one fifties down to the one thirties, to the point where the valuation was at a point where when investors got a beat right across the board, they decided to go in there.
And buy it.
So you had that move up, as you just mentioned, two point one percent. So it's interesting if you think that a lot of the correction that we're seeing at the moment is really due to valuation.
Very interesting day in the bond market, and I wanted to talk a little bit more about one of the things that may have been functioning today as it relates to week foreign currencies, particularly the Chinese You won, as we heard earlier, the U one weekend over nine two seven spot three five against the greenback. That's when we were told Chinese authorities gave instruction to some state owned
banks to step up their intervention. Now it's reasonable to assume that a few of those banks sold some US dollar assets, long dated US treasuries as an example, to raise funds in order to buy the Chinese currency, and that, Brian, I think may have been one of the reasons that we see a little bit of weakness at the long end today.
Yeah, and it's interesting that China would be selling US treasurers. We had reported that that had been the case in this latest round, and that Japan had upped its amount of treasures, but China had sold. So there's definitely a lot of nervousness there. And I think, as you mentioned right now, we've got the offshore Chinese currency at seven thirty forty, so strengthening considerably. Very interesting stories out of China.
I mean, we mentioned that people said that police officers came to their homes and paid a cordial visit visit, but we know in China, when police officers go to your home and tell you don't go out to public protests, people get the message, whether or not they consider the visit cordial or not. Another interesting point, sources telling us that Tyson Foods, the biggest US meat company, is looking at options, including selling its China business. Interesting process.
Looking forward to next week, right with those loone prime rate cuts.
Yep on Monday. Very interesting. Indeed, we'll see most likely they'll follow what we saw from the PBOC earlier. It's not always slam dunk, but I think that's what we expect. Now it's time for Global news. Questions mounting here over why Maui's warning sirens system did not sound when the Maui wildfires broke out. A batched with Global News in the nine to sixty News from San Francisco.
Ed, Yeah, that's right. Brian officials are saying that they were not designed for fires, but for tsunamis, and that instructions are to flee to higher ground. They say, the officials do that that would have had people running toward the flames. The Attorney General is dubious and investigating, as well as accounts that some of the alarms are broken. Anyway, It's been no official cause released for those fires, but from the beginning there's been concern that it could have
been down power lines. Bob Marshall's CEO of Whisker Lobs power Monitoring System, says that new video shows little doubt about what happened. There is didn't meddle and sparks falling down to the ground, So if you've got dry grass and fuel underneath, that's what sparks the fire. Hawaiian Electric is not commenting. There are now thirty FEMA canine teams searching through the rubble of the Hina Town fire, and Governor Josh Green says a slow, painful process, one.
Individual by one individual.
It makes us, like I said, heartbroken.
And President Biden has made his most visible comments about the fires today.
Already from the darkness and the smoke and the ash, we've seen the light of hope and strength, first responders working around the clock. Many of those first responders in fact impacted by the fires themselves, losing their own homes. Volunteers delivery made by fishing boat on jet skis.
He is going to be there on Monday, with President Biden hosting the leaders of Japan and South Korea tomorrow and North Korea being a prime topic for conversation. It is one of the major topics and was the topic of conversation today at the UN Security Council, Human Rights Chief Vulgar Turk telling the Council human rights are very much being abused.
The people of the DPRK have endured periods of severe economic difficulty and at other times severe repression of their rights. Currently they appear to be suffering both.
Turk says people are becoming increasingly desperate. Los Angeles Area has put together a task force made up of Los Angeles Police, La County Sheriff's Office, Burbank and Glendale police departments to crack down on retail theft. The flash mobs hit luxury stores, they're in and out. LA Mayor Karen vass.
To Angelino's our message is clear, those who commit these crimes will be caught, they will be held accountable, and we will work to address this issue.
And La County Sheriff Robert Luna says it will be multifaceted.
We're not only focused on the individuals who are walking into these stores and committing the crimes that we see on video. But if you are supporting them logistically, either by being a driver, harboring them, buying merchandise, selling merchandise, you're in this chain.
Yeah. The task Force says it has to stop global news powered by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries. In San Francisco, I'm Ed Baxter, and this is Bloomberg.
This is Bloomberg Daybreak Asia. I'm Brian Curtis in Hong Kong, along with Vonni Quinn in New York. A guest is Joy Young, head of product management Market Vector Indexes. Joy, thank you for taking out the time to be with us. So we've seen this repricing in the bond market, but yields have gone up a lot more at the long end than they have at the short end, which might suggest that investors don't really see a lot of big
changes coming to FED policy. Hence, is this correction that we're seeing in the stock market Is that more about valuations than perhaps fears about sharply high interest rates from the.
FAT I mean interesting question because we look across markets and we see equity markets are also down, so I think, you know, it could be that people are just now sensitive. We thought August was going to be quiet, but it
hasn't turned out that way. You know, when we look at where we came from at the beginning of the year, you know, we were looking at very diversient opinions with the market trying to price them both rate hikes and rate cuts, and the VIX the measure of fear and uncertainty in the markets was quite high above twenty five. We got to July and we thought we were getting confident building consensus. Everybody thought rate hikes were nearing the end.
Markets were optimistics, and then we're here in August reading the Fed minutes, and now we've had kind of a reversal of opinion because the Fed is saying that, you know, inflation is not over. There is still a risk of inflation, so we're we may be looking at more interest rate hike. So I don't think this is just repricing. I think there is you know, gener you know, kind of fear again back in the markets, with the vicks crawling back up,
equity markets down, the bond market is still inverted. Yields, so I think that's looking quite fragile still.
Joy are we shaving up for some kind of perfect storm with everything that's happening in China as well? It seems like everything is coming to a head right now.
It's interesting because I think we do need to look around the world, not just focused on the US market. We're seeing this fragility in the Chinese market. The you know, kind of reawakening hasn't happened, and we're looking at really like numbers coming out every day that don't look good. And we look across to the UK markets, you know, we're seeing inflation has weird its head again, Labor markets are quite strong. So those are indicators of what maybe happening or spreading across the world.
Well, the vicset seventeen isn't all that high historically, and five percent correction in stocks is not a huge amount, but it seems like, you know, for a lot of investors, they see the kind of growth that you get from the Atlanta GDP now, and you know, seeing some of the data well supported for the economy, they they're not that nervous you say they should be.
So, you know, but I think, you know, this is where I think we also need to look beyond the headlines, beyond aggregate market numbers and look, you know, kind of below, you know, look into the details. And we know that this is a market that's been led by just a few you know, big macro tech stocks. You know, we've been calling them the Magnificent seven and they've been slowly reducing to maybe just the Magnificent one with Nvidia. But you know, if you look at what's happened since me,
some conductors have been flat. Oil, you know, is up thirty percent oil service companies, whereas you know, at the beginning of the year, oil service companies were down and semiconductors were up almost fifty percent. So I think we're seeing this rotation and it may be masked on a high level aggregate number.
So joy at Market Vector, you published once a month the best performing indexes, and you know, perhaps unsurprisingly, in July, it was things like bond indexes and digital assets indexes. How does that flip for August and September, given that we saw bitcoin in the twenty five thousand dollars range.
Today, Yeah, so I mean bitcoin has you know, kind of fallen back again, but I think, you know, we still have this application process, which spot bitcoin ETF in the filing, and you know, that's a big that's going to be you know, big opening for bitcoin should it be passed. And I think just being filed, you know, is an indication that institutions are looking at this space and that so.
Many have been rejected on so many are still file.
But I think this is you know, this may be you know, a long term process, but I think it's showing that we're you know, people are looking at the space and that they're giving it credibility and that there are different investors coming in to give it a diverse you know kind of market.
Joey, you're sounding pretty cautious here. So are you somewhere between a soft landing and hard landing or do you actually believe we will get that sort of full blown recession.
I think investors should be cautious, always cautious. So I think if you look at what's happening with banks, you know, we also do follow top ten banks. You know, should rates hold for longer higher, then that's going to spill over to credit risk. It's going to spill over to default risk, it's going to spill over to refinancing. Risks. So we're looking at banks, we're looking at reeds, you know, and those haven't been moving up at all, and they've been moving down.
So where are the flows into your indexes?
Well, semiconductors here to date are still strong. But you know, I think investors shouldn't be chasing flows. They should really be thinking about their macro views and really either being diversified or being nimble. And ETFs are a good structure, but some of those flows may be moving very quickly, and that's the point. They're liquid instruments, so they are good tools for investors to use in this in this environment.
How about emerging Marcus, it seems like with China all that's going on there that that would be dragging them down. And I note that EEM has been down pretty solidly here for the past two weeks overall. What's your thoughts on.
Emergency interesting because we have a Vietnam index as well as India index and those have been pretty strong as well as Brazil. Seeing that, you know, you know, although China will have a significant impact on emerging markets overall, that these individual markets have been quite resilient and maybe prepared for divergent performance.
What's the number one question you get asked by clients these days.
Good question, but you know, we're getting a lot of digital asset interests, so people are asking about how to think about price in this market. And you know, that's one of the big concerns for the SEC filings is, you know, how do we think about rigorous pricing with a market that's so fragmented with so many exchanges.
You know, you know, we've only got about forty seconds left. So perhaps the final question about where yields are heading, particularly at the short end. We haven't seen you know, such a big balance in the two year yield. Where do you see that, say, over the next six months.
Yeah, so I don't have a crystal ball here that you know. I think investors should be prepared for more volatility in both the bond market and the equity market.
This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street.
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Listen coast to coast on the Bloomberg Business app, Sirius XM Channel one nineteen, the iHeartRadio app, and on Bloomberg dot Com. I'm Bryan Curtis.
And I'm Doug Krisner. Join us again tomorrow for all the news you need to start your day right here on Lumberg day Break Asia.
Mhmm