Powell Says Fed Should do More, Adani Crisis Continues

workers as the service adapts to slower growth. The US has China, refuses a call to discuss the balloon bounding Biden to address China and the US economy and state of the Union. Turkeeper claims emergency powers and the wake of the twin quakes. I'm at Baxter with Global News. The liv Golf series reveals some stunning financial news. Dan Schwartz been I'll have that story more coming up in

Bloomberg Sports. That's all Straight Ahead on Bloomberg Daybreak Asia on Bloomberg eleven and three on New York, Bloomberg Washington, d C, Bloomberg one O six one, Boston, Bloomberg nine sixties, sent frances Go Syrius Exam one nineteen and around the world on Bloomberg Radio dot Com and via the Bloomberg Business app. Good morning, I'm Doug Prisoner and I'm Brian Curtiz. Here are the stories we're following today. The market seemingly a little bit out of step with exactly what j

Pali said. He said that additional rate hikes will be needed to bring down inflation, and he said the Fed's key rate, the terminal rate, may need to peak above a level previously expected. Here's Pal speaking with David Rubinstein at the Economic Club of Washington. The labor market report for January, it kind of shows you why we think that this will be a process that takes a significant

period of time. The labor markets extraordinarily strong. If we continue to get, for example, strong labor market reports or higher higher inflation reports, it may well be the case that we have to do more in race Hight likes more than this price. Then. Pal also said that we are seeing the early stages of disinflation. However, he acknowledged he's probably going to be a bumpy ride ahead. Pal said he will likely take until next year for the

FED to reach its two percent inflation target. And before the Powell interview, the head of the Minneapolis Fed, Neil Cash, Cary was saying policymakers need to keep hiking rates. Here's cash Cary speaking on CNBC two. Were surprised by the big jobs number. It tells me that so far we're not seeing much of an imprint of our tightening to date on the labor market. There's some evidence that it's having some effect, but it's pretty muted so far. So I haven't seen anything yet to lower my rate path.

Right now, I'm still at around five point four percent. If I had to pick a number today, I'll do where I was in December, alright, five point four and cash Cary went on to say no one should overreact to any singular report. He also said the underlying strength of the services sector he is still very robust. We were talking about the I s M Services Index coming in way above estimates US Friday. Cash Cary thinks that's

where many FED officials are now focusing their attention. Brian to Corporate News, a company that benefited from pandemic air lockdowns is now slashing jobs. That story from Bloombridge Tom Busby.

With so many more workers back at the office, there's not as much demand for video conferencing calls and now Zoom Video Communication says it's cutting thirteen hundred jobs that's about fift of its workforce because of slowing growth, and CEO Eric Yuan, who said in a blog post that he's accountable for the company's recent struggles, says they'll take a pay cut and forego his annual bonus. Shares of Zoom rose nearly ten percent in trading on Tuesday. Tom

Busby Bloomberg Daybreak Asia. We are told at Meta Platforms is asking many of its managers and directors to transition to jobs as individual contributors or leave the company. We have more from Bloomberg's Charlie Pellett. Those sources say the process is known internally as a flattening. Higher level managers are sharing the directive with their subordinates incoming weeks, separate

from the company's regular performance reviews that are currently underway. Meata, which owns Facebook and Instagram, fired thirtent of its workforce in November during its first major layoff, and sources say in the months since, staff of faced intense anxiety about the potential for future cuts. In New York, Charlie Pellett Bloomberg Daybreak Asia, Soft Bank posted a net loss of seven eighty three point four billion yen or five point

nine billion dollars for the December quarter. Analysts had been projecting profit of more than two hundred five billion yen more from Bloomberg's David and Glaze. The key factor was the Vision Fund. It has reported losses for four straight quarters. The fund lost six hundred sixty billion yen on declining valuations for companies in its investment portfolio. Now, to make matters worse, the founder Masayoshi saw On skipped the earnings call for the first time one record first off bank.

One of the keys to reigniting investment activity lies in a successful I p O for ARM, that's the chip design firm Sawn acquired back in. Saan says he wants to focus on that task and that's why he'd skipped the call. Analysts are skeptical. Saan says he still thinks ARM can become the largest I p O by a chip company ever. In Hong Kong. I'm David and Glass bloom brig Day Brick Asia coming up in a few moments.

We will be chatting with Kin Pung, who is investment strategies that city Private Bank Asia Pacific with us right here in our studios in Hong Kong, Doug. I like that data point you brought out about the earnings that would seem to be a little bit positive for the bulls. Here's another interesting read that if you look at inflation year on year, it really doesn't tell you all that much because you know who cares really what was happening

last year. The rolling three month core CPI is ump about three at an annualized rate, and that's almost a two. And remember what cash Cary had to say the lag effect here on the FED rate hikes that are already in the pipeline. A lot of this has not really impacted the labor market yet. Information tech, I know we've talked about it. It's been very hard hit. I think that the total number of job cuts in the information tech space since the beginning of the year right now

is probably just under around seventy thousand. There will be more job losses, guarantee it. And we just cannot know, um what the future holds in terms of the data. And it was interesting to hear Pal talking about how he's basically responding to the data and we all should be doing that and not not placed too much hope in what we expect the future holds all right, it

is time now for global news. The Pentagon says China has cut off communication regarding the balloon downing by US forces at Baxter has global news in the nine sixty News from San Francisco, and yeah, that's exactly right, Brian. The Pentagon saying that try has rebuffed all efforts by Defense Secretary Lloyd Austin, especially when he tried to set

up a call with Defence Minister Wave Fun. The Pentagon says the call was made right after the shootdown, but in a statement now, it says the PCR has declined any requests. The US says it wants to maintain open lines of communication in his State of the Union addressed, and I President Joe Biden will of course have to address foreign relations, the war in Ukraine, which coincidentally broke out right before last year's speech, and then the international

balloon incident with China. Republican Congressman Steve Sleey says that Republicans are watching with a very critical eye, saying the Bid administration acted much too late on the balloon. It was still flying on its path, so it was getting some kind of data from somewhere to nowhere to go? Are you telling me it wasn't also sending information back during that path? Should have never been allowed to complete its mission. It's never been allowed to start its mission.

The Biden administration's past responses that it couldn't be shot down over land. We'll watched for tonight. He's also expected to to call for a minimum tax on billionaires and to quadruple the levy on stock buybacks. He's intending to walk the line addressing public concerns in the US and trying to install a feeling of optimism about the future. Congresswoman Deborah Ross, Democrat from North Carolina, on Bloomberg's Balance of Power Today, says the address will show the president

is a dynamic fighter. We were in the middle of a global pandemic. We had an insurrection at the Capitol. I mean, when has that happened? Both of those things at the same time. But despite that, the Biden administration really fought back to get people back to work, back to school. She says, accomplishments and plans for the future. A Bloomberg coverage begins at eight thirty Wall Street Time on all Bloomberg platforms. We will have it for you,

of course. On Daybreak Asia sounds of frantic searchers looking for possible survivors in the quake in Turkey. The latest death toll count now is over six thousand, with more than eleven thousand buildings damaged, with people still trapped in

freezing temperatures. Thirteen point four million people live in the areas affected by the quakes, and Turkey has declared a three month state of emergency rules and although not disclosing any specific threat for the super Bowl, Homeland Security Secretary Alejandro Majorca says they prepare for and an imaginable scenario. We have our personnel from our countering weapons of mass

destruction office, chemical and biological threats have depleted. The individuals have deployed uh their equipment to make sure that the air is save in secure. He says, no specific credible threat against the super Bowl, but they need to be prepared in every way. Global News powered by more than journalists and analysts and over one d twenty countries in

San Francisco, I'm d Baxter and this is Bloomberg. This is Bloomberg Break Asia and Brian Curtis along with Rashad Salama and our guest is Kinpung, investment strategist at City Private Bank Asia Pacific. So can for the markets, the FED was your adversary last year. This year, it's not except that premise or rejected. I think that's acceptable. Um. We've seen Chairman Powell UM do some flip flops over the years. Right. Remember you know quantitative tightening was on autopilot.

Remember inflation was transitory, and so so this is UM an opportunity for him to do so again. And I think by March the level of CPI will be below that of the fit funds, right, and that I think opens up a little window. UM. As we go through the second quarter, the level of his CPI will become significantly below that of the fit funds rate. So I think now that doesn't necessarily encourage him to cut rates, but I think it definitely opens up the room to

pause again. Absolutely, And you know, you look at that job's reports to really throw the spanner in the works and just showing the ser strength of the US econing, which he acknowledged in that interview that he conducted that Tuesday. And the point being if we do get let's say we went fifty basis points next in March. We're not gonna feel that for a year because the transmission mechanisms and have got such a lag between the tight monetary policy and what we're seeing. That's right, Well, if he

will fifty, I think we'll feel feel pretty immediately. Um But but I think I think, yeah, you're right that the type the amount of tiding that was done last year, it's not fully reflected in um in markets, in the econ economic data just yet. And also with regards to that payrolls reports, I think what the pandemic has done is to make a lot of these seasonal adjustments obsolete, right.

Um So, so in the last month in January there was actually one have million job losses, but seasonal just been added three million, and so you know we're probably going to see some payback of that in February when season adjustment will subtract a million, and this is probably gonna be fewer unadjusted job gains. So in any case, I feel the five seventeen thousand was was was kind of absurdly strong and we shouldn't be taking that at its um you know, phase value. So you're actually pretty bullish,

you like the China recovery. You like a bear market in the dollar to continue or to push forward, and you like investment grade bonds. Um, let me put a data point out there that Doug mentioned, which is kind of interesting that more than half of the companies in the SMP five reported and earnings have dropped. They've dropped two point eight percent though from a year earlier, and that's less than the three point three percent that was

expected before the earning season began. It's by no means great because earnings are coming down, but uh and they're coming down at a time when rates are still going up. But it's not the big story that we thought it would be. Right. Um, So rewind to last October, the consensus for fourth quarter earnings was plus four something like that. So so basically the consensus number came down by seven

percentage points before this earning season started. And so you know, basically, you know, before each earning season there's a few months of downward adjustments to earning the expectations so that the companies can actually beat by a little bit. The margin of beats is the smallest for since the pandemics in the initial pandemic, and uh far smaller than the average one average beats that we've seen over the past ten

years or so. So so basically you know that there's it's it's losing some someone, but the bears have hung their hat on. You know, this is gonna be one of the biggest drops in earning. You listen to Mike Wilson and Morgan sound the biggest drop in earnings we've ever seen and that sort of thing. That's not actually what's happening. No, I wouldn't think it's gonna be the biggest. Uh. We're looking like sometime percent drop um, probably not carried over the full year um. But you know that's not

being factored into consensus expectations yet, right. Consensus expectations basically looking for the media recovery in the first quarter, and I think that's two optimistic still. It's about forward guidance, and that has been really patchy in terms of positivity. Okay, okay, let's talk a little bit about some some of the moves out here in Asia. Interestingly, last week we had

to sell off in in some Chinese stocks. We had the NaSTA Golden Dragon Index and also the Tech index here in Hong Kong and basically MSCI China moving down a little bit, so they were taking profits I suppose, or were they expressing some fear about the reopening Ken No, I think it's it's profit taking. I mean, you know, prior to that little correction, we're almost six up, you know when you're looking at MSCI China from the end of October and so so that's that's quite quite a

lot to uh to take in. Um. I think the recovery has just begun, right, we're seeing you know, for example, after the Chinese New Year, the mobility indicators like road traffic and subway ridership are back to basically pre pandemic levels um and so so, so that momentum is still going. And another thing that is very important is that last year Chinese households accumulated some fifteen trillion woman buh. That's like that's two and a half trillion US dollars worth

of new deposits. Right. Some of that money was supposed to go to property, but then people are afraid of incomplete projects. Some of that money came out of stocks and bonds, and a lot of that money was meant to be spent, but I couldn't, so all three of those things what happened this year? Right though there will be more spending, you've already seen some of that, um, and I think more influence to equity markets, and so we have not seen that yet. Again, Okay, they do

have all that money. The thing is Chinese uh consumes our savers as well. Let's them forget that, the big time savers. Sure, but you know the thing is you mentioned households that you know, we've got a house. Perhaps there's been a fundamental shift in household confidence in residential real estate. I mean there's a declining population and then we've got a real estate infantry with a hundred twenty two million square meters available in the ten largest cities.

I mean, these things are good to be played out in people's minds. They are aware of this and it has a wealth effect. Yes, certainly so, um, those who all have have had that a little bit hidden on the on the price. It wasn't dramatic because there were simply that that many transactions last year. UM. But now these how to digest these inventories are basically convincing buyers that they will be completed. I think that would be a first good step. UM. Now, that's uh, developer financing

is back. I don't think that the incomplete projects is going to be as big a problem this year. And to be honest, you know, we thought that the real estate sector was perhaps over capacity, you know, before the pandemic hit um and and now that capacity has shrunk by perhaps right. So so there there's a little bit recovered to be done just to get back to something that that that would have been considered normal. We talk a lot about geopolitical tensions between the US and China.

I was looking over the trade numbers for last year two record. Okay, it was pretty pretty astonishing, up close to seven billion dollars in total trade between the two countries. That's not adjusted for inflation, but but that's still a pretty big number at a time when relations are not all that good. Is that a good sign or does it mean that we moved down from here? It just

means that divorces are very always difficult. Sorry, and then it's just it's it's kind of hard to figure out exactly which ties to keep, which ones do to sever, um and so so I think this is a testament that's um, well, you saw a little bit of increasing in US exports of China and quite a bit of increasing Chinese Chinese exports to the US. So basically that the the exports that China would have absorbed are not allowed to happen. And so so I think this is um,

it's not really inconsistent with about geo political situation. UM, but I do think that um, it's a good thing. That's this divorce, this decoupling is uh is more difficult to achieve. Ken, what's your biggest concern that you get from clients and tell me how do you then responded and what is the strategy? Very very briefly, sure, So the concern with regards to the U S is that is, are we really getting into a recession? What if rates have to go much higher? Um? Well, I think I

think that's that's a big, an important question. But I think we aside from payrolls, just about every other indicator is pointing that's the U S economy is weakening and the later um, this recession hits, uh, it'll probably be deeper. Right. So so so I think I think the um, uh, you know, I think that's that's the that's that's the first message we have is basically the FED needs to pause and UM, and that will be positive for the for the boom market. Final question in thirty seconds or so,

we didn't get to investment grade bonds. You like them where and in what industry? Sure? I think this is basically we we like the in the investment grade space UM above above the triple beast right because in a in a potential recession, we're likely to see more downgrades UM and the potential for UM for short term right three year and under yields to fall is significant, and

so we like that segment of the curve. This is Bloomberg Daybreak Asia, your morning brief on this story is 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 podcast. You can also listen live each day on Bloomberg eleven three oh in New York, Bloomberg ninety nine one in Washington, Bloomberg one oh six one in Boston, in Bloomberg nine sixty in

San Francisco. Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty plus Listen Coast to coast on the Bloomberg Business app, Sirius XM Channel one nineteen, the I Heart Radio app, and on Bloomberg dot Com. I'm Brian Curtis and I'm Doug Prisoner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak Asia