Solid Eco Numbers And ASML's Data Stolen

considers speech on balloon and China relations. Scotland's Nicola Sturgeon resigns big tech CEOs A pointed to testify before Congress over free speech. 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, and just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App, and everywhere you get your podcasts. Good morning, I'm Dud Prisoner and I'm Brian Curtis. Here are the stories we're

following today. US retail sales rising in January by the most in nearly two years. Commerce Department data show that the value of overall retail purchases increased three percent after one point one percent drop back in December. It shows that Americans are spending on goods and services even as borrowing costs rise and inflation remains elevated. We heard from Danta Telsey, the CEO of Telsey Advisory Group. She was reluctant to draw conclusions over one month's data. It was

very strong. You looked at apperil, you looked at furniture, they showed strength. Also in addition to a big uptick in restaurants. Keep in mind, I don't take January as seriously as I take March, April and May. January is about clearing out promotional and clearance goods. You're hearing about retailers having inventory levels that are up twenty and thirty percent in the third quarter and now they're down in the fourth order. The fact that you went from up

twenty and thirty and now you're negative. You moved product, some of it at markdown still worries amounting that strong consumer spending will keep prices elevated and force a hawkish response from the Fed. On Tuesday, several Fed official stress the need for further rate hikes, but expressed differing views about how close they were to stopping well. The Dutch chip equipment maker A s mL has accused a former Chinese based employee of stealing confidential information. We have that

story from bloombergs Van Man. It's the second incident of this kind linked to China in less than a year. The Dutch company says export controls may have been violated. It's unclear the moment, though, whether the former worker had any connections to authorities in China or elsewhere. It's also not clear if the data allegedly stolen could be used to develop lithography systems for chips. The news comes just as the Netherlands and Japan had agreed to restrict exports

of some equipment to China. These latest charges may lead to heightened geopolitical tensions in Hong Kong. I'm van ma'am Bloomberg, Daybreak Asia and as a footnote, a person familiar with the situation tells Bloomberg the alleged breach occurred in an area with sensitive details of systems that produce advanced semiconductors. Bryan Doug Tesla is going to halt production for some of its lines at the Shanghai factory until the end

of February. The ev maker is upgrading its facility so it can start rolling out a revamped version of the Model three Sedan. The revamp comes as Tesla faces increased competition from b y D and Neo in the Chinese market. Upgrades have occurred at facility lines in stages over the past couple of months. The section of the Shanghai factory currently being worked on is is making Model threes and Model y sport utility vehicles, as like expects deliveries of

the Model three Sedan to begin leader this year. White House officials have reached out to a key Democratic ally in the Senate to discuss filling the vacant role of FED Vice chair. That story from Bloomberg's Charlie Pellett. Senate Banking Chairman Shared Brown says he spoke with White House officials about the vacancy created by President Biden's decision to name Vice Chair Leo Brainer to be his top economic advisor. The Wall Street Journal reported that Chicago FED President Austin

Goulsby is under consideration for the post. The Ohio Democrat would not disclose if any names were circulated, but said he wants a nominee who can focus on the Fed's dual mandate of employment and wages. Naming the fifty three year old Ghoulsby to the board would mark an abrupt job change for him after he assumed his role leading

the Regional Fed Bank in Chicago last month. In New York, Charlie Pellett Bloomberg dabre Asia, Well, we got some strong earnings after the closing bell from Cisco, the maker of computer networking machines. Bloombergs Tom Busby has the story. Shares of Cisco rising upwards of eight percent in extended trading after the maker of computer networking gear top second quarter earnings at eight cents to share on revenues of thirteen point five billion dollars, up seven percent from a year ago.

It also raised its forecast for the current quarter, saying sales of tech infrastructure could jump as much as double a previous estimate thanks to a backlog of orders that built up during the pandemic. Tom Busby Bloomberg Daybreak Asia. Cisco is currently up about two point eight percent in

late trading. Well, Doug, I heard you allude to this earlier higher for longer about to be changed too much higher for longer, or maybe at the fed UH should investors start to plan for a possible fifty basis points at the Marcher Main meetings. That's one of the questions I'll put to our guests coming up in in a few moments here we'll be chatting with Marion Montange from

Gradient Investments. That may be a little too aggressive. Although to your point today, the Atlanta Fed that did ratchet up its first quarter GDP now forecast a growth rate. I don't know if you saw this, Brian, two point four two, that's up from two point one six. A lot of that has to do with this beat on January retail sales, and we're a little more than a

week away now from that January PCE deflator data. So when you start to consider retail sales, a lot of the other signs of robust consumption that we have seen higher growth expectations. I think you're onto something here, the so called no landing scenario. I think it's being fortified.

The impact on the market, though, is a bit unclear, because the obvious offset to the the higher borrowing costs would be the strong sales that we saw I mean that's good for companies and and it's also I think interesting in that it's newer news than the pace of rate hikes, and so investors may ride this a while

until they see sales weaken. I think you could be right about that as well, and that may be underpinning the gains that we had in the equity market today, right because we talked about yield spiking typically a negative for stocks, but that wasn't the case. Yeah, it's puzzling, isn't it. So you have to think that, well, maybe they just think that a strong economy is probably number one. Anyway, we will get into that with our guests coming up.

Time for global news. China is saying that U S balloons have traveled over sensitive areas over the mainland in the western part of the country, out over sin Jong. Let's get to Ed Baxter. He's got global news in the news when San Francisco in Yeah, right, jar Bryan, the Foreign Ministry says some of the ten balloons since last May passed over sin Jong and Tibet. Those are the areas where the government is accused by the US

and other nations of human rights violations. And China again warned it will retaliate against violations of its sovereignty, and the reports the US President Joe Biden is thinking about making a speech regarding balloon incidents and relations with China before heading to Poland later this week. Bloomberg's Mario Parker at the White House as the President is trying to scale a tone down a bit attention the balloons is the rhitorate some of the temperature around that is trying.

They're trying to dial it back again both sides, but

nevertheless we keep this in relative terms. The tensions between the US and sign of the world's second largest economy are really really high, right, Yeah, And Mario says not only does the President need to consider relations with China, but exactly what to say in a politically fractured Washington, d C. And United States And Susan Thornton Farmer, acting Assistant Secretary of State for East Asia and Pacific Affairs, says it is time for the lions of communication to reopen,

making these meetings between the US and China normalized. It's regular diplomacy. We talked to other big powers, other important powers. We have to talk to the Chinese, and we can't just cancel every time something comes up. Thornton on Bloomberg's balance of power, says a meeting at the Munich Security Conference between the foreign ministers of the two countries is a very good start. Scotland's first Minister, Nicola Sturgeon, has resigned. She says her decision or eight years as head of

the country's government may seem sudden, but really not. And it might seem sudden, but I have been wrestling with it, albeit with Ossole eting leavels of intensity, for some weeks and bloombergs Lizzie Burden in London says the first issue that will go wanting is independence. Nicolas Surgeon has been trying repeatedly to get a second referendum on Scottish independence and failing repeatedly. Most recently the UK Supreme Court tossed

out the should they ruled against unilateral independence vote. Yeah, and Lizzie says Sturgeon was planning on using an upcoming election to try to gain more traction, but now that's not going to happen. The CEOs of Alphabet, Amazon, Apple, Made and Microsoft have received congressional subpoenas to testify before the House Judiciary Committee this an escalation of the Republican

allegations that big tech suppresses free speech. The subpoenas have asked for documents from March three, the convicted shooter in the Buffalo Shop Being Center massacre has been sentenced to life in prison without possibility of parole a domestic act of terrorism motivated by hate in the first degree, an a one felony, and Judge Susan Egan says, too late for remorse. You will never see the light of day

as a freeman ever again. Defense attorneys had argued that he had learned hate from white supremacist websites and was regretful for his actions. Global News powered by more than journalists and analysts and over one twenty countries in San Francisco. I'm d Baxter and this is Bloomberg. This is Bloomberg Daybreak Asia. I'm Brian Curtis along with Rashad Salama. We're here in Hong Kong and our guest is Marianne Montagne,

portfolio manager at Gradient Investments. Marianne, you probably heard Doug and I'm musing over this much higher for longer possibilities for the FED. When when the data changes, we should change right, or do we need to factor in the lag effect and just be patient. Well, I think Brian,

we've got that combination. We are waiting for that lag effect, but it's so lagging that we have to expect that we're going to get a couple of more basis point hikes in the rate this spring, and recognize that while the feed is tightening, that also has the effect of raising rates by about twenty five basis points each each time each go round. So we really are in a higher interest rate for longer scenario as far as we're concerned. Yeah, you know the thing is you have a look at

what is happening in the US. Is this also, you know, despite interest rates going up, you would have thought people would be borrowing less, but we've got consumer credit card and lending it near record highs right now. Is this well just being fueled on debt. It is. But you have to recognize too that the labor force is getting hit by the Fed. They don't like the numbers. That big number that came out on February three UM is

highly unlikely to be sustained. But right now, job openings are about equal to the number of people searching for work and layoffs are happening in those higher paying jobs while we're seeing uh, you know, additional people brought into work at very low paying jobs. So when you have a scenario of, uh, your friend is getting laid off or your next door neighbors getting laid off in such I think that will put a pause on the consumers borrowing. Yeah,

they sent, they spent their savings. Now they've borrowed money, and so we could be getting towards the end of that that cycle. But you have to, you know, you have to take your hat off and give a hat tip to the strength here in the economy. And and that's a nice offset to higher interest rates, isn't it. And particularly if people don't need to borrow, they feel comfortable going out and spending. Well, I do believe it's rather temporary, and we can see that in retail sales

that were reported today. It looks like their strength there. Uh it was three percent versus expectations for one point seven percent increase. But you have to recognize that sales were down in the prior two months. In January is the month of clearances, so people were looking to get the deals. That seventeen point five percent increase in sales at department stores. That's telling me that people are just diving into real savings because they're nervous. Oh, what about

the market, and what are the implications here? That should of course in gender a bit of optimism. But you know it's always sometimes good news being bad news. And what does it mean for you stop picking and et cetera, and what you put into a portfolio. Well, here's a couple of things. On the equity side, we believe in buffers. Buffers are akin to keeping your seatbelt fastened when the

airplane is in motion. So Innovators and First Trust both offer a variety of etf that provide a buffer to the downside, call it per cent or so, while providing some upside to a cap over the next twelve to eighteen months. And I would look for something maybe in the twenties for a cap on my buffer um. But that's one recommendation on the equity side. On the UH fixed income side, we're keeping duration below the six year

level that's in the EGG index. We're overweighting investment grade and high yield um given those very current high rates of yield um. But again we're keeping our duration short. YEA high Yield today down about two tensive one percent. Well, if you look at h y G. I got to ask you about China. You know, we had a little uptick in the NASTAC Golden Dragon index, but you know the past two weeks has been brutal out here with about a ten sell off in the indexes in and

some key names. What are you thinking about China at this moment? Yeah, I just think there's a lot of strife going on right now, and you know politically and the UM manufacturers and other purchasers of items from China have to be very nervous. Uh. So you know, the way we would play this situation is to UM look at small cap stocks, so they're going to be US based small cap stocks. Uh. We like high quality balance sheets, strong cash flows. And here's an e t F where

you can find that. That's the ban X Small Cap Mote ETF kicker SMOT. This is Bloomberg Daybreak Asia, your morning brief on the 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 at your podcast. You can also listen live each day on Bloomberg eleven three oh in New York, Bloomberg in Washington, Bloomberg one oh six one in Boston,

and 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 thirties 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 Krisner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak Asia