Welcome to DAYBREAK Australia.I'm Heidi Star votes in Sydney. We're counting down to Asia's majormarket opens Iron Man about rulers in Hong Kong.The top stories this hour. Asian stocks face pressure after WallStreet's fourth session of declines. That's the longest losing run sinceJanuary. Dip buyers, though, emerging in theTreasurys market. President Biden works to win the votesof union workers promising us steel will stay American owned.And saying he may. Triple tariffs on Chinese importsand investors are waiting.
TSMC earnings with its CapEx outlook thekey to potentially extending a $340 billion stock surge.Take a look at how we're setting up when it comes to the start of trading in thispart of the world. And of course, we're hour away from thestart of trading in Australia, Japan, and also, of course, looking ahead totrading in the Chinese markets as well, given those threats of potentially moreserious tariff implications from President Biden.But take a look at futures for Sydney. We're looking like a little bit ofupside, about 3/10 of 1% higher. We are getting labor market data out alittle bit later, expected to show.
Employment falling in March.We had that big surge in February. We're expecting about a 25,000 jobdecrease, according to Bloomberg Economics.We're also getting BHP and Santos reporting their quarterly numbers aswell. So watching out for those when tradingbegins. Kiwi stocks already down by just about1%. We're seeing a pretty muted session forthe Chicago Nikkei futures at the moment.But as I said, we're sort of watching to see broadly about Asian stocks comingunder pressure after we saw US stocks.
Just extending that losing streak.Yeah, actually, the longest losing streak, as we said we've seen sinceJanuary. Interesting session as well.You've got futures here just coming online, fairly muted at this point intime. But it was that story of, yes, anotherday of weakness. So the S&P 500, for instance, is nowdown around 4% from its record high. Big tech really bearing the brunt ofthis as well. There has been a lot of question marksover how much or there had been a lot of question marks over how much further themarket could go over the near term.
But it is really that digesting of theFed message, we are going to be staying higher for longer Treasury yields aswell. They fell we actually had a weakerdollar in the session, but still, that is the outlook as we come online.And let's discuss where markets go from here, bringing our first guest of theday. That's Burns McKinney, senior portfoliomanager and IFJ Investment Group joining us now.Burns, I was taking a look at your notes and really it just seems like investorsshould expect low returns, higher volatility, at least in the near term.That's correct.
Again, I think you noted that what themarkets have been doing over the last couple of days has been really kind ofconsolidating around some of the latest statements from Jay Powell.You know, I think that's probably the biggest driver of equities over the pastweek and probably over the coming quarter, whereby, you know, inflationhas been stubbornly sticky this year so far.And as a result, you did have Chairman Powell talk aboutthat. You know, they have the patience tomaybe wait a while before they cut rates.And as a result, you've said the market.
Started this year expecting, you know,six or seven rate cuts and now they're pricing in one or two at best.The good news is that the markets have done a pretty good job notwithstandingthe last few days of of really digesting and handling this.When one considers that stocks are still up from where they were last fall, wheninterest rates were about the same level.So, you know, equities have done well. Corporate earnings have been fairlystrong. And despite the fact this ratetightening cycle began a couple of years ago and, you know, there is a lag tothat.
The economy's handled this pretty wellwhen one considers that the unemployment rate, for example, in the U.S.is has been below 4% for over two years now.It's actually the longest streak of unemployment being this low in over 50years. And so, you know, because the economyhas been fairly solid, it does give the Fed the ability to be patient.It's sort of like if one if you're on a road trip and your car is getting alittle better mileage than you were expecting, you can make it a few moreexits before you have to make a pit stop.But that does mean higher for longer.
Interest rates.It would suggest higher volatility, as you noted.And really it probably suggests that investors should maybe focus a littlebit more on shorter duration financial instruments.This really isn't a great scenario for some of the highest growth tech names,but it does bode well for, you know, possibly being a catalyst for areversion to mean towards value equities that tend to be shorter duration.It could be very positive for value stocks and dividend payers as well.We can't get to value stocks in just a moment.But I do want to mention what you said.
Around big tech there in the outlook,because this is also the other big potential catalyst.And where we go from here, there are a number of big tech earnings coming outover the coming days. You got the likes of Mirror, Nvidia,Amazon, lots of different names. But the point is what are you expectingand are we going to see really that that strength in big tech continue, do youthink, given that even though we have had high rates, a lot of it's been onthat theme instead. And the theme has really been theprimary driver of equities this year, despite the fact that interest rateshave risen, the fact that stocks are up.
As well.Really, I think results from the fact that you had a lot of these big technames. You can look at the last quarter,Nvidia, they had high earnings expectation baked in.They beat those, they had their investor conference whereby they introduced newproducts and, you know, they really boosted a lot of investor optimismaround that. That said, you know, a lot of thesenames, they really are they really do have very optimistic scenarios pricedin. And so when we look at big tech, youknow, we're probably suggesting that.
Investors is probably the time to be alittle bit choosier. And it is a sector for which not allnames are created equal. It is a sector for which you have a lotof cash on balance sheets. You have low dividend payout ratios, youhave room for future growth, and you do have a lot of long term secular benefitssuch as, you know, growth in e-commerce as well as demand for cloud computingand AI. So there definitely are someopportunities to be had there. But when you take a look at the growingdivergence that we are expecting when it comes to monetary policy and the ratesenvironment, do you see more potential.
In Asia with in particular the favorablecurrency effect? I mean,the currency effects could certainly definitely, you know, act as abeneficiary. That said, you know, I think one of thethings that, you know, with you know, with interest rates potentially beinghigher for longer, that really does means a stronger dollar.It actually gives a boost to exports from other other countries.And so when we look at U.S. and investors, it probably would be apositive for for multinationals, and it can definitely be a nice solid benefitfor countries that are export oriented.
And a little bit more cyclical, whetherthat be, you know, some of the export oriented companies in places like Europeor countries like Germany. And it could continue to give the boost.Japan, which is really been one of the biggest winners over the past year.When you're looking domestically, are you looking for any companies that mighthave exposure to Asia, to China in particular?I notice that Starbucks is one of your picks and obviously they have a lot ofinvestment when it comes to the Chinese market.Yeah, we're looking at domestic stocks thathave that Asian exposure.
It's really it's not necessarily fromlooking for names that might benefit from China, rather, those are the namesbecause of the slow reopening of the economy in China.A lot of companies that do have exposure there, they've just gotten hit prettyhard on earnings. And as a result, they've just gottencheaper. A lot of the expectations have comedown. And so if you look at a name likeStarbucks as a result of the fact that they do get a substantial amount ofsales in China, the stock is much really as cheap as it's been that we can recallright now.
You can get Starbucks, it's a premiumgrowth name at a discount to the S&P 500.It's right now that you're not buying a name without, you know, with theexception of a brief period during the pandemic, it hasn't been this cheap inthe last 30 years or 2010 years. And, you know, you have a company thatthey've been very generous with returning capital to shareholders.They've grown the dividend by, you know, high double digit rates for a decade.So that's a great way to keep up with inflation.And I just on a personal level, I look at the type of name they have pricingpower because they sell a legal and.
Addictive product.And it's a place where my daughter does her homework there, my son meets hisfriends there. It's really kind of positionedthemselves as being the town square of the 21st century.Byrnes You mentioned value equities, perhaps ready to turn a corner.Can you just give us more insights into the sectors perhaps that you're lookingat or different industries? Well, just looking at value equities asa whole, the best case you could make for them is reversion to the mean, whichin finance is one of the most rock solid rules there is.And, you know, we live in a world in.
Which the last year the U.S.value index trailed the growth index by 30 percentage points.Historically, when that happens over the last several decades, usually valueoutperforms growth about three quarters of the time over the subsequent year.The discount of the value index, it's right now trading at nearly a 50%discount to the growth index. That's typically more like a, you know,a 25% discount. So you have valuation on your side.You have the fact that they've lagged and, you know, the one thing you need isa catalyst. And that catalyst could be interestrates being a little bit higher for.
Longer.So, you know, we like value names really across all industries.But that said, you know, if you want think about some more specific areas.You know, defensives are actually starting to look good.You know, going back a year ago, investors were just dead certain we weregoing to have a recession. And as a result, they piled into thedefensives. They got expensive.Well, you know, going back towards the end of 2023, investors pretty much atthis point aren't pricing in any risk of recession at all.And so those defensives that would.
Defend capital in that instance havebeen largely dumped. That's sort of the way we say it isthat, you know, when it's sunny outside, no one's shopping for umbrellas.You can get them on the cheap. And so, you know, areas like utilitiesis one space that investors have really fled, as you can get some solid valuesthere. Benz, always great to have you with us.Barnes McKinney, senior portfolio manager at an FHA investment group.Still ahead on DAYBREAK, a look at how the Fed's wait and see approach isboosting the dollar, but sharing their outlook for later.But first, the IMF says the US and China.
And their levels of debt will pose risksfor global public finances. That is next.This is Bloomberg. India's elections kick off with a focuson the economy, social divisions and climate change actions that willinfluence the global story. Bloomberg is live on location with thelatest updates from the world's largest democracy.Coverage begins April 19th. The International Monetary Fund hasissued a fresh warning about the risks coming from US and Chinese debt.The fund says the two great economic rivals would drive much of the increasein global public debt over the next five.
Years, with their own obligations nearlydoubling over the next 30 years. Let's bring in our senior U.S.economy, Chris JANSING, who joins us now.So, Chris, where does the IMF see the risks deriving from?Well, in the United States, one thing that we are hearing from not just theIMF, but a number of delegations here in the Washington Spring meetings of theIMF and World Bank is that the U.S. fiscal stance is really out of whack.If you consider that the economy is growing strongly, if you consider thatthe U.S. is effectively at full employment, it isextraordinary that they are on course to.
Run a .6 trillion deficit andsomething that has consequences for the rest of the world is, of course, thetransmission channel of big U.S. deficits, higher inflation, strongergrowth, stronger dollar. That makes it more difficult foreverybody else to pay back dollar obligations, especially if you are thelikes of developing in emerging markets. So that's one thing.And then on the China side, there is concern about the overall level of debt,especially at the local government level and increasing questions about China'slong term growth prospects and the ability to sustain that debt load.Yeah.
And then how do those issues withinChina and that larger than expected slowdown, how does that also have haveramifications for the rest of the world? What are the implications here?Well, the implications are that many of the countries that had been supplyingChina as a real estate engine, for example, sink, Chilean copper sink.You know, Brazilian commodities, the demand is not likely to be what it havebeen. And in the meantime, you've got a debtload in China that raises in a potential transmission channels through fruit,through finance as well. We're seeing the Chinese yuan are, youknow, pushing towards 7.3 per dollar.
You know, many countries have exchangerates that are tied to the yuan. So it needs exchange rate depreciationpressure. It means less of an export game.So a host of different concerns. All right.That was saying the US economy into the present day.And some breaking news just crossing the terminal here.This relates to more details on US funding for major chip makers.It's all part of this effort by the Biden administration to bringsemiconductor production back to American soil.And we've just had the latest recipient.
Or or details of perhaps the latestrecipient, because this is according to people familiar with the matter.But Micron is poised to get over $6 billion in Chips Act grants next week.The award, as we said, it's not yet finalized, but it could be announced inthe coming days. Not clear as well whether the companyplans to accept loans. They would be available through the 2022Chips and Science Act in addition to what is this direct grant funding?As we said, the CHIPS Act, it said around nearly $40 billion for directgrants as well as loans and loan guarantees.That's worth $75 billion, but $39.
Billion going toward direct grants andMicron poised to get about $6 billion worth of this.There's been a number of different chip companies that have been unveiled aspreliminary recipients so far. The likes of Intel, TSMC, Samsung aswell, was when we had earlier this week. So that is the state of play.Micron, as we said, poised to get over $6 billion in CHIP grants next week.And it really does come as that tension, that race for tech's primacy between theUS and China. And on that point, President Biden hascalled China xenophobic. Highlighting the Asian nations economicwoes as he sought to make the case for.
US economic strength.During a campaign stop in Pennsylvania. While overall relations between the twonations have stabilised of late, tensions are growing over Chineseinvestments in manufacturing. They've got a population that is morepeople in retirement than working. They're not they're not importing any.They're not bringing their they're xenophobic.No, nobody coming else coming in. They've got real problem.Well, the president also vowed to keep us still American owned and threatenedhigher tariffs on Chinese steel as he seeks to win over union workers ahead ofthe November election.
U.S.Steel has been an iconic American company for more than a century, and itshould remain a totally American company.American old American, operated by American Union steel workers, the bestin the world. And if that's going to happen, I promiseyou. Well, let's bring in our global businesseditor currently. So what's in it for President Biden andwhat's in it for the union? And can they sort of come to anagreement? Well, Heidi, let's take a step back andlook at what's happening, especially in.
The context of the election in November.Biden wants to woo the union. He wants their support.At the same time, U.S. Steel shareholders have approved a 4billion takeover effort, takeover bid by Nippon Steel, which is a Japanesecompany. So Biden's been hitting the groundrunning in Pennsylvania this week. His he wants the support of the state.He wants to win it. It's a big swing state.But at the same time, this is now going to go to politicians and regulators.So whether this is going to be something that moves markets, whether this is moreof a political stance, is yet to be.
Seen.And, Karen, we've heard as well, President Biden really pushing fortariffs on on Chinese steel, for instance.But let's just take a listen to what he said on the campaign trail.Book right now. My U.S.trade representative is investigating trade practices by the Chinesegovernment regarding steel and aluminum. If that investment confirms theseanti-competitive trade practices, then I'm calling on her to consider triplingthe tariff rates for both steel and aluminum imports.
So give us some more context on this,because I think part of the question around tariffs is how how substantive isit? Yeah.Well, Biden's proposed a 25% Levi on certain Chinese steel and aluminumproducts, and that's meant to shore up U.S.steel. It's meant to court the workers.But at the same time, Bloomberg's being told that this could be more of apolitical statement it might make. It might have no market impact at all.And the Chinese steel imports are just a small sliver of the U.S.steel market.
So what we're really going to be lookingat is what this does for Biden in terms of his support among the workers goinginto November's election, because he does have the backing of the union.But at the same time, so does Donald Trump.He's got a lot of support among the rank and file.And this is something that both of these candidates want to win going intoNovember. A global business Edison currently the Bwhile China's Commerce Ministry has blasted a Biden administration plan fora formal review of its maritime logistics and shipbuilding sector, theUS Trade Representative Office announced.
The investigation after a petition fromfive major union groups. Beijing says a review wrongly framesnormal trade and investment as being harmful to the US and is being driven bydomestic politics. You can get a roundup of the stories youneed to know to get your day going in today's edition of DAYBREAK.Subscribers can find that at the tiebreaker.It's also available on the mobile in the Bloomberg Anywhere app.He can customize their settings as well as to get the news in the industries andassets that matter to you. This is Bloomberg.
UBS is said to be planning another roundof job cuts as the firm continues to trim headcount following its rescue ofCredit Suisse. Bloomberg Finance editor Adam HAJEKjoins us now with the details. And Adam, this is going to affect anumber of different business units. Yes, but as we understand, it's mostlyin investment banking, right? So this is essentially going beyond theusual pruning of the kind of the bottom five or 10%, the underperformance.This is more about the continued restructure following the absorption ofCredit Suisse. And what it shows is that stillglobally, Heidi, there's still more work.
To be done in terms of tweaking theteams and the resources that they need at UBS.They're still going through the process of understanding exactly where they wantto highlight, as has been the priority areas.And this is kind of another example of that.So interesting to say that this is fairly wide scale.It will be quite a, you know, a sizable number of people.But yeah, just another example of how this integration is really taking quitesome time. So.Adam Which which areas are going to be.
Most impacted.We know investment banking, but possibly also wealth management market units.Who's sort of the one of a better phrase on the chopping board here?Yeah, well, certainly investment banking seems to be the main area of focus forthis round of Sanibel. But of course there are some adjustmentsstill being made in wealth management. And as we know in places like Australia,you know, the wealth management business for UBS is still really, really a strongcore area that they're wanting to build out.So you really still do need to see this in the context of the integration ofCredit Suisse.
But but growth areas that that UBS isstill wanting to highlight like Australia for wealth management likeplaces in in up in Asia, in places like India for wealth management.So there are still the growth areas alongside some of these moretraditional areas like investment banking, which of course is still a verypressured area of global finance at the moment.So you do you would expect that there are still some and further adjustmentsto be made as they bring on board all the people from Crédit Suisse.That was at bloomberg finance editor adam.Hey there with our scoop on UBS.
And just a couple of lines that arecrossing the terminal, we've got Fed Reserve Governor Bowman commenting at anevent in Washington and a couple of different headlines.The drubbing from this as well. Chief among them is that he's sayingprogress on inflation could have stalled.And that's really sort of been the big question mark and and really speaks towhat we've been hearing from the likes of Jay Powell, for instance, saying thatinflation is taking a little bit longer than expected to come down, thatso-called last mile of disinflation very much in play, But time will tell.That's another line is saying time will.
Tell if policy is sufficientlyrestrictive. We didn't actually see Treasury yieldsdropping in the prior session will mark them again when Tokyo reopens in about30 minutes from now. But coming up, Barclays shares theiroutlook on fixed markets as a resurgent dollar concerns sway through Asiancurrencies. This is Bloomberg. Time for morning calls ahead of theAsian trading day. An economist at Citigroup going out on alimb by wagering that virtually everyone on Wall Street is wrong about the Fed.Andrew Holland Hearst and Veronica Clark.
Are sticking to their forecasts for fivequarter point cuts this year. They say policymakers are eager to seizeon any signs of disinflation or economic weakness.Bank of America, Morgan Stanley, Goldman Sachs, they've all dialed back theirrate forecasts for this year. And trade is in the interest rate.Futures market are also piling into a contrarian bid.That's happening in the futures on the secured overnight financing rate, whichclosely tracks the Fed's key policy rate and involves buying the December 2024contract while selling the one that's due in December 2025.Scenarios in which that trade stands to.
Gain include the Fed frontloading ratecuts before the presidential election in November and more aggressively easingthan is currently priced in to markets Heidi.And of course, so much debate going on in terms of the noise around Fedexpectations and whether, in fact, by signaling a pivot to rate cuts towardsthe end of last year, that perh aps this is part of the reason why we're seeingthat stickiness and the stubbornness when it comes to the inflation now.But of course, we continue to monitor that as our top story driving marketmoves. We're seeing a little bit of upsidethere going into the open in about half.
An hour's time.Sydney up about 3/10 of 1%. Elsewhere, though, looking pretty meek,to be honest. Kiwi stocks accelerating losses down by1.1% there. We're also seeing a Singapore Nikkeifutures looking a little bit to the downside, about half a percent.We have a little bit of breathing space when it comes to Asian currencies, butcertainly these latest comments from the likes of bomen from the likes of Mr.as well. Time will tell if policies sufficientlyrestrictive that progressive inflation may have stalled will continue to kindof reprice that outlook for the Fed.
And that'll play out no doubt when itcomes to Asian effects. Weakness again, trading at 154 at themoment was certainly pulled back a bit from the 155 plus levels that we saw inthe previous session. But the dollar is taking a bit of abreather there. After multiple sessions of gains, theAussie dollar at 6440. We do get numbers out of Santos and BHPlater on today as well as labour market indicators out of Australia after thebig surge in jobs gains that we saw in February.We are expecting that pullback in those March numbers watching Dollar one aswell, given the remarks that we heard.
From President Biden about potentiallyan acceleration of steel tariffs on China.Let's bring in Mr. Kasich on the subject of ethics is aahead of ethics in and macro strategy Asia at Barclays Capital.Great to have you with us. So we have a little bit of respite forAsian affects, but given the direction that we see when it comes to US ratesand the inflation picture, do you expect to see further strength for the dollar?Well, I think a couple of things here. I mean, certainly dollar sentiment hasshifted sharply, positive positioning on sentiment, especially against G10currencies.
So that may limit the ability of thedollar to move too much higher from here.But now we talk about the Fed and clearly there has been a massiverepricing of US interest rate expectations.US Treasury yields have been shifting higher continuously almost in recentweeks and that again has been helping to propel the dollar higher.It's hard to see that reversed any time soon.So even if the dollar doesn't move higher with the same sort of momentum,it is likely to continue to remain firm in the weeks ahead, which does put a lotof being able to bite Asia, but a lot of.
Asia, Asian currencies on the back foot,especially those that have lower yields that don't have that sort of interestrate protection. So it does look like we're still goingto be in this environment for the time being.We have cut our own Fed easing expectations as well.We now only expect the Fed to cut once this year in September, although thereis a good chance they may even delay that till December.Again, that pullback in easing expectations again and support to the USdollar. We've seen a couple of attempts by Chinato kind of loosen its grip when it comes.
To trading rages for the yuan.Right. Do you expect to see this as as anongoing theme? Because really moves in the yuan havebeen almost as impactful as the moves that we've seen in the dollar when itcomes to Asian effects. That's right.Look, obviously, the peg or the very, very tight fixing that the U.S.has maintained in recent months have provided an anchor for regionalcurrencies. But this anchor is proving difficult tohold. As the dollar strengthens, the fixinghas to probably move higher to avoid.
This breach of the 2% band withouthaving to intervene significantly. So while China does have enoughammunition to maintain stability of the currency, it is losing out.From a competitive perspective, the CPI, its trade weighted index, continues tomove higher above 99 in our view, and that is adding more and more pressure interms of competitive prices at a time when exports are weakening and there'songoing deflation in China. So if anything, it means that China willprobably have to loosen up its grip on the currency in the weeks ahead,allowing somewhat more depreciation and probably less trade weighted gains inthe currency.
And talk to us about the interplay thatwe see between the Dollar yuan and also the dollar yen.The weakness that we see in Japan's currency.Well, again, that is adding to that pressure, right, because dollar yencontinues to move higher. And again, there's no real apart fromintervention risk, that doesn't seem to be really much to stop that move to adollar. And when interest rate differentialscontinue to widen, again, that adds pressure on China.Clearly, it's not just the yen, but you look at example Dollar Korea, which isalso we've.
Again, the trade weighted perspectivemeans that the yuan is returning on a trade weighted perspective, especiallyas the yen continues to weaken. So as dollar yen moves higher, in ourview, that just adds more and more pressure for dollar yuan to also movehigher in the days and the weeks ahead. So our forecast for the yuan was 730 byend of this quarter. The reality is that with these moves ineffects that we're seeing present, we may hit that forecast much sooner thananticipated. And again, as I mentioned, it's very,very, very difficult to keep on fixing so strongly the currency for the U.S..Yeah.
And of course, currency.Currency concerns have been at the IMF meetings because, for instance, on thesidelines of those we've been hearing, we've got the readout from that meetingbetween the finance chiefs of the US, Japan, Korea.What are the steps really, do you think, or what options are available tocurrency chiefs in Japan and Korea to to arrest the slide in the one in the yen?Well, I think it's very difficult because this is, after all, a US ledmove. It's a US rates led move.It's also risk aversion. We've seen risk appetite havingdeteriorated fairly sharply in recent.
Weeks because of a plethora of concernsin markets, whether it's the Middle East, rising commodity prices, or justthe fact that the Fed may not cut as much as expected, but that is adding tothat dollar. So in reality, yes, central banks inAsia can intervene and we are already seeing significant interventions acrossthe region, and that's probably obscuring some of that dollar upsideagainst Asian currencies and hence why we're seeing more dollar upside againstsome of our G10 currencies. But there's only a limited amount ofammunition you can throw at this move when the dollar continues to be asrobust as it is.
So the other option, of course, isinterest rate hikes. We've just put out a piece yesterdayhighlighting that, for example, Bank Indonesia may need to hike rates to givesome support to its currency, but again, this may all prove fairly limited as thedollar continues to strengthen. And even for Japan, if we do see BOJintervention, U.S. dollar yen could move lower.We anticipate on average that move in intervention ends up being about 3%moving billion yen. But again, it may be short lived and allI understand is speaking for a number of investors, it may just provide betterlevels for clients or investors to go.
Back into long dollar and position.So it may be only temporary if we do see intervention from these central banks.Yeah. And as you said, possible rate hike fromthe Reserve Bank of Indonesia to shore up its currencies.That's something as well that you're seeing possible for India Central Bankas well. I think India's in a somewhat betterposition. You know, India is benefiting still fromvery strong capital inflows both on the bond and equity side.And I think India, if anything, the RBI has actually been buying dollars inrecent months.
And despite that dollar INR, yes, it'smoved higher, but not significantly so. So we continue to look for Indian rupeeoutperformance. We actually hold trade recommendationsto buy the rupee versus the entire just based on that view that the rupeewill continue to do better. So we don't really see risks of a ratehike in India. Admittedly, the RBI is not movingquickly to cut rates either, and we're watching inflation evolution in India.But again, we think as we move into the second half of this year, possibly laterinto the third quarter, we could see a rate cut from the RBI, but certainly noprospect of hikes protect the currency.
In India.It is very much something that we may see in Indonesia as, as I mentioned, butunlikely to see that, for example, being replicated in India.Mental architecture, the head of infection and macro strategy Asia atBarclays. Thanks for your time this morning.And let's get back to a breaking story that came out in just the last 10minutes or so, but it relates to Micron and you are seeing that stock thereclimbing in after hours so far. What we're hearing is that it could beset to receive a very large amount in grants from the Commerce Department inthe US to help pay for domestic factory.
Projects.But we want to bring in Mackenzie Hawkins.He actually is the person on that scoop for us today.Mackenzie, thanks very much for joining us.Talk us through it because we've heard a number of differentcompanies already being announced as preliminary recipients.But but Micron now also. So Micron would be the seventhannouncement that the Biden administration has made from thismassive U.S. push to subsidize semiconductorcompanies to build factories in the.
U.S..Micron has pledged to build as many as four fabs to produce chips in upstateNew York. They're also planning to build a 5billion facility in their home state of Idaho.And they are one of 600 companies that expressed interest in this roughly $50billion program from the US government. And they are in line to receive a verysignificant sum of money. It could be announced as soon as nextweek to subsidize some of the factories that they're building to producecomputer memory chips in the United States.The Commerce Department has already.
Announced significant awards for Samsungfor TSMC, the world's top chip maker, and Intel.All of those are worth also north of $6 billion, with Intel capturing the mostand some of the companies receiving multiple billions of dollars worth ofloans as well. And some awards for old generationships, though we're already seeing a lot of federal funding and really just acouple of these past few weeks start to finally flow out the door with thesepreliminary award agreements coming from the U.S.government at some of the world's most powerful technology companies.We know that there are multiple factors.
Being planned and Macron has four ofthem just for itself. But did these grants potentially onlysupport the ones that will go into production sooner?So as I said, there are 600 companies that have expressed interest in thisfunding. And the Commerce Department, which isadministering the UC chips program, has some really difficult decisions to make.And so Secretary Raimondo said a couple of weeks ago that they're going toprioritize projects that will be in production by 2030.A lot of these factories, which many of the biggest ones are on, actuallydelayed timelines, sometimes by a.
Quarter, sometimes by multiple yearsfrom some of Micron's competitors here. But the secretary has said we're puttinga cap on it. We're going to prioritize projects.I'll be in production by the end of the decade.And they've attached a lot of their goals, such as producing 20% of theworld's advanced logic chips to that 2030 deadline.And so Micron's New York project, which the firm is, that could be up to 00billion investment contingent on U.S. support.Two of those factories are set to be done by 2029, two of them not until2041.
So what we're hearing is that it's verylikely that the Commerce Department funding is going to be designed tosupport the first two factories, but not the second.McKenzie I mean, we can say that there's no such thing as a free lunch here.So any strings that are attached to thisfunding, given this is also about the US making sure that it stays competitiveand ahead of China in chip making efforts?Certainly. So each of these awards, I mean, it'shashed out between the Commerce Department, brought in some bankers fromWall Street who are used to negotiating.
These type of deals with companies tohash out the awards over months and months of negotiation.And the announcement that Micron is expected to have next week.This is the case for all of the announcements the Commerce Departmenthas made so far is just a preliminary agreement.They're not actually going to receive any money.Then they will enter months of due diligence, continue to hash out specificbenchmarks on which they will receive the money over time.So the first check that they get is not going to be for more than $6 billion.It will be for some fraction of that.
Once they hit a certain construction orproduction milestone. And they'll continue to get money overtime as they had additional milestones that are negotiated specific toindividual factories. There's also always the possibility thatthe Commerce Department for could claw back some of the money if Micron doesn'tmeet the goals that it said it will for whatever stage of the grant process theU.S. government has written into statute,into the CHIPS Act law, that they have the ability to take the money back.So there are lots and lots of strings attached for these companies that inpart why it takes so long to hash out.
These agreements.And it'll be really important to watch over time when those that fundingactually starts going out the door. US industrial policy are part ofMackenzie Hawkins with that story on Macron.We do have more ahead on DAYBREAK Australia.This is Bloomberg. But some of the corporate stories we'retracking and a couple of Bloomberg scoops as well.And we've learned that Saudi Arabia's Neom City project is planning its debutreal bond sale for later this year. That's as it looks for more fundingsources for the .5 trillion worth of.
Construction projects that are planned.Sources tell us that NELMES appointed banks, including HSBC, to advise on thesale of Islamic bonds, which could raise as much as .3 billion.And documents seen by Bloomberg show Jane Street generated over 0 billionin net trading revenue last year. That was among financial markets.The firm or maker's rather, the firm disclosed to investors as part of a debtdeal that it is seeking. It's a very rare glimpse into themechanics of the notoriously secretive firm, which has steadily expanded tomake markets in areas including ETFs, stocks, currencies, derivatives andbonds as well.
And Jp morgan CEO Jamie Dimon has beenlaying out his vision for the future of money in an AI world.Bloomberg Originals spoke exclusively with Diamond to kick off season two ofthe circuit with Emily Chang. She asked him about the opportunitiesand the risks that are ahead. The best thing is be prepared for anybusiness. Think when you think about risk, thinkabout things that can go terribly wrong. Can you survive them?You know, it could be technology. It could be government regulations.It could be it could be the literally the weather.If you're a restaurant, you know, that.
Might close you down.If you if you lose this week's business, you're out of business kind of cash.So you just think all that through. Bill Gates once said banking isnecessary. Banks are not.To what extent could I or fintech replace traditional banks.So I think, first of all, I remember him saying banks are dinosaurs.I spoke to about 1997 and obviously he was dead wrong.You probably agree to that. But but he's not wrong.Technology changes everything. And if any one is complacent or arrogantor think that because you have a big.
Position taking a big position tomorrow,that's a mistake. And then you define what is banking,someone's going to have to hold the money.So he's got to move the money. So he's got to raise the money.So he's got to do research around money.Those services will still be around. And, you know, hopefully we're doing itand using a lot of tech to do a better job at it.But I've always thought it's very possible that some tech Zaino intimatesa piece of that. And I've been writing about, you know,big tech growing our business.
We got fintech, but we also have bigtech and they will embed payment systems in there, and some are going to whitelabel banks, kind of what Apple did. You know, they have the right to dothat. I'm not against that.I would be against unfair use of their position to dominance in a business.Well Apple is is going deeper into financial services.Do you worry about the Bank of Apple? Well, I'm going to compete.So they have a they have a tough competitor.But you know, they hold money. Move money.Yeah, they're a formidable competitor.
You know, we also partner with them.But I'm very used to partnering and competing with lots of people.No existential threat. I don't think it's an existentialthreat, but I think if we were complacent about it.Yes. And you can watch that interview in fullon the circuit with Emily Chang. It's on Bloomberg Television at 6 p.m.Wednesday. That's 6 a.m.Thursday if you're watching in Hong Kong.And coming up, TSMC is releasing its first quarter results later today.We discuss why analysts are expecting a.
Rebound in earnings growth next.This is Bloomberg. All right.Taking a look at Micron shares in after hours here, you can see that that popthat we've got there after we had a Bloomberg scoop out talking aboutMicron. It's poised to get over $6 billion inCHIP grants, possibly next week. That's what we're hearing from sourceshere. But Micron, as we know, is the largestUS maker of computer memory chips. And these these grants would be to helppay for domestic factory projects. The award, as we say, not yet finalized,but it could come within the next.
Several days.That's according to our sources. There have been a number of differentcompanies that have benefited so far from the CHIPS Act.It's set aside that nearly $40 billion for direct grants.There's also loans, loan guarantees that are in play.But officials so far have unveiled six preliminary awards and three two firmsactually that produce older generation semiconductors, plus multi-billiondollar packages for the likes of Intel, Samsung and also, Heidi, TSMC.Yeah. And we're watching shares of TSMC, ofcourse, the world's biggest chip maker.
More than doubled from the 2022 lower asthe company benefits from the AI boom and full first quarter results due laterThursday, could deliver more catalysts to drive that stock even higher.Let's bring in our executive editor for Asia Technology Pedestrian joins us now.Peter, what are these expectations? Well, the expectations for TSMC arequite high at this point. We're expecting the company to recoversome from some of the challenges that they've had in the past.One of the issues that we're looking at very closely, though, is the earningsresults we got out of ASML and smell is the most important maker of the machinesthat actually fabricate chips.
It sells a lot of those machines to TSMCin particular and some of the other makers.And what we heard from ASML yesterday was a little bit concerning.Their revenue fell about 22%. Also, the bookings, their advance thattheir forecast of what revenue is going to be in the future was much, much lowerthan expected, about 20% shy of where it was expected to.So that's kind of raised concerns about how strong demand is from chipmakerslike TSMC to be able to buy these high end machines and whether they'recontinuing to invest as aggressively as we've seen in the past.There are a bunch of things driving.
Demand for chips right now, includingyou mentioned. AI in particular has been in a biginvestment area in videos making the the the A.I.chips that everybody wants right now. It really can't make them fast enough.And TSMC fabricates those chips for these customers.So everybody thought that demand was going to be very strong.It was going to continue very strong. And what we heard from ASML yesterdaywas a little concerning on that front. So what do you think then for theoutlook for for TSMC? As you said, we've got these earningsthat are coming out, question marks of.
Whether that that boom can extend.What does this mean and what's the likely reaction from investors when itcomes to the share price? Yeah, well, one of the key things thatpeople will want to understand is why are orders from Taiwan?Those are almost certainly orders from TSMC fell for ASML in particular, andwhether TSMC is pulling back at all on its capital spending plans, ithistorically has invested about $30 billion a year in CapEx.A lot of those go to machines like assembles machines.So the consensus has been that TSMC is going to invest very heavily so that itcan build up additional capacity in AI.
In particular and other kinds of newtechnologies. There's also this very interestinggeographic expansion going on. You mentioned Micron earlier.Chipmakers are not only investing in these machines, but they're trying to doit across different countries like the US, Japan and Taiwan.Yeah. All right.That was our executive editor for Asia Tech, Peter Elster.
