OPEC+ Slows Production and UBS Job Cuts

detained citizen from Beijing. Trump to be arraigned on Tuesday. Explosion in Saint Petersburg kills Russian pro war blogger. I'm at Baxter with Global News. That's all straight ahead on Bloomberg Daybreak Asia, the business news you need to start your day in just one fifteen minute podcast available on Apples, Spotify, the Bloomberg Business app and everywhere you get your podcasts.

Good morning, I'm Richard Salaman and I'm Dak Krisner. Here are the stories we're following today, and we're looking at OPEC Plus because it announced the surprise oil production cut of more than a million barrels a day. It abandoned previous assurances that it would hold supply steady. Dumb Closer, an analyst at Oil Price Information Service, as the move

is not a good one for the consumer. This is probably worth another three, four or five dollars barrel and the price succrued, and that means higher prices for gasoline, diesel, jet fuel, you name it. The resulting price hikes could cause more inflation, which may force center banks to keep interest rates higher for longer. Might house calls OPEC plus is a move ill advised under current market conditions. Today, Saudi Arabia leather Cartel by pledging its own five hundred

thousand barrel a day supply reduction. Philommers including Kuwait, the United Air Memorates and Algeria follows it, while Russia said the production cut was it was implementing from March to June would continue until the end of the year. UBS is reportedly reducing its workforce by between twenty and thirty percent. Now. These job cuts come after UBS completed its takeover of Credit Suis. We have more from Bloomberg's Joe n Wang.

The Swiss newspaper Sontaks item reported as many as eleven thousand UBS employees will be laid off in Switzerland and another twenty five thousand will be let go worldwide. Both UBS and Credit Suis together employed almost one hundred and twenty five thousand people at the end of last year. Now we hear some firms are gearing up to recruit some of the investment bankers and wealth managers likely to

be let go. They include Joische Bank, Citigroup and JP Morgan. Separately, The Financial Times reported Saturday that UBS has a shortlist of four management consultants to advise on integrating Credit Suis. The newspaper reported UBS is soon to decide between Bain and Company, the Boston Consulting Group, McKinsey and Oliver Wyman

in Hong Kong, Joan Wang, Bloomberg Day Bricasia Well. In another development, switch Land's Office of the Attorney General is saying it has opened an investigation into UBS's takeover of Credit Suite and the department is working to identify possible crimes. Rashard, All right, well, let's have a look at Tesla now, as it delivered a record four hundred and twenty two thousand, eight hundred and seventy five cars worldwide in the first quarter, and that compares with the bad what four twenty one

thousand that anlets have been expecting. Although deliveries were roughly in line, Tesla would have to pick up the pace of deliveries for the rest of the year. That's according to Gene Munster Deepwater Asset Management, saying that Tesla deliveries group thirty six percent from a year ago. But months have pointed out that CEO Elon Muska's call for fifty percent delivery growth during the company's last earnings call. Tesla even slash prices early in the year to to boost demand.

After fourth quarter deliveries are disappointed, Elon Musk and Tesla aiming to make between one point eight to two million vehicles this year. Well, the inflation data released in the US last Friday was below estimates. The core rate of the Personal Consumption Expenditures Price Index or PC rose a mere three tenths of one percent last month. Now, as you know, this is the Fed's preferred measure of inflation. This seems to suggest an end of an aggressive rate

hike cycle, maybe near an end. However, the head of the Boston Fed as Susan Collins says it's simply too early to assess whether FED policy where it will go next. My assessment at the last meeting just last week with the summary of economic projections did suggest an additional rate hike and then pausing and holding over the year. But I need to assess all of the data that's going to come in between now and when our next meeting

is in early May. The new data that I've seen just in the past week has not materially changed how I'm thinking about things. Boston FED President Susan Collins. There, she went on to say the American economy will likely see some credit tightening as the result of the recent turmoil seen in the banking system, and she said the path to easing inflation would not necessarily trigger an economic downturn.

Rashot Yeah. And meantime, former Treasury Secretary Larry Summers said it's too early to give any kind of all clear sign on recent financial troubles in the US. Summers said that there's well under a fifty percent chance of a repeat of the bank runs that brought down Silicon Valley Bank and Signature Bank earlier in March, but he did say that there could still be some kind of other

accident that causes a constriction in credit. When you have a series of earthquake tremors, it's a fairly long time before you should be in a position to be confident that you've seen the last of them. And that's why the Fed's got such a difficult job. Summer said, it's plausible the recent banking woes subside without a big impact on credit, leaving in place serious inflation issues. In such a scenario, he thinks the fair will have to tighten

much more than what is already priced into mukets. So I think it goes without saying that our top story today is this unexpected cut in production of crude oil from OPEC plus, and I think it's fair to say it's coming at a very inopportune time, just as some of this disinflationary force seems to be taking hold. And this is undoubtedly going to complicate what the FEED has been trying to achieve. The impact of a cut by one point one million barrels will likely lead to higher

inflation expectations in the month ahead. So even if credit conditions tighten in the second half as a result of a lot of the stress that we have been seeing in the banking system, the notion of rate cuts that may be a little more difficult to conceive. We're going to take a closer look at that dynamic with our guest Peter Cheer of Academy Securities. Coming up, and before we go to Global news from Dow Jones, McDonald's will

reportedly close its US offices temporarily this week. The fast food chain is preparing to inform corporate employees about layoffs as part of a broader restructuring. News is next. China is urging Japan to refrain from joining the US in restricting the export and access to chip making equipment at Baxter. With more from the Bloomberg Newserman San Francisco Eddie. Yeah,

that's right do. Beijing is saying the US is trying to suppress the Chinese semiconductor industry, and the suggestion comes with a veiled threat because it comes at the same time Japan is asking for the swift return of a Japanese citizen being detained in China. Beijing says a chip blockade will only strengthen its resolve and chief self reliance. China says a US in the past is suppress Japan

and now is suppressing China. Meanwhile, the US is called in the G seven nations to take joint countermeasures if China engages an economic coercion. Donald Trump, the first former or sitting president to be criminally indicted, is set to be processed, photoed, fingerprinted, and arrange and on Tuesday, US. His attorney, Joe Tacopino says that Trump will plead not guilty.

He's gearing up for a battle. You know, this is something that obviously we believe it is a political persecution, and I think people on both sides of the I'll believe that that's a complete abuse of power. Tacopin on ABC has heard here on Bloomberg, says they're thinking about a motion to move the trial to Staten Island, but needs to actually see the charges first. And we're ready for this fight, and I look forward to moving this thing along as quickly as possible to exonerate him. He says.

If this case wasn't Donald Trump, it would never have gone this far. Now, if there is a trial, the key witness will be Trump fixer Michael Cohen on CBS has heard here on Bloomberg. Cohen says well, his testimony will not be about him. This is solely about accountability. I should not be held accountable for Donald Trump's dirty deeds. Let him be held accountable. Let those in his orbit that are truly accountable, like Bill Barr Right, who he

used to weaponize the Justice Department against his critics. He says he's ready to be a powerful witness. Meanwhile, Donald Trump last week on Fox News said that the final analysis, Vladimir Putin will win in Ukraine, but ultimately he's going to take over all of Ukraine. So should a former president be making those kinds of statements. Well, on CNN today, the chair of the Foreign Intelligence Committee, Mike Turner said that is not a foregone conclusion at all, and people

should stop making those kinds of statements. He says Putin didn't expect the kind of help in Ukraine that Ukraine is getting from NATO. Putin has said, this is not about Ukraine, this is about Eastern Europe, this is about NATO, this is about our allies. And President She of China and Putin together said this is a result of they're trying to turn back one hundred years. This is authoritarianism versus democracy. We all need to be on the side

of democracy turners. In southern Poland today, an explosion to cafe in Saint Petersburg, Russia, has killed Ladin Tatarowski, the military blogger who has supported the war in Ukraine. The explosion also injured twenty five people. The device was the size of a bar of soap, was hidden in a statuette presented to him. That's a task report Global News powered by more than twenty seven hundred journalist and a list in over one hundred twenty countries. In San Francisco,

I'm Ed Baxter, and this is Bloomberg. Let's get to our guest to Peter Cheer is with us. He is head of macro strategy at Academy Securities. On the line from here in New York City, Peter, it's always a pleasure. Thanks so much. Just when the market seemed to be taking a little bit of comfort in this reading on the PCE that was below forecast, we have an oil shock now with OPEC plus cutting production unexpectedly by more

than a million barrels a day. What does this do to the idea that inflation is going to come down anytime soon. I think it throws a little bit of a rent into that plan. So just this past week I highlighted how much freight shipments were down in the US. The imports into ports were way down. So it's actually not surprising if OPEC is responding because they're probably seeing demand for oil's shrink as the economy is slowing. So to me, that's a bit of confirmation the economy is slowing.

That's why OPEC is responding that way. And the flip side of this, it's probably a good reminder of the geopolitical influences that are around right now, where countries in the the least are less dependent on the US than they once were and may be I don't want to say lashing out, but expressing their frustration at policies towards the Middle East at US. The thing is how much of an impact will this have on inflation? And that's going to be key here is that we look at

the federal result. I think it's not going to have as much as people thinks. Obviously, the price of oil is going to go higher. I think it's trading five or six dollars a barrel more and that's going to put some pressure on the system. But as a whole. I think it's in response to the slowing that they're seeing that showing up in the data, that freight's turning down,

that things like the Baltic Drive and turning down. So I think it's going to create a little bit of inflation fear earlier in the week, But to me, it's really going to resonate with the recession is coming crowd and people are going to be able to talk about ALPEC doing this because they're seeing so much less demand because the economy is slowing much more than the official

data is hinting at. But I'm wondering if we begin to see a move up in inflation expectations even before some of the data points began to roll over, and whether or not that complicates the Fed's job and the notion of rate cuts really are taken off the table

between now and the end of the year. I think the FED was already trying to get the rate cuts off the table, and they already have an incredibly tough job trying to figure out what they've already done had they pushed too far, what triggered the crisis with Silicon Valley Bank. So they were already in a rock and hard place. This is just going to add to that pressure right now. With that in mind, I mean, let's

not forget that. You know, as we see what happened with the banks and the liquidity issues, when does this also affect credit? And I mean that we got these banks who are lightly to be putting up the drool bridge is going to be having much stricter criteria for making loans and the light that that could, of course act as I think they fed themselves suggested between twenty five and fifty basis points as tightening, but it could

be much more surely, So I think it's happening. The good news, I guess in some ways is that it started happening over a year ago. So when I talked to large banks, large institutional lenders, they were already tightening credit standards. So this has been in the past, so

it's going to hurt a little bit more. I think what's really difficult to tell is that it's probably going to hit small and midsized companies more than the big companies or anythink the big companies have been very good credits companies that have went to them have done well, so I don't think it's going to be dramatic, but it is going to be there. I think we're gonna have to watch local economies very closely because I think

this is going to be a very local phenomena. Peter, as you know, we saw enormous volatility in US treasuries for most of the month of March. In your view or things going to be calmer now as we get into the second order, I hope so, But the reality is I don't think they will be. I think we've traded our liquidity system for something that creates the perception of liquidity when you don't get big moves, so everything's super liquid looking. There's little bit off or costs because

all these algos are there. But if someone has some size to move, liquidity dissipates pretty quickly. And we're heading into the summer, so I think this might just be a brief respite from that higher volatility. April it's traditionally the best, if not one of the best months for equities. Are you killing your loins in optimism and an anticipation? I am actually not this time. I started being a

little bit cautious last week. Obviously was wrong. We had a nice three and a half percent equity rally in the US, and I'm actually getting more cautious. You know, I had to rethink about was I wrong, what did

I miss? And I think the markets got ahead of themselves last week, and I'm looking for a bit of a pullback and if anything, hopefully for my sake, these higher oil prices push us down a little bit on I'm curious to get your take on China right now, Peter, and how you're viewing what has been a pretty impressive reopening story. It may be waning just a little bit at the moment, but are you bullish on the China story?

I am not. I continue to see the one thing the US politicians are bipartisan on is their distrust of China, and I think that friction is real. I thought it was encouraging jack Ma was allegedly back on shore and being involved in some things. I just see this long term trend that China is less to do with the US, and so that's why I can't get too bullish over

China again. You know, you know sort of seen the regulatory I guess a storm Claus disappeared, But you know, when you've got something like the breakup of Ali Baba doesn't that in any way change that you're thinking, given that it perhaps may indicate that they are turning more market friendly once again, there's certainly it was an encouraging steps. So it made me from Diehardberrish to Okay, let's think

about what they're doing. But China does play a long game, and I can't really tell whether this is a significant concession that's going to be good for us in the long run, or this is just keeping the wheels turning right. I think China is very good every time the US pushes hard on it, coming up with some plan that lets the US back off and say, Okay, China's playing nice again, only to realize six months to a year

down the road they're not. And I think the earlier segment you were talking about China and Japan on chips, I think that's a much bigger issue. There's this overall almost chip battle going on, and that's going to override all the little things that we're seeing. So I just can't get that comfortable with China. Well, you mentioned Japan there, Peter, And as you know, at the end of the week, Harihiko Coroda will end what has been a ten year

run as the head of the Bank of Japan. A new governor, Kazuo Ueita, will take the reins, and there had been a lot of speculation as to whether or not we're going to see a Polish to shift on the part of the BOJ under this new governor. Is that something you're expecting. I would expect to see a little bit of a shift. They've been somewhat the one outlier, I think, as the ECB and FET have been so aggressive.

Japan has done a few things like these restrictions on their targeting of where the tenure has to trade, but they've still been relatively easy money. So it would not surprise me to see them fold into the world order a little bit more and come out a little bit hockey, which I think would be a surprise. Well as what's his legacy. Yeah, that's a hard one to say. I

think China, you know, sorry, Japan. The one thing they managed to go through this crisis is they did not have the inflation that the rest of the world had, and that's something I think we're all trying to figure out why why not. I do think Japan's actually gonna be a really interesting investing story as countries get more and more nervous about China and their sphere of influence. Japan, I think is a very good foil to that, and I'm expecting Japan to actually do very well of the

coming years. So, Peter, if you had to begin the second quarter on taking a long position in markets globally right now, is there a case or something that you see a scenario that is particularly attractive. I actually like Japan.

I think is interesting, and I've got to rethink. I was actually very bullish energy because I believe a lot of people were playing energy from the short side, thinking that that was going to be one way to express the economic slowdown, and OPEC plus's willingness to restrict that might make that trade even more interesting and could help energy companies across the globe. What would be your trade though,

what would be your favorite trade? I like some of the European energy companies that are very progressive in terms of moving towards sustainability, but have a very good core business. So I like that right now, and I would probably buy some long dated treasuries, and overall, I would short some of the more disruptive things that have moved up recently, very quickly Peter on the subject of geopolitics, how are

you evalue waiting that risk globally right now? So you know, at Academy we work for seventeen retire generals and admirals. We talked about this all the time. We've felt some recent summits. There has not been a time in the last five years that we have seen as much geopolitical risk out there, and very meaningful geopolitical risk that you could see China's selling weapons to Russia, which I think

would be dramatic for the markets. North Korea is saber rattling again, so I'm very nervous and I don't see a lot of good outcomes on the geopolitical front. So that's something I think the market is not pricing in right now. This is Bloomberg day Break Asia. You're a 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's Spotify and anywhere else

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