Good morning.
I'm Brian Curtis and I'm Doug Krisner. Here are the stories we're following today.
Well, the US intelligence community and the White House are making an urgent plea for a concerted effort to fight China cyber crime. At Baxter has the story and more from San Francisco. Ed.
Yeah, that's exactly right, Brian. FBI Director Christopher Ray issuing a warning before our a House Select Committee on China today, saying national state cyber crime is the defining threat of our generation.
If you took every single one of the FBI cyber agents and intelligence analysts and focused them exclusively on the China threat, China's hackers would still outnumber FBI cyber personnel by at least fifty to one.
Now, Ray says more funding, more support, more understanding of how deep the threat is. He says it is going to not only harm government, but business and the economy. He says more people needed. Meanwhile, the Justice Department has charged four Chinese nation with smuggling American electronics to supply Iranian weapons production. The US is now saying it will carry out targeted attacks against Iranian proxies covering several days NSC spokesman John Kirby.
We believe that the attack in Jordan was planned, resource and facilitated by an umbrella group called the Islamic Resistance in Iraq, which contains multiple groups including Katab, HESBLA.
And Iran is hardening its position, saying it will hit back at any US strike. Bloomberg Middle East editor Patrick Syke says Tehran's talking tougher then.
We had Biden ever nights saying that they've made a decision on how to respond, and since then in Iran there's been a change of tone, promising a decisive response to any attacks on its territory, interests or citizens abroad.
Now the White House is intimating the next few days for its attacks. Heads of the country social media companies in front of a Senate Judiciary committee today metas CEO Mark Zuckerberg getting a well tongue lashing from Senator Marsha Blackburn.
It appears that you're trying to be the premier sex trafficking.
That's that's ridiculous.
No, it is not ridiculous.
You want to turn around and tell.
These people platforms a week, why don't you.
Take it down?
We are here discussing to work with us.
No, you're not, you are not.
Zuckerberg did offer an unscripted apology to the families of victims of sexual exploitation of the platform, saying I am sorry for everything you have gone through. Meanwhile, TikTok will pledge two billion dollars this year on protecting children and other viewers on its service. House speaker Mike Johnson has given its first floor speech on the crisis at the US border with Mexico. This comes as a first article of impeachment against DHS Secretary Alejandro Marcus has been drawn up.
He's handicapping law enforcement. He's limiting their ability to catch narcotics like Finnel.
He says, the House will move swiftly through the process. We'll have a tough time in the Senate getting a conviction.
Though.
President Biden continues to trail former President Donald Trump in each of seven swing states and the latest Bloomberg Moot News Morning Consult poll. The survey shows Biden is lagging Trump forty two to forty eight percent across those states in a head to head matchup, and also, very interestingly, it showed that if Trump is convicted of any of the crimes ninety one. What is it against him? Now? Half of the swing state more voters more fifty three
percent say they would not vote for him. Fifty five percent said they would not if he goes to prison. Global News twenty four hours a day and whenever you want it with Bloomberg News now in San Francisco. I'm Ed Baxter. This is Bloomberg all.
Right, Brian, thanks very much the time six and a half minutes past the hour, Brian Curtis and Doug Christner. We wanted to drill down a little bit more for you here on the Federal Reserve and what happened today and also get the market response. In a few moments we will be speaking with Jersey of Bloomberg. But let's see what they did. Fed policy makers. They once again held the benchmark US interest rates steady. Now the Fed has been on hold since June, and it signaled openness
to cutting rates, although just not right away. Powell himself, the chair, was reluctant to give a timeframe for a potential rate cut.
We want to see more good data. It's not that we're looking for better data, so we're looking at continuation of the good data that we've been seeing, and a good example is inflation. So we have six months of good inflation data. The question really is that's six months of good inflation data. Is it's sending us a true signal that we are in fact on a path, sustainable path down to two percent inflation.
That's the question that's fed share Jerome Powell. The decision to leave rates unchanged was unanimous and the FOMC will hold its next policy meeting March nineteenth and twentieth.
The other big story today in New York was the story surrounding New York Community Bank Corp. The stock was down over thirty seven percent today. NYCB reported a surprising loss for the fourth quarter. This is a regional lender. NYCB also reduced its dividend five cents. Here's the thing, the strait was looking for kind of a maintaining of the dividend at around seventeen cents, So that was also
a bit of a shock. Bloomberg Intelligence senior bank analyst term and Chan tells us this was kind of a surprise. Although NYCB is an outlier.
Pretty much across the board of their larger piers, everybody was actually pretty sangle. In about twenty twenty four credit quality. So this seems more of a New York community specific issue of needing to shore up their balance sheet and facing a blip on their credit quality that they need to know and still some more confidence in the market.
That is Bloomberg's Herman Chin. Now, last year, NYCB purchased deposits from the now defunct Signature Bank. That happened right after Signature collapsed. Now NYCB is stockpiling cash. And one of the things that was also surprising today we learned that provision for loan losses surged to five hundred and fifty two million. Needless to say, that came as a bit of a shock to both analysts and shareholders.
Right well, Qualcomm gave a revenue forecast for the current quarter that was in line with analyst estimates. The company is projecting between eight point nine and nine point seven billion dollars in sales for the fiscal second quarter. We get some reaction here from John Vinn, analyst at key Bunk Capital Markets.
You know, there's a little bit of consternation in the supply chain about Apple demand. You know, I think we've seen sell through get a little bit weaker in the China market. We've seen get a little bit weaker in the North American market, but we haven't seen major cuts out of the supply chain at Apple. More broadly speaking.
John Vinn Qualcom is looking to decrease its dependence on the phone market with ventures into automotive and PC chips, but Qualcomm's earnings are still heavily influenced by smartphone demand, particularly in China. Shares of Qualcom in late trading traded down about a quarter of one percent. Well, let's get to our guest now, and that is Bloomberg Intelligence Chief
interest rate strategist Ira Jersey. Ira. Sometimes the market reaction is more interesting than the event itself, and we saw a lot of selling today after Jerome Palace news conference. It's funny because yesterday we were reporting that there was only a one in four chance now that we would see a rate cut in March, and so him more or less taking it off the table doesn't seem like
it's such a huge surprise. Is this a a hedge in the marketplace against maybe the Fed just being too slow and that would that would hurt the economy.
Well, we have to be careful about the timing of when we saw a lot of the market moves today, particularly in the rates market. Certainly equities didn't like the idea that maybe the Fed Reserve was going to go a little bit slower than some equity investors had thought.
But in the bond market, when you look at what happened in ten year bonds and in particular two year notes, so that's the very front end of the curve, usually more sensitive to interest rates set by the Federal Reserve, those first started to rally, so prices went up and yields went down, and that really started after the employment costs index numbers came in a little bit better than anticipated.
And then it actually they actually did very little during the Fed They actually went up and down, up and down, up and down, but they basically finished the end of the press conference right around where they were at two o'clock when the statement came out. But then at the very end of the day you had months end rebalancing, and what you saw, I think then was stocks did
really well. This month's bonds kind of didn't do very much at all, and so you had people selling stocks to buy bonds, and you really saw that pretty massively. Right around the four o'clock close.
There's so much that I want to talk about, but one of the things that I want to throw into the pile here is the details on the quarterly refunding. Could that have had any impact, I could all in terms of the dynamic that you're describing across the curve.
I if anything, I think it would have went the other way. So that move was a little bit surprising. So it's hard to disentangle these because the quarterly refunding announcement, so the Treasury Department said it was going to issue at least a bit more of two year notes and five year notes than we thought they were going to issue.
So they're they're going to issue nine billion dollars more this quarter of both of both two year notes and five year notes, and they increased everything else because deficits are still running very hot. So you would have thought that with that announcement that the bond market would have sold off, so again, higher yields, lower prices. You didn't
see that. You saw just the opposite because that data, that announcement came out right at the same time as the ECI data, and I think the market really focused more on that employment cost index. You know that inflation data is much more important to the market right now than is the supply data.
The chair didn't really want to use the the phrase soft landing, but when he was asked about it, I mean, his picture of the economy is reasonably good. I mean, i'd say it's very sanguine. And he said more importantly that the Fed is not looking for growth to slow or for jobs to be lost. That's not what they're targeting. That's not what they want. They're simply looking at inflation
coming down and they're watching wages. And if you think about it, given the choice, isn't that what investors would want?
Yes, well, they want the soft landing, So I think, you know, j Powell was much more direct today than he has been as to the path of rates right saying that his base case is not that they're going to cut in March. That's pretty unusual for any FED chair to say, you know, and certainly Jay Powell hasn't
been as explicit as that in recent months. But at the same time, you know, they are concerned that as inflation comes down, they don't want to leave the target rate, the FED funds rate too high for two long because they're afraid that that might drive those other good things, right, the proper profits, the employment and everything else, might drive those down and cause of recession. So you know, it's
weird balancing act that they're trying to do. And he might have sounded a little bit confusing about that, because you know, they're trying to calibrate the market to the economy to their policy, and it's been difficult for them to do that, and that's often the case right around turn. So we think that they're going to start cutting in May, and then they might not cut every meeting after that, but they're going to, you know, cut at least a little bit.
One of the things that was not in the FED statement today that had been in the previous statement was the fact that the US banking system is sound and resilient, and maybe a little ironic that this occurred on a day when we're talking about the New York Community Bank Corp. And a real build up in lone loss provisions all the way up to five hundred and fifty two million dollars. A lot of this is tied to office space, commercial real estate. Is this a canary in the coal mine?
Should we be concerned about this as it applies to maybe a few other regional banks or is this an isolated case on the part of New York Community Bank Corp.
Do you think, well, I would defer to my colleagues who cover the banking sector. But my thought has been since last March when we had the banking hiccup with SVB and Signature, is that in a way, I feel like a lot of what's going on right now in the regional banks and the smaller banks is more similar to the savings and loan crisis that we had in the late eighties and early nineties, And so there will be issues that will crop up here, and they are
for any variety of reasons. You'll notice that when you have New York Community Bank or not a small bank, but at the same time not one of the globally systemic financial institutions, which have so much equity capital right now and they have to hold so much and not take nearly as much risk as they were allowed to prior to the global financial crisis in two thousand and
seven to two thousand and nine. They So I do think that these issues will in regional banks will prop up now and again, you know, and it might be a fact of life, and you know, so I can't say if this is it's certainly not systemic, right, not in the way that you know City Group was or Bear Stearns was back a decade ago. But it does matter, right, and it is something that's going to certainly affect market psychology if nothing else.
I also found it interesting that Jerome Powell was not that concerned about inflation turning higher. He said he was much more concerned that inflation would stabilize at too high a levels in your own analysis, do you see that as a quite reasonable possibility.
Yeah, I don't. You know, when we look at when we look at the data, what we see, and j. Powell alluded to this today as well, is that goods prices have been coming down, but the services sector, even services excluding housing, are still running at a reasonably high pace and are going to keep inflation a bit higher than maybe some would like to see. And certainly it's going to make it hard for inflation that come down
to two percent. You know, if we go back even to the mid twenty tens, and you go back to twenty fourteen, fifteen sixteen, it turns out services inflation was running at three percent, but goods prices were falling, So that's how you wound up with the PC deflator with a two handle, So you know whether or not that can be maintained. I think will be very important to the FEDS read on monetary policy and what it's going to do going forward. Either way, I do think that
the Fed is going to cut right. I think the big question that the market is going to continue to have to ask itself and probably reprice for, because I think it's miss priced right now in terms of how fast it's going to cut is firstly, is the pace of those cuts? And then secondly, are they going to actually cut to three and a quarter percent like they suggest that they will in twenty twenty five or will they have to cut more or less based on the path of the economy.
This is Bloomberg Daybreak Asia, your morning brief on the story's making news from Hong Kong to Singapore and Wall Street.
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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