♪ >> it is 12:00 in hong kong, i'm haslinda live from day number two of the hsbc global summit. stocks are higher with few

catalysts ahead of wednesday's inflation print. 10 year rate is the highest since november, yet a whisker away, but cpi number could senate tumbling. blackstone nearing a deal to take a cosmetics company private, ending a 14 year listing. annabelle droulers on top of things. annabelle: midpoint in the asian trading, green for a second straight day. these are markets that we are tracking. taiwan is standing out to the upside. u.s. government officials pledging support for tsmc leading to a jump for the

chipmaker and taiwan index. we saw near four point 5% mark but the highest level since 2020 or. recalibration with traders rethinking where the fed will go , that is impacting a couple of key assets. japanese yen is one of those. a lot of different investors and analysts including standard chartered are saying japanese officials are unlikely to act until we see u.s. inflation print. will it be sticky? it could lead to yen weakness. where holding around a record high, a move that puzzled a lot of us. there is a lack of obvious

trigger and recalibration. we gotta died on inflation expectations from the new york fed who put out a survey. we've seen it going up again. on the one year basis, flat, slightly lower. people in the economy are concerned about the outlook. there getting concerns about ability to repay loans. quick check on markets, we will see seven rate cuts coming through. investors are seeing fewer reductions around 60 basis point. there has been a split on whether it will be two or three. haslinda: it could mean none

according to cash carrie. thank you so much. we have been hearing from fed officials including neel kashkari saying he expects pressures to ease. i spoke with james bullard who expects policymakers to stay cautious. >> my base case is inflation will fall and i jotted down in march that we would have two interest rate cuts, then i explained if we don't see progress and it moves sideways, that makes me question cutting interest rates. >> you should take the committee at face value. of course the data can go one

way or another, that is the best case. yvonne: do you lucian -- do you listen to bullard or kashkari? let's bring in david, portfolio manager. why that assumption? david: we were looking for a rate cut in june and we saw the payroll and we are data dependent. our view it is three rate cuts because markets are pricing in a rosy picture and not taking into consideration high interest rates. we believe that this is not felt

by the economy. in march of 2023 will we saw the impact of interest rates on silicon valley, we are seeing it in terms of economy and real estate. our view is it is great to see the market pricing in a rosy picture soft landing, no landing. our view is the impact of interest rates, we can see the impact felt much more. hence we stick to the rate cuts rather than the two rate cuts. >> the data we are seeing so far are backward looking data. when you look at labor demand,

what does it say? >> good question. the driving force of economic growth, they are low. they are looking to reduce their workforce. specially those that are highly indebted, the cost of funding is going to come in hot. we would love to believe a rosy story. the impact will be felt on sme's. we had a strong labor report. we are looking at the service

sector, these have proven sticky components. rent will come down and we will see the inflation coming down. we do believe inflation will trickle down as the impact of the higher rates has an impact on the economy. yvonne: how are you positioned in the bond market? >> we position by the yield curve. our view is it is difficult, long-duration or short duration this year, difficult to time that you know which way the markets are going to react. our view is mean reversion.

both in the u.s. and europe, our view is the yield curve is a better way of taking a view on interest rates, so that's why we talk five years, our view is the valley of the curve will fuel anticipation of rate moves. our view is we have steepened growth. haslinda: thank you, david. for your insights. still ahead this hour, hsbc global research expects china's gpt -- gdp growth to fall short of the 5% target that the chief economist explains why later. janet yellen wraps up a china visit with a warning against aid for russia's war in ukraine. details next, keep it here with

us, this is bloomberg. ♪

♪ >> we continue to be concerned about the role of firms, including those in the prc, the role they are playing in russia's military procurement. companies including those in the prc, must not provide material support for russia's war or they will face significant consequences if they do. haslinda: treasury secretary janet yellen wrapping up or days of talks in china with a warning against moves to boost military capacity.

stephen engle is here with more. stephen? stephen: there are two main issues that janet brought up. it was her second trip to beijing in nine months. definitely making an effort, whether there were deliverables is to be debated. again, the treasury department telegraphed she would be talking about book concerns the u.s. has about excess capacity exporting or dumping cheaper products. and again, the russian comments were interesting as well at a time when the foreign minister of russia arrived in beijing on the same day. janet yellen meeting with the pboc. met with the economic czar, li qiang, the premier. in voiced concerns about

capacity in new energy vehicles and solar and batteries. when it was -- they did not get angry, let's just say. state media was vociferous criticizing janet yellen, lasting her for the narrative of chinese excess capacity. not huge deliverables, making an effort. haslinda: stephen, at her press conference janet yellen said the global economy may be adversely impacted by ramped up china. what was beijing's response? stephen: we heard from the vice finance minister of china essentially saying that the current production capacity issue in china is far from market demand and again, this is

a big issue with the treasury department about this excessive investment in manufacturing capacity that is a priority of xi jinping. we talked about it at the national people's congress where they made advanced manufacturing a top priority is beijing seeks gdp growth of 5%. how will they do that when the domestic economy is suffering. they cannot sack up demand so that concern by janet yellen is it will be x worded or may be dumped on global markets. new productive force is what xi jinping wants to unleash, so they are in a pickle taking janet yellen's urging because again, they have marching orders from xi jinping to get this

capacity in new productive forces. the new three if you will. haslinda: thank you for the insight, stephen engle. not everyone agrees with janet yellen. bloomberg opinion columnist david thinks her viewpoint is a protectionist disaster that could muddy done that zero omissions. yellen's complaints go against 200 years of economics, what is the problem? >> this is one of the most well attested arguments, doctrine of competitive advantage. janet yellen did an interview with the wall street journal where she said standard textbook economics would say if a country is selling you cheap goods you should buy them and send your thank you notes. i do not agree with that anymore is a paraphrase of what she said.

this is a well attested lesson, a standard thing. look at tesla 10 years ago when they announced their first gigafactory and said they would produce in one year more batteries than the world produce the year before or go back and look at henry ford building the first modern factories and ford plants in detroit. this is a standard pattern in capitalism. if you think you have a competitive decision, you build capacity and that is what we are seeing in cleantech manufacturing in china. haslinda: the case she is making his chinese companies benefit from unfair subsidies and that justifies restrictions. what you make of that? >> i would like to see some of

the standard of measures that the world economy has to deal with unfair competition. there has not been a wto case for this only case brought against china for cleantech at all, in case dominant since 2011 around solar panels. instead we are having jawboning, domestic investigations. don't have to meet the high standard of evidence for the wto to judge on them. china has vast advantages. it is a country with cheap lands, skilled labor, extensive demand subsidies and beneficial tax breaks. these are things every large economy uses to encourage industries, not examples of

unlevel playing fields in terms of what the wto would regard. haslinda: isn't it fair to worry about the u.s. goods in china? >> that is one of the big things driving this. you see arguments about overcapacity at the heart of this. u.s. census bureau every month tracks the u.s. china bilateral balance of goods and trade. 2013 was the smallest u.s. deficit vis-a-vis china since 2010. u.s. economy is larger than 2010 you measure the size, the deficit was the smallest, 1% of u.s. economy. smallest since 2002. it is not really a very strong argument at this point, it's as

weak as it has been in 20 years. haslinda: thank you, david for going. we are continuing exclusive live coverage at the age the amc -- dhs mbc -- the hsbc meeting. and co-founder will be joining us later. keep it with us, this is bloomberg. ♪

♪ haslinda: welcome back. former st. louis fed president james bullard says the best case history cuts. spoke to him at the hsbc global investment summit.

james: you should take the committee and chair at face value. their best guess is three cuts and data can go one way or another, but that is the base case. very successful policy, rates increased during 2022 and inflation fell. core inflation would've been 200 basis points higher, the committee's favorite measure. looking at successful policy with strong economy, so a lot of things are going right. haslinda: powell has been right? james: the committee has been right to pursue aggressive

strategy. most was in 2022 and it bore fruit in 2023 and 2024. haslinda: the fed is data dependent, powell says he is data dependent. what does this mean and what data is he looking at? james: mostly inflation data because on the real side of the economy things are going well and you can argue why, but they are going well. committee does not have to worry about that side of the mandate. if all they have to worry about is getting inflation down to the 2% target and they have come a long way back. it was four point eight, now 2.8. core inflation on 12 month basis means you've only got 8/10 of 1% to go and some are saying the next report will lead to core pce being 2.6% in 12 months.

starting to get close enough, enough data in hand now to justify first rate cut, maybe not a string, but the first rate cut now based on the data they have. haslinda: u.s. economy is strong so would you say risk in the u.s. economy is inflation and not growth? james: that's right. haslinda: why is the u.s. economy resilient? we expected a recession. christ in a recession, yet here we are. james: last year you had a bank failure of silicon valley bank and other banks. that was over interpreted to mean the u.s. was going into recession. i don't think it was good to tell because banks failed, but

only a fragment of the sector. that card was overplayed and modeling to the u.s. not go into recession, the economy boomed in 2023, so you got a strong outcome that has continued into 2024, although we are closer to the trend, not above the trend. haslinda: that was former st. louis president james bullard speaking exclusively at the hsbc event. markets are inching higher ahead of the cpi print out of the u.s.. traders are looking at yields.

highest level this year, convinced we will see to rate cuts instead of three. in our earlier conversation, james says three is the base case. funny more ahead, debate here with us. this is bloomberg. ♪

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♪ >> still invested in china because we see long-term potential. transition taking place, now is the time to invest to be part of the transition. >> investors are looking for growth companies in china that they have been hearing about,

that is stimulating secondary market growth. we are underweight china the moment. the overhang of real estate going into consumer confidence, starting to see inflows, seeing policy coming through. haslinda: hsbc executives speaking to us at the investment summit. you're watching bloomberg markets asia. annabelle? and about: off the back of those comments, we are seeing an uptick. taking a look of the annual basis, drop of 15% but february lows were starting to pick up and investors are turning more

positive on chinese equities. is this the point you want to buy in? jp morgan as one of the most read stories on the terminal suggesting we different way of looking at this, use cheap options to bid on chinese equities, this a safer path to seizing gains. specific recommendations include a narrow call spread while the ftse china 50 and buying chinese equities call, that is contingent on u.s. dollar not following and we've been tracking closely, but it follows the broad trend, optimistic that dream shoots are coming through in china economy and manufacturing. haslinda: thank you, we get

insights from greater china economist at hsbc global research. janet yellen wrapping up a four-day visit in china, complaining about overcapacity. what do you make of overcapacity risks? >> it is encouraging to see u.s. and china. that will inject stability into the international relations. for overcapacity when the market was hoping for big stimulus, the response we've got from communication of chinese official tend to be they are mindful of distortion to the market. 4 trillion package famously created some overcapacity concerns. so they did not do the big stimulus and because this year

the two sessions, the pboc governor said china is going to curb financing to some of the overcapacity sectors. when we look at the data, some are due to the insufficient demand, such as cement and steel. property sector slow contribute to that and janet yellen mentioned, some of that was due to the competition among local governments and also it depends on how you look at the time horizon. from a longer tom horizon, not so bad. haslinda: what does it mean for chinese growth? will they get 25%? >> we have seen encouraging signs on consumption. in the festival, the three day

small little break, we see per capita spending for the first time was more than 2019 level and we believe consumption will continue to perform well. that will contribute by our forecast more than two thirds of growth this year. obviously the market is still concerned about the property. for the property sector we see the model seem to help to some extent. secondhand housing transactions ticked up substantially, but new home sales are yet to improve. haslinda: is the property sector getting better? we heard yesterday about concerns for the sector. >> by shipley -- basically the transaction model will pick up a lot because we see the price

correction in this sector reflect more quickly. in the past all kinds of restrictions seemed to impact new homes more than secondhand homes such as controlled of price etc.. if japan let's private housing return to the commercial sense, supply will play a bigger role. we think stabilization will come later and the government is also using -- converting public housing -- private housing into public housing. haslinda: china's weakness is impacting its currency and what the fed higher for longer, it will be under more pressure. where do you see the yuan? >> just now, we hear from the

st. louis former governor, james bullard, he was talking about he anticipate three cuts this year. that is exactly how hsbc feels. although probably the rate cut will be slower this time, but it is kind of confident to say fed is near the gun the hiking cycle. that will take pressure from them. at the same time we do see chinese economy continue to rebound. that will put some anchor to the exchange rate. haslinda: yuan has been anchored because of the pboc fixing. without that, where would it be? >> that is interesting question. over past several days we see convergence between exchange rate, so that show to some extent the recent data print .2

stronger fundamental can support the yen. in the fed going more dovish can help. haslinda: the market is looking at stimulus from china. can we expect that? >> by our calculation the fiscal impulse will be stronger than last year and that comes in different formats, including we see the special chair rebound. and we can see the central government is shifting more spending responsibility to its own shoulder. of that will help when local government are quite tight in their balance sheet as well. haslinda: are you concerned china's economy might be way down if donald trump were to come back to power? he has promised 60% tariffs on chinese exports. guest: this is an interesting question.

we see the first round of the trade war, a lot of chinese manufacturer starting to look to supply chain relocation to avoid unitive tariffs. that is why we see ossian and mexico. if trump were to come back to power, impose such a high tariff, the trend will continue. haslinda: thank you so much, greater china economist at hsbc. let's stay with china. alibaba cutting prices from cloud customers by as much as 59% to win back customers in the hotly contested market. let's get more from catherine lim. does it come as a surprise to you that alibaba cut prices outside of china? catherine: haslinda, not at all. take a step back, we have seen how they have cut prices for

cloud services in china and international markets, not the biggest market. it is a matter of time that we see the moves from the company to get back market share for the cloud businesses globally. this will tie in with aia ambitions that the company has for the rest of the year. haslinda: so how might this impact the financial outlook of the company? catherine: excellent question. this is one of three profitable units for the company. we are looking at six major units for alibaba and right now, if you look at numbers, expectations for expansion is too high given the magnitude of price cuts globally.

when the company makes report, we will save some form of downgrades in terms of cloud numbers. the market will look to see whether the company can revive topline growth. haslinda: how can the company do that? what can it do? catherine: well, that is the million-dollar question. we have seen rivals retaliating, fighting back with their fair share of price cuts, whether it is in their face or more subdued and subtle. over the next 12 months, this new fiscal year for alibaba, they are making an impact since, you know, we are now over and done with with, you know, the

attempt at capital restructuring story. they are now committed to gaining market shares not just in cloud, but in their other businesses as well, so let's see how the company can deliver this year. haslinda: we await the answer to the question. senior analyst catherine williams, thank you for that. another story we are checking out of china, bloomberg learned ups is getting full ownership of its china platform. it is proposing to buy 33% stake in ubs securities from beijing's state owned asset management and it would sell its 51% position in credit suisse. it adds a twist to the bidding process with ant group and citadel vying for the venture. still to come, blackstone deal

to a cosmetics detailer looks to turn private after 14 years of the hong kong stock exchange. details coming up, this is bloomberg. ♪

♪ >> bloomberg learned blackstone is nearing a deal to take a cosmetics firm private, ending the company's 14 year run on the hong kong stock exchange. let's bring in manual. what is behind the deal? manual: what an interesting deal

with a well-known brand globally. behind the deal is trying to take advantage of a low valuation in. but potentially release the company somewhere else, hoping to get higher evaluation down the road. it's a theme we have seen, ongoing theme given low valuations for hong kong listed firms. haslinda: will i guess the question is can blackstone do it? can they pulled it off? manual: yes, we need to bear in mind that the german company that owns more than 70% of the company is driving the deal and

he is working with blackstone to kind of like provide some financing and try to get together in a financing package to pull it off. so this is the chairman working with blackstone to put together a deal so they can take the company private. conditions are good and they may work it out. haslinda: mm. might this be start of a trend of more entities considering going private? >> given valuations have been low, i think owners and shareholders are coming to terms and realizing that these values are here tuesday perhaps.

coming to terms and understanding that perhaps it makes sense to go private and turnaround the business and look for a higher evaluation. haslinda: thank you for the update, deals reporter manual in hong kong. here are some top stories were following around the world. israeli officials say progress has been made in negotiations in gaza to include release of hostages and palestinian prisoners. israel has reached a point for difficult decisions on returning hostages. israelis says a meeting of the security cabinet has been called for tuesday. germany is forging ahead with a military overhaul of $4.6 million. they want to order hundreds of

transport vehicles and navy frigates as part of the push to modernize the military. it requires approval from lawmakers in parliament. japanese prime minister is in the u.s. for a state visit including a meeting with president joe biden and speech to congress on thursday. they're expected to undertake efforts to strengthen the alliance with the u.s. and divisive issues like napalm steals takeover bid of u.s. steel are off the agenda. it here with us, this is bloomberg. ♪

♪ >> let's talk crypto. ethereum has grabbed the spotlight after the biggest jump in more than a month. speculation to start etf's for the token, i asked caroline whether regulators should treat assets as commodities or securities. >> we need to get this settled and i would love to see us have cooperative working arrangements like we've done in the past including joint task forces or public roundtables to have a dialogue about this and how change in interpretation can

have devastating impact on markets that have been in place since 2017. haslinda: the other topic is bitcoin etf's. where are we? >> it is interesting because there is a portion of the options market regulated by the state. when we look at different innovations, it is important for regulators whether u.s. or u.s. and non-us, to make sure we have a system that will promote access to markets and address opportunities or regulatory gaps where you could have fraud. haslinda: what is the likely outcome? market participants save this is a hedge against risk, against volatility.

it is essential, it is required. >> people forget derivatives are risk transfer. they take the opposite position and provide hedges against cash or spot positions, so it's important to have a functioning derivatives market with strong regulation. the rules for derivative markets, it is the same. haslinda: what is your biggest concern? caroline: when you have speculative activity, it's more important for regulators to look for anything unusual as far as market activity. we do this for all commodities markets, whether it is energy, metals, brain.

and whether or not it is bitcoin. haslinda: there are bills to regulate currency. what are the chances of them getting past? caroline: congress oversees me so i am pleased congress is working on a solution and we will have to see what happens. haslinda: which are the most significant? caroline: in the house there is a bill called for 21 that would result market structure issues between jurisdictional lines so that gets a lot of attention. haslinda: there are gaps in regulation, what do you make of those and how do we ridge those because there needs to be a global regulatory environment. caroline: it's important jurisdictions are moving to

implementation phase of the international standards. you seem jurisdictions across europe, asia and so on working toward implementing standards into their own national laws and regulations and what i have been doing, we have come out with the cutting edge digital asset taxonomy to reach policymakers and establish foundational concepts that promote alignment of u.s. to international standards. haslinda: that was the commissioner of the u.s. futures trading commission. and speaking of currencies, either grabbing the headline, posing as biggest move in more than one month it surged. speculation about starting u.s. etf's for ease there, the

second-largest digital asset at 3710 and eve there is 62% year on year gain is closing in on bitcoin 68% rally. continuing live coverage from the hsbc global summit. tesla cofounder martin everhart joins us to discuss his outlook for ev's. that is it from bloomberg markets: asia. this is bloomberg. ♪

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♪ >> boot morning, this is daybreak euro and i am lizzy burden in london. asian stocks are higher as focus turns to inflation data. treasuries