tv Bloomberg Daybreak Australia Bloomberg May 4, 2022 6:00pm-7:00pm EDT
increases should be on the table at the next couple of meetings. we will make our decisions a meeting by meeting as we learn from incoming data and the evolving outlook. for the economy. -- evolving outlook for the economy. haidi: dashing expectations for the 75 point move saying that that is something that they are not considering. sophie: discussing the fallout of the fed's policy direction. >> the odds are something like yes they can engineer a, they can enter a mild recession. there is a chance it will be much harder than that. shery: futures are under a little bit of pressure, this is after stocks saw the best day since may of 2020. we had after the apple and the statement. after the press conference we
saw them soar to session highs. the nasdaq 100 finishing up more than 3%. because the dollar index falling by the most in a month. wti at the moment under a little bit of pressure after jumping by the most in three weeks given that we not only had u.s. fuel inventory falling to lows but also the eu continuing to threaten to ban russian supplies by the end of this year. look at what is happening in the treasury space, we saw the huge movement in bonds with the front end rallying, two-year yields falling below to 60 at one point. we saw this happening towards a treasury space, the spread in fact, really steepening more than 10 basis points. haidi: let us take a look at some breaking news earnings continue to roll in. crossing the bloomberg, we are seeing the cash profit number coming in at $3.48 billion.
that is slightly better than expectations. the income coming in at 3.5 billion again, better than estimates. when it comes to the ratio, 12.5%, higher than the 12.3%. the interim dividends declared 73, a bit of a boost over the $.70 expectation. we are expecting an update as the first half of earnings and we have been expecting the positive result given that has a pretty strong first quarter. shares are up 12% this year. we do have the strong trading up for the first half and that is looking like it translated well into first have earnings. let us take a look at the broader asian open as we get into the start of cash trading in sydney. futures are positive at the
moment. .4% higher, an upside of about .5% after a rally. treasury yields are falling as well, we are watching australian and new zealand treasuries. that move has been in the aussie dollar. we saw the broad-based dollar weakness overnight. moderating some of the gains, sitting about 72 u.s. dollars. -- u.s. cents. we expect the kiwi pair to be challenged. that is a budget deficit coming in in the forecast best in the forecast. -- that is a budget deficit coming in the forecast. shery: this was anticipated.
it was the 75 basis points being eliminated from being considered seriously. what really led to that presser being considered has global implications. that is something that the committee is not actively considering according to the chair and right now, markets are trying to understand why. perhaps because the central bank believes inflation expectations are stable? perhaps because the central bank believes their credibility is intact, either way we are going to see the market reaction reverberate through the asian session as well. haidi: it is also because market participants got ahead of themselves by taking the idea that 75 basis points was not off of the table when running with this, the market adjustment, we saw it in the pond in the dollar and the short end treasury
yield. take a look at rate derivative contracts, really adjusting themselves shortly as we see how sidelining the idea of this move could be anywhere near eminent. we saw the index overnight really dipping back to about 1.35 for the june meeting before it happened trading at 1.4%. the top not being seen anytime soon. >> let us get more on the most aggressive tightening campaign in decades. let us bring in our policy editor at our cross as it editor. it was really interesting to see the market move, when the statement came out, a really strong direction. chair powell started speaking, what is that telling us about where we are in the still -- skill of dovish to hawkish this? -- hawkishnes.
>> jerome powell said very clearly that the next two meetings he expects to do 50 basis point hikes. you are on the hawkish side of that spectrum. taking 75 basis point rate hikes off of the table by saying we are not discussing that right now, i made it clear, no one on the fed is probably endorsing the 70. let us listen to what jerome powell said. >> this is involved in ways that are consistent with our expectations. additional 50 basis increases should be on the table for the next couple of meetings. >> we talk about how hawkish or dovish this was. ongoing increases in interest rates will be appropriate.
they expect to keep hiking rates. in the prepared remarks, inflation is a much too high, moving to break it down, they know it is painful but they are moving in this direction. he was asked a couple of questions about neutral rates, jerome powell said first of all, there is no magic about the neutral weight. it is an estimate. if rates are required, we are a long way from neutral from now. the economy can handle a tighter policy a good chance of soft or soft tissue landing. it seems to me that this is actually a fairly hawkish statement. the market got ahead of itself, but if you look at what is going on, the fed is getting ready to hike rates repeatedly and bring inflation down. >> despite the leaning away, we saw some stockmarket relief. may be this feeds into the
narrative that a soft landing is more plausible? >> the the -- the markets went into the powell press conference priced for peak hawkish and is. all that they took out is the fact that the fine line with 75 basis points. it was a release rally. we are seeing the u.s. futures cut off at the end. either people are invested in strategies, i am puzzled why the market had reacted so strongly. it had sold off a lot, it was not looking for something to rebound from the steep losses. it looks like a short term. . relief someone called it during
a break at investors. -- throwing a brick at investors. it is a sustainable rally, there is a relief that for the time being, the 75 basis points is somewhat out of the way to call it, it has been interpreted as being dovish, it is a little bit more of a hawkish dollar there as well. shery: let us get over to vonnie with the first word headlines. >> jp morgan ceo says the fed should have moved faster in raising interest rates. he said the u.s. economy is strong and he sees a one third chance of it leading to a soft landing. he says it is the same chance for a mild recession.
>> the fed is going to have to raise rates. they cannot, they will try to slow down the economy enough so that 8% comes down over time. i wish them the best. we are a little bit late. 50% unemployment and no vaccine. take a deep breath, give them a chance and they are going to move, the sooner that they move, the better. >> india's central bank has a rate to contain inflation. they raised the rate of 4.4% from a record low. they also raised the cash reserve ratio by 50 basis points. the governor said that inflation measures are becoming more acute, particularly on food. the european union is planning to ban russian crew over the next six months. another round of sanctions aimed at moscow. there also discussing extending
the ban to more banks and banning property transactions with russian citizens and entities. hungary and slovakia could be granted a longer timeframe to cut their alliance on -- reliance on russian energy. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: we analyze the onto of the fed achieving a soft land and jerome powell signals a lot more tightening to come. of the rules are around the 10% rate, the economic model. stanford university joins us next. this is bloomberg. ♪
>> inflation is a much too high. we need to see that our expectation is being fulfilled. inflation is under control and starting to come down. 75 basis point increase is not something that is being considered. an additional 50 point increase should be on the table at the next couple of meetings. if that involves a levels that are higher than estimates, we will not hesitate to go to those levels. we will not, if higher rates are required, we will not hesitate to deliver them. shery: we get another central-bank decision from brazil, they hike rates by 100
basis points as expected to 12.75%. what we are watching is whether they would indicate this would be the end of the hiking cycle. one of the most aggressive tightening surround the world since the pandemic started. they will continue that at a regular pace. they are seeing elevated uncertainty, they need additional caution that this is a significantly contracted cycle and that this is appropriate. this is as we continue to see inflation above 10% for the past seven months. we watch all of the central-bank action, the focus is on how the market continues to react to the federal reserve decision. let us bring in our policy editor kathleen hays who is standing by with our next guest. haidi: john taylor, professor of economics at stanford university. former undersecretary of the treasury.
author of the taylor rule. so many accolades. >> i want to start with what jerome powell said, what the fed did. 50 basis point hikes, the next two meetings, we have not talked yet about 75 basis point hike. are they on the right track? >> i think they are going in the right direction compared to where we thought they were a month or so ago. there is a question of whether there will continue in this, thanks to two. it is a little bit low considering how inflation is very high and signaling is a good idea. i think they're in the right direction. unfortunately, not quite enough just yet. >> jerome powell did say that the fed ready to get to neutral. an estimated to have percent-3%, -- an estimated 2%-3%, what does
john taylor's rule tell us about how high this is going to get to rein in a .5% inflation -- 85% .5 percent inflation? >> you cannot have an inflation rate of 8% and have a rate that is so low. there will be an adjustment if this is done it a straightforward way and will be telegraphed and i think you could even have it being beneficial to have a more normal interest rate. >> fiscal policy going forward to ensure the best chance of a soft landing here? >> i think fiscal policy has been quite expansionary and needs to find a way to stimulate growth without being so expansionary. i think that is hard to do.
the most important focus now is on the fed. the fed is declared, it was promising a way that inflation is much too high. that is something that is going down. fiscal policy as part of the equation. the main driver is monetary policy. haidi: what do you think about the policy narrative from the fed? taking 75 basis points off of the table? >> promising thing is a couple of 50 basis point moves or possibly more than that by the end of the year. i think that is still low. they said the neutral rate is 3%? those are putting upward pressure on inflation. we do have a higher rate. that is beneficial and it creates a drag on inflation and we cannot have an inflationary
and have a successful economy. >> you are holding your monetary policy conference this holiday. the theme is how monetary policy got behind the curve and how to get back. what got the fed behind the curve? was it politics? the to not be confirmed yet? was it politics of them having promised they would not start raising rates until the labor market was hot? >> i think they got so used to the pandemic and the right cut and it is hard to get back to normal. there are so many indicators even a year ago that says they should start to think about raising rates and did not do it. this is a lesson to keep with the basics, things have to be rule-based. they have to be predictable.
we would not be in the situation that no one wants to be in now. >> the new framework, average inflation targeting, letting out full -- letting employment get above, does the fed go back to the drawing board and teach it? -- drawing board and try again? >> 2% inflation. useful elements of that in jerome powell's press conference talking about inflation as a problem. there may be two point moves, it could be more than that but i think that is in the right direction. it is quite a change.
haidi: no one is using the term transitory anymore. look at the drivers of the price pressures, the lockdowns in china, how they are dealing with covid, the situation when it comes to the russian invasion of ukraine under the pressures there, is there a chance some of these pressures could ease off depending on developments? >> the problem with these other developments is they do raise prices. gasoline prices especially. that is a distraction because the problem is not russia, it is not ukraine, the problem is in itself in terms of prices, it is temporary. longer-term movements which we are clearly seeing before the russian invasion of ukraine. it is so easy to be distracted by the special advance -- events in the news all of the time. i think that is where the source of the issue is and where the
source of the solution has to be as well. >> i have been wanting to ask you this for a while, given we have been through in the pandemic, but we be seeing lasting changes in the economy, come back to the taylor rule. it seems to suggest that if you look at unemployment, the fed funds rate would need to go as high as 10%? is this rule still valid? do need to update it as well? >> it has been around 30 years. people keep referring to it. i think it is useful. when you see such a high interest rate it is because it is not smoothing. it has always been an average of inflation rates over recent periods. again to account that we are adjusting to different rates. we get numbers that are less than what we are talking about. i think a point in the right
direction, something that has to be done. the fed has done a lot in a short period of time. we will see of they continue in that direction. it is driving in the right direction although you may not want to put in the exact numbers . >> your former secretary said the imf and the world bank were concerned about the slowdown in china the imf was the number four threat to global growth. how big of a threat is it to global growth? is the pboc on the right track to get china's economy growing at a faster rate? faster than they were expecting a few months ago? >> a lot of problems in china. they are struggling with the whole system. i think we are seeing in some of the distractions that lower rate, we may have a little bit of that and higher rates. i think that is an issue. you have a question about what
shery: brazil hike rates as expected, what was not expected that they see a rate hike of a smaller size in june. we wonder if the end the tightening cycle, one of the most aggressive in the world. the key rate decision was unanimous. they see consumer cpi continuing to surprise negatively. they see further deterioration
raise rates. they are to slow down the economy enough so that 8% comes down over time. i wish them the best. we are a little bit late. no vaccine. people should take a deep breath and got him a chance and they need to move to the better. >> going back to the 1930's we have never been able to do this
without inducing an recession. if we do not get close to the 2% target it is unlikely that we will have some kind of economic slowdown well before we get to the desired inflation target. shery: scott minerd alongside jamie dimon speaking directly to bloomberg. time for our morning calls ahead of the asian trading day. comments have analysts updating expectations, terminal fed rate forecast of 2.5-2 .7% may come sooner than they expected. the senior economist expects a 50 basis point hike in june. rbc says there is a strong case for the fed to get to a neutral stance soon. global stocks may bounce back in a big way over the next 12 months. chief global equity strategist peter oppenheimer receives double-digit upside for most stock market in that time. rates peak and tensions begin.
there is a limit to how much soskin fall from current levels unless there is a recession. haidi: let us bring out the next guest who says the biggest question is whether the fed can achieve a soft landing. it seems is there a greater degree for investors that are soft landing? -- for a soft landing? >> there is hope. the market reacted quite strongly when german powell said that the 75 was not in the future and we should be looking for a 50 bit hike for the rest of the year. potentially four more. rays moving the uncertainty is helpful for getting some of the -- removing the uncertainty is helpful for getting some of that back into the market.
whether it is bonds or equities, whether we end up with a soft landing, i am not going to make a call on that. i know the fed is trying their best to make that happen. we already have one quarter of a contraction. it is possible that could also be the second quarter of the year, they could caac traction. we are not sure about how strong the economy is. for the soft landing, i am up in the air. >> we stop buying across both sides -- we saw buying across both sides. is volatility sting away in the short term? do you pull more cash into action? >> we have been trying to figure out when the bottom of the equity markets would be within the u.s. market.
if you were an investor you broke some previous death lows a few days ago in april. it felt like there was these capitulation days where it is 90% of the stocks are down. today, being so positive across all asset classes, whether it is small cap, no large-cap growth value, everything was up. it feels like it could be the turning the point -- it could be the turning point. there is only two hours of this buying going on good if it is early to call rate there is a lot of thinkers that are crossed , saying that maybe we will return to more rational beings. there are some stocks that are highly valued. amazon was disappointing, i think companies are highly valued are still very risky.
we have a much heavier tilt towards value. preferred stocks, i still feel that there is a fair amount of risk in the higher value names as they have to adjust to a slowing economy. >> what sectors are you going to to find that value? >> health care is one of them. energy and utilities, we are so defensive. dividends, stable, low data is looking very attractive and has good value. materials is another one that does very well. you can do a simple straightforward value etf, the typical value sector and financials, that is the one sector that has been holding back since the value stock or looking for the pure value
style. shery: are you factoring in the strength of the dollar? we had the biggest plunge in a month or so. we have seen strength especially against other currencies like the japanese yen. when are you looking at margins, is that something that factors into your calculations? >> i would love to be looking at those more nuances around fundamentals. right now, there is so much fear and so much volatility across all asset classes. whether it is gold, bond, equity. it is a tactical allocation at this point rather than looking at how strong the dollar is. if we got into those types of nuances versus worrying about the recession, i would be so happy. haidi: great to have you with us.
we have a couple of updates when it comes to trading in airlines in this part of the world. air new zealand falling in the early part of the session after we saw the four year outlook, disappointing. we saw them complete the equity raising after the shortfall. finalizing the shortfall component of its 2-1 right offer. that equity has been completed with a total of 1.2 billion kiwi dollars raised. that will come towards the existing crown alone and improving liquidity and help position the country for recovery. and reseal was allowed to reenter new zealand after borders have been closed for most of the pandemic. we are seeing new zealand falling beyond 6%. after we saw the update to the full year outlook saying that the full year losses were
significant could actually be better than expected if the encouraging trends continue. we also see the start of trading in sydney, the shares of alive aviation, this is a trillion based operator that services the mining and resources sector. buying at just under 20% of alliance in february of 2019. that came under some scrutiny from the competition regulator and the agency has been advised ahead of today's announcement. let us give you the first word news. >> chinese tourism travel plummeted over the holiday, this is as the stringent covid zero restrictions cap people at home. for spending over the five-day vacation period was $9.8 billion. down 43% from 2021. domestic trips also fell from 230 million last year.
the security and exchange commission has added to the broad list of chinese companies that faced delisting in the u.s.. may have joined the regulator spotlight because of beijing's refusal to allow access to financial orders. u.s. and china have been at odds due to the policy due to decades and the ftc is cracking down on companies who do not comply. a key policy to speak on china after covid-19, blinken was fully vaccinated and boosted is experiencing mild systems and will work from home. lincoln has not been in close contact with president biden for several days -- he has not been in close contact with president biden for several days. severe heat waves damaged crocks, it hurt the harvest -- severe heat ways damaged crops. it hurt the harvest.
haidi: we saw gold holding onto gains after it bounced back from an 11 week low. we are giving a boost to bullion. we also had copper gaining .7%, this is as we had a weak dollar against major currencies. despite the fact we continue to have some demand concerns given what is happening with chinese lockdowns. we saw a jump of around 3%. we are hearing the india may be restricting wheat exports. they are considering this given a heat wave has damaged their crops. we see these moves coming because of global tight supplies when it comes to food.
we saw some moves from indonesia when it came to cooking oil. we are watching that closely. we are under a bit of pressure during the asian session. we have a jump, the most in three weeks in the new york session. not only do we have u.s. fuel inventory falling to record lows, we also have been closely watching whether or not the eu bands russian fuel imports -- bans russian fuel imports this year. that ban would be staggered. it would not be necessarily hit vladimir putin's regime right away. we saw the jump in the ruble already. haidi: we are seeing the reaction across the arts trillion bond yield curve. the three-year-old -- the three year yield dropping after the fed crashing through the 3% level there. i should say that was a 10 year
3.3% after the fed decision to go for 50 basis points rather than 75 as some parts of the market had been speculating that they would. dropping 14 basis points, under 2.9 percent. we are seeing it recover when it comes to the yield, sticking above the 2% which is the first time it had surpassed 3% in 80 years. watching a similar reaction when it comes to kiwi two years and 10 years. this is after we saw traders peering back to its of a bigger june hike after we had the pushback from jerome powell. we saw buying in terms of equities and treasuries rising led by t belly of the curve after the. 50 basis points was announced. let us take a look at the big move we see across commodity futures. let us bring in keenan. the plan for russia, sending
prices higher. >> that is putting supply constraints front and center once again as the eu rolls out its plan. the strictest ever. it gave us more details what they are proposing. to quote the eu, it will be a complete import ban on all russian oil, seaborne and pipeline, as west texas intermediate jumped up in the new york trading session. it is down slightly, holding at those levels. adding to the supply pressures for west texas intermediate as mentioned. inventory data showing regional supplies on the east coast of the u.s. falling to record lows. you are looking at crude, that also reacted in a big way to the eu's proposed ban. the eu plans to ban russian oil and refined fuels by the end of the year as part of the six round of sanctions.
this is to boost pressure on russia over its invasion of ukraine. the phaseout of russian oil in europe which is highly dependent on russian oil comes at a time when the whole world is to grappling with a refined product crisis. that makes it all the more costly for europeans to wean themselves off of russia's fuel. particularly diesel. this will weigh heavily on the supply demand equation. shery: where is opec-plus heading for this thursday's weeding -- meeting? >> we are seeing the industry focus on what they have done labeling. the survey showing whether they met or missed their april supply hike. they did not. supply constraints and production wells remain with libya and nigeria showing a decrease in output. saudi arabia which is typically the strongest producer of mint
increased the target, iraq boosted input among the entire group. of the cartel is failing to deliver on the agreed upon volumes -- the cartel is failing to deliver on the agreed upon volumes. and modest increase, we are hearing a lot of the will veterans say it does not matter what they pledge going forward. it is their inability because of supply constraints and production woes to meet the pledges that they are making. haidi: listing a dividend after reporting a first-half profit. bringing you the details, next. this is bloomberg. ♪
competitor, reporting sally better than expected results. the details, what is the performance that we saw? >> the cash was 3.4 $8 billion, better-than-expected. there was a bit better than expected as well. capital ratios are a pretty healthy at 12.48%. the national australia bank saying that reflects the impact of a 2.5 billion dollars share buyback that occurred. net interest margin is down 11% on the year to 1.63%. you heard we are now in a different era where rates are rising. the air of sweet -- tricky margin appears to be -- shrinking margins appears to be over. we see the cut from the bank of australia. something weird happened, the
prime minister called on banks to pass on the rate rise to the public holders as well. that is something that the commonwealth bank of australia did, raising deposit rates by eight times the reserve bank's rate increase. we see a bit of competition in an area we are not used to seeing it. >> at giant has tapped the -- a technology giant has seen a debt raise. how the money will be spent and the rising costs. >> there is a long, unmet medical need. we find a demand for our product, it has not been impacted by the inflationary or economic times. we are foolish to be in that space. having said that, from a cost perspective, we have found through the pandemic and coming out of the pandemic and a lot of cost pressures and that has many businesses, we are trying to
find efficiencies to offset some of those increases. the government to demand perspective where we see long-term growth for our product. >> where are you saying the cost pressures? an example of where you are managing to cope with those? most companies are facing that. bigger businesses like this have managed that a bit better. >> u.s. is a big part of our business. we have seen that through wage inflation, it is through an us -- shown us through people who donate, we are collecting. in the u.s., in terms of how we are responding to that, we are continuing to be very focused on how we drive efficiency, how we take care of our system, improve the yield, those with the big areas we are focusing on. >> you talked about your
platform business, d.c. debbie impacted going forward? -- do you see that being impacted going forward could it have an impact on demand as well? >> the pandemic had a constructive -- destructive effect. even before the pandemic we were in a supply constrained environment. we see ourselves in a supply constrained environment for quite some time. demand for our product has been strong for a long time to come. it is not that easy to replicate. we see new indications and needs for our therapy and it is strong on the demand side a lot of work to drive the supply. >> you are coming on the back of the record taking capital rate. what is the reception you received? what is the investor sentiment and how people perceive the growth trajectory going forward?
>> we have a $4 billion debt raise in the u.s. public debt market. it is our inaugural issue, quite eye-opening for me and it is a very deep market. it is very strongly supported, investors supported it very strongly and that is going to be very interesting. it is creating great flexibility for a balance sheet and for our capital structure. and supports the acquisition of equal pharma that we announced of last year, critical company which is really strong in iron deficiency and the renal space and we look forward to completing the acquisition in a couple of weeks. >> so much attention is stripping on how do we feature proof -- feature proof the next pandemic. the fact that we came to this wave of new vaccines in such a
short period of time, is that something that can be replicated if there is investment? is that investment coming through private investors or from the government? >> we saw an increased demand for influenza vaccines. governments are trying to prevent between the pandemic of covid and the flu pandemic. i think governments are prepared for a flu pandemic, but clearly it shows covid was a surprise. we can invest in future technologies and vaccines. we are excited about our cell vaccine which will be the new standard of care for influenza seasonal vaccines. we are investigated our second iteration -- generation program. haidi: that was joy talking to
haidi: good morning, we are counting down to asia's major market open. shery: welcome to daybreak asia. the fed raises rates by 50 basis points and signals similar steps ahead. >> there is a broad sentence on the committee that this should be on the table at the next couple of meetings. haidi: asian stocks said to
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