5 Things You Need to Know to Start Your Day

Janet Yellen warns on the debt ceiling, the mood sours among global fund managers, and The Big Short’s Michael Burry bets on China tech. — L [View in browser]( [Bloomberg]( Janet Yellen warns on the debt ceiling, the mood sours among global fund managers, and The Big Short’s Michael Burry bets on China tech. — [Liza Tetley]( Ceiling damage Treasury Secretary [Janet Yellen warned the US is already paying the price for its failure to raise the debt ceiling]( as talks pushed into a second week. “We have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” she said in a letter to congressional leaders Monday, also sticking to her warning that the Treasury could run out of cash by June 1. The White House and lawmakers from both parties are negotiating around possible spending caps in future years, changes to energy permits and a GOP-led bid to claw back $65 billion in unspent pandemic funds. Mood sours [Global fund managers are now the most pessimistic they’ve been all year, flocking to cash amid concerns that a recession is looming](, according to Bank of America’s latest survey. 65% of survey participants now expect a weaker economy, the poll showed, though around two thirds see a soft landing and only a small contraction in earnings. Cash levels rose to 5.6% in May, exposure to equities also climbed to the highest this year, and bond allocations are now the biggest since 2009. The stocks rally has stalled in May amid fears of sticky inflation, while the US debt ceiling is also hurting risk appetite. Burry bets Michael Burry, the money manager made famous in The Big Short, [is going long on China, boosting investments into e-commerce giants JD.com and Alibaba](. The two are now the biggest holdings in his Scion Asset Management portfolio, accounting for 20% of stock holdings. This comes on the heels of [news that the famed short-seller loaded up on regional banks during the first quarter,]( including First Republic, before the embattled lender was bought by JPMorgan. Other bets included PacWest Bancorp, Western Alliance Bancorp and New York Community Bancorp. Stocks muted Futures on the S&P 500 and Nasdaq are trading in a tight range, while Treasuries are up ahead of the debt-ceiling talks. A measure of the dollar is slightly weaker, while oil is extending yesterday’s gains. Iron ore is up this morning, while gold is lower. Coming up… A busy day for speakers and data today. We kick off with Cleveland Fed President Loretta Mester speaking at 8:15 a.m., followed by Treasury Secretary Janet Yellen at 9 a.m. An hour later, the Fed’s Barr testifies before the House Financial Services Committee, and meanwhile, OpenAI CEO Altman will testify to the Senate Panel. Then there’s a slew of other Fed speakers: Barkin goes on BTV at 10:30 a.m., Williams speaks at 12:15 p.m., Goolsbee will be on BTV at 2:30 p.m., Logan speaks at 3:15 p.m. and Bostic and Goolsbee both speak at 7 p.m. Looking at data, we’ll get US April retail sales at 8:30 a.m., followed by industrial  and manufacturing production numbers at 9:15 a.m. We also have that all-important meeting between Biden and McCarthy at 3 p.m. And lastly, the US will sell $36 billion 52-week bills and $45 billion 154-day CMBs. Earnings include Home Depot, Keysight Technologies. Elon Musk speaks on CNBC at 6:00 p.m. and  JPMorgan and Tesla are due to hold shareholder meetings. What we’ve been reading Here’s what caught our eye over the past 24 hours: - [Waning momentum in China’s economic recovery]( prompts calls for more policy stimulus to bolster growth - [UBS poaches half a dozen technology, media and telecommunications bankers from rival Barclays]( - The US Virgin Islands have issued [Elon Musk with a subpoena saying Epstein]( may have referred him to JPMorgan as a client - [Morgan Stanley is considering a 7% cut in its Asia-Pacific investment banking workforce](as US-China relations dampen deal-making - [Wells Fargo has agreed to pay $1 billion](to settle a shareholder lawsuit - [UK employment rose more than expected and wage growth remains high]( - [Is the tech industry building something akin to human intelligence?](bbg://news/stories/RUQUFRTVI5MO) And finally, here’s what Joe’s interested in this morning Last week we got the latest CPI report, and it was fairly encouraging. Numbers were generally at the lower end of expectations. And some key measures appear to be rolling over decisively. Here's a look at services ex-shelter, which is a category that the Fed has been focusing on. Actual shelter/rent inflation remains very high. However, we know from the private-sector readings (such as data from ApartmentList or Zillow) that it's been coming down a lot. So Shelter disinflation is coming to the official data in the months ahead. What's interesting though, is it's a little bit hard to find the evidence that any of this is really tied to the rate hikes. We had an extraordinarily fast (at least in a nominal sense) pace of tightening in 2022 and the first few months of 2023. And yet the unemployment rate is at a 70 year low. It's hard to draw straight lines between higher rates and lower prices, particularly since some of the most "rate sensitive" categories are still cooking. Autos come to mind. Not only are car prices still very high, but auto sales continue to rise, as supply chain issues get worked out. Here's a look at the most recent monthly new auto sales from Ward's. Sales are at their highest since the middle of 2021. And of course, we all know that the housing market, after falling into a bit of a downturn at the end of last year, has the momentum again. If you look at the Bloomberg Economic Surprise monitor, housing is the strongest category relative to expectations. We spoke about [the hot housing market last week]( on an episode of the podcast with [Ali Wolf](, the Chief Economist at Zonda. Along with the episode, Ali sent us over a bunch of charts from her own data, including this one which mentions that a third of builders are concerned about their own credit conditions, and possible constraints they may face when it comes to meeting the market. Despite higher rates, and the collapse of multiple banks, there's scant evidence of a major collapse in credit availability. Things seem to be tightening, but so far not dramatically. Nonetheless, this speaks to some of the perverse effects of rate hikes. In theory, they cool demand. And maybe they're doing that. But they also play a role in supply. And reducing the number of new homes that get built, because at the margin some builders have less access to financing, doesn't really help anyone. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](