Although.
Good morning. Welcome to DAYBREAK Australia.
I'm Heidi Stroud. What's in Sydney?
We're counting down to Asia's major market open.
Good evening from bloomberg world headquarters in New york, I'm Vonnie
Quinn. The top stories this hour, a volatile
session on wall Street with stocks and bonds gyrating as a US inflation pickup
temper is bets on a Fed rate cut in March.
Also ahead, Bloomberg learns that a national security review of the US steel
takeover by Nippon Steel could last much longer than the companies have signaled.
And I'm Yvonne Man reporting live from Taipei.
The day before an election set to give investors their first major geopolitical
test of the year. Let's get a quick check on Wall Street
and where the session ended. Just a few points either way for major
indices. So the S&P 500 down just three points, a
fraction of a percent. The NASDAQ 100 up 2/10 of 1%.
But it was a very volatile day with very small ranges for the most part.
This after the inflation pick up, the ten year yield perhaps showing more of a
reaction, in fact, down about five basis points now below 4%, which is key to
three 9658. And then we had Iran seizing an oil
tanker in the Gulf of Oman, and that sent oil prices higher.
But we still around the $72 a barrel mark for WTI crude.
For more now on the U.S. inflation trend, let's bring in
Bloomberg's global economics correspondent, Andy Curran, who's in
Washington, D.C.. So end the Fed will be concerned about
some of the underlying measures, such as shelter, inflation, How concerned?
It wasn't a great inflation reading. Prices for housing, for energy, for used
cars, for airline tickets. All were ticked higher in December.
In fact, prices for auto insurance in all of 2023 rose by the most since 1976.
So the data for December suggested that the kind of US disinflation story seemed
to have lost some momentum over December.
There's still some stickiness in the system, as economists describe it.
And this is where it does kind of concern that it may be the sort of the
expectation that prices for goods and services would come off the boil as
every month went by. Will, Maybe that's not such a surefire
bet. As you say, the core core reading that
the Fed likes to look at that seems to be heading in the right direction, or at
least not taking off, not really any kind of major alarm bells for the Fed.
It's only one month of data. It doesn't suggest that this inflation
story in the US is over, but at the very least, I think it does give pause for
the whole time. The whole idea that US inflation is
heading back to the target, heading back to pretty quickly.
And of course the question is how this feeds into Fed expectations.
Right. We heard from Loretta mester a little
bit earlier. Take a listen.
Think March is probably too early in my estimation, for a rate decline because I
think we need to see some more evidence. I think the December CPI report just
shows there's more work to do and that work is going to take restrictive
monetary policy. And do you think that really does
suggest that there is further to go and that perhaps there's now moral more of
an argument for the camp of staying higher for longer out of caution?
Well, I think at the very least it pushes back against this idea that the
Fed were going to cut rates in March. Some.
Some big houses out there and Wall Street, including Goldman Sachs, were
reckoning. A rate cut could come as soon as then.
But analysts look at these numbers and I think it'd be hard to justify a rate cut
given given the figures that we got today.
Like we had some Fed speakers out, like you mentioned, Loretta mester, one of
those making the point that it's probably too soon to be talking about
that. And remember, Ms..
Mester is among those who is expecting rate cuts this year.
Wales and Thomas Barkin at make the point he needs to be convinced that
inflation is heading back down towards 2% target as well.
Like I say, it's only one data set for December.
It doesn't necessarily mean the US disinflation story is over, but I do
think it gives pause to the rate cut debate and probably at the very least
suggests that the Fed won't be moving sooner and moving more towards that
midyear pointed out seem to be to take from a lot of economists following this
story today. Bloomberg's global economics
correspondent indicated that in Washington.
Let's get some more perspective with Ahmed Rezko, who is the chief investment
officer and senior. Great to have you with us.
What do you make of this rating? It feeds into Fed expectations.
Does it kind of underscore the ways that investors and markets have gotten ahead
of themselves? Look, unfortunately, I don't think one
print and especially this print has not really change the narrative so much.
We're still in a disinflation trend in the United States.
But I do think that it's going to at least raise some eyebrows at the Fed and
among investors into perhaps thinking that they have been a little bit too
exuberant in pricing and too many rate cuts from the Fed.
At this point, the market's pricing in roughly 150 basis points of rate cuts
from the Fed. That's more than double what the Fed
itself has told you that they want to do or project to do for next year.
So I think at the very least, it gives us pause.
But I don't think it's enough to change the current trajectory that we're on
right now. We've already entered a period where
we've seen valuations extremely high profit margins potentially coming under
pressure. So where do you see opportunities given
a lot of the uncertainties that are at play here?
Well, we think for opportunities for this year, you really have to look at
some of the the losers from last year, at least not as big of the winners from
last year. Remember last year?
Yes, the S&P was up 26% and a lot of investors kind of get caught up with
that number. But the underlying trend was one of
concentration of of returns among a few names.
In fact, if you strip out of the top seven names, the index didn't do or
didn't have nearly as part of a year. So I think for investors, they want to
remain in or at least want to deploy new capital in some of those more being down
sectors, some of the sectors and companies that did not participate in
the rally last year. Okay.
Or do you still prefer us over
international? We do.
And part of the reason why I know that the U.S.
is a lot more expensive on across many metrics is not just relative valuation,
but across many metrics. The reason why we're sticking to our
call with overweight in U.S. versus other sectors is because we do
think that there is a greater than what the market is currently expecting
probability of a recession next year, a mild one.
And in those cases, U.S. markets and U.S.
assets tend to outperform. So that's really the core reason for
that. What about the markets?
Where are you seeing opportunities across bonds, across fixed income.
What does your sort of portfolio look like going into 2024?
Yeah, so that's our favorite place to be right now.
I got to tell you, the Treasury market, especially the long duration Treasury
market, is where we want to be because we think in either instance, whether we
enter a recession or mild recession towards the back end of 2024 or whether
we just narrowly escaped one through a soft landing.
I think the long bond, the longer dated U.S.
Treasuries are the place to be, because in the first instance, let's say there
is no recession, you will at least find the carry or receive the carry from that
trade. We think fair value in case of no
recession for the U.S., ten year is somewhere between 3.6 3.8%.
And in case of a recession, we do think the ten year will fall slightly below
3%. So I think in either instance, if you're
going to deploy fresh new capital today, our highest conviction trade is in
longer dated U.S. treasuries.
In other parts of the fixed income market, we're preferring investment
grade over high yield. We've done analysis of asset price
movements in and around the last hikes from the Fed and the first rate cuts.
And in all instances, we find that investment grade and higher grade
corporates tend to outperform high yield.
So we would prefer investment grade over high yield, but specifically focused on
the rate market. We like longer dated U.S.
Treasuries. How focused are you on geopolitics as a
main risk this year? Yeah, we think it's a major risk.
And actually, we think the main geopolitical risk is not where most
people are focused on right now, which is in the Middle East, although we do
think that that's a source of risk. We think the United States is actually
most likely to be the biggest source of geopolitical risk this year.
We're really focused on the U.S. elections here in November.
And let me tell you why. We're at a point in the United States
where the country, as we all know, is evenly divided.
It's very well polarized. That is well known.
But what is, I think less understood is that half of the country sees the other
half of the country as an existential risk to the country, which means no
matter what the outcome, whether Biden wins or whether Trump wins, we're
expecting a lot of civil unrest, uncertainty, perhaps even protests and
violence, no matter what the outcome is. And of course, depending upon who wins,
there will be political ramifications, mostly in the foreign policy space that
we have to closely monitor. But we think the U.S.
what could potentially be the biggest source of geopolitical risk for 2024.
Yeah, which is interesting because, you know, I'm sure you, alongside a lot of
other investors, would would see that as perhaps ironically translating to to
haven demand for US stocks and the US dollar.
Yes, that's right. I mean, remember, at the end of the day,
the dollar really is just the cleanest dirty shirt out there.
Remember the dollar? Unlike other currencies and other bond
markets, people own it not necessarily because they want to, because they have
to. It's the most it's the deepest and
liquid and most liquid bond market in the world.
So in moments of crisis, it still retains its safe haven status, although
it will do so less on the margin than it has in the past.
So we're definitely complementing our safe haven plays with other assets like
one that we particularly like a lot is gold.
I'm address Guy is a chief investment officer at Insignia.
Let's take a look at how Asia markets are shaping up as we head into the
weekend, this final Friday, Friday. This is the fray, I should say, as we
set up the picture here in Sydney. We're seeing a little bit of downside
pressure there when it comes to trading going into the cash session in about 50
minutes or so off by just about half a percent.
We're seeing the Aussie dollar more or less on the front foot at the moment, 66
and 19, we were trading shy of that 67 level.
We did see the US dollar really kind of easing, reversing some of those gains
alongside Treasury yields falling after markets in a lot of respects, largely
kind of downplayed that faster than expected US consumer inflation report
for December. We saw the Bloomberg dollar index easing
just about a 10th of 1%. We saw a rise of less than half a
percent after the CPI release there as well.
Taking a look at what we're expecting when it comes to the start of trading
across major Asian markets. And it is a bit of a mixed picture
there. We already have New Zealand Online off
by about a 10th of 1%. We could see, Vonnie, just a mirroring
of what was really a volatile session on Wall Street overnight, that kind of
whipsaw price action.
Right. As as traders will continue to try and
decipher what this one inflation print means to these fed expectations.
Exactly right. And let's not forget we get another one
in the Friday session, right. With PPE, which also has elements that
plays into the whole thing. Coming up, we'll take you live to the
Morgan Stanley Global Alpha Investments conference in Hong Kong.
The event brings together investors and top leaders in business and finance.
You can catch our conversation with Morgan Stanley's head of APAC Wealth
Management in the next hour. But first, voters in Taiwan preparing to
pick their next leader in an election that could change the course of US-China
relations. We're live in Taipei, next.
This is Bloomberg. No, she won't.
I hope that after I'm elected president, China will understand that peaceful
development is the responsibility of both sides as well.
Taiwan will not change its position of friendship, the hope for cooperation,
peace and prosperity. The two needs.
Well, first, we must have sufficient national defense capabilities.
Second, we need to tell China that we are willing to have dialogue with you.
They might look friendly to us. But does this mean that we stop
preparing for war? This is too dangerous.
Too dangerous. I wonder, Angie, when the Taiwan
security issue is a problem for the whole world.
Peace and stability across the Taiwan Strait are necessary elements for global
security and prosperity. So beginning during my tenure, I will
not tackle the issues of unification. I will not tackle the unification issue
during my tenure. cross-Strait relations should not only
rely on one side, it was off on those. Why do you worry about what will happen
30 years from now? At least I understand that Taiwanese
people do not want reunification within ten years.
The three contenders to be Taiwan's next president are speaking ahead of
Saturday's election. It's a vote that carries serious
implications for geopolitics, trade and investment.
Joining us now from Taipei is Bloomberg Markets co-anchor Yvonne Man.
And so, Yvonne, plenty of reasons for a global interest in this election,
obviously. Yeah.
And I think that the amount of global interest we've had seen leading up to
this election is something that we really haven't seen in many years.
And in fact, this is one of the most hotly contested elections we've seen in
decades. And you got to ask why.
And what's really at stake here? And I think it's because of this high
level of tension between the U.S. and China.
Now, you have Taiwan's position, of course, in key supply chains like the
chip industry. That certainly is leading to a lot of
implications of what the outcome could be.
And what does it mean for the global economy as well?
And then you got to wonder, right, this is a chance for the Taiwanese voters to
decide what the future of Taiwan is going to be.
Is this one that is going to be closer with with China, which is exactly what
the opposition parties, the KMT and TPP, are vowing for what you heard just now?
Or is it a chance to fight for democracy with, of course, the US backing, which
would set the course for the DPP to win a third term in a row, which is
something that we haven't seen before here in Taiwan.
Ivan, are we seeing any signs of Beijing trying to meddle in this election?
And how does that potentially play out with the result on Saturday?
Yeah. You guys have been reporting about some
of this, right? Some some indications that we've seen
that China is trying to interfere in this election and everything in the form
of Chinese balloons, which we've seen have passed by across the media line of
the Taiwan Straits almost every single day this month.
Also, some even flying around the island as well.
And then there's forms of sort of economic coercion, Right.
With Beijing suspending some of these tariff concessions on some Taiwanese
products and warning that more could come.
Then you've seen some maybe perhaps dirtier tactics out there.
Of course, we can't verify where they came from, but even just fake videos of
president tying one has have been surfacing online as well.
So, you know, this is something that I think Taiwanese voters are used to.
We've seen this in the past. So certainly there is still a level of
discussion here of how far Beijing will go in interfering further or even
showing their displeasure if the DPP, in fact, wins another term.
It's hard to say at this point, right, because, you know, there is a sense
that, you know, of this whole San Francisco sentiment that President Xi
Jinping wants to maintain the sort of optimism that carried on in November
after meeting with President Biden and then again, also China going through a
lot when it comes domestically in its economy right now.
Does it have the capacity to continue and talking and interfering in Taiwan?
That's also up for debate. We had President Tsai was saying maybe
China right now to consume domestically, to even think about, you know, some sort
of invasion with Taiwan also. So certainly, you know, there are limits
to all this. Maybe no drastic actions in terms of the
Beijing response. But certainly I think it's safe to say
we could still see some pressure applied by Beijing in the next coming days or
weeks. It's interesting, though, Ivan, isn't
it? Because, you know, most elections are,
at least in some part, about pocketbook issues, but this one seems different.
Is it just about China, this particular election, or are there other domestic
factors at play? I mean, that certainly is a key
narrative in the headlines here. US-China relations, cross-strait
relations. That's what the global I think
Investment Committee is very, very attuned to here right now.
If you ask the local mom and pop here in Taiwan, what matters to them.
Yes, China is important. But let's keep in mind, this is also an
election that we have to talk about the economy as well.
Domestic issues, right. This is a Taiwanese population that is
also among many economies dealing with a cost of living issue.
Inflation is high. Wage growth has not picked up.
In fact, it's been slower than expected as well.
And housing affordability is certainly a key issue here in Taiwan.
So I think especially when it comes to some of the young voters here, I think
they make up about a fifth of the population.
It's not so much about China in some ways, but also about the economy, which
has shown some signs of fragility here as well.
The government was talking about their growth forecasts for last year.
It's about less than one and a half percent, which is the slowest we've seen
since the global financial crisis. Yeah.
Bloomberg Markets going to have our man there on the ground for us in Taipei
ahead of that key vote this weekend. We'll get more expert analysis, too, in
the next few hours as we count down to Saturday's vote.
That's in addition to those full results and analysis from Monday.
This is Bloomberg. These are the US National Security
Review of Nippon Steel's takeover of US Steel is likely to last until late this
year and possibly into 2025. Bloomberg Su Keenan joins us now.
And so that's a lot longer than the companies have publicly indicated.
Yeah, this defies the indications. We initially heard from both Nippon
Steel and US Steel saying that the $14.1 billion deal would likely be completed
by the end of the summer. In fact, U.S.
Steel CEO reinforced this in a December earnings call completion by the second
or third quarter. Sources close to the matter, however,
tell Bloomberg that a national security review unlikely to conclude until late
this year at the earliest. Bloomberg's report, as you saw,
initially knocked shares of the US steel company down by almost 4% before they
pared those losses. Scrutiny by the secretive Committee on
Foreign Investment in the US, as it's called, is in its early stages,
according to sources. The special inter-agency panel, which is
led by the Treasury Department, has the power to approve, block or amend deal on
national security grounds, or they can send it back to President Joe Biden for
decision from the Oval Office. Again, while the precise timing of the
review means unclear, people close to the process said they expected it to
take about a year or longer and that the process can really lurch ahead or be
delayed due to legal wrangling, as is typical of a review of this kind where
you have a buyer from Japan or any other foreign company country.
So tell us about the concerns that this deal could have as we head into an
election year. You have involved the vote, right?
That's where it gets complicated, because US Steel is located in
Pennsylvania, which is not only a battleground state in terms of the
election. It's also where Biden was born.
It's also a heavy union state. We know the union initially and has
vocally opposed this deal. Nippon, The plans immediately touched
off calls from both Biden supporters and Democratic lawmakers for a close review
of the deal. Last month, the Biden White House said
the deal deserved, quote, serious scrutiny.
And that's a call that earned praise from the United Steelworkers Union
again. They have been opposing the deal from
the moment it was announced. Now, Trump has said Biden's policies
have weakened the US economy. So that's become an election issue.
And two senior administration officials tell Bloomberg they expect the review to
be on the longer side of typical reviews.
And these are typically done in secrecy. So there's not much information that
will be becoming available. There has been no comment from Nippon or
executives at U.S. Steel.
Back to you. Bloomberg's Su Keenan there.
Sue. Thank you.
Other corporate stories we're tracking this hour.
US air transport regulators have opened a formal investigation into Boeing's
production operations following last week's midair indoor blowout.
The FAA says Boeing needs to comply with the high safety standards that they're
legally accountable to meet. Regulators grounded 171 of the 737 max
nine jets in operation, prompting airlines to cancel hundreds of flights.
Airbus set a sales record in 2023, racking up more than 2000 net orders in
what has been one of the most active purchasing periods in aviation history.
The sales were driven largely by the plane maker's Mega-deals with India's
Indigo Air India and Turkish Airlines. Airbus also beat its annual delivery
target by achieving 735 handovers. Reuters is reporting that Tesla will
suspend most car production at its factory near Berlin from January 29th to
February 11th. The moves stem from a lack of components
due to shifts in transport routes because of the armed conflict in the Red
Sea. Chinese automaker Geely had also warned
last week that its sales were likely to be affected by shipping delays.
Tesla down about three quarters of a percent now in post-market trading.
Plenty more to come right here on DAYBREAK Australia.
Do stay with us. This is Bloomberg. We do have breaking news when it comes
to a response to these ongoing attacks in the Red Sea by Yemen's Houthi rebels.
We are hearing that the UK prime minister, Rishi Sunak, has authorized
joint military strikes with the US against Houthi rebels in Yemen and his
cabinet has approved that action. That's according to a person familiar
with the matter speaking. The allies looking to deter further
attacks on commercial vessels that have been taking place increasingly in the
Red Sea. So next cabinet approving that decision
on a conference call on Thursday. Airstrikes are now possible as soon as
later in the evening, according to that person familiar with the matter who
asked not to be identified discussing these private conversations.
So that's office has declined to comment for now.
We're seeking more details. But the US and the UK had earlier warned
the Houthis of unspecified consequences if they keep up that string of attacks
against these trading vessels and ships passing through the vital shipping
route. We saw earlier on Thursday the Houthis
firing a ballistic missile in the Gulf of Aden in what US officials say was now
the 27th attack on commercial shipping by the group since November 19th.
We also saw reaction from the Houthi leader as well, saying they're vowing a
big response to any U.S. military attack.
The leader of the group threatening, quote, that big response to the US and
its allies if they indeed proceed with military action against his group, will
confront the American aggression, according to Abdul Malik al-Houthi in a
speech on television on Thursday. He says any American attack won't go
unpunished. We're now hearing, according to a
source, that UK Prime Minister Rishi Sunak has authorized joint military
strikes with the US against Houthi rebels in Yemen, and his cabinet has
approved that decision. We'll get more details, Bonnie, of
course, on this breaking story as we get them.
Exactly. Needing authorization in order to
announce it. Well, turning to another top story, the
pick up in US inflation tempering bets on a Fed rate cut in March.
Here's what some guests on Bloomberg earlier had to say on the latest data.
CPI coming in hotter than expected. CEOs are already complaining about
inflation. They're saying the cost of doing
business is higher. That has proven to be very sticky
because of wage inflation. From wage increases to higher interest
rates. This economy is rebalancing.
The labour market is rebalancing. It's not a sprint.
This is a marathon that still puts us on a downward trajectory for inflation.
We think that the Fed probably won't start cutting rates until around June.
They're going to have to be patient. They're going to have to wait.
Push back. The timing of the Fed's first interest
rate cut likely not six rate cuts, with the first one starting in March of 2024.
And the key thing will be the course of inflation.
We see less rate cuts and we see them starting later because the Fed needs
more data around inflation easing. Well, joining us now is Gregory Daco,
chief economist at EY. Why?
Gregory, thanks so much for joining. Does this prove that whatever about rate
cuts, the last mile on inflation is going to be more difficult?
I don't think so. I don't think the last mile will be the
most difficult. I think we will see bumpiness and we're
seeing that in the latest December data. There is going to be some upward
movement even as we remain on this strong disinflationary trajectory.
I think there are ongoing forces that will continue to push towards more
disinflation as we navigate through 2024.
There is an environment where final demand growth is easing.
We are seeing an environment in which rent disinflation is likely to pick up.
And we're also in an environment where monetary policy remains quite
restrictive. We should not forget that all of those
factors should provide to be the ideal combo to really push inflation lower
over the course of the next few months. It's interesting, though, because
shelter prices rose 0.5 percent. Super core services, another one, the
Fed watchers say 0.4 percent, so the same as the previous month, roughly.
That's not a great sign. Is this, Greg?
Not a great sign. We're yet to see the full
disinflationary momentum when it comes to shelter cost inflation.
But that actually is one of the reassuring factors because one of the
key drivers right now of inflation is the fact that shelter costs, inflation
remains quite high. But if we look at some of the real time
data in terms of rent price inflation, in terms of home prices, we are seeing
that disinflation having materialized. It takes a bit of time to feed through
into the CPI data. There is a lag because the CPI data is
not just new rents but existing rents as well.
So that is actually a reassuring factor. We know that disinflationary momentum
will feed through over time and will lead to lower inflation as we navigate
through the rest of the year. So we'll be at 2% by the end of this
year without too much difficulty. The key question is whether we see some
renewed pressures on the supply side, some potential geopolitical risks.
Those are all risks that we could see lead to higher inflation.
But if. That does not materialize.
We're on a strong disinflationary trend. What would it take, Gregory, for those
geopolitical risks to have an impact? I mean, we are seeing definitely some
disturbances, let's say. Would they have to escalate in large
fashion in order for them to have an influence or would skirmishes like what
we're seeing be enough while we are in a supply constrained
world? And I think that's one of the realities
that we have to deal with that business leaders have to deal with in this
post-COVID environment. We're still in an economy that is
globally rebalancing, both on the supply side as well as on the capital side.
And that means that any minor shock to supply can have disproportionately
larger effects. Now, what we're seeing in the Middle
East and disruptions in terms of trade routes does have a cost does lead to
supply disruptions that will feed through to inflation.
But it's going to be regional and dependent on how long and how severe
these disruptions are. I think what we're seeing right now
could have an impact on European inflation, maybe a little bit to a
lesser degree on U.S. inflation.
But we would need to see much more contagion of the conflict in the Middle
East to see a broader and more significant impact on global
inflationary trends. And, of course, oil price developments
would be a key catalyst in terms of guiding the potential shocks in terms of
inflation. Yeah, Reuters reporting earlier that
Tesla will hold most Berlin site output in terms of its Teslas because of the
Red Sea conflict, credit card delinquencies.
We got that number today as well. And they're now at a decade high,
according to a Fed study. How concerned are you, Greg, about the
US consumer? Well, I think we have to be careful in
how we analyze the US consumer. We're still in an environment where the
key driver of consumer spending activity remains income.
And one of the interesting facets of the consumer, as the consumer trajectory in
the U.S. has been its resilience, we have seen
that over the course of the past 12 months, despite a historic tightening
cycle, despite these geopolitical tensions, despite credit concerns, we
have continue to see consumer spending. The key reason being labor market
resilience. We have not seen a retrenchment in
employment, and that remains the key pillar of income and in turn, spending.
So, yes, there are some cracks in the foundation of household balance sheets,
but we started this COVID crisis with healthy balance sheets on the household
side as well as on the corporate side. And that has prevented much more
retrenchment in terms of spending and in terms of investment.
So it is something to monitor, especially for lower income families.
But as of this stage, the fact that income remains on a fairly moderate but
positive trend is a positive factor for sure.
We also saw initial jobless claims and continuing claims remaining low today.
Greg, thank you so much for your time today.
That's Gregory Daco, chief economist at EY.
Why? Heidi?
And very few are in Sydney at the moment.
You'd be forgiven for being confused as to whether this is Australia, whether in
Singapore and Hong Kong. Such is the level of humidity this
summer. And you know, the country was really
bracing for a summer of potentially destructive wildfires.
Instead, we've seen wild storms, heavy rains that have flooded homes and
destroyed crops and begs. Paul Allen joins us now.
And it's also been like, you know, four seasons in one day, right.
Sunny, one moment and then hailing the next.
In the last few weeks, what's been the impact across industry, Across
agriculture? Yeah, this was most unexpected.
As you say. We were bracing for what was potentially
going to be a very severe fire season. And it's been exactly the opposite.
Pretty much The state of Victoria has been having a lot of floods.
It's been the wettest start of a year on record since records began in 1900 and
Victoria. So a lot of damage to fruit orchards.
The wheat harvest is going to be delayed and if we look further north to
Queensland, they've already had one cyclone, not unusual for this time of
year, but another is brewing. There's been reports of some sugar
farmers losing up to 60% of their crops. Rail infrastructure associated with
sugar has also been damaged. So if we take a look at some of the
insurers, we've got claims rolling in the damage bill's likely to be in the
billions. And of course for insurers, floods are a
whole lot worse than fires because fires just tend to burn vegetation.
Floods affect a great deal of for infrastructure, so the damage bill is
going to be pretty bad. Sounds miserable for very, very many
people. Paul, what's causing this?
When will Australia get some relief? Yeah, well, we do in terms of the cause,
we have the return of El Nino after three successive La Nina and that's a
term many people would be familiar with. Less familiar is a phenomenon known as
the Indian Ocean dipole that was meant to be strong as well.
So those two combined was meant to bring these hot, dry conditions and create a
severe fire season. But we've got a third one for you that
we can all now stroke at chins and not wisely about.
And that's the southern annular mode, which a lot of people might not have
heard about before. But that's really nullified both.
And it's bringing a lot of this warm, moist air.
And as Heidi mentioned, Sydney's like Singapore at the moment.
It's had its most humid day on record yesterday and today is the same and it's
going to keep going for a while. So it all sort of begs the question how
did the forecasters get it so wrong? And we've had the Agriculture Minister,
Murray Watt, defending the Met Office saying, look, climate change has meant
traditional forecasting models are just breaking down, they're not really
working anymore. So it's making it very, very hard to
forecast and get the sorts of warnings that we have become accustomed to.
Paul Allen Here in very humid Sydney, you can get a roundup of the stories you
need to know to get your day going. In today's edition of DAYBREAK,
Bloomberg subscribers can find that debris go on their terminals.
It's also on the mobile in the Bloomberg Anywhere app.
You can customize those settings as well so you just get the news on the
industries and the assets that matter to you.
This is Bloomberg. UK Prime Minister Rishi Sunak has
authorised joint military strikes with the United States against Houthi rebels
in Yemen. We learned his cabinet approved the move
Thursday. The group have been attacking ships in
the Red Sea for almost two months now. For more, Bloomberg's Nick Wadhams
joins. So this is procedural, right?
Nikki had to get permission in order to announce what exactly has been
announced. Well, what we know, nothing has actually
been announced so far. This is what we're hearing from people
familiar with the situation that Prime Minister Sunak has authorized strikes
with the US. We've known for some time the US and the
UK have both threatened what they say will be consequences for the continued
barrage by the Houthis against commercial ships in the Red Sea.
And after you had the heaviest barrage yet a couple of days ago, 21 drones and
missiles by the Houthis that were shot down by both US and UK ships in the
region, essentially they were forced to respond.
So it's appears that is likely in the next hours or days.
Nick, what about retaliation? Because we've already heard from the
leader of the Who days that what they call American aggression will be
responded to forcefully. Right.
I mean, that's the big question. So everything we've heard so far from
the Houthies is that they will be undeterred by any potential military
action. Obviously, we're trying to determine
what form that action would take, how extensive it would be, how how wide
ranging across Yemen. But, you know, this has been an issue
with the Houthis for some time. And Saudi Arabia has been engaged in a
war against the Houthis for several years now.
And the group has only continued to expand and expand its foothold in Yemen.
So deterrence efforts and efforts to really roll them back so far have not
succeeded. And it's a big question facing
policymakers, and it's why we've been waiting for so long for them to take
action, because they don't want to do so much that the conflict in the region
would expand to an even wider war. But they do want to get the Houthis to
stop what they're doing. Yeah, I mean, this is really complicated
because there are several countries in that coalition that wouldn't want to
have any part of this. Right.
Right. But potentially, France would want to do
something on its own or wouldn't want to have Spain.
Qatar has said, you know, do not get involved like this.
This is going to be very serious for the region.
So this is a very serious action that potentially the UK and US might take.
Will other countries join or will it just be a bilateral action?
Well, I think, you know, certainly at this stage you would only see bilateral
action. Other countries in that maritime task
force that were that was established late last month.
I mean, they were so concerned about the optics of being associated with that
task force that some didn't even want their names to be known.
They didn't want it to be publicly announced that they had joined the task
force. So there's a lot of sensitivity there.
I think what you're going to see is if these strikes do go ahead would be a
very explicit statement on the behalf of the UK and the US that they are doing
this separately from the task force, which is really, they say, a defensive
measure aimed at protecting ships and not very intentionally not the grouping
that would be going after the Houthis. And that's U.S.
national security at a ten day quorum with the latest.
Another story when it comes to geopolitics were moderate monitoring.
Papua New Guinea has declared a state of emergency after violent protests this
week in the two biggest cities. Australia's ABC says at least 16 people
were killed in Lucy, an arson attacks. The violence began when police and
defence officials appeared to walk off the job over what they're saying was an
unexpected pay cut. The Government says an era was due to a
computer glitch promising to fix the problem.
The violence comes amid high unemployment and a rising cost of living
in the country. Well, you can watch us live and catch
our past interviews on our interactive TV function.
That's at TV Guide. You can also dive into any of the
securities, all of them. But functions we talk about must become
part of the conversation by sending us instant messages during our shows.
This is for terminal subscribers only to check it out.
It is at TV. Go.
This is Bloomberg. You're watching Typekit Australia and of
course a real test, in fact, probably the first test when it comes to the
appetite for geopolitical risk for markets and investors as we head into
what is a key year of elections in 2024. And of course looking ahead to the vote
in Taiwan on Saturday. Beijing is a huge part of this when it
comes to those cross-strait relations. And we're seeing that sort of expressed
when it comes to some of these Taiwanese assets as well.
It's interesting that we're seeing traders most bullish on the Taiwan
dollar at the moment in 16 years, even as the broader world really continues to
fret about the geopolitical implications of the upcoming election.
Investors, at least via this proxy, is looking more or less on fast currency
options, looking like the most bullish on the Taiwan dollar in about six years.
So suggesting that at least when it comes to markets, the bet is on the
status quo being maintained regardless of that election or tech obviously is
the other big issue when it comes to Taiwan.
Markets and Taiwanese computer maker Icis is expecting PCs powered by
artificial intelligence to become the biggest driver of demand in the coming
years. We spoke exclusively to the co CEO as Y
SU in the lead up to this weekend's election.
He told us how the company plans to recovery recover, I should say, from a
difficult couple of years. At 22 and 23 is some kind of tragedy
because we prepare a lot of material and the goods.
But after the coffee, because the demands suddenly disappear.
So we spend some more time to clean our stock.
Too much inventory? Yes.
Yes. So the first half of 23 is not good for
us. But after we can see our stock and the
market back to normal. So actually, in the second half of the
year of 23, we are getting back to normal.
And actually in this year. Q three, we give a relative very good
performance. What's going to be the drivers for that
rebound that you talked about? Actually, I think of course in the 24
the IPO would become a very hot topic because after the opening they released
the TPP. I think everyone wants the A capability
is a high pieces. Are they going to be a big driver for
the industry going forward? I think I've seen some of the quotes
coming from your company saying it's still going to be, at least in the next
couple of years, a very small part of shipments, maybe about 3%.
Do you have a kind of a projection of that, the number of units that will be
shipped with AI capabilities if you are talking about this year of cars?
Because just as I mentioned, the IPC includes several different factor, the
highway software and always because the in Microsoft they released the always in
the second half. So I think in this year the PC you where
ship to the market it will be in Q4 so the total number will be limited.
And so I think in this year, the APEC share may be around low single digit and
maybe in the next year, this year for APEC around maybe high single digit, and
they will need maybe two or three year to become more mature and the more
popular. Obviously, the supply chain has been a
big issue over the last couple of years. That is absolutely exacerbated by the
US-China difficulties geopolitically. Are you moving production to Indian
suppliers from China or is it simply adding in India in addition to what you
already have in China? Actually, because the source is the
brand. So most of production line we are cold
walk with our items upon a. So actually a lot of VMs because the
geopolitical issue some customer they already asked them to have the different
production side so it would depend on the customer's requirement for example
some US customer they are request the manufacture line
have limitation. We cannot use the factory in China.
So we would ask our EMS to support that kind of deal in different factory.
I know we're not going to talk about who you want in the election to win.
We're not here to talk about the politics, obviously.
But what would you like to see, regardless of the outcome or regardless
of which party wins, what would be the business friendly outcome that you would
most likely want to see going forward? Actually, I think either TPP all came to
win the election. I think the one
who win and when they take the new position, they always want to have the
very good economic and business development in Taiwan.
So I think everyone, when they take that position, they will try to provide a
very stable and a healthy environment to help the enterprise to develop and to
have the good business and economic status in Taiwan.
SS co-CEO S.Y. SU, speaking exclusively with
Bloomberg's Stephen Engle and our special live coverage from
Taiwan, continues in the lead up to Saturday's vote.
We'll have full results and analysis on Monday.
