Good morning.
I'm Doug Chrisner and I'm Brian Curtiz. Here are the stories we're following today. US inflation cooled sharply last month. It offers some new hope that the FED will soon wrap up the most aggressive interest rate hiking campaign in decades, but former New York FED President Bill Dudley says the data, this latest data won't stop the FED from hiking in July.
They're looking at the totality of the data of the last three months going to the July meeting, and the reality is that commy is still doing quite well. The economy really hasn't slowed down enough to make the FIT confident that they're going to see that slack of all air work that they want.
Fed officials will take into account upcoming readings on producer prices, inflation expectations, and also retail sales before their next policy decision. The FED does meet next on July twenty fifth and twenty sixth.
Well, speaking today, if you look at the FED speak it appears that a number of officials are poised to resume those rate hikes. We heard today from the head of the Richmond FED. He's Tom Barkin. He said that growth in US consumer prices is still too quick, even though it did slow in the month of June, and mister Barkin went on to say, if you back off too soon in terms of rate hikes, inflation will come back strong. We also heard today from the head of
the Minneapolis Fed, Neil Kashgari. He said banks must be prepared in case Fed officials need to tighten policy further.
If inflation proves more entrenched than expected, policy rights might need to go higher, which could further reduce asset prices, increasing pressure on banks.
That is Neil Kashkari, the head of the Minneapolis Fed. He went on to say that increasing bank resilience could help minimize risk if high inflation is persistent, and he said supervisors could insure banks preparedness with high inflation stress test to identify those banks most at risk.
Brian to Corporate News, Walt Disney has extended the contract of CEO Bob Eiger for another two years. The story from Bloomberg's Charlie Pellett.
It gives the longtime executive more time to implement his turnaround and find a successor. Under the new arrangement, Iiger will remain CEO through December thirty first of twenty twenty six. The seventy two year old Iiger returned to run the entertainment giant in November, after previously serving as CEO for fifteen years. At the time, he was given a two year deal expiring in December of twenty twenty four. Disney made the announcement while Iger was attending the annual Allen
and Company conference in Sun Valley, Idaho. In New York, Charlie Pellet Bloomberg Daybreak Asia, we.
Go next to the semiconductor's space and Vidia is said to be in talks to join a list of investors in the IPO of ARM Limited. Now you may know that ARM is the British chip designer backed by Japan's SoftBank. We have more from Bloomberg savon Men.
We're told the IPO backers will not be finalized until the offering gets underway in the fall. The Financial Times reported that in Video was seeking to invest at evaluation of thirty five to forty billion dollars. That's lower than the eighty billion that Soft Bank wants. Nvidia is a longtime partner and client of ARM, and tried to acquire it last year after the deal unraveled, soft Bank embarked
on plans for an arm IPO. The Tokyo firm bought arm back in twenty sixteen with hopes of regaining its own footing after losing billions of dollars on startup investments. Now, SoftBank founder Masayoshi's son hopes the arm IPO can be the largest ever by a chip company, and bringing in anchor investors could be a big help. In Taipei, I'm ivon Mann Bloomberg day Break Asia.
Chinese Premier Lee Chiang has met with senior executives from the leading tech companies in the country. More from Bloomberg's Juan Wong in Hong Kong.
This could be a signal that Beijing is ending is crackdown on the tech industry. The meeting included executives from Chinese tech firms Ali Baba, Bike Dance, and May Twan CCTVs has premierly urged local governments to provide more support to internet firms, calling them trailblazers of the era. He also pushed the companies to support the real economy through innovation. The hope is to bolster the Chinese economy without the
use of major stimulus and other examples. The Chinese government recently urged banks to extend loan relief to developers, and President Chi ching Ping called for more foreign cooperation in areas including trade and investment in Hong Kong and Joanne Wong Bloomberg Day Brick Asia.
I'm Brian Curtis along with Doug Christner and Doug In addition to the premiers meeting, you also had the NDRC praising tech companies yesterday, which is pretty unusual for that sort of entity. It praised ten Cent, May Twan, Ali Baba, and it shows that the policymakers now are looking at other ways of stimulating the economy outside of just monetary and fiscal support.
And look at the Nasdaq Golden Dragon China Index in the US today, Brian jumping four percent and a call from Goldman Sachs the firm strategists see China stocks as investible right now. We've talked on this program about obvious political risk, whether it's geopolitical or regulatory, along with the loss of economic momentum in China. Now many in the market have asked this question we have on this program
as well. Are Chinese stocks investible well? The answer, according to Goldman right now is a clear yes, given the fact that these risks essentially been priced in now. Goldman seemed to plug in a few assumptions here over the next twelve months. One is that the economy will grow in real terms in terms of GDP at a rate of around four point seven percent, and geopolitical tensions will kind of assume a three year average, so no real surprises.
There are really a lot of doubters though these stocks are down so much. We've often mentioned that companies like ten Cent in Ali Baba, they are really not quite the same companies they used to be, and ali Baba for instance, still down even after the rallies of late, still down about seventy percent, So you'll know that's what makes a market. There will be people who will say
it's worth the risk. Others will say, we know what the policymakers are like, and we know that they don't support these types of Internet giants, the monsters like may Twan like ten Cent and Ali Baba, so it'll be interesting to watch that one. I wanted to make a quick line here or comment on the inflation numbers, because obviously we're leading off with that I like the line in one of our stories, too early to pop the champagne,
but start chilling the bottle. The only thing is particularly with us on this program talking to investors, is we need to probe the bouncers to see if the guests have already vibed too much. The Nastak one hundred to that point, the Nasdaq one hundred, with the gains today now up forty percent here to date.
I don't think you can argue with this move that we had across the Treasury curve today at the short end of twelve basis points to the downside at four seventy four at the long end word three eighty five right now, so the market's convinced that the FED is nearly going to wrap up this project of tightening.
It depends I guess what happens with Core CPI four point eight percent is down definitely from where we were a year ago, but it's not down that much and it's not down as much as the FED wants. So although that three percent handle sounds great for headline CPI, the four point eight percent on a year to date number four Core is simply not good enough. Lots to talk to our guests about and coming up as the
first guest on the program this morning. In a few minutes, we'll be chatting with Ben Emmons, senior portfolio manager at New Edge Wealth. Now it's time for Global News. NATO has offered assurances of long term protections to Ukraine at Baxter with Global News in the San Francisco nine to sixty news room.
Head, Yeah, that's right, Brian. This is half of what President vladimerz Alenski wanted and comes after him saying not offering membership or a date thereof quote absurd. Now this came before the meeting.
I want to discuss with our partners all these things and the sword will will speak today and fight for this. It's security guarantees for Ukraine on the way to NATO.
Now that one he did not get, but after meeting with leaders, including US President Joe Biden, the.
Outcome of the need of summit and illness is very much needed and.
Meaningful success for Ukraine.
And I'm grateful to all leaders in Needo countries who are very practical and I'm presented its support.
A change of tone, how saying he feels after the war is over, Ukraine will secure membership. Now, this is the way President Biden sees it.
And one thing is ze Lensky understands now is that whether or not he's in and they doo now, he's not relevant as long as he has the commitment that remember my talking about saying retreated like guarantee security along with a number of other NATO countries of the day, how we deal with for example, is long tournament. So he's not concerned about.
That man now, NATO General Secretary Jan Stoltenberg.
Ukraine is not closer to NATO than ever before.
Allies reaffirmed that Ukraine will become a member of the Alliance.
Yes, saying Ukraine will get memberships so that Russian history does not repeat itself. Overall, Today, airlines remains a bulwark of global security instability, as has been for more than seven decades. NATO is stronger, more energized, and yes, more united than ever in its history. Meanwhile, the White House has issued a statement condemning North Korea's test of a long range ballistic missile, calling it a brazen violation of
multiple US Security Council a UN Security Council resolutions. Meanwhile, North Korea calls a test a warning of shocking consequences for spy planes flying near North Korea airspace. The ice
dBm are the most powerful in its arsenal. FBI director Christopher Ray has told the congressional hearing today that it will comply with a federal judges order banning it from communicating with social media companies about misinformation, although Ray says it may impact effectiveness of catching foreign adversaries.
The thousands of active investigations we now have into the Chinese government's efforts to steal our most precious secrets, rob our businesses of their ideas and innovation, and repress freedom of speech right here in the United States.
And the US as hackers have breached a series of email accounts linked to government agencies in the US and Western Europe. The government Microsoft described the attackers as being based in China. 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. This is Bloomberg.
Let's take a look now at what's going on these days in market action with our guest Ben Emmons. He joins us in the Bloomberg Interactive Broker studio in New York. Ben is senior portfolio manager at New Edge Wealth. Thanks for being with us. Let's begin by looking at the inflation story here in the US. People were really celebrating this reading on the CPI, both on the headline and the core rate coming in a little bit below estimates.
Do you think it's enough to say that the Fed is has succeeded, that it's won the fight, and okay, we get another twenty five basis points this month, but we're kind of going to be on pause indefinitely.
I don't think it definitely dug, but it is definitely moving in the right direction.
And then so if you look at that month to month change in.
The core services X housing number, that's particularly what you want to look at because that's what the FED is most worried about. That month of month was about point two five percent, I believe, a lot lower than what people had thought. And it's coming off about point five early in this year. So it's in a nice to
send down. And I think if we continue to see lower prints though in that particular item, which is really where the heat of the economy currenty is right, it's all in services and other related sort of ancillary services. Then we'll read and tracked to see the inflation getting from core infation back from four and change to readly towards the fat's target. So it's good progress. The FAED is basically being vindicated of what they did was the
right thing. And I think the bomb market is given and fed a lot of credibility today by saying yes, rags can now can go down in the future.
That's why I saw the movie yields.
On the other hand, they're not exactly done, and you know, both Barking and Cascarry were quite clear about it. I called it like they want to manage the expectations to the finish line. They want to make sure that these expectations are not going to suddenly become and get a bit higher, right, And that's been the seventies problem, and when they ease too quickly and inflation expectations started to break up again.
So you know, there are more hawkish investors and also even economists like our own analog who think that inflation will tick back up on a technical base. Is because of the big numbers that we saw a year ago. Those will drop out and then you'll have on a comparison basis a tick up and in any case, like you said it, maybe that the FED wants to go it wants to air on the side of too far. So it's not really the all clear just yet, is that right?
No, that's right, Brian.
I think that this tick up and inflation, that's it is technical, but it's certainly something about perception of inflation and right how people look at inflation and if it continues to be something that's elevated and higher, you know, that's the that's worry.
Like, if you don't lean more against that, then.
People have expectations that are basically and this is this conference board number coming out in the next week and a half is a really good sign of that that that one year expectation is at over six percent. But people still expecting really high inflation from here. You know, as long as you don't manage that down further, you will end up again in the future potential but again higher inflation. So this is the Fat's not a conundrum. It's not a dilemma. It's it's more like, this is
the risk that they're running. Therefore they stay the course on this and this message of we need to bring inflation really down to two percent, we can't be satisfied at three percent.
So with the meeting at the end of the month, is there a risk for Powell, for the FED chairman that he sounds a little too dubbish he wants to kind of adopt a more kind of a hawkish stance just to keep the market on the back foot.
Yeah.
Probably, I think he will probably give that hockeyish tone. I would think in a way he did recently too in that testimony front of Congress, right and in the following on the minutes, there's that similar tone in there. So I think that he's wary of that. You know, within the fet there's a group of people that are really hawkish. You could tell that from the top loot. There are people saying, no, we have to get the six percent rate, that's much more of a better rate
to get inflation down. But he's more in the camp of saying, we cannot really be of those who are below where the median is because you know that that would not be sufficient. Right, So keep that hockey still for sure.
And in terms of the markets, because most of our discussion has really been what the economy is doing with the levels of inflation. But what about in terms of the markets. I mentioned that, you know, we have to see whether or not people have already you know, drank from the till a bit too much. Markets have rallied pretty sharply in the first half of the year.
Yeah, that's right, Brian.
There is a lot of anticipation, right, essentially build upon what we saw today. You know, we got the confirmation that we're we're in the live path down on inflation for now, right, and and so yes, you could say that at some point there's a fair bit of that overpriced, right, it's just too far maybe pricing, and that's where the correction will be. I say, take note of what's happening
with the dollar and the movement in the end. I find that in the striking, you know, the Bank of Japan will be at some point making a decision too. Is that some of that anticipation everybody said like, once the end gets really stronger, that will be the next central bank that could start affecting markets, And that's I think to be worse.
Yeah, we've had a couple of big days. I mean, in terms of yen strength versus the dollar, we're sub one thirty nine right now, and I'm wondering would you be betting on some type of modification to the messaging from the BOJ when they meet next just preparing the markets for change and yield curve control.
Possibly because it's been going on now for some time. The bottom line messages like we keep easying because of you know, we still haven't reached our core rate for two percent was what he said at in CenTra Ueita. But within those minutes and those those policy discussions have been coming out, there's been you know a little hints here and there that they're willing to make it a step in that policy and basically relax that why that yukere of control actually you waded to an extent that
is too in CenTra. So I think they're getting much closer to that decision, and that is a big deal to markets, I think, because that is in a way the last central bank that really is following the s and because the end has been so we and people borrowing yen, so it's actually being a sort of a vehicle for risk taking. You know that that unminded that yen carry idea, that's that's going to affect mark us negatively.
So I carefully watching.
That strengthen the end though, really over the past ten days really feels like more dollar dollar weakness than yen strength. I don't think the signals really have been that strong out of the Boja, but if because also if you look at the yuan, the Chinese REMMB, the CNH now seven sixteen. A week ago, we were worried about hitting seven thirty. So that that's but that does big A little bit of discussion here quickly on China. We've had a number of developments lately about non monetary and fiscal
ways of stimulating the economy. Do you like what you see?
Well, Brian, there's a lot of liquid he bumped into the system now, right, the new loans that came out the other night.
I mean that's more than.
Triples BBOC contas the exact liquidity you know, very quickly, right, So it's a sort of a few there for yeah, for biggest stimulus or at least a push. I think these PMI data are coming out later in July. You know, you could see some effects from that. The cacshin surfaces PMI data was a little stronger than expected. That so there's already I think some of that stimulus that they did earlier in June is impacting data, and the Chinese are very technical and very effective in it.
This is Bloomberg Daybreak Asia. Your morning brief on this story is making news from Hong Kong to Singapore and Wall Street.
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