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tv   Bloomberg Daybreak Australia  Bloomberg  May 30, 2022 6:00pm-7:00pm EDT

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>> good welcome to "daybreak australia," i'm in sydney. >> i am david, let's that your top stories at this hour, australia's prime minister is set to name his ministry after clenching a majority in parliament giving them the have to push through big policy changes. >> back in beijing, saying for the basis points by several meetings thing a cannot be taken off the table until inflation eases. >> shanghai takes its biggest steps towards its reopening in two months, pmi data expected to show lockdowns are stifling activity. >> we are into the last trading
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day of may in asia, inflation concerns are top of mind for investors, we saw futures coming it online. markets have been close for memorial day, we can expect to see some subdued trading, in sydney, a weaker start. we did have some comments out the fed governor chris is says that 50 basis point moves are on the table until we start deceive and -- c and ease and inflation. the economy, even though they do plan to hike, recession is an opera -- recession is a possibility. bitcoin trading as highest since may 8,. >> it is bottoming out somewhere, europe was a very stark reminder of the global problem we have, we look at oil
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prices one of the big drivers through this, we settled at 121 on brent, we are getting new lines as far as sanctions are concerned. they are sanctioning some russian oil, highest level since march 8 on brent prices, a reminder of how things closed overnight. to that point here, on inflation over in europe, yesterday was spain and germany, later today we have eurozone, france, italy, this inflation problem as far as europe is concerned a percent handle is not a good thing -- 8% handle is not a good thing. >> inflation top of mind just about everything, including australia, one of the key hot button election issues. we know that it wound up securing the labour party its victory, if you have been
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tracking, we have been counting votes and some of the hotly contested seats. counties still continue, we still have the labour party over the line of that 76 majority result. it is a slim majority, it will give them a little bit more that mandate, if you well, this out to work with the biggest independence in australian history who are a lot more ambitious when it comes issues like climate. when it comes to policymaking at some of the negotiations that has to be had. let's take a look at this week, the labour party, the new prime minister clenching the parliamentary majority. in the meantime, china has a plan to sign a sweeping trade and security deal with 10 pacific island countries, has suffered a setback's. some with elements of the proposal, let's get more with
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our australia government reporter. let's start off with the parliamentary majority. we got there in the end. what does it mean as for that mandate to govern? how much work has to be done? >> this is great news for anthony albanese. australia has two houses of parliament, in the lower house you will not have to negotiate with a wide cross branch, most of whom wanted tougher action on climate change. they want 43% cuts by 2030, the climate focused independence 16% and's the greens 170% -- want 70%. in the upper house he has to face to the green party that has the veto power over legislation in the senate. they want a 70% cut to climate emissions by 2030. if they are holding out over anthony albanese you might face
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a tough road to his current climate action plan. >> what position now is the government in? are they in a better position to tackle some of the economic challenges? one of which, is inflation. >> it will be a great relief to him that he can now just pass any legislation he wants without stress on the lower house of parliament. also when it comes to things like parliamentary procedure he has a majority to send through the measures without objection. the other house, the senate, everything he passes will have to go through a cross bench that includes 12 green senators that want rapid action on, change. they want -- on climate change. they want a number of other minor independence, who is also
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looking for more climate action as well as like a national anticorruption body. you will put pressure on anthony albanese to deliver. >> the other big challenges regional security, something of a setback for beijing on this visit, we have reporting late last night, a number of pacific nations are looking to walk away from what is sounding like a very sweeping security and multilateral deal was being proposed. >> absolutely, this will be a big setback for beijing. we have to remember is, getting that security agreement was a diplomatic coup in the first place. this is the first one the pacific, now they assigned another deal, not the same level of security agreement, the final text is not been released. they are already making rapid, rapid strides in this region. although they have a setback
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from this multicountry agreement that they had wanted, they are already making rapid gains in this region. clearly the new labor government of australia has been clear that they will be pushing back hard. they are reaching out, to rebuild relations. china is making inroads fast. you will see how much the new government australia -- of us really it will do to keep australia's place as the main partner of choice in the region. david: great stuff, ben. let's pivot back to markets right now, inflation, a bad reminder out of europe yesterday. investors weighing the data points, a lot more coming out today, plus the comments coming out the fed. essentially pushing for more
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half-point rate hikes. you have the sanctions of what happens with russian oil what this means short-term for prices like brent over levels of 121. looking at key levels for china, pmi's do out 3.5 hours. let's talk to our asian editors. inflation worries back on the radar. >> absolutely. fed governor christopher coming out last night and saying he is backing 50 basis points, basically for several meetings, for as many meetings as it takes to bring that inflation rate to the fed target around. in the last couple of weeks we have had some sort of expectation, it has been on the table that maybe the fed will fold, maybe they will go 50
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basis points at the next couple of meetings, but if inflation cools maybe they will be able to stop and think a little bit. you also have the fed minutes suggesting they could be more flexible. waller coming out and saying, he wants the fed to keep going, to bring that inflation rate down. also it is worth noting that the fed will start shrinking its balance sheet, it will start doing that on wednesday at a rate of $47.5 billion a month. it was suggested that at rate, according to some economic modeling, it could be equivalent to a couple of 25 basis points rate hikes. he did say the data could be a little bit uncertain. definitely inflation on the table, it is so crucial now, that joe biden going to meet with the fed chair jerome powell
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in a rare oval meeting at the white house to discuss these elevated prices. four decade high in the u.s.. definitely something that will be back on the radar for investors. >> inflation may not cool any time soon, we saw brent surging past 120. just over the past hour that the eu leaders are backing the push to ban russian oil, forbidding russia oil delivered by see, but having a temporary exemption for oil littered by pipeline. how pressure does is put on the outlook for oil? >> definitely puts upward pressure on all will prices --
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on oil prices. you have the various traders and banks saying they do expect oil prices to remain elevated. it definitely plays into this whole concern about inflation. we already have elevated foot price, now elevated energy price that does not look to be coming down for the foreseeable future. again, this plays into how aggressive central banks will need to be to bring down inflation. we know that the ecb will be raising rates as well. they have been talking a lot more tough on hiking rates. definitely not good news for energy prices. it will underpin, in the stock market, underpin some of those oil producers. in terms of the whole inflation feature deftly something that
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will be worrisome. david: let me bring you in, counterintuitively, if you are an inflation hawk, the chinese economy that is recovering is a lasting and need. >> i think it will be a good barometer to see if april was the floor of the -- services pressures have been hammered by lockdowns and shanghai. will it be a v-shaped recovery? they do not think so. it shortly rebounded in the next month by march, april, may it was back above 50, or 18 six -- 418 consecutive months, it was back above 50. we are not likely to see that.
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both the manufacturing and non-metafiction -- manufacturing services pmi's to have improved. both of the numbers are expected to be below 50. meaning pessimists outweigh optimists and contraction still likely in those sectors. the anecdotal evidence is good. the policy misses from the government are positive, in shanghai we are getting the biggest steps forward to return to some sort of normalcy after two months of lockdown. people in low risk areas will now be able to come and go from there compounds, public transports will be resuming tomorrow in beijing and shanghai in low risk areas. cars will be allowed back onto the streets. you know those live shots of some cities with no cars? that might start picking up. when people are out moving, shopping, factories can get
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going again, supply chains can improve we will have to see if this the bottom or not. >> and drea, what does it -- andrea what does it portend when it comes to the market rally in china? >> it is interesting, we saw this easing of the curve in china, in fact markets in asia and also in europe were supported. we did not see the same sort of gains in china. gains have been relatively muted despite the curve easing. all the measures we have seen, they seem to be confidence investors elsewhere, but not in china. jp morgan, goldman sachs, a
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small amount of investors saying perhaps we have seen the bottom in the chinese market. >> let's get to the first word headlines. >> russia is planning a bond payment mechanism defying u.s. sanctions and potential default, it would allow foreign investors to open accounts in russian banks in both rubles and hard currency. after coupon payments in euros and dollars failed to you -- reach accounts in the evening triggering a 30 day grace. . biden will be holding a meeting with fed chair powell discussing the economy and inflation, is the first meeting between the two since the nomination of a second term. this signals is plans to
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continue to raise rates in june and july while signaling the massive run of the balance sheet. according to documents seen by bloomberg, the government is scrutinizing their auditor reports for fraud. they just recently find the competitor -- buying -- fine the competitor. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul, this is bloomberg. >> still had commodity prices are soaring, inks could get worse -- things could get worse. how the world can avert a bigger food crisis. our next guest says rapidly worsening foreign indicators are a concern, but makes let's hawkish -- let's hawkish comments could signal a
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recovery. this is bloomberg. ♪
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david: welcome back to the show, good tuesday morning, let's show some of the real estate we have here and the open of the market the last trading session of the week, you can see there might be creating some uncertainty over the inflation outlook with 122 in striking distance. pleasure to have you on the show, we are up for the first month across the asian equities for the first time of the year. >> our fund has done incredibly well during this period. partly because we are a
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longshore fund so we can take a long picture of the market volatility. we can always find opportunities come at the same time we do have australia centric, the share market has done incredibly well this far -- so far this calendar year. i think things have been going well and going forward i think the next month should definitely pick up very soon. david: any tweaks to strategy or some of the thesis they are looking to put in place ahead? >> looking ahead, i think we have been saying the commodity and the others have been the core focus of the fund for the last six to 12 months, going forward we are seeing a lot of opportunities crossing things like health care space.
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we are seeing stabilization of bond yields. regardless of economic outlooks health care businesses will be delivering much-needed growth in the next few years. that space is looking very interesting. also looking forward into some of the tech sector, certainly looking very interesting. we are very cautious in terms of which market leader we do put position into. >> how are prices in australia when it comes to hiding from stagflation or global risk? are you upping exposure in the global market? >> i think the australian market is positioned very well just because there are a couple of reasons, there is the commodity exposure, we have a very large resource focus, as well as the financial focus. with these together, the outlook is very strong, secondly, we do have our corporate earning
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growths still lacked the global equity markets such as u.s. in terms of their earnings growth. australia was partly in lockdown for most of the last financial year. we still have that earnings growth to come through in the next 12 months. it is looking pretty strong for the australia market. at the same time our dividend yield is incredibly high. >> health care is another when we have talked about over the past few conversations. what opportunities are you seeing post-covid era, at least in this part of the covid euro we are in -- era we are in? >> it is a very interesting sector. i think this sector will be attractive again, the last couple of years, surprisingly part of the health care sector did not benefit from the
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once-in-a-lifetime pandemic. partly because of the lockdown send resulted -- lockdown resulted in hospital shutdowns and going forward we see it being removed and many of the health care businesses overturn to trend growth, they will have a surge in reopening backlog, if you like. these businesses will benefit in the next two years, aside from very defensive earnings growth. >> always great to chat with you, jun bei liu. you can get a roundup of the stories you need to get your day going in today's addition of daybreak, stay around with us seeking get the news on the industry and assets that matter to you. this is bloomberg. ♪
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>> a quick check of the latest business flash headlines, they remain the largest maker for the third straight year they had outsold volkswagen by more than a million vehicles. they had better managed to limit the damage. the credit space is reportedly in the early stages of considering its options. the risk with lightly -- the segment told they are not raising additional equity capital. he has completed his $5.4 billion takeover of chelsea, ending 20 years of ownership under russian billionaire, who was forced to sell because of
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the war in ukraine. it's the first time that more than half of the league in the english premier league is backed by american money. coming up next, we speak with an expert that has worked with the world bank and several governments on the world's escalating food crisis. this is bloomberg. ♪
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david: good morning, welcome back. lots happening in europe. it is quite late there. european leaders agreeing to pursue this partial ban on russian oil, paving the way for a sixth package of sanctions to punish russia for the invasion of ukraine. let's get details from kevin in brussels. he is burning the midnight oil for us. help us understand what was decided. >> this was a political agreement to go ahead with sanctions. not a done deal but they do have the key agreement from the holdout hungary on banning seaborne oil by the end of the year.
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this exempts pipeline oil, which is why it is still just a partial ban. enough bilateral commitments from poland and germany, the main buyers of the pipeline oil, means the effect should be cutting off 90% of russia's oil sales to the eu by the end of the haidi: how long-term do we expect the impact of these sanctions to be? >> the assumption is they are going to be there for a while. the war shows no sign of letting up. it is going to take a pretty major shift on the part of russia to change the dynamic on the european side. european leaders are gearing up
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to a long period without it but their plan has been to shed dependence on russian oil over the coming years. this accelerates plans that were already in effect and sets out potentially difficult and expensive years for european customers in the interim. >> thank you, kevin whitelaw. let me redo this tweet, basically talking about the eu agreeing on further drastic sanctions against russia, an embargo on much of russia's oil imports, which is why we are tracking west texas, brent back above $121. it is energy and food. later on in the week on friday, the u.n. will be updating us, the monthly update on the food price gauge. they don't really need a lot of explaining to tell you food prices are essentially at all-time highs. haidi: let's get more on that. our next guest has studied food
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security for decades and works with asian governments in policy response during the 2008 food crisis. peter timmer, professor emeritus at harvard university. we appreciate your time. we spoke with the u.n. fao last week and he said he doesn't think we are at the point of a global food crisis yet. are we on the precipice? >> yes, we are really close. the announcement that oil prices are going to go up higher will add further stimulus. wheat prices are at all-time highs. already there is pretty serious problems in north africa. i work primarily on asia but there is very real concern that if we can't stop the momentum in
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wheat prices, vegetable oil prices in the next five to six months, there is going to be massive hunger and starvation. haidi: how optimistic are you that there will be global or regional coordination? entering the picture is the domestic concern over food security and increasing acts of protectionism. >> when we went through the 2007-2008 world food crisis, rice was in pretty good supply but asian countries panicked, the philippines on the buying side, india and vietnam on the exporting side. that speculation just caused rice prices to go to levels we had never seen before. i had not seen anything like the
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dynamics we saw then. that took a very significant intervention to break the speculative bubble and the world was able to do that in 2008. now in a much more complicated world where we are dealing with food, fertilizer, vegetable oil, wheat, corn, is there any coordinated action that governments could take that would stop this panicked dynamic? everybody keeping food to themselves, all the protectionism that your reviewers know quite well. is there any way we could stop that dynamic? i think we have got an opportunity. i was talking with your colleagues in singapore earlier in the week.
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i think we have an opportunity with the g20 meetings in november. there is a long planning process that leads up to that. the question is, can we get the g20 to put food security squarely in the center of their agenda and make some visible, binding commitments to stop protectionism, start rolling it back, and give countries the confidence that supplies will be there, the assistance will be there. we are going to live with higher food prices, higher energy prices for a couple of years. this is not temporary where we can go back to what we considered normal. we heard earlier this war is going to drag on, but we are taking out something like 30% of the wheat supplies from the
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export market, taking out a lot of the vegetable oil supply. we have to figure out a way where the balancing mechanism is not human starvation. we need to find a way. we have to do the adjustment, but how do we do that without starving 100 million people? david: the premise you put forward is the g20 must convince each other that supplies are there. the solution is predicated on everyone being convinced that is the reality. our supplies there? that is the question. >> the wheat supplies are not there if we do business as usual. the wheat supplies could be there if we do the appropriate
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commodity substitution. in india you can move the line of wheat consumers. you can move rice consumption north. in china they can do the same thing. southeast asia imports 26 million tons of wheat now. a decade ago it was half that. adjustments can be made to free up wheat. we can use more rice. if we stopped using maize in particular to make ethanol in the united states, if we stopped feeding a lot of grain, there is wheat that could be freed up for lower quality uses for non-leavened bread. there is ways of breaking up wheat supplies by making other commodities substitute for them. that means the other commodities have to be somewhat more expensive.
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in the united states, not a popular idea, but we are looking at significantly higher wheat races if we can diverge away from poultry, pork, and beef and diverge it to human consumption. there a lot of wonderful foods you can make using maize as the basis but it's going to take pretty dramatic incentives to make these shifts in food consumption patterns. people don't like to change food consumption but they do when they have to. david: economic actors don't change unless the incentive is there. whose job is it to put the incentives in place? >> the market will not do it. the market will solve the problem by starving people. it is up to governments and government interventions to solve this problem.
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it's not something the market solved by itself. the market doesn't care if people starve. governments care if people starve. we need the g20, which is a big part of government activity in the global economy. if they can come together and figure out these steps forward and how to incentivize the adjustment mechanisms that are needed, i think we can stop the dynamics by the end of the year. if we don't do that, the market will take care of it for us. david: in some way it already is taking care of it with food inflation and social unrest. we could be here for hours. we look forward to speaking to you again. food security, inflation the themes we are tracking in today's morning all.
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annabelle is looking at rice. >> you did just mentioned rice. a more positive slant on the picture, particularly looking at prices in asia. strategists say the benchmark for rice is up 8%, but significantly lower than the global benchmark for wheat, 50%. you have the abundance of rice, the world's three largest exporters, india, thailand, vietnam, and secondly rice is not commonly used as feed for animal or livestock. there are a couple of headwinds facing the rice industry. india could end up doing similar to what it has done with wheat and sugar, they could ban exports. the ocbc not too concerned about that because of the early onset of monsoon rains in the rice
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producing regions. there is a risk thailand and vietnam could come together and act like a cartel to raise prices. for their farmers. ocbc saying it could happen and could add to inflation pressures. there is the shock of the war in ukraine continuing to spark inflation fears. haidi: we are hearing a fund increased their exposure to russia in the. run-up to the war. david: this is one of the most read stories on the terminal. the largest bond did add exposure to russian default swaps in 2022 ahead of the invasion. they already had about a billion dollars of that on russia's credit default swaps. it sold more than $100 million of that in january. that exposure does leave pimco
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as one of the biggest players in this week's drama. on tuesday there is a key meeting of investors. if that happens, we understand pimco may not translate to major additional losses because they have already written down a lot of their exposure to russia. haidi: china suffering a setback in the attempt to sign a regional trade and securities deal in the pacific. we look at that means for beijing's new government. ♪
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david: you are watching daybreak australia. eu leaders have a great to pursue the partial ban on russian oil that paves the way for a possible sixth package of sanctions that forbid the purchase of crude oil and petroleum products from russia delivered to member states by c. according to people familiar with the negotiations, a temporary exemption for pipeline crude is included. i fed governor is backing rate increases of .5% for several meetings. he says he is not taking 50 basis point hikes off the table until inflation comes down
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closer to the 2% target. he says the model suggests quantitative tightening will be equivalent around a couple of 25 basis rate hikes. in shanghai the city is taking steps toward reopening after lockdown. residents in low risk areas will be allowed to freely leave their compounds from wednesday. infections and shanghai fell to 67 on sunday, half the level of the day before. in australia, the prime minister is set to name his ministry on tuesday after clinching a majority in parliament. his labour party still recorded a historically low primary voting margin. a loose grouping of independen ts made record gains, grabbing one safe electorate from the main party. haidi: we have new zealand
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building permits data, a fall of 8.5%. that contraction really disappointing some expectations, particularly as in march we had a gain of .8% but in april, a fall. we have heard from a number of analysts as well as the rbnz that there are supply strains that could affect new zealand home stocks. accessing construction materials as well as labor costs, already operating within a tight housing market. we see a similar situation in australia. let's get back to one of our top stories and china's plan to sign a sweeping trade and security deal of 10 countries has suffered a setback as several are concerned about elements within the proposal.
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paul, when we talked about the proposal and the deal, there were lots of implications when it comes to policing, securities trade, and it seemed some nations had difficulties with these. paul: some of the specifics, hard to pin down about what the problem was. a number of pacific island nations wants to differ the deal. the plan includes a free-trade deal and special envoy to the pacific. if consensus couldn't be agreed among the family of nations, they would not want to proceed with original agreement. there are signs that fiji is trying to have a bob each way. it did sign three agreements with china mostly on economic development matters. it also signed a deal with united states to join the indo pacific economic framework.
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that group has 14 members and is seen as a counter to china's growing influence. david: the reaction from the chinese side on these diplomatic setbacks? paul: a diplomatic response. the foreign minister says the nations at the table agreed to a need for further discussion around these areas of concern, including ideas around agricultural doors, post-pandemic recovery, but not security arrangements. he is heading to the eye the nation of care boss next. an official says security arrangements are not on the cards. the foreign minister also told pacific leaders at the summit not to be too anxious about china's growing influence in the region and that the deals it it signing pacific nations up to
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come with no strings attached, the exact words australia's foreign minister used when she visited fiji at the end of last week. david: could only be one or the other, right? we are on bloomberg radio if you are more of an audio person. if you mr. ris -- you missed rish, there he is. we are broadcasting live from hong kong on this is bloomberg. ♪
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david: welcome back. a look at your crypto assets. partially, we don't have enough space to go through all. fairly consistent with the return of risk appetite across the region. 1.4% nearing again. we will see if we get there. ether, 2000 is what we are watching here. haidi: we like the around
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milestone levels. indonesia's go to group seeing revenue group of 53% in its first quarterly report since its ipo. the ride-hailing operator says gross earnings rose to $357 million last quarter and losses more than tripled that. go to is the result of last year's merger between indonesia's two most valuable internet startups. india's largest drug maker has posted. a surprise quarterly loss. earnings were dragged down by a one-off payment of 107 million dollars for a legal cost. overall revenue rose 11%, below expectations, and costs rose 9% year on year. indian state run insurance giant lic saw fourth-quarter profit fault in its first earnings report since listing.
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lic shares are down more than 10% since their debut earlier this month. its ipo was india's largest ever, raising $2.7 billion. david: let's get you set for the trading session across equity markets. futures are still brighter than mine. new zealand up .5%. we are looking ahead to the last session of the month. we are still on track for the first monthly gain in 2022. a little weaker as far as the aussie is concerned. a lot updated to get through today. we talked about new zealand building permits. it is going to be very heavy as far as japan is concerned. retail sales, industrial output, and we get busier looking ahead to pmi numbers coming out of china later today. essentially we are expecting
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traction. the silver lining is we should be doing better than that for all intents and purposes. we will get an insight on how businesses are feeling. later today out of europe, eurozone, french, and italian -- not cuisine, inflation. they are due out later today. coming up in the next hour of daybreak, china'sing virus curbs fueling optimism for investors that the company is moving away from covid zero. we talked to investment firm firetrail about their energy strategy. energy prices back in the mix. china begins easing lockdown measures and the eu is looking to ban russian food. this is bloomberg.
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