Bloomberg Audio Studios, Podcasts, radio news.

Bloomberg Audio Studios, Podcasts, radio news.

This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner. You can join Brian Curtis and myself for the stories making news and moving markets in the APAC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner. You can join Brian Curtis and myself for the stories making news and moving markets in the APAC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

Joe Little, Global chief strategist for HSBC Asset Management, to take a closer look at market, So we'll get the global hat on first here at Joe and we'll come around to China in a few moments. A lot of interest in that NDRC news conference today, But in terms of issues that hit Wall Street today, you've got the geopolitical attentions. We mentioned that higher oil prices seasonality and also rising treasury yields in a sense, is this noise now or is it something really to worry about?

Joe Little, Global chief strategist for HSBC Asset Management, to take a closer look at market, So we'll get the global hat on first here at Joe and we'll come around to China in a few moments. A lot of interest in that NDRC news conference today, But in terms of issues that hit Wall Street today, you've got the geopolitical attentions. We mentioned that higher oil prices seasonality and also rising treasury yields in a sense, is this noise now or is it something really to worry about?

Well, Hi, Brian, that's a great place to start the conversation. Look, we've seen some big moves, haven't we in the last few trading sessions, as you say, oil price moving dramatically, all the developments in China and Asia stock markets, and then this big move in the last couple of days in terms of US treasuries responding to the stronger than expected labor market data. So look, I mean, I think we have to take some of these signals seriously.

Well, Hi, Brian, that's a great place to start the conversation. Look, we've seen some big moves, haven't we in the last few trading sessions, as you say, oil price moving dramatically, all the developments in China and Asia stock markets, and then this big move in the last couple of days in terms of US treasuries responding to the stronger than expected labor market data. So look, I mean, I think we have to take some of these signals seriously.

It tells us of.

It tells us of.

An environment where maybe fed trajectory is going to be a little bit different to what people had anticipated. Maybe there's a little bit of a threat around cost push inflation, as you hinted at on your intro. I mean, it's early days in the process, is probably too soon to draw firm conclusions. So I think maybe you're right to be a little bit skeptical. But the fact is the facts, and we have to be adapting our view of the world in accordance with how some of those trends are evolving.

An environment where maybe fed trajectory is going to be a little bit different to what people had anticipated. Maybe there's a little bit of a threat around cost push inflation, as you hinted at on your intro. I mean, it's early days in the process, is probably too soon to draw firm conclusions. So I think maybe you're right to be a little bit skeptical. But the fact is the facts, and we have to be adapting our view of the world in accordance with how some of those trends are evolving.

So one of the key questions I think here in the States is can you have economic growth to the extent that we had the very strong jobs report without producing a meaningful uptick in inflation. Let's say we were not at the FEDS two percent target, but we're not far away, and it may not move in a significant manner even though the jobs market is pretty strong.

So one of the key questions I think here in the States is can you have economic growth to the extent that we had the very strong jobs report without producing a meaningful uptick in inflation. Let's say we were not at the FEDS two percent target, but we're not far away, and it may not move in a significant manner even though the jobs market is pretty strong.

Is that reasonable to assume? Yeah?

Is that reasonable to assume? Yeah?

Thanks, thanks Derk. Look, I mean so last last week's labor market data is one data point. The trend that we've seen over the last three or maybe six months is for very gradual cooling of trends, and I think that that pattern is still a reasonable one to conclude based on the balance of the data that we see. So that's not discounting completely the latest latest news, but reflecting more on the recent trend. And of course, when we look at some of the newer, more more trendy labor market indicators, like vacancies, they've been falling very quickly in the US data. So there is evidence of cooling of the labor market. It's just happening at a very gradual pace, much more slowly than many people anticipated, I think as regards inflation pressures coming from the labor market. There's also good signs that wage growth and the leading indicators of wage growth are beginning to cool as well. So I'm not sure the labor markets at this point contributing to sort of a turn in dynamics faster hiring, more wage growth. We've not yet reached that point. What we're checking or reflecting on, I think, in markets as investors as analysts, is the speed at which that cooling process is taking place, and that's the big revision of view that's been going on over the last few sessions in markets.

Thanks, thanks Derk. Look, I mean so last last week's labor market data is one data point. The trend that we've seen over the last three or maybe six months is for very gradual cooling of trends, and I think that that pattern is still a reasonable one to conclude based on the balance of the data that we see. So that's not discounting completely the latest latest news, but reflecting more on the recent trend. And of course, when we look at some of the newer, more more trendy labor market indicators, like vacancies, they've been falling very quickly in the US data. So there is evidence of cooling of the labor market. It's just happening at a very gradual pace, much more slowly than many people anticipated, I think as regards inflation pressures coming from the labor market. There's also good signs that wage growth and the leading indicators of wage growth are beginning to cool as well. So I'm not sure the labor markets at this point contributing to sort of a turn in dynamics faster hiring, more wage growth. We've not yet reached that point. What we're checking or reflecting on, I think, in markets as investors as analysts, is the speed at which that cooling process is taking place, and that's the big revision of view that's been going on over the last few sessions in markets.

So we had a big drop in yields since April. Really the two year went from five percent down to three and a half percent. So now we've had this balance and on the tenure, you know, poised right at four percent. I heard from a number of technical traders this morning that it's around four and a quarter percent. It's kind of the rubicon line, you know, that could determine whether or not it becomes an issue for risk asset. So do you have a sense of, you know, where rising yields all of a sudden start to worry people rather than just be a reflection of saying a little better than expected growth.

So we had a big drop in yields since April. Really the two year went from five percent down to three and a half percent. So now we've had this balance and on the tenure, you know, poised right at four percent. I heard from a number of technical traders this morning that it's around four and a quarter percent. It's kind of the rubicon line, you know, that could determine whether or not it becomes an issue for risk asset. So do you have a sense of, you know, where rising yields all of a sudden start to worry people rather than just be a reflection of saying a little better than expected growth.

Yeah, so I mean you're you're right, Brian.

Yeah, so I mean you're you're right, Brian.

The yield curve has has gone from being inverted to disinverting itself and is now back to quite quite a flat shape. So twos versus tens pretty much around the same yield level. So there's been some interesting developments there. Look a lot of that is coming from the market revising its assumptions around November December, As you said on the intro November had been assumed as likely for another jumbo cut from the FED. That's been properly pared back. But also when we look at the rad ex dictations in May or June for twenty twenty five, they've been adjusted again. There's still a process around, as Power says, recalibration that's properly I think reflected into market pricing. So the FAIRED is adjusting rates back to a more appropriate normal level of interest rates as per market market expectations. But at some point, like you say, there are some implications, particularly for the long bond for other markets and maybe the macro story. I think that's particularly an issue for credits and for stock markets. One of the features of the system that we've seen so far this year is all the volatility has been in the rate space. Macro interest rate expectations have been moving around with quite dramatic shifts in the narrative, but credit markets and stock markets have been surprisingly immune to that, surprisingly.

The yield curve has has gone from being inverted to disinverting itself and is now back to quite quite a flat shape. So twos versus tens pretty much around the same yield level. So there's been some interesting developments there. Look a lot of that is coming from the market revising its assumptions around November December, As you said on the intro November had been assumed as likely for another jumbo cut from the FED. That's been properly pared back. But also when we look at the rad ex dictations in May or June for twenty twenty five, they've been adjusted again. There's still a process around, as Power says, recalibration that's properly I think reflected into market pricing. So the FAIRED is adjusting rates back to a more appropriate normal level of interest rates as per market market expectations. But at some point, like you say, there are some implications, particularly for the long bond for other markets and maybe the macro story. I think that's particularly an issue for credits and for stock markets. One of the features of the system that we've seen so far this year is all the volatility has been in the rate space. Macro interest rate expectations have been moving around with quite dramatic shifts in the narrative, but credit markets and stock markets have been surprisingly immune to that, surprisingly.

Low levels of volatility.

Low levels of volatility.

Now now higher bond yards could impact that and maybe inject more volatility into credits and stuff markets as we head toward the end of the year.

Now now higher bond yards could impact that and maybe inject more volatility into credits and stuff markets as we head toward the end of the year.

So Brian mentioned the NDRC press conference later today to kind of add a little bit of a finer point to some of the stimulus measures that we know a little about.

So Brian mentioned the NDRC press conference later today to kind of add a little bit of a finer point to some of the stimulus measures that we know a little about.

Joe, can you give me.

Joe, can you give me.

A sense of how you think the economy will accept these measures and whether or not it's going to have a meaningful impact.

A sense of how you think the economy will accept these measures and whether or not it's going to have a meaningful impact.

Well, I think investors are looking for some detail. At this point.

Well, I think investors are looking for some detail. At this point.

We've had a comprehensive set of liquidity measures, which is the first piece of the puzzle, and then the second and the third pieces are reflecting the shape and size of the fiscal stimulus, and then in time some structural reforms to address productivity and high quality growth. So in the near term and maybe looking ahead to the Economic Council later in the year and even the NPC in the early part of twenty twenty five, we're expecting an incremental flow of news around new policy initiatives. And like you say, the focus here I think should not just be on the trillion R and B package that may or may not come and may or may not be imminently announced, but also on the composition on the shape of those packages. We want to see more of a focus around policies addressing social security issues, maybe addressing some of the challenges for local governments, maybe injecting capital into banks that addresses the demand shortage ending too.

We've had a comprehensive set of liquidity measures, which is the first piece of the puzzle, and then the second and the third pieces are reflecting the shape and size of the fiscal stimulus, and then in time some structural reforms to address productivity and high quality growth. So in the near term and maybe looking ahead to the Economic Council later in the year and even the NPC in the early part of twenty twenty five, we're expecting an incremental flow of news around new policy initiatives. And like you say, the focus here I think should not just be on the trillion R and B package that may or may not come and may or may not be imminently announced, but also on the composition on the shape of those packages. We want to see more of a focus around policies addressing social security issues, maybe addressing some of the challenges for local governments, maybe injecting capital into banks that addresses the demand shortage ending too.

I want to see consumers kind of get get out there, and we've seen some you know, a little bit of a bounce here in housing over the Golden Week, and of course the stock market is jumped.

I want to see consumers kind of get get out there, and we've seen some you know, a little bit of a bounce here in housing over the Golden Week, and of course the stock market is jumped.

What's key to you to see if this is sustainable?

What's key to you to see if this is sustainable?

Well, I mean, I think it's the nature of those announcements, in the shape of that fiscal package, and then you want to see the follow through in the economic data. Brian, So, I mean, it's hard to say which indicator is the most important one. Maybe consumer confidence is ultimately what we're looking to improve, but there's maybe clearer evidence of that in some of the retail sales dynamics first and format. I think that's an important one, alongside some of the aggregate dates on credits.

Well, I mean, I think it's the nature of those announcements, in the shape of that fiscal package, and then you want to see the follow through in the economic data. Brian, So, I mean, it's hard to say which indicator is the most important one. Maybe consumer confidence is ultimately what we're looking to improve, but there's maybe clearer evidence of that in some of the retail sales dynamics first and format. I think that's an important one, alongside some of the aggregate dates on credits.

Yeah, I wrote the data and Shijin Ping, let's see some action from him, or at least some confidence building. Joe, thank you very much.

Yeah, I wrote the data and Shijin Ping, let's see some action from him, or at least some confidence building. Joe, thank you very much.

Joe Little from.

Joe Little from.

HSBC Asset Management, Stephanie long here, chief investment officer at Stashaway to take a closer look at it. So the government has rolled out some of these measures including interest rate cuts. We heard that, you know, in a big flurry from the PBOC one day, more liquidity to support bank lending, and that should be good if the demand is there. And then also this pledge to stimulate the stock market. It's something like three hundred and forty billion dollars worth of of a pledge to allow companies to buy back shares and such. Should we should we be expecting a lot today, Stephanie, or just be patient. It's going to happen step by step.

HSBC Asset Management, Stephanie long here, chief investment officer at Stashaway to take a closer look at it. So the government has rolled out some of these measures including interest rate cuts. We heard that, you know, in a big flurry from the PBOC one day, more liquidity to support bank lending, and that should be good if the demand is there. And then also this pledge to stimulate the stock market. It's something like three hundred and forty billion dollars worth of of a pledge to allow companies to buy back shares and such. Should we should we be expecting a lot today, Stephanie, or just be patient. It's going to happen step by step.

Yeah, I think.

Yeah, I think.

I mean today it seems like everybody is holding the breath for the brief, for the press conference, to see kind of what kind of policy would come out after the long holiday. Now, I think if you kind of take a step back and look at I mean want the Chinese government and in a coordinate effort, I guess PBOC and also the UH, I guess from the fiscal side have done so far. We're focused on the monitory policies, right, and I think if you kind of think about the timing of the stimulus package, basically you're looking at China data which has been deteriorating in the past few months. Arguably, if you look at the most important metric, which is the property market on a month and month basis, I mean, prices were still falling and China was actually trying to fight off a deflationary uh kind of uh slow down. And I mean the fact that I mean the Fed has actually started is rate cutting cycle earlier kind of last month. I basically gave the p B o C a window to actually loosing up the mantary policy a bit more to kind of prevent the spiral from further kind of deteriorating. And I think looking forward, of course, the all the manitary policies are actually supportive, and I guess some of the property market measures have encouraged settiment turnaround, as seen from kind of some of the Golden Red data just that's just coming out. However, to have kind of any impact on the economy, uh, a more kind of physical stimulus of policy needs to be and not acted. And I think that's why, I mean, the market from so focused on what kind of fiscal policy and to what extent, uh would the fiscal policy.

I mean today it seems like everybody is holding the breath for the brief, for the press conference, to see kind of what kind of policy would come out after the long holiday. Now, I think if you kind of take a step back and look at I mean want the Chinese government and in a coordinate effort, I guess PBOC and also the UH, I guess from the fiscal side have done so far. We're focused on the monitory policies, right, and I think if you kind of think about the timing of the stimulus package, basically you're looking at China data which has been deteriorating in the past few months. Arguably, if you look at the most important metric, which is the property market on a month and month basis, I mean, prices were still falling and China was actually trying to fight off a deflationary uh kind of uh slow down. And I mean the fact that I mean the Fed has actually started is rate cutting cycle earlier kind of last month. I basically gave the p B o C a window to actually loosing up the mantary policy a bit more to kind of prevent the spiral from further kind of deteriorating. And I think looking forward, of course, the all the manitary policies are actually supportive, and I guess some of the property market measures have encouraged settiment turnaround, as seen from kind of some of the Golden Red data just that's just coming out. However, to have kind of any impact on the economy, uh, a more kind of physical stimulus of policy needs to be and not acted. And I think that's why, I mean, the market from so focused on what kind of fiscal policy and to what extent, uh would the fiscal policy.

Have the impact on GDP growth?

Have the impact on GDP growth?

So I think I mean it's going to come out today or if not, I mean later this month. We also have the the the NPC meeting, that's another window that China can come up with further policies.

So I think I mean it's going to come out today or if not, I mean later this month. We also have the the the NPC meeting, that's another window that China can come up with further policies.

Does it surprise you with all the PBOC really has withheld using its balance sheet, I mean what we may call either in the US or in Europe, you know, kind of quantitative easing, where some of this bad debt is put on the balance sheet and it allows the market to kind of breathe in away without levels of stress and encourages capital to take a little bit more risk.

Does it surprise you with all the PBOC really has withheld using its balance sheet, I mean what we may call either in the US or in Europe, you know, kind of quantitative easing, where some of this bad debt is put on the balance sheet and it allows the market to kind of breathe in away without levels of stress and encourages capital to take a little bit more risk.

Yeah, I think what's happening in China is lon liquidity problem. It's more a confidence problem, and it's very hard to solve a confidence problem with more liquidity, because I think, I mean, Shada is actually not lacking liquidity. The problem is that there's no long boring. So if you look at kind of what the IMF has done, they've looked at the efficacy of marty policy versus fiscal policy in China. So back in the old days and in just and eight, for example, when China came up with a big kind of marshy stimulus, that was much more effective. However, that sort of effectiveness has worn off throughout the years, and now I think the policy makers actually also understand this. So that's why I mean, BOC has been quite expanding.

Yeah, I think what's happening in China is lon liquidity problem. It's more a confidence problem, and it's very hard to solve a confidence problem with more liquidity, because I think, I mean, Shada is actually not lacking liquidity. The problem is that there's no long boring. So if you look at kind of what the IMF has done, they've looked at the efficacy of marty policy versus fiscal policy in China. So back in the old days and in just and eight, for example, when China came up with a big kind of marshy stimulus, that was much more effective. However, that sort of effectiveness has worn off throughout the years, and now I think the policy makers actually also understand this. So that's why I mean, BOC has been quite expanding.

The point that I would make. If you're holding dead, I mean, if you're underwater on an asset, right, you're not feeling too good about holding on to that position. Yeah, you may service it because you have the ability to do so, but it's not going to allow you to take greater risk.

The point that I would make. If you're holding dead, I mean, if you're underwater on an asset, right, you're not feeling too good about holding on to that position. Yeah, you may service it because you have the ability to do so, but it's not going to allow you to take greater risk.

Yeah, exactly right.

Yeah, exactly right.

And if I mean, that's why I pointed to the falling property prices as a as a as a metric that is actually quite important because I mean, as you've mentioned, if you see kind of your wealth shrinking every day and if you're under the water, you're not going to spend on other basic consumptions or kind of this gretory spending, and that's kind of quite contractional for the economy.

And if I mean, that's why I pointed to the falling property prices as a as a as a metric that is actually quite important because I mean, as you've mentioned, if you see kind of your wealth shrinking every day and if you're under the water, you're not going to spend on other basic consumptions or kind of this gretory spending, and that's kind of quite contractional for the economy.

Yeah, so confidence, as you say, is the main thing, and getting consumers to actually feel comfortable in releasing some of their you know, they have huge savings even if they might be a little underwater on their mortgage and not spending the money that they've saved over the past you know, goodness knows how many years.

Yeah, so confidence, as you say, is the main thing, and getting consumers to actually feel comfortable in releasing some of their you know, they have huge savings even if they might be a little underwater on their mortgage and not spending the money that they've saved over the past you know, goodness knows how many years.

So how do you actually do that?

So how do you actually do that?

I think the president she you know, could could could be influential in this area, but it doesn't seem that that's his thing.

I think the president she you know, could could could be influential in this area, but it doesn't seem that that's his thing.

Yeah.

Yeah.

I think, of course, in the past two years or so, we've seen a lot of policies that were very market friendly or didn't kind of gear towards encouraging consumption, and also in terms of stock market that has been fairly low in their prity list, and I think all these things actually have hurts consumer confidence. But I think what we've seen so far in the last two or three weeks is that there's been a concerted effort and that seems to have a consensus at the I guess at the highest level that this cannot continue and they need to sort of backstop this. I think they were actually waiting for a window where basically they have more room to maneuver, and the fact that the FED has started as great cutting cycle is a great window for them. Of course, we have the US election coming up, and that is another potential uncertainty that the Chinese government has to grapple with, so I mean they're actually looking at that as well.

I think, of course, in the past two years or so, we've seen a lot of policies that were very market friendly or didn't kind of gear towards encouraging consumption, and also in terms of stock market that has been fairly low in their prity list, and I think all these things actually have hurts consumer confidence. But I think what we've seen so far in the last two or three weeks is that there's been a concerted effort and that seems to have a consensus at the I guess at the highest level that this cannot continue and they need to sort of backstop this. I think they were actually waiting for a window where basically they have more room to maneuver, and the fact that the FED has started as great cutting cycle is a great window for them. Of course, we have the US election coming up, and that is another potential uncertainty that the Chinese government has to grapple with, so I mean they're actually looking at that as well.

So do you suspect when it comes to market action that the gains that we have seen before the holiday and the gains in Hong Kong, that this could be a flash in the pan, and that if the underlying trends in the overall economy don't change, I mean, you're essentially throwing good money after bad and some of these markets will just not respond in a positive way.

So do you suspect when it comes to market action that the gains that we have seen before the holiday and the gains in Hong Kong, that this could be a flash in the pan, and that if the underlying trends in the overall economy don't change, I mean, you're essentially throwing good money after bad and some of these markets will just not respond in a positive way.

Yeah, I think.

Yeah, I think.

I mean, of course, that the market has had a big rebound, but remember where China equity valuation came from, by it came from a very very very low level. And I think what we've seen in the past two weeks or so is basically a flurry of shortcovering plus maybe some rotation of of kind of regional loan money from for example, from India.

I mean, of course, that the market has had a big rebound, but remember where China equity valuation came from, by it came from a very very very low level. And I think what we've seen in the past two weeks or so is basically a flurry of shortcovering plus maybe some rotation of of kind of regional loan money from for example, from India.

Back into China.

Back into China.

Because most funds are actually underweight uh and even with the valley that we've had, we look kind of at regional funds or even global funds, funds are still on aggregate underweight China. So if if we look at valuation right now for MSCI China at least that has gone back to sort of historical average. So for the equity market to rally further, I think you do need to see kind of more confidence in terms of the earning cycle turning in the next twelve months, and that has to come from more fiscal stimulus.

Because most funds are actually underweight uh and even with the valley that we've had, we look kind of at regional funds or even global funds, funds are still on aggregate underweight China. So if if we look at valuation right now for MSCI China at least that has gone back to sort of historical average. So for the equity market to rally further, I think you do need to see kind of more confidence in terms of the earning cycle turning in the next twelve months, and that has to come from more fiscal stimulus.

Well, those swap facilities for companies to buy back shares and and such could be important. And you know, in terms of the social assistance that might get people willing to spend their money, the help that they're giving to you know, young graduates from universities that don't have jobs. Is there more coming? Is that a start or is that it?

Well, those swap facilities for companies to buy back shares and and such could be important. And you know, in terms of the social assistance that might get people willing to spend their money, the help that they're giving to you know, young graduates from universities that don't have jobs. Is there more coming? Is that a start or is that it?

Yeah?

Yeah?

If you look at the I think one of the biggest problems that China has tackled is also the youth unemployment problem. Right, it's actually approaching sort of high double digits. And the I mean the policymakers help understand that there's not enough investments going on, there's not enough kind of I guess business opportunities to hire all these young people coming out from school. Uh, and that's something that they need to directly address. So within that fiscal package, and some of the things that they can do is actually directly subsidized companies to hire these younger folks, right, And I think that could be a very effective way to encourage youth employment. So, as I mentioned, I mean, basically these are things that the government can do very very directly in a very targetive manner, which is much more effective than just kind of pumping liquidity in the system because basically, as we have seen in the past episodes, the risk of just injecting liquidity is that it goes into a market, right, it goes into probably bubble, etc.

If you look at the I think one of the biggest problems that China has tackled is also the youth unemployment problem. Right, it's actually approaching sort of high double digits. And the I mean the policymakers help understand that there's not enough investments going on, there's not enough kind of I guess business opportunities to hire all these young people coming out from school. Uh, and that's something that they need to directly address. So within that fiscal package, and some of the things that they can do is actually directly subsidized companies to hire these younger folks, right, And I think that could be a very effective way to encourage youth employment. So, as I mentioned, I mean, basically these are things that the government can do very very directly in a very targetive manner, which is much more effective than just kind of pumping liquidity in the system because basically, as we have seen in the past episodes, the risk of just injecting liquidity is that it goes into a market, right, it goes into probably bubble, etc.

So that's where we're looking.

So that's where we're looking.

All right, Stephanie, we got to go Unfortunately, next time, you know, come back to the studios with us. Stephanie Lung there from stash Away.

All right, Stephanie, we got to go Unfortunately, next time, you know, come back to the studios with us. Stephanie Lung there from stash Away.

It's been one year since the October seventh attack on Israel and around the world today people people being remembered, some abducted, others killed. Tragic situation. We want to reflect on that now with David Tafuri, former State Department official also foreign policy expert, joining us from Washington, d C. David, thank you so much for making time. How are you reflecting on this situation one year on.

It's been one year since the October seventh attack on Israel and around the world today people people being remembered, some abducted, others killed. Tragic situation. We want to reflect on that now with David Tafuri, former State Department official also foreign policy expert, joining us from Washington, d C. David, thank you so much for making time. How are you reflecting on this situation one year on.

Well, a lot has happened in this last year.

Well, a lot has happened in this last year.

Obviously, we have to think about this anniversary and the tragedy that happened, and the remembrance for the over one thousand Israelis who were killed, many of them young people, most of them civilians, who never should have been targeted, and who suffered incredible atrocities at the hands of these Hamas militants. But at the same time, the response by Israel and by the IDF has forever changed the relationship of Israel with the Palestinian territories. And we are so far away now from a two state solution, which is really the only way that we'll ever have peace in this area. And so I think right now we should be thinking about those who were killed, those who were hostages, but we also in the future after this anniversary, have to move towards some resolution.

Obviously, we have to think about this anniversary and the tragedy that happened, and the remembrance for the over one thousand Israelis who were killed, many of them young people, most of them civilians, who never should have been targeted, and who suffered incredible atrocities at the hands of these Hamas militants. But at the same time, the response by Israel and by the IDF has forever changed the relationship of Israel with the Palestinian territories. And we are so far away now from a two state solution, which is really the only way that we'll ever have peace in this area. And so I think right now we should be thinking about those who were killed, those who were hostages, but we also in the future after this anniversary, have to move towards some resolution.

So we did have a nuanced position taken by Kamala Harris in the interview in sixty minutes when she was asked about Israel, and she said, we support the Israeli people, and so by implication that meant that support for the government was not so easily stated. The only thing is that in Israel there's a lot of support right now for Benjamin Netanyahu and the existing government. Right so I'm curious about the US strategy vis a VI Israel and how you get at urging restraint when right now it seems as though Israel wants to go for the jugular for both Hamas and Hezbelah.

So we did have a nuanced position taken by Kamala Harris in the interview in sixty minutes when she was asked about Israel, and she said, we support the Israeli people, and so by implication that meant that support for the government was not so easily stated. The only thing is that in Israel there's a lot of support right now for Benjamin Netanyahu and the existing government. Right so I'm curious about the US strategy vis a VI Israel and how you get at urging restraint when right now it seems as though Israel wants to go for the jugular for both Hamas and Hezbelah.

Well, a couple points.

Well, a couple points.

First of all, I'm not sure that Natanya who is popular again in Israel.

First of all, I'm not sure that Natanya who is popular again in Israel.

Remember he was deeply unpopular before the.

Remember he was deeply unpopular before the.

October seventh attack, and his political future was very much question.

October seventh attack, and his political future was very much question.

He's still facing.

He's still facing.

Charges of fraud and bribery that are criminal allegations that he needs to deal with, and there are a lot of people inside Israel that are unhappy with the response that he's brought. But more importantly, Israel certainly has the right to defend itself. It has the right to go after all of those who are responsible for the attacks a year ago, those who planned them, those who funded them, and those who carried them out. But what most Israelis believe is that their future depends on finding a resolution of the Palestinian situation, and they believe that Palestinians have a right to self determination.

Charges of fraud and bribery that are criminal allegations that he needs to deal with, and there are a lot of people inside Israel that are unhappy with the response that he's brought. But more importantly, Israel certainly has the right to defend itself. It has the right to go after all of those who are responsible for the attacks a year ago, those who planned them, those who funded them, and those who carried them out. But what most Israelis believe is that their future depends on finding a resolution of the Palestinian situation, and they believe that Palestinians have a right to self determination.

They want peace, and before.

They want peace, and before.

The October seventh attack, Israel was moving, you know, in the right direction in terms of resolving its relationships with some of the other Arab countries, and that could have also ultimately perhaps helped get the Arab countries on their side to find a resolution to the peace negotiations with the Palestinian territories. Now we're in a situation where their relationship with nearly all of the other Arab countries is very much strained. And you have to worry that while Netanyahu is carrying out, you know, many strikes that are have tactical benefits to Israel in the short term, in the long term, are they helping Israel's security or they jeopardizing Israel's security Because every time you take out, you know, an elder leader of Hamas or Hesba, it's going to be replaced very quickly by someone else, and you may be engendering a whole new generation of militants who are even more committed to using violence as their strategy. At some point, Israel has to end the effort to retaliate against all those responsible, and again it does have the right to go after all those responsible and has to start moving towards a detente and ultimately allowing the rebuilding of Gaza with the hope that will have a new government in place. And I also just remind your listeners that nearly fifty percent of the people living in Gaza are eighteen and under, and the last time there were elections in Gaza was seventeen years ago. Most of them didn't even have a chance to vote for Hamas. They didn't choose Hamas, and many of them are very unhappy with Hamas. But there have been forty two thousand people killed, many of them are civilians who did not support Hamas.

The October seventh attack, Israel was moving, you know, in the right direction in terms of resolving its relationships with some of the other Arab countries, and that could have also ultimately perhaps helped get the Arab countries on their side to find a resolution to the peace negotiations with the Palestinian territories. Now we're in a situation where their relationship with nearly all of the other Arab countries is very much strained. And you have to worry that while Netanyahu is carrying out, you know, many strikes that are have tactical benefits to Israel in the short term, in the long term, are they helping Israel's security or they jeopardizing Israel's security Because every time you take out, you know, an elder leader of Hamas or Hesba, it's going to be replaced very quickly by someone else, and you may be engendering a whole new generation of militants who are even more committed to using violence as their strategy. At some point, Israel has to end the effort to retaliate against all those responsible, and again it does have the right to go after all those responsible and has to start moving towards a detente and ultimately allowing the rebuilding of Gaza with the hope that will have a new government in place. And I also just remind your listeners that nearly fifty percent of the people living in Gaza are eighteen and under, and the last time there were elections in Gaza was seventeen years ago. Most of them didn't even have a chance to vote for Hamas. They didn't choose Hamas, and many of them are very unhappy with Hamas. But there have been forty two thousand people killed, many of them are civilians who did not support Hamas.

David, do you think it's possible to engage with Iran or is that an exercise in futility.

David, do you think it's possible to engage with Iran or is that an exercise in futility.

I don't think Iran has the best interests of the Palestinians or or the Middle East in general in mind, and when they carry out their actions and their conduct to the Iranian regime is working hard to ensure that they stay in place, and the proxy forces that they support, including Hamas, they provide that support because destabilizing other countries around Iran helps protect Iran. So I'm not convinced that there can be any talks right now with Iran. If there were talks, those talks should be focused on ensuring that Iran does not develop a nuclear weapon. We cannot allow Iran to develop a nuclear weapon, and I certainly hope that that is the highest priority of whichever administration is next Here in the United States.

I don't think Iran has the best interests of the Palestinians or or the Middle East in general in mind, and when they carry out their actions and their conduct to the Iranian regime is working hard to ensure that they stay in place, and the proxy forces that they support, including Hamas, they provide that support because destabilizing other countries around Iran helps protect Iran. So I'm not convinced that there can be any talks right now with Iran. If there were talks, those talks should be focused on ensuring that Iran does not develop a nuclear weapon. We cannot allow Iran to develop a nuclear weapon, and I certainly hope that that is the highest priority of whichever administration is next Here in the United States.

We would know that Hamas fired a lot of missiles into rockets into Tel Aviv, and that most of them seem to be intercepted. Is that system in place so strong that it can withstand continued barrage of missiles.

We would know that Hamas fired a lot of missiles into rockets into Tel Aviv, and that most of them seem to be intercepted. Is that system in place so strong that it can withstand continued barrage of missiles.

It certainly seems like it is.

It certainly seems like it is.

You know, very few of the missiles and rockets fired from the Palestine territories hit their targets. Similarly, very few of the missiles fired from Iran are hitting their targets. And I think, you know, one of the things we've learned in the last year is that Israel's air defense system is highly effective, and that's a wonderful thing for the people of Israel, and I think it's very bothersome for Iran because Iran had hoped that it could retaliate with some strength by firing missiles and rockets, and it really hasn't had much of an impact, and it does make Iran look pretty feckless, as well as the other proxy forces who rely on, you know, cowardly rocket attacks against civilians in Israel.

You know, very few of the missiles and rockets fired from the Palestine territories hit their targets. Similarly, very few of the missiles fired from Iran are hitting their targets. And I think, you know, one of the things we've learned in the last year is that Israel's air defense system is highly effective, and that's a wonderful thing for the people of Israel, and I think it's very bothersome for Iran because Iran had hoped that it could retaliate with some strength by firing missiles and rockets, and it really hasn't had much of an impact, and it does make Iran look pretty feckless, as well as the other proxy forces who rely on, you know, cowardly rocket attacks against civilians in Israel.

I'm sure you've had many conversation with your colleagues in the foreign policy community.

I'm sure you've had many conversation with your colleagues in the foreign policy community.

Is there a.

Is there a.

Scenario that you can kind of accept as to the path forward here, how this may come to some sort of resolution or do you think this is essentially going to go on indefinitely.

Scenario that you can kind of accept as to the path forward here, how this may come to some sort of resolution or do you think this is essentially going to go on indefinitely.

I think this is going to go on for quite a while longer.

I think this is going to go on for quite a while longer.

I don't believe it's going to end up escalating into a full scale war between Israel and Iran. I think if there's going to be a resolution, and I hope there will be, it will start with a ceasefire in Gaza, which would involve not just you know, Postinian leadership and Israel, but would also involve the other key countries that have been trying to broker a ceasefire, which includes Egypt and Jordan and Katar and Turkey and the United States. And if all of those countries could put the two sides together and come up with a ceasefire, I think a ceasefire would help quell the violence there. It would also make it less likely that some of the proxy forces would have an excuse to tack Israel, and then you try to move from there to try to resolve some of the other tensions.

I don't believe it's going to end up escalating into a full scale war between Israel and Iran. I think if there's going to be a resolution, and I hope there will be, it will start with a ceasefire in Gaza, which would involve not just you know, Postinian leadership and Israel, but would also involve the other key countries that have been trying to broker a ceasefire, which includes Egypt and Jordan and Katar and Turkey and the United States. And if all of those countries could put the two sides together and come up with a ceasefire, I think a ceasefire would help quell the violence there. It would also make it less likely that some of the proxy forces would have an excuse to tack Israel, and then you try to move from there to try to resolve some of the other tensions.

Yeah. Maybe on the practical front, given all that's happened, is you know, you spoke of a two state solution being impossible. Now, can Gaza be rebuilt anytime soon.

Yeah. Maybe on the practical front, given all that's happened, is you know, you spoke of a two state solution being impossible. Now, can Gaza be rebuilt anytime soon.

I think Gaza it can't be built right away. I mean, there have to be a seasfire, and there have to be some you know, political solution and hopefully, you know, some way of brokering a new government that's not linked to Hamas, and then a lot of people think that there's going to need to be some kind of peacekeeping force in Gaza.

I think Gaza it can't be built right away. I mean, there have to be a seasfire, and there have to be some you know, political solution and hopefully, you know, some way of brokering a new government that's not linked to Hamas, and then a lot of people think that there's going to need to be some kind of peacekeeping force in Gaza.

David Tafurrey, foreign policy expert.

David Tafurrey, foreign policy expert.

This is the Bloomberg Daybreak Asia podcast, bringing to the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.

This is the Bloomberg Daybreak Asia podcast, bringing to the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.