Good morning.
I'm Richard Salamat and.
I'm Doug Krisner. Here are the stories we're following today.
J Pale very much here.
I sent to stage, going to fix at that symposium at Jackson Hole in Wyoming, and we should get his assessment not just of what's happening monetary policy wise, but of course the state as he sees it of the American economy. Let's get details out from bluemo's Denise Pilgrini.
Cher Paul will deliver remarks on the economic outlook at the FEDS Annual Symposium in Jackson Hole on Friday last year. He used the event to say policymakers would keep raising interest rates until inflation was under control, and he said doing so would cause some pain. And even with all the interest rate hikes since then, we're still seeing strengthen
labor markets and consumer spending. And minutes of the July FED meeting out last week showed some officials in July saw more inflation risks ahead and thought more tightening could be required. Since that meeting, no key data points have shown price and wage pressures continued to dissipate. And on top of all this, FED watchers may also be hoping that Paul will at least give a hint about whether the Fed might cut rates or not next year. Denise Pelgriny, Bloomberg Daybreak, Asha, Well.
The S and P five hundred has lost ground for three consecutive weeks. Bloomberg's Charlie Pellett now with a look at the drivers for the week ahead.
With little in the way of earnings this week, investors will be keeping an eye on China's economic turmoil and the jump in bond yields. Cameron Dawson is chief investment officer at New Edge Wealth.
This current correction is not about growth fears. We're not seeing EPs estimates come down. You're not seeing these worries about recession kick up. This is all valuations in light of a context of higher interest rates.
Among the US companies schedule to report earnings this week, tech names including in Nvidia, Analog Devices, Autodesk, and into It. We'll also hear from home improvement retailer Low's and Dollar Tree in New York. Charlie Pellett, Bloomberg Daybreak Asia.
All Right, well, we are looking at what's going to you now with President Biden going into the weekend, announcing spans announcing plans for annual leader level meetings with the Japan and South Korea. The allies also agreed to a new hotline to swiftly share intelligence. Here he is the President speaking at his Camp David summit.
We've all reaffirmed our shared commitment to maintain peace and stability in the Taiwan Straits and addressing economic coercion. We're going to continue to counter threats from the DPRK, including cryptocurrency money laundrying, the two to billions of dollars potential arms transfer in support of Russia's brutal war against Ukraine.
Biden saying the United States, Japan, and South Korea were also launching annual multi domain military exercises. We hear that North Korean hackers try to infiltrate security related companies to obtain information on joint US South Korea military drills that started. That start actually on Monday by South Korea police saying they obtained no classified information.
Negotiations are underway for some high level talks between China and Australia. We have more on that from Bloomberg's Paul Allen.
Australian Foreign Minister Penny Wong told ABC News that officials are working on a time to host China's foreign minister. This comes as Camera and Beijing are working to improve relations. China scrapped import tariffs on Australian bali earlier this month. Let's after Beijing had accused Australian exporters of dumping on
the Chinese market. Meantime, Australia still holds a deep concerns in relation to two of its citizens being detained in China, and Penny Wong says she's keen for more meetings between the country's foreign ministers in Sydney. I'm Paul Allen Bloomberg day Break Asia.
All right, well, let's have a look now at what is happening with Global News. California Governor Gavin Newsom has declared a state of emergency to deal with a potential damage that could be done by tropical storm Hillary. Let's get over to Ed Baxter in some Francisco.
Ed Ah Rich, thank you. Hillary is now a tropical storre. I'm having hurricane status, but flood warnings have been issued for most all of southern California. It's been raining heavily in some sections of San Diego are already. Mayor Todd Gloria in San Diego, we have.
Hundreds of additional city employees on hand station throughout the city. Everyone from public works employees looking for backed up drains and pumps stations, to police officers, firefighters, and lifeguards all positioned to be able to deal with the brunt of the storm.
And in Los Angeles, Fire Chief Christian Crowley says, people need to remain vigilant.
If you are in a flood prone area, move immediately to high ground. A flash flood is a sudden, violent flood that can take from minutes to hours to develop.
And Mayor Karen Bass sums.
Up, stay safe, stay home, and stay informed.
And now the hardest hit areas will actually be outside of Los Angeles proper, in the mountains and the deserts, Palm Springs. Mayor Grace Garner, do you know.
That there's going to be flooding, because, like I said, even an inch or two of rain in the desert can cause damage.
And Nancy Ward with a Governor's Office of Emergency Services says, at the very least, be prepared to lose power.
There will be power outages, Make no mistake, there will be power outages across southern California.
And now we're getting word of a five point zero magnitude quake in O High which is north of Los Angeles inland from Santa Barbara. Yeah, during the tropical storm Rain. US President Joe Biden First Lady Jill will visit Maui tomorrow. Meanwhile, FEMA Director Dion Criswell, and ABC has heard on Bloomberg says they are making some search progress.
The search efforts are seventy eight percent complete in Lahina Town and we continue to have our teams on the ground going through all of the structures that were lost as a result of this fire.
And Governor Josh Green says a process of the recovery will now change.
More than a thousand. They are unaccounted for about one thousand fifty. It will take several weeks. Still, some of the challenges are going to be extraordinary now we go into the larger buildings, which require peeling back some of the floors and structures. That last fifteen percent could take weeks. We do have extreme concerns that because of the temperature of the fire, the remains of those who have died in some cases may be impossible to recover meaningfully.
And Grain directly attributes some of it to climate change.
We've had six fire emergencies this August. We had six fire emergencies between nineteen fifty three and two thousand and three.
Well Famous says well over eight million dollars have gone to families that have been impacted and registered with FEMA. Global newspower by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries in San Francisco, I met Baxter in this as Bloomberg.
In a moment, Ben Emmons will join us for a look at what's happening in the Chinese economy. Ben is senior portfolio manager. You're also head of fixed income at New Edge Wealth. It was on Sunday that Beijing said it again pushed banks in China to boost lending. We have more from Bloomberg's Joanne Wog in Hong Kong.
China Central Bank has also urged to adjust an optimize policy for home mortgages. This comes as concerns heightened about a deteriorating economic outlook. Chinese media Tai Sine also reported Beijing clients to allow local governments to sell two hundred and six billion dollars of special bonds.
To help repay debt.
Last week, top leaders have pledged to expand domestic consumption and support the private sector, but it fell short laying out specific details. Meanwhile, banks are said to cut their key lending rates by fifteen basis points. Later today in Hong Kong, I'm joined Wang Bloomberg Day Brigasia.
All right, let's bring in Ben Emmons, Ben a senior portfolio manager and the head of fixed income at New Edge Wealth. How serious is the situation right now in China and the degree to which it has the potential to spread through the global financial system?
Is that a risk?
It's a risk, Dug, But I don't think it's the same as when we had, like say, back in twenty fifteen sixteen, when the Chinese economy started to suddenly slow down, we had a lot of manufacturing slow down globally. This time around, it seems to be more driven by that you had that reopening. You shot off the economy for so long that the manufacturing sector had a lot of trouble to restart. There's a lot of discussion about long
COVID in China. That's causing additional disruption. There is a lot of confidence issues that people are very wary there, so they don't really behave exactly the way we used to do when we reopened, even though in the very early stages of reopening it did show someone that major
V shaped type of recovery. And then lastly, it is about the China government being initially somewhat conservative in terms of stimulus, a lot of discussion but little implementation, and I think you're seeing it coming through now, Like at these measures that the Jusia College talked about, you know, that's to me like that was sort of pending, so to speak. So they're going to try to push it a little harder, I feel, to get to their growth target.
Because the real time trackers that are out there from Goldman and several other investment banks that try to track Chinese activity on the ground, Yeah, there's a difference between those trackers around three twenty a half percent and where the government wants to be at five and a half percent, right, So I think within the Chinese government they probably have that understanding themselves, and hence you's seeing the sort of urgency emerging now of pushing stimulus into the economies to
get to that growth target, which could be by the Way's last point, it could actually be meaningful for markets in the fall well.
Being it they keep on sort of playing at the edges because they don't have the money. The physical tools, the manetary policy tools are not going to work particularly well either, because this is a structural or shift for the Chinese economy. But of course one of the symptoms has been deflation. Are we feeling any of the effects of that, and how closely you think the FED looks to what's going on in China and takes into account of that when it's looking managery policy.
To some extent rich But I think that the deflation that we currently have in China was vainly driven by food and transportation predominantly, whereas some on the services side of the economy there there's actually more strength as in inflation. So the import of deflation out of China is somewhat
limited at this stage. But it isn't to say that it could become a bigger issue obviously, right because if it does turn out to be that this near term stimulus they're trying to push in the economy isn't really working and they don't get that growth target achieved this year, there will be more downward pressure on prices coming out of China, and we know we will import some of that, so it will affect the US economy at some point.
So the question is whether the slowdown might snowball and represent something similar to what we saw in Japan in the nineteen nineties. Is that a possibility.
Perhaps, although you know that comparison to the Japan is as being a bit difficult even with the US and Europe right that we are. At times people made their comparisons in the same way, you know, demographics and economy aging and all those two typical factors that a side around Japan. I'm not sure that it's entirely the case in China. One thing that's really different from from our
economy is that a plan based economy. You know, they can't inject liquidity and measures across the economy really fast, so it's a little different way of I think it responds to what we do. But that isn't to say that that overhang from the property sector is really serious, and we know from the Japanese situation that's how the deflation started. It was a banking issue with real estate that that we had to be worked out for many, many years, and that's to an extent now in China too.
You know, there's that much you can do with you know, the faults on dollar bonds, right, It's another thing to have the bank sitting on loads of death from the property sector and having to solve that with liquidity and with more issues of death, and we know that's going to put pressure on the economy.
Ben you mentioned dollar dollar bonds. I want to go and use that as a sort of awkward seguae to talk about what's going on with treasuries and give me a sense of what you are looking at when it comes to the bond market. How does the FED look at what's happening there and beyond.
Yeah, Rich, I think it's interesting that this month we had a significant rising rates and people are pointing to this maybe have something to do more than just the economy. But I did a little event study on it, and I noted that quy ah, the majority is still the economy.
Right.
You know, on every data we had stronger data than expected. If you add up all the times that the yields went up, that's more than on the days when let's say the Fitch downgrade or the Dirty Auction dailing or the Treasury funding announcement that had impact on raids, but not as much as the economy. So it's still that's
strong economy story that's dominating. But we have to take note of that what has happened by you know, adjusting the borrowing to such a larger amount, by issuing more long term bonds while the downgrade was happening, while we had the whole you know, bringmanship of the of the death ceiling sort of putting into focus in that in
that downgrade has made people wary of that. You know, there is there is a sustainability issue here that at some point we have to reckon with, you know, for many years one.
But I just want to take it back to China for a moment, because we know that the government is a big holder of US treasuries. They've been defending the currency lately, and I'm wondering whether there is a connection there sell US treasuries to raise the funds necessary to defend the currency. Is it a big factor?
So so fortunately, Doug, they do have sufficient reserves to address the currency that way, so they I don't think have to tap into the direction you're talking about, like ultimately you know, liquidating more treasuries to raise the funds to defend the currency. Yeah, as we know, China is a kind of interesting system of how currency is managed, right.
It's it's a completely control currency on shore within the offshore market the c n H. Yeah, it's traded a lot by funds and hedge funds and people do that and the banks ultimately, the Chinese banks can be very effected there by the PBOC, meaning like what happened is now right, they instructed the banks start selling dollars and bring those back of bringing you on back on shore,
so to speak. So it strengthened on that way, you on that way, and that's I think I had a big impact immediately because it's not a very liquid currency like unlike the end or any other major currency. Right, So it depends a bit what goes from here. If you go back to twenty sixteen, there was a huge amount of capital outflow at that time out of China. They stopped up with capital controls and kept it in place for a long time, and that's still the place.
So I think they can manage it so far with what there's buffer of reserves that they.
Have without selling you as treasure, without selling you.
Okay, Ben, this.
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