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tv   Bloomberg Markets Americas  Bloomberg  August 2, 2022 10:00am-11:00am EDT

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>> from the financial centers of the world, this is bloomberg markets, with alix steel and guy johnson. alix: 30 minutes into the u.s. trading day. here are the stories we are following for you at this hour. tensions over taiwan. speaker pelosi is expected to touch down in taipei this hour. china calls this a scramble and threatens military action in response. and selling stocks and buying havens, escalating tensions between u.s. and china. and stand by for fed speak.
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mary daly is speaking now with charlie evans, other presidents on the docket today. i'm kailey leinz with guy johnson in london, alix steel is off today. guy, happy taiwan tuesday. guy: it will be interesting to see whether it is a happy day. we will find out later on. pushback to 45, we will watch what happens and what reaction we get from the chinese later on. you were talking about fed speak -- let's focus on that, mary daly talking a few moments ago out of san francisco, raising the idea that feds -- the fed is looking at the data and rate hikes thus far. whether that could be possible, but she certainly says as well that the job is far from done. the data comes in softer than anticipated.
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10,698,000 is where we stand, the market was looking for around 11 million. the previous number revised to touch higher, so we are seeing a slowdown in the job openings, but they remain at historical highs. one needs to be aware of that as well. let's look at what is going on under the hood, what the jobs market is telling us. this of course ahead of the payroll numbers we are looking for friday. we are expecting to see a slowdown and will be looking carefully at what is happening with the claims numbers as well, to get an idea of what is going on there. some evidence out of the jobs number, kailey, there might be easing in the labor market but is a historically type labor market -- tight labor market. kailey: this is still a labor market that is incredibly tight and the federal reserve is aware of that, would begs the
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question, guy, how much cooling in the labor market do they want to see, what do they want to accomplish, and what becomes more worrisome that might cause them to pull back as the market is expecting? bloomberg's international economics and policy correspondent michael mckee is here in the newsroom. mike, fewer job openings. what does that signal? mike: it suggests one of two things. companies are no longer trying to hire because they think there will be a slowdown, or they have hired a lot more people. but it does not look like the hiring has taken place at the same level. it does suggest that we may be are slowing down. this all revolves around something called the beverage curve, which is represented here. the number of job openings rises as unemployment goes down. there is a big fight now between larry summers and chris waller
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of the federal reserve board, who are arguing over how far unemployment will have to rise to bring down these job vacancy numbers. summers says 5.5%, and the two have been trading accusations of shoddy math and it has captivated the market at this point. it does suggest at this point that we have a lot of slack in the labor market. the fed would say it is very tight because there are a lot of openings, but there are not people to fill them. guy: mike, mary daly speaking, saying i do not see a labor market that is in a recession. what numbers would we see in a recession, do you think? mike: it's hard to say, guy, because we have such a low unemployment rate now. you can't compare it to what happened during the covid crisis. but the rule the fed follows shows unemployment, if it goes up half a percentage point on average over three months,
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little over 4% that would start to worry the fed. the fed has said, we can get to 4%, 4.5%, and that would not be too bad. but if you got to larry summers at 5.5%, there would be a recession and a real problem there. kailey: looking at the headlines from mary daly, she said there may be a modest increase in the jobless rate, but not a large one. she was also talking about how the fed would be premature to unwind work or say the job was done. they are looking at cpi data to see if they can slow down the pace of hikes. what would they be looking for in the jobs report on friday that would indicate the fed could do so? mike: you would be looking for a slowdown in hiring. unemployment would take a little bit longer. those numbers are backward
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looking by a month and we have shown, or seen that you don't get negative job creation until you are already in a recession. it is not called by the markets in advance. it could surprise us, but probably we would see a slowing down, which we are seeing, but 250,000, the forecast, is still a lot. they would like to see a cooling in our bridge -- in average hourly earnings, which would suggest some of the inflation pressure is coming off. guy: mike, what does pushback in your mind look like from the fed? i'm listening to daily -- daly, she is sounding fairly hawkish. we will see what charlie evans has to say in a few minutes. what would constitute serious pushback from the fed? what language do we need to hear? mike: fed officials are saying, we really have not changed. the market took the wrong
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message out of jay powell's conference. the idea that we are no longer doing forward guidance does not mean we are not willing to do 75 basis points. they want to leave themselves flexibility, because you don't want to say 75 basis points and then have the job numbers for august be poor and inflation go down, but they are still committed. they are trying to tell the market they are still committed to frontloading and getting over neutral, getting into the threes, and people should not expect them to have already planned to start cutting rates next year. they are not sure what is going to happen to the economy, so they think the market is getting way ahead of itself. kailey: michael mckee, bloomberg international economics and policy correspondent. as the market digests those headlines, we are seeing yield headlines, five basis points on the 10 year, back up to 2.62 and the dollar is at a high as well. in addition to watching the fed speak today and the market
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reaction, we are keeping a close eye on taiwan. we are waiting for the plane carrying house speaker nancy pelosi to land in taiwan and see what china's reaction will be, and how investors hedge that risk. our guest discusses, coming up next. this is bloomberg. ♪
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>> everything you need to know to get ready for the start of u.s. trading.
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kailey: we are still watching taiwan, awaiting house speaker nancy pelosi's expected arrival there. potential military action if she does indeed make the trip, raising the possibility of geopolitical risk and raising tensions between the u.s. and china. that brings us to our question of the day -- how do you hedge taiwan risk? joining us now is our guest. lisa, if you can, how do you do it? lisa: geopolitical risk is one of the most impossible things to handicap as far as timing, but also dimensions in the state of
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play. the most forward portfolio positioning to any of this is obviously loading up on cash and treasuries and maybe there is a bit of a move we see and treasuries afflicting some of that political risk premium. these are hard to handicap as we know, back in february a lot of people thought that the russian ruble and russian equities would be destroyed. that proved to be a very short-lived trade. it ended up being all about oil, as it very often is. these things are very hard, and for our clients, which are ultra high net worth individuals, we typically tell them to wait and step back, and not try to step -- anticipate news for it happens. guy: let's focus on the
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inflationary story around all of this. is increase -- is geopolitical tension becoming inflationary to global trade? lisa: without a doubt. we are now in a place where we have humbly called cold war 2.0 or 3.0, where trade blocks and deglobalization is in full force. over the next decade, it's highly likely we will see a reconfiguration of global trade blocks and reconfiguration of supply chain that will probably be structurally inflationary. we will also see a big shift towards fiscal spending. we are no longer in a period of global peace, where we got the peace dividend, and we will see very high levels of defense spending, cybersecurity spending
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, spending on space surveillance, public health, all of that. guy: i want to follow up, but from a different angle. from a corporate point of view, how should we be thinking about this? we looked at the arrival of speaker pelosi in taiwan and then i look at caterpillar today -- caterpillar out, an economic bellwether, talking about the fact that it is starting to see trouble in china. does the corporate story reflects some of the risks we could potentially see right now? lisa: we don't think that it does. we have been extraordinarily surprised, and i know you all know how slowly overall corporate guidance and forward earnings expectations have come down to reflect what is going on in the world and most specifically the profound slowing we are likely to see in europe, the continued recession there and the lack of a bounce
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back in china. this is very serious for the market and multinational companies. most of whom source 40% of their sales on average from outside of the united states. kailey: let's talk about a more constructive take that came from jason -- jp morgan in the last 24 hours. the face of bad data being interpreted as good is gaining traction while peak federal reserve hawkish's, pe yield, and peak inflation -- peak yield, and peak inflation is playing out. your take? lisa: i could not disagree more. this market is attempting to see a fed pause that has not happened and a recession that has not happened. in our humble opinion, that amounts to nothing more than a bear market rally.
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fundamentally, fed policy operates with big lags, eight to nine month lags, and we have never seen the fed hike this fast at the same time they are doing quantitative tightening. i am sitting here saying "we ain't seen nothing yet" in terms of what is going to evolve in the economy in terms of the rate at which growth may slow or inflation may or may not come down. and the implications that has for corporate earnings. it is way too early. guy: credit suisse talking about an l-shaped recovery. we go down and stay down. the fed will have to sit at higher rates for longer than the market is anticipating. what do you think about that shape of recovery that we could see? lisa: i am more sympathetic to that view. i think part of that view
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envisions the potential for stagflation, or this idea that growth essentially grounds to a halt at the same time that inflation remains somewhat above the fed to percent target. if some of these geopolitical tensions sustain, it is entirely possible we continue to struggle with inflation that is in the 3% to 4% range, which may not make the fed happy. kailey: finally, lisa, we are talking about the situation in taiwan, an ongoing war in ukraine as it relates to higher oil prices, a federal reserve that is tightening -- all these things happening in the lead up to elections in november. is it time to start talking about domestic political risk as well? lisa: yes, i am so glad you brought that up. i do think american investors in particular are extraordinarily complacent to these risks.
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the international investors are highly overweight u.s. assets in both the u.s. treasury market and the u.s. stock market, and yet you talk to non-us citizens, who we often talk to, who are investors in our markets. they continue to marvel at the dysfunction in washington and it gives them pause. if we were to go through an election season here in november where we were in a position where elections continue to be contested, potentially having to be resolved in our courts, that's a really bad look and something that is going to add to our cost of capital and risk premiums in our capital markets. we really have to take this seriously. guy: the chinese are watching. lisa, thank you very much indeed. lisa shalett, morgan stanley
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wealth management cio. we are awaiting nancy pelosi's arrival in taiwan. you have a live shot on your screen right now. we have more on that story in just a moment. ♪
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♪ guy: speaker nancy pelosi set to land in taipei in about 20 minutes time. we thought it would be 20 minutes past, now may be pushed out to 45. she is the highest ranking elected u.s. official to visit taiwan in over 25 years. let's talk about the implications of this in beijing, taiwan, and washington. joining us now, bloomberg's washington correspondent annmarie hordern. and our taipei bureau chief joining us as well.
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what does this look like and what will the reception be? >> as you mentioned, we are expecting her to land around 20 minutes from now, the plane assuming -- assuming the plane the whole world has been tracking is actually carrying nancy pelosi. there has been in norma's amount of traffic -- an enormous amount of traffic, the website crashed as people have been checking in on the flight carrying nancy pelosi to taiwan. it entered taiwan airspace, so it is getting close to landing in taipei, a short distance from here. as for what else we have seen going on this evening, there has been a quite incredible pushback from twine -- china
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, who opposes this trip and says there will be consequences if pelosi visits. this appears to be a coordinated series of cyberattacks on taiwanese websites. the foreign ministry website still appears to be down and many other less high-profile websites have been downed. we are also seeing quite a lot of military activity in the taiwan strait, these are incorporated reports for now. -- uncorroborated reports for now. there does seem to be a lot of activity in the real world and in cyberspace going on around taiwan as nancy pelosi arrives in taiwan. kailey: we also understand there are several u.s. naval carriers right now in the area. if we do get that response from
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china, if they give some kind of military response, do we know how quickly and with what moves the u.s. would react? anne-marie: we do have the uss ronald reagan and other navy ships in the south china sea. right now, what the white house is trying to do is trying to play down and tone down the rhetoric we have heard coming out of beijing. but what we could see from china is not unlike what we potentially saw in the past, when other foreign leaders visited taiwan. there could be more incursions into taiwan's air identification zone, we have seen that happen for months. there could be more intercepts with the financial times. we could also see the chinese military, the pla come across the median identification line in the taiwan strait. there is no talk of what the u.s. would potentially do to counter what would be regular
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items, but a little bit more aggressive. what is the risk and concern is if the pla went right over taiwan, and then it was up to taiwan whether or not they wanted to shoot down a pla, people's liberation army, warplane. that would spark a very serious crisis. but what the white house is trying to do is tone down any of that rhetoric, saying speaker pelosi has every right to visit taiwan and it is not a change of the one china policy the administration and u.s. government has towards china. guy: talk about this in terms of the response we could get. we could see a military response to a military response. what is the state of readiness in taiwan? samson: so, the defense ministry put out a statement earlier today, of course, trying to play down any fears. they've got the situation under control and have deployed
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additional resources around taiwan, and are ready to counter anything the pla throws their way. it is clear, again, taiwan is talking a good story, trying to project this appearance of strength in the face of a threat from a much larger neighbor, but if anything were to happen, if this were to go from rhetoric to anything approximating a hot war , taiwan would absolutely need assistance from its neighbors and democratic allies, such as the united states and potentially japan. kailey: samson ellis in taipei and annmarie hordern at the white house. we understand from an official that the foreign minister will be greeting and "vip" at the airport, we expect that is nancy pelosi touching down in less
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than 20 minutes time. we will talk about that with the former un security council president, coming up next. this is bloomberg. ♪ when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time.
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kailey: we are an hour into the u.s. trading session and moments away from house speaker nancy pelosi's expected arrival in taiwan. the geopolitical risk weighing a bit on risk sentiment. abigail doolittle looks at how that is translating through the market. abigail: it certainly is weighing on the market overall. you see the nasdaq futures on the visit and increasing tensions with china, down sharply, then up a little bit. .4%, second down day in a row. we have got some weakness after the big rally in july. if we break it down relative to earnings committees would've interesting, old-school earnings versus new school. uber soaring 14% after they put
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up a narrower loss than expected. they beat on revenue, $5.1 billion. pinterest up 11.8%. monthly active users better than feared, unchanged over a year-over-year basis. caterpillar down 3%. sales missed, china weakness. dupont down 1.2%. the third quarter is likely to be weaker. if you look at what is happening relative to the earning situation, p vs. e, jp morgan is relatively bullish as a strategist on wall street. forward pe on the nasdaq 100 in yellow, and yellow the line at 23.4, 10-year average. in purple, s&p 500 forward pe.
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marco klein average is making the point that it is below the 10-year average and it makes the valuations of the s&p 500 attractive. not so attractive is the dow transports, down 2.8% at this point, worst day in quite a few and the lowest level in seven weeks. masen down. the logistics company put up a very strong quarter, but it was downgraded for reasons i will be looking into, really weighing on shares. jetblue is down 6.1%. higher fuel costs weighing on the profits. wider loss than expected. investors not liking it. transportation sector truly underperforming. guy: absolutely. ii will bei speaking to the ceo jetblue later on. they are distracted by the
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spirit story. let's focus on what is happening in taiwan. you are looking at a live shot from taipei. we understand that nancy pelosi's jet -- we think it is nancy pelosi's jet -- it is now in taiwanese airspace. we are getting cctv reports that a fighter jet is flying across the taiwanese straight, taiwan s trait. we will keep an eye on both of these aircraft. kishore mahbubani, distinct fellow at the asia research institute, joining us from singapore. he was singapore's ambassador to the un, sat as president of the un security council. he has watched situations like this unfold. we are interested in his point of view. thank you for your time, sir. how big an escalation is this, if nancy pelosi is about to touch down in taipei? kishore: is very, very serious.
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i think it is very important for americans to take a very long-term perspective with china. here is a 4000-year-old dragon that went to sleep for 100 years or so, and now is finally making up. and when this 4000-year-old dragon is waking up, it decided to poke it in the eye and say we don't care what you think, we will do what we want to do. on a very sensitive issue, which every american president has handled very carefully to make sure that, hey, on taiwan, we don't change the status quo, we keep it as it is, os it doesn't beco-- so it doesn't become a bone of contention. here is nancy pelosi for purely political reasons domestic --
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domestic reasons shaking about consensus between the united states and china. that is a very dangerous thing that has people around the world very nervous. kailey: how dangerous, if the dragon has been poked, what do we expect the dragon to do? are we realistically talking about a warlike scenario here? kishore: i think china, as you know, always thinks long-term. china is not ready in 2022 to fight a war with the united states. so there will be a dramatic reaction of some kind to the visit of nancy pelosi. but it will fall short of something will work -- something world war iii. if you want any piece of good news, world war iii will not start. but at the same time, you are creating the conditions for a major downturn in u.s.-china relations at some point in time,
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because taiwan has to know from tries point of view is the last remnant--china's point of view is the last remnant of the century of humiliation china suffered from 1842 to 1949. sorry to switch metaphors -- but taiwan as an issue is visceral for the chinese. and you have to know that. you have to understand the history behind it. guy: what would be a proportional response from the chinese? we are getting reports of a very advanced fighter jet flying across the taiwan strait. what would be a proportional response from beijing? kishore: this is where it is in china's interest to keep the united states guessing. you know, i don't know whether
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you saw the column by tom friedman in "the new york times" where he said that at a time when you want to make sure that china doesn't support russia on ukraine and china has been supporting russia in ukraine, why are you giving china an incentive now to support russia and ukraine? clearly, you can't fight on two fronts. you gotta decide, do you want to win the war in ukraine or do you want to start a war in taiwan? in my book, i point out that what the united states needs to be is a comprehensive, long-term strategy to manage the rise of china. that strategy is missing. and instead you get this random action like this provocative visit by nancy pelosi to taiwan , and you have got to be sure
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that china is going to react. you cannot do nothing. -- it cannot do nothing. if it does nothing, it will be perceived to be weak. kailey: just a timing update --pelosi's plane is expected to arrive 10:43 local time, less than six minutes from now. you said a moment ago that china in 2022 is not prepared to fight a war with the united states, which brings me to the domestic issues that china and more specifically xi jinping is currently confronting. covid zero policy, turmoil and the property sector, growth slowing in general. to what extent do you think that may mitigate the more aggressive impulses of the communist party right now? kishore: well, i think 2022 is a bad year for china. no doubt. you pointed out many of the reasons -- zero-covid policy is difficult to keep up, economic growth is slowing.
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2023 will be a good year for china, after political succession is taken care of and train opens up again. -- china opens up again. but remember when you are dealing with china, never focus on the short term. you are thinking in terms of the next few months. china is thinking where will we be 10 years from now, 20 years from now, 30 years from now. the chinese are making sure that the end goal of making sure that they have a victory on the united states of america in 10 years, 15 years, 20 years, and believe me, the world changes dramatically when the united states becomes the number two economy in the world, this is a thought that is inconceivable to many americans, that is where the chinese and that when we are number one, we will remember everything you did and how you poked us in the eye in august
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2022. we will remember that. that is when all the real retaliation, real responses will come, when china eventually becomes the number one economy in the world. guy: how should the united states be thinking about that, therefore, in terms of what it does and its relationship to china? is this a situation that we are watching at the moment, this re-freezing of relations, going to present the united states with an opportunity -- maybe "opportunity" is the wrong word here -- to economically slow china down? are we going to see a fragmentation of supply chains? are we going to see transfers? and are trips like the one antiquities making now going to excel--the one at nancy pelosi
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is making out going accelerate the process? kishore: don't dream of slowing china's economy down. in the year 2010, china's retail goods market was $1.8 trillion. china -- united states' retail goods market was $4 trillion, more than double that of china's. fast-forward 10 years, 2020, united states has gone from four chile dollars to, $5.5 trillion $1.8 trillion -- china has gone from $120 trillion to $6 trillion--$1.8 trillion to $6 trillion. and china transformer with the rest of the world than the united states does, even if the united states cuts off weeks with china, it will keep
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growing. there are countries in the world to be more trade with china than with the united states. the world has changed fundamentally. the united states can no longer stop china. china has taken off. china is integrated with the rest of the world. kailey: great to get your valuable insight. kishore mahbubani, distinguished fellow at the asia research institute, former president of the un security council. we are looking at a live shot of taipei's airport. it seems to be the shot of an incoming plane getting ready for landing. we understand that pelosi's plane is expected to arrive 10:43 local time. incredibly historical moment, the first time the u.s. speaker of the house has visited taiwan in 25 years. very important, high-ranking
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official in the u.s., second in line to the resume in terms of any possible secession -- second in line to the presidency in terms of any possible secession. guy: as you say, an historic moment. we are assuming that nancy pelosi is on this aircraft. judging by the array of dignitaries that are at what appears to be the vip terminal at the airport, it would appear likely that she is. she is in the taiwanese airspace a little while ago. many people taking pictures of what you say, an historic moment, the arrival of nancy pelosi in taiwan. the next question we have to ask is how does china respond. that is the question that everybody is asking today, how does china respond, what is a proportional response, what is a disproportional response from china. we have reports of an aircraft, fighter jet across the taiwan strait.
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we will see what happens the next few minutes. images of nancy pelosi's aircraft. she will be touching down any second now. kailey: absolutely. we are watching the final approach. it could be any minute now. as you were discussing with the former of the un security council, any kind of reaction from china isn't necessarily in the next 24 hours can even in the next week. china may have a long-term plan. looks like the wheels of what we expect is an air force plane is touching down. we understand that china's foreign minister is at the airport ready to greet a "vip." we expect that will be house speaker nancy pelosi. let's go to the white house, where annmarie hordern is standing by. we expect that the plane has landed and he will be speaker policy who gets off at any moment now and we will continue to watch the images as the plane taxis on the runway.
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your reaction and the likely white house reaction to what we are watching, history being made in real time? annmarie: we are ready gotten white house reaction. the president's national security advisor jake sullivan , was talking on nbc about how this is a normal visit. there have been speakers of the house in the past, newt gingrich in the late '90s, members of congress in the last 12 months, going over and visiting taiwan and he says this is quite normal, and that if there was to be an escalation, it would be on china's watch. but of course, the rhetoric leading up to this moment has been harsh and it has been rigorous and it has been nonstop from china's foreign ministry. they will not stand idly by with speaker pelosi coming. they view her as the third ranking highest u.s. official in the united states, even though admiral kirby has made clear do
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you xi jinping that these two leaders spoke last week. congress is an independent entity, the foreign ministry of china believes that everyone in the united states should be abiding by the policy, the one china policy, and they view this as an act of aggression. guy: there are those, there are many who say this is about the midterms. how does the democratic party, how does the republican party deal with this trip? how do we manage the story? clearly foreign policy is an area that the president has wanted to focus on. yes look at his area of expertise and has wanted to step into this arena. but the republican party has had on many occasions that there is a risk that he is being soft on china. how do both parties deal with this? annmarie: two things, and you are right, guy, has been from
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the senate foreign relations committee, he was the chair. -- president biden comes from the senate foreign relations committee, he was the chair. when it comes to the midterms, you would be hard-pressed to find anyone in washington who does not want to attack china. everyone wants to be seen as a china hawk into the midterms, when recent the administration has been laboriously debating whether to lift some tariffs and has not yet, because they know it is something they would get attacked in the midterm elections four. speaker pelosi has been a long time china hawk and she comes from california and one third four constituents are of asian descent. she has visited china before and she has wanted to take this trip since april. republicans, in the end, were pushing her to go and saying this was a good thing, individuals that would never side with speaker pelosi on any other issue are telling her she should be taking this trip to taiwan. but there is another wrinkle we
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should discuss them and that is the fact that there is some tension that has become washington and beijing, but between speaker pelosi's office and the white house, according to our reporting. what we have learned is that the white house did not want her to take this trip, but speaker pelosi really dug in her heels, and her office that if they did not want her to go on the trip, the president needs to come out and say that. the president did come out and say that the military did not think it was a good time to make the trip, they did not ask her publicly to not go. plans went ahead, and here we are today. many are poking holes in the administration's policy and the democratic policy is this being incoherent in terms of what they are trying to get out of china. at the same time you have the chinese delegation and the american delegation talking about the first in person visit with president biden and xi jinping of his administration. guy: we will go back to you for more analysis as we watch nancy pelosi's plane taxiing in
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taipei. she will probably deplaned very shortly. remember, she is the first u.s. house later to visit taiwan since 1997. this is an historic moment at a time when tensions between china and the united states is elevated. annmarie hordern, we will be back to you at the white house shortly. joining us for further analysis, etf investment ust policy strategist. talk to me about your reaction to this trip, what impact it will have. >> i think two or three big impacts, guy. good to see you. first of all, i think if it's a successful trip, and observed-- an absurd drop in treasury bond yields, go back up. that is the first thing. the second is the prospect for trade improvement between the u.s. and china are nil. i don't see any chance of
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reconciliation between the two countries anytime soon. third, i think this is a strong argument for even more defense spending. congress already is far exceeding what joe biden has asked for. i think congress will spend even more. his two friends, ukraine -- there is two fronts, ukraine and china, and u.s. needs more shipbuilding. kailey: we will also be seeing something out of china, greg, which raises the question, what this ultimately will accomplish other than provoking china, one of our earlier guests was saying is a sleeping dragon that you are now poking. greg: yeah, it is a risk in that regard. you have china suffering from a economy and soft real estate. they handled the covid outbreak, the most recent ones, very harshly. and you have got the president, xi jinping, seeking a third term this fall. it is quite toxic mix, in my
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opinion. i think xi has to look tough. he cannot afford to look weak right now. guy: how high are the chances of a one-on-one meeting between the two leaders do you think right now, greg? greg: between biden and xi? minimal. they had a phone chat about a week ago, but i think there is a minimal chance for any kind of reconciliation right now. i worried about in the next 72 hours chinese military exercises in the strait of taiwan. that could be viewed as fairly provocative. kailey: we already had reports of a chinese military aircraft flying over the taiwan strait. we are watching images of the plane just landing at taipei's airport, where we expect house speaker nancy pelosi, who i believe we are seeing an image of, to deport as she makes this historic trip to taiwan, the
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first on the u.s. house speaker will have landed and set foot in taiwan since 1997, 25 years since this has happened. we are looking at a number of people getting off the plane now. greg, obviously this comes in contact of a war still waiting in ukraine and china has not participated in the global effort to ostracize russia. you've seen the u.s. coming together with its allies in that effort. is the u.s. alone in this fight against china, or this were to exploit, would receive the same coalition of -- escalate, would we see the same coalition of allies? greg: i don't think so. there are some countries that worry about china -- australia, for example -- but a lot of countries have been very steadfast in their support of joe biden on ukraine but will not be as steadfast in the fight with china. china has so many tentacles around the world but i think a lot of countries would be reluctant to really confront china right now.
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guy: what impact on the midterms? greg: probably nothing, although i think joe biden has to be careful on china. there is going to be a decision in the next couple of weeks on whether to indict hunter biden or not for his dealings with china. that could complicate this quite a bit. i think for the midterms -- guy: greg, i'm going to stop you there for a moment. it looks like nancy pelosi is now walking down the jetway, stepping foot onto taiwanese soil. it looks like -- i think she is wearing a mask as she comes down that jetway, the steps of the aircraft. she will be greeted by the ambassador of the united states in taipei. we understand that the foreign minister is also going to be there as well. very hard to make out exactly what is happening here. it is obviously incredibly late, 12 hours ahead of the united
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states, eastern time come in taipei right now. effectively approaching 11:00 at night. darkness has certainly fallen. we are watching the group going down the stairs. nancy pelosi is in the middle of your shot wearing pink. we will continue to monitor her arrival in taipei. doesn't matter how long -- does it matter how long she stays there? if it is a flying visit, a day or so, does it have an impact on how china is likely to respond? greg: that's a good point, guy. and as that a pretty brief -- it has to have a pretty brief visit, a toast with key taiwanese leaders, but a longest day would be provocative -- long stay would be provocative and up the chinese even more. kailey: we are waiting to see what china's reaction will be
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and what the resulting u.s. action will be. the biden administration is looking to be hawkish in china but also looking to lift some tariffs to fight inflation and wanted to work on some of those issues together. how much does this disrupt those other efforts if you have taiwan standing and awake? greg: i think it does, kailey. it makes the beijing government far less inclined to do anything with u.s. we will go into a deep freeze the next several months. guy: what does that mean -- if you are sitting in the markets trying to understand the implications of all of this, we were talking to lisa from morgan stanley earlier on and i asked a question about geopolitics, and whether it is inflationary. this is clearly going to have an impact on trade between the two. it is going to put sand in the years of global trade more broadly.
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when you think about this from an economic point of view, how much of a problem is this going to cause the president? how persistent is inflation going to be as a result of what is happening on the foreign policy front? greg: i would say the main inflation impact comes from ukraine, where the price of everything from green, fertilizer, fuel, will be heading higher. this view of the bond market in the last week or so that maybe inflation has peaked to me is naïve. i think it is premature to make that conclusion. kailey: we are seeing in the market it appears to be some relief that the speaker has landed safely. no longer seeing a bid into the haven of the bond market. yields are up 9.5 basis points on the 10 year treasury on the day. as we think about the implications of this going forward, we were talking to the former un security council president and he was saying china is thinking long-term,
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they are not thinking over the next week or month ahead or the near term like we are. this is a long-term strategy. do you have a sense that the u.s. as a firm idea of what it wants its china policy to be in the longer-term? greg: it's unclear, in my opinion. joe biden had to be corrected by his own aides earlier this year when he talked about strategic ambiguity, i think was the phrase. i think the u.s. view is not solidified. i think it is going to be an albatross for biden in the november campaign. guy: the pelosi visit "severely impact china-u.s. foundation." but think about what is happening here. are we returning to the cold war? is that how we should think about global politics? are we going back to highly competitive capital facing off against each other, large amounts of money being spent on the military as a result of
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that, in an effective arms race once again being friend of mine? --front of mind? i think we have been in that for a while but have not noticed it. is that the framework we should be thinking about when we look at what is happening in taipei right now? greg: good companies can still have good earnings, but geopolitically, we have a situation where russia is holding hostage one of our athletes. you have a situation where china is furious over the provocation from they think, by nancy pelosi. i see a rocky period ahead. that doesn't mean the u.s. economy can't come back and we can't have pluses on other fronts. but i think geopolitics is going to be a real problem. kailey: just to reiterate, some of the headlines we are getting out of the news agency citing a statement from the chinese ministry of foreign affairs, the ministry of foreign affairs said the visitor violates chinese territorial integrity, also previously saying, as guy
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mentioned, that it severely impacts the u.s.-china foundation, contradicting violating the one china principle. all of that is according to the agency. an china lodges "solemn representations with u.s." on pelosi's visit. from the perspective of taiwan, we understand their political applications for nancy pelosi from both parties in the united states as to why she would go. why would taiwan want her there knowing it would be a major provocation to china? greg: i think they want protection. i think the chinese government, in saying how this is a provocation, we have had lots of members of congress go to taiwan. newt gingrich went to taiwan, lots of house members went earlier this year. i think the chinese are perhaps exaggerating the threat. but they do view it as an
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intrusion, and i think that we have got a long, cold period without much in terms of trade deals and with the inflation threat may be becoming a little more acute. kailey: greg valliere, agf investments chief u.s. policy strategist, thank you for joining us as we mark this moment in history, house speaker nancy pelosi becoming the first leader of the house to set foot on taiwanese soil in 25 years. you can follow the coverage on bloomberg's blog. we are getting some headlines, the one from xinhua that i mentioned, china saying that the visit is a dangerous act of playing with fire, echoing the language, xi jinping spoke himself to president biden when they spoke a few days ago. nancy pelosi, for her part, is talking about how she is talking with taiwan to focus on reaffirming that her visit to taiwan offers a commitment to vibrant democracy.

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