Transcripts For BLOOMBERG Bloomberg 20240703

We have 10 year yields in the u. S. At 4. 63 . We are looking at what is being interpreted as no more Interest Rates hikes this year coming from jefferson and mary daly and of the dallas fed president larry logan. Lets look in thailand. We have the market up. 6 . The currency has strengthened overnight. And the dollar index moving to the downside. And the indian session suggesting a move to the upside. It is also Consumer Confidence which is up to three year highs which has also generated some positivity. Oil markets are steady and holding on the gains we have seen in the last 48 or 72 hours. The biggest jump we have witnessed in six months. Wti at 86 a barrel. Brent slightly lower. Lets get to the reason why we saw this surge. It is the israelhamas war. Yousef gamal eldin joins us now. What is the latest . What are the moving parts now . We are in day four and the violence and red showing no signs of abating violence and rhetoric showing no signs of abating. Hamas saying theyre willing to kill is really hostages. Looking at the casualties. The total death toll exceeding 1600. 900 israelis, mostly civilians and 700 palestinians killed mostly during retaliatory strikes. Keeping an eye on any movement in a comes to diplomatic efforts. The qataris are taking charge of maybe arranging a prisoner swap. To the north of israel, there have been skirmishes. Idf reporting there could be some activity with militants crossing the border. We have different takes on what happened there along the border but it is something keeping both sides very nervous. And of course the finger is being pointed at tehran but the u. S. And israel say there is no direct evidence yet of tehrans involvement. It will be interesting to see if hezbollah does anything. Iranian involvement is the critical point in the broader equation. At the moment the iranian side has made clear that though they celebrate the occurrences over the weekend in terms of sending congratulatory messages to hamas, the actual statements also indicate they take responsibility or that they have been implicated. Make it clear that the palestinians or hamas specifically know how to defend themselves and their shows they have come a long way from prior years. And this shows they have come a long way from prior years. In terms of actual tangible evidence and official confirmation, iranian involvement has yet to be taken a hold of. That would change everything completely. It is a domino effect. If iran comes into the game, how does that affect russia, china, the u. S. That is what is at stake. A lot of rhetoric coming out of capitals including cairo. Is this genuine or is it just talk talk . Ultimately israel has to look at what it does to hamas in a fairly guarded way, i suppose. Ejections have been peace brokers egyptians have been peace brokers over many years but that role has faded over the last 10 years or so with the rise of gulf powers specifically saudi arabia. And qataris as well. Egypt has taken a neutral position. Calling on both sides to step away and renounce violence and catch a breath. In terms of a breakthrough it does not look like the egyptians and the or janie and the jordanians have led to a breakthrough. I look to turkey and saudi arabia to maybe breakthrough this terrible pattern of violence is costing many lives as every hour passes. Yousef gamal eldin there. We will stay with us conflict. With this conflict. The ukrainian president is urging global solidarity. He drew parallels between the attack of the hamas militants on israel and russias invasion of ukraine. The only difference is that there is a terrorist organization that attacked israel and here it is a terrorist state that attacked ukraine. And that is the difference. But the essence is the same. The is really government and media websites the Israeli Government and media websites [indiscernible] the Palestinian Resistance and taking credit for briefly taking down the Jerusalem Post website. Delta, united and American Airlines shares fell 4 as the three major u. S. Airlines halted flights to tel aviv. Multiple carriers have suspended services to israel including the likes of lufthansa, air france and air india. The faa is recommending exercising caution before resuming operations to the bengurion airport. A ticketing turmoil at indias world cup is going beyond angry fans. We have the outlook on markets including the impact of the violence in the middle east. This is bloomberg. What i think about is the real rate that is required to bring supply back into balance with aggregate demand. I think current policy is restrictive and is putting downward pressure on the inflation rate. That is what my concern is. Higher term Interest Rates. If term premiums rise they could do some of the work of cooling the economy for us leaving less need for Monetary Policy tightening to achieve the fomcs objectives. Rishaad jefferson and logan. We will hear more from fed officials over the next few days. This is the lineup we have including bowman, bostic, kashkari. And we have the september Meeting Minutes also released. Lets get to the market action. Eli lee from the bank of singapore. Lets start off with what is happening in the middle east. We have seen a lot of tumult on the markets. They dont usually last long but this could be different so how do you guard against that . Eli right. If we look at history, it is very hard to tradeoff [indiscernible]. I think going into this being positive on gold we have a position on gold and we are positive on u. S. Treasuries as well. We have exposure to the long end. If tensions escalate, these Asset Classes will guard against some of the market volatility we will see but we advise against investors trying to time the events too much. Rishaad you look at that and then you have the Federal Reserve which is at the epicenter of what happens next. There is a lot of signaling that they may be done for this year, that coming from three we mentioned earlier. The point being there is no mention of there being rate cuts and they have been cognizant of not mentioning anything on that subject. Eli i think we have to take things one at a time. First, we think that the fed is done with hikes. We see them pausing from here. And we probably have to see more stress in markets and a downturn in growth for them to complete cuts. I think the fed president , logan, is in the hawkish camp and it is meaningful that she has changed her tone slightly. The fed is keeping an on what is happening at the moment. Rishaad that is the thing. We have seen flattening take place. What does that signal to you . Eli the 10year has moved 40 or 50 basis points since the last fomc meeting. The fed has not done much sense. It has to be concerned that the long and is moving up helping to slow down the economy doing the feds work. But they may be keeping a real close eye on how to turn premium. And we have seen [indiscernible] from 4 to zero over the last four years or so but this may start creeping up. Reasons include supply, reduced demand globally, inflation. And if this becomes a problem especially in terms of market trading and dynamics in the next few months, this could increase volatility and the market. And the u. S. Treasury is still due to issue a significant amount of paper over the next few weeks. Rishaad absolutely. With corporate issues being the path of least resistance and bond prices going lower again. Eli i think a lot of market the market is thinking this is a negative spiral. What breaks the spiral is that the fed needs to return to the past. Maybe they communicate that rates are forthcoming. This needs to be watched closely and could be a trigger for market volatility in the next 36 months. Rishaad you look at what everyone has been piling into and that is japanese equities. You are overweight the market there, the stock market. How much of a boost will this get if this if we get the bank of japan changing his policies . Eli we think the bank of japan will likely stay loose. More than one market expects that because i think they think they have time. They have dealt with too low inflation and low growth for too long and they think this is there opportunity. The japanese economy, we see, will continue to accelerate over the next 12 months happening together with the corporate reforms happening within japan. We see corporates giving cash back and buying back shares and using capital. When we benchmark this reform, we are only halfway there in terms of the rally. Rishaad and many people are talking about the japanese economy being in the doldrums for the last few decades. Beijing is looking at that closely as we see economic malaise there as well. Signs of stability are you seeing those . Eli the signs of stability the last Economic Data we saw was very pessimistic. This is showing the chinese economy showing there is too much pessimism. A sequence of policy easing is starting to take effect in the chinese economy. I think we are starting to see more signs of stabilization. Price action could improve sentiment price action could improve and sentiment could follow. I would caution that it will take a lot of time in the fixed income market. The property sector, the local government financing vehicles it will take a long time to work through those issues there. I would not rule out investing in this space. You just have to be quite careful. Rishaad what does your perfect portfolio at the moment look like . Eli in equities we are overall underweight and we prefer asia to developed markets. Within asia we are neutral on china. We are picking sectors on a bottom up basis. We are neutral on india. In the fixed income space we still like u. S. Treasuries. And our duration strategy is a barbell stance. We stand ready to move to the long and if we see t the long end if we see rishaad eli lee giving us his thoughts on the markets and where we are at the moment and what you should be buying. We will be checking in with these equity benchmarks. The hang seng off the highs of the day. The tech side of things are still going is still going great guns. This is bloomberg. An everchanging landscape comes with challenges. From our vantage point, we see opportunities. As a topten real estate manager, we harness the power of a 360 perspective, delivering local insights and global expertise across public and private equity and debt. Our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. Principal asset management. Actively invested. And your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com its easy to get lost in investment research. Introducing j. P. Morgan personal advisors. Hey david. Connect with an advisor to create your personalized plan. Lets find the right investments for your goals okay, great. J. P. Morgan wealth management. Rishaad Semiconductors Stocks in the hong kong market. 1 up. We were higher than that earlier on. Looking at the semiconductors side of things. The market itself up 1. 1 . The real story includes samsung and sk hynix. A u. S. Decision allows the chipmakers to acquire the equipment they need to expand their operations in china. Lets get more from the asia tech senior reporter. What does this mean overall for the chipmakers . It allows them to fulfill demand where they may possibly have found it difficult. That is right. This is a huge achievement for the Korean Semiconductor industry. A year ago the u. S. Government announced sweeping measures to limit chinese plants access to chipmaking equipment. Sk hynix obtained a oneyear extension for operations in china. It created a lot of uncertainty for them and made it challenging for them to advance their technology and china. What this government has announced is effectively including their chinese plants in the list of verified endusers which means they dont need to renegotiate a oneyear extension every year. It really eliminates a lot of uncertainty for them so they can now plan things and operate their manufacturing plants where they have poured millions of dollars of investment in the past. In the foreseeable future they can plan ahead and stabilize the operations. Rishaad with the u. S. Enforcing the rules restricting china, part of the question is what sort of chips will they be allowing sk hynix and samsung to produce . And what are the risks as we move ahead . These are legacy semiconductors. Not really the highend, hightech chips that these companies are developing at the moment. These are flash memory chips mostly which account for maybe more than 60 of the Global Supply chain at the moment. I think the u. S. Government sees that these are not very at risk in terms of u. S. China rivalry in that sense. So, but, in the grand scheme of things there are still a lot of risks. It does not fundamentally change the fact that there are geopolitical tensions at the moment. Even though we have some positive development, i think the government and the semiconductors will still have to focus on this intense environment. For example, highend equipment is still under strict restrictions. That means these Companies Like sk hynix and samsung will have to, down the road, will have to navigate and probably take steps to diversify their supply chain away from china. Rishaad thank you so much. The asia tech senior reporter. Lets have a look at some of the big stories we are following. Chinese home sales during golden week raising doubts about whether the government stimulus is doing enough to revive the countries poverty sector. The daily sales during the eight day holiday period were down 17 from last year. Sales of existing properties, h percent. Bloomberg has learned that a copper Trading House has lost contact with its founder. It is believed that he has been detained by police for questioning. The company was once chinas biggest importer of copper and it fell into a liquidity crisis last year. During covid lockdowns. Union members workers have criticized chevrons efforts to finalize an agreement on pay and conditions. Lets have a look at the market action. Energy stocks at the front. They are up once again. 1. 2 up. The conflict in the middle east has got people fearing that if there is a retaliation against iran from israel it could endanger the passage of vessels through the straits of hormuz which is a vital conduit. That is a look at what we have overall with these markets. Equities are all bid apart from those in china. The nikkei will resume trading in about three and a half minutes after gaining 2. 5 this morning. This is bloomberg. Rishaad in shanghai, we are less then a minute away from the lunch break. Stocks are lagging with what is happening regionally. The golden week holidays were a little damp. Investors hoping for a more forceful come back for this. And the turnaround came up shy. There was an improvement from last year. But not quite as good as people were anticipating. Chinese traveling less and spending less than official projections. The real results barely beat the prepandemic numbers that we had in 2019. They are offer lunch. Take a look at the hong kong market. Up 1. 25 . Tech outperforming. And properties as well. We are looking also now at the restart of trade and japan. Japanese stocks up to. 2 for the nikkei. Up 2. 2 for the nikkei. Oil shares helping to boost things as well. And of course because of the conflict in the middle east. Lets take a look at what is happening with country garden. It has warned that it does not expect to be able to meet its offshore payments and confirming it is hiring cicc as Financial Advisors as it seeks a holistic solution. What has happened today . What has the morning been in terms of the news . Country garden has been foreshadowing the news in the past few months. It has warned previously several times that it may not meet its offshore debt obligations. There is really no surprise. Country garden is seeking restructuring advice. They are looking for a holistic solution. We would hope so. The example of evergrande, the real risk is the Regulatory Risk with what the local government will do. Or are they going to end up the same with what has happened with evergrande such as a potential liquidation scenario. Rishaad what about the creditors looking to form a group . What do we know about that . That could mean more unified action to get better results is the premise i suppose. Offshore creditors have ad hoc meetings and discussions. The goal is to have a threshold which enables you to counter everything you dont like. Essentially it gives creditors more problem more power. It helps them fend off challenges from different Creditor Groups which we have seen in other cases. That is good news in a way. We are going to see a rise in Bargaining Power from the creditors once they form a substantial and sizable group. Rishaad evergrande. This is something that people can look at as foreshadowing what is happening with some of these other developers. What is the latest . The foreshadowing is like a bad foreboding for the sector. The latest with evergrande is that the Creditor Group issued a statement yesterday saying they were left in the dark by the company after the company said they could not issue new debt which is essential to the completion of the restructure process. The whole thing has been put on hold and there is no real plan that can be implemented. The creditors dont think evergrandes excuse is convincing. I think they are charging the company the bigger problem is if that happened with evergrande, which we know there is a lot of regulatory involvement in the restructure process. There was a lot of discussion between offshore creditors and the local government. What will happen with other projects . Will the same thing happened with these possible regulatory hurdles . Rishaad they will be busy. We will have the corolla raise corollaries with what has been happening with these property companies. The commodities markets are being roiled by the Housing Market in china but also center stage, the hamas attack on israel. Our reporter in singapore has more. We had the massive run up in oil , the biggest gain in six months and we are holding onto it apparently. Yes. Lets before i get to some of the price moves in the commodity space, equities. It is the Energy Related stocks that are moving higher in japan and south korea today. Korea petroleum surging as much as 30 . These are beating the gains on the topix and it is because oil and gas prices hanging onto the gains from yesterday. To put this into perspective, this is the first chance for traders in japan and south korea to react to events over the weekend. Look at brent prices, it is not moving much from the surge yesterday. Sitting slightly below 88 a barrel. We solve gas prices surging as much as 14 in europe trade. And chevron shut its production field in israel on security concerns. Our colleagues in Bloomberg Intelligence say there is likely to be little impact to global lng supplies given how this europe gas storage is almost full. Gas prices could remain volatile and elevated as they track oil prices. Rishaad up until friday we saw that the oil price went into correction. We are talking about brent and wti. They have skyrocketed with the events from the weekend. Does the rally have legs . How high could the prices go . We really have seen brent and wti on a wild ride. The developments over the weekend takes the spotlight away from the demand and supply fundamentals. If history is anything to go by, our colleagues at Bloomberg Intelligence have poled up data dating back to 1970 and it is interesting to see the range of responses to geopolitics. When you look at what happened in 2014 with the gaza war, prices barely budged. But in another incident they quadrupled. It is a range of responses that we could potentially see in terms of price action and all eyes are on what israel potentially decides to do next. Rishaad thank you. Lets have a look at the whole conflict in the middle east with the founder and president of this Eurasia Group saying it is unclear whether iran was behind the hamas attack on israel. There was an Israeli Intelligence failure allowing this attack and that will be the prime ministers legacy. The United States government has said there is no evidence, as of now, that the iranians were behind the attack. Lets be clear. They are not nice people as a government. The Supreme Leader and president fully supported the hamas terrorist attacks and they have provided not just diplomatic cover but also weapons and Financial Support to hamas directly over the years. I would be surprised if they were unaware of the attack that there is a big gap between unaware and orchestrating. And i will tell you that life has been going reasonably well for the iranians of late. You will remember that the chinese facilitated diplomatic engagement, a breakthrough, between iran and saudi arabia and the past months. And the Biden Administration came to an agreement to get five american citizens held hostage by iran back to the u. S. And was planning to provide 6 billion of iranian assets unfrozen back to the iranian regime. And iran has allowed International Inspectors as it has reduced its uranium enriched stockpiles. None of these are actions by and iranian government that is about to declare war against israel that would lead to clear reprisals, eminence reprisals by israel if it was found out with evidence that they actually were working with hamas. I dont have a lot of confidence in the sense that i hardly talk to the iranian leadership but i would be quite surprised if we found out that the iranians were directly ordering. Is it a surprise that israel, mossad, the cia seem to not have known about this attack . In 1973 they dismissed intelligence from an individual and did not listen to a bug they had in sadats office. You would imagine they learned from that. How could they not have known about this attack . Israel represents the Gold Standard not just on human and signals intelligence but also on border security. This is not like build the wall in the United States. Their borders are relatively compact. And they know how to defend them and they know the consequences if they dont. The issue is that the israelis told their eye off the ball. You know that israel has been in the headlines over the last year quite a bit. Not at all about the palestinians. The focus was unprecedented demonstrations in israel fearing a constitutional crisis with the initial reform that with the judicial reform that netanyahu and the far right government have been pushing and there has been an expansion of the settlements in the west bank leading to palestinian reprisals. And a bunch of the Defense Forces were sent to the west bank. To deal with and respond to the reprisals. Both in terms of domestic instability, intelligence focus, unwillingness of some difference forces to serve if the judicial reforms went through and these expanded settlements, israel was not acting like they had the Gold Standard on defense capabilities, border capabilities and intelligence capabilities. And this is on netanyahu. This is a matter for another day. Right now they have to defend their borders and get their hostages back but this will be their legacy his legacy. Rishaad we have a lot more coming up ahead as we focus in on india. This is bloomberg. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Rishaad all right, that is moved b mumbai at the moment. We could be raising erasing some of the losses we saw on monday. Looking at that and certainly right now we have a lot in play. We have a conflict in the middle east playing havoc with stocks on monday. And we had the surprise attack on israel by hamas. The nifty declined by a similar level. 30 seconds away from the start of the trading day. The cash session anyway. What we have is a lot to be grappling with. We are looking also at how the world cup is a slight digression. The escalation in the middle east is causing pessimism in the global markets. The Oil Price Surge is the greatest danger as far as india is concerned. We have opened the cash session to the upside. How do you play this and what is the Market Strategy given the events taking place globally and market wise . Shweta rajani is ahead of mutual funds at Anand Rathi Wealth private wealth management. Look at what is happening in the middle east and perhaps these things historically do not reverberate that long but it could be different this time and so how would that affect how you look at investment portfolios . Shweta good morning. Yes, looking at what is happening in the middle east. As of now the initial indication is india the trade relations with these countries is less than 1 . From an economic standpoint it should not impact much. Crude will be a factor that we have to watch closely. Given how india has reacted even during the russiaukraine war, there should not be much implication. But we will see how u. S. Gets involved. Watching where crude is heading is something we are watching closely. The initial signs suggest we should not be much impacted by the middle east tension at this point. Rishaad the reserve bank kept rates on hold but it did make a couple of moves which would almost act like an Interest Rate hike. What do you make of that and what are they worried about . Shweta yes, there are certain concerns. On the face of it it looks like the rate hike cycle is over. They will do some tightening, over the next few months, maybe a quarter or two. Even now the rise in the inflation [indiscernible] for the next year heading towards the 4 inflation number. The rate hikes seem to be over. Liquidity should move from tightening to a neutral level kind of a stance. Rishaad of course inflation is likely to be temporary, at least that is the narrative at the moment but these things can get sticky. It is about the Indian Consumer and the domestic consumption story is a key driver. Is this still a valid theme . Shweta absolutely. In india the consumption story is there for the longterm. One thing that has been a shift in the consumption pattern. We are seeing moving from the traditional consumption going toward services. Consumption when it comes to tourism, hospitality, healthcare services, financial services, that consumption is increasing. Shifting from traditional consumption to Service Oriented consumption would be something we could see a trend change in india. Rishaad also, if you look at foreign inflows, how are they looking . Are they being supported also and supportive of the Retail Investor in india which has been a revelation in recent years . Shweta absolutely. If you look at the Household Savings data that comes in, almost 9 or 10 of Household Savings is invested in indian equities. The last 10 years there has been a shift in the investment pattern. There is more money going towards indian equities coming out from real estate and fixed deposit. The kind of investments that have traditionally given a 6. 5 return. Now they are is the possibility of getting a 12 return. One measure for us is the sip, systematic Investment Plan inflow. It has been increasing every month. We have crossed the 3000 of sip money coming in every month to date. Investors are investing in equities and that is going up. There is enough support coming in from the Retail Investors as well as the must take institutional investors. For the last 1. 5 years, those flows have been positive. And so is the support even from foreign institutions. So far this year we have had positive inflows. A slight outflow in the last few days. There is enough equity and the shift in the Investor Sentiment towards indian equities. Rishaad shweta rajani, thank you for joining us from Anand Rathi Wealth private wealth management. I did not get to ask you about the world cup but we will be discussing what is going on with the cricket nation in india as it hosts this tournament. This is bloomberg. Rishaad right, having a look at problems with ticketing for indias cricket world cup. Really garnering the ire of fans and threatening a soft power push from the prime minister. Tell us a bit more about what is really happening here. Right, the cricket world cup is being held in india and it is off to a rough start. There has been a lot of chaos around the sale of tickets. On sunday the board of control for cricket in india in a surprise announcement said it would be selling 14,000 more tickets for the match. A much anticipated match between india and pakistan. The match was sold out until a week ago. Fans were caught off guard. It led to a lot of chaos. And viewers claimed they were able to purchase tickets for the match between india and australia. A few hours before the match. It obviously brings questions about the planning abilities and the administrative abilities of of the worlds richest cricket sporting body. In the first match in that the modi stadium with a capacity of 130 thousand seats, the match opened to a nearly empty crowd. And even at sundown, the crowd came in but you could still see a lot of deeds empty. Rishaad are there any other lapses that cricket fans are also complaining about . Yes. Exactly. The main or primary issue with the tournament has been the cricketing body only announced at the schedule for the games about 100 days in advance. To put it into perspective previously end the world cup in 2019 the schedule was announced a year in advance and all the games were sold out six months in advance. Fans disgruntled about the process, about the difficulties in getting tickets and booking flights and about getting reserved stays. And in addition it threatens to derail indias soft power push. Rishaad thank you. Having a look at the trials and tribulations of hosting one of the biggest tournaments end of the world. This is what it looks like. Asias markets looking up. We have japan leading the charge. 2. 2 up on the nikkei. Daybreak middle east and africa is up next. Its easy to get lost in investment research. Introducing j. P. Morgan personal advisors. Hey david. Connect with an advisor to create your personalized plan. Lets find the right investments for your goals okay, great. J. P. Morgan wealth management