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tv   Bloomberg Daybreak Asia  Bloomberg  May 30, 2022 7:00pm-9:00pm EDT

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haidi: a very good morning. we are coming down to asia's major market open. david: a pleasure to have you all join us. welcome to daybreak asia. haidi: eu leaders agreed to pursue bands on two thirds of russian oil imports. inflation worries way on agent investors. calling for several 50 basis point hikes. shanghai takes its biggest steps toward reopening. tmi data set to reflect the economic cost of lockdown. david: we are getting breaking
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data out of south korea. we're looking at the year on year figures. let's start with the 3.3%. a little bit above the hurdle. it is the sequential data that is more important to get a gauge of economic momentum. out put is down 3.3%. the strength you are seeing in the currency. that should be the biggest monthly contraction in the metric in south korea going back to 2020. -3.3% month on month. haidi: we are watching the european council special meeting taking place in us -- in brussels. we are hearing they are working on a ukraine package mechanism. also to address terming 10% of imports not already addressed way this proposal. the d lifting of sir bank is
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good news. russian oil imports cut by 90%. this comes as we saw the decision being made eu leaders with the made banking sanctions on russian crude. we will continue to likely see the upside pressure when it comes to crude prices given we have seen brent going past 120 in the last trading session. let's get you to annabelle to take a look at how this is going to player. we see the demand worry alleviate. annabelle: certainly those lines we are getting from the eu meeting is supporting oil prices print west texas around 3% in early trade could the e.u. pledge from one of the big caveats was the exemption for oil. saying they will be covering
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about 90% of previous oil imports by year end. china easing the covid curbs. that rally crude. david: get more on this story. let's bring in kevin, our brussels bureau chief joining us. we are looking at some live pictures. for viewers joining us, take us through the nuts and bolts. >> what we have from the e.u. side is 27 leaders agreeing to go ahead with an oil band. 26 leaders walked in this morning and to do that and they had to convince hungary's viktor orban to go along and they finally did. they were able to secure a political agreement. they still have little bit of work to do on the legal text. the idea is to go ahead with a ban on seaborne oil by the end of the year on buying russian
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seaborne oil. that is about two thirds of the oil. with poland and germany agreeing to stop purchasing pipeline oiled by the end of the year, you get to about 90% cut off in theory if this goes as planned. haidi: what else did we see in this package? >> what this does is unlock the rest of the package which had agreed to but not finalized. this gets into d swift thing one of russia's largest banks. cutting it out with the messaging system. some individual sanctions as well as a ban on ensuring shipments of oil. this is a reasonably broad set of sanctions that make up the sixth package that the e.u. has done but it is also showing this was the hardest to get through. quite a painful process.
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a couple of things dropped at the last minute including a ban on russians producing real estate in the european union. it is a sign they are running out of things the 27 members can all agree on. haidi: our brussels bureau chief with the latest. the looming sanctions on russian crude adding fresh concern. let's get to some of the chinese pmi numbers. mark cranfield and our north asian correspondent stephen engle. talk to us about the rising oil impact. you also have china potentially lifting restrictions. demand coming back from there. the summertime peak demand just about kickoff for the u.s. >> if we see crude oil prices head back to $130 a we saw earlier this year, that is going to be a big friction point for
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financial markets in the weeks ahead. the fed, the fed members talking about a series of 50 basis point hikes. we know the fed is probably committed to at least two. if you get oil prices traveling back to the highs at a time when inflation is already high, we saw the european numbers or the german numbers going toward 9% which is crazy inflation numbers compared to what we have and use to any the last 10 years. it is going to add to the difficulties inc. have been facing. we were getting used to the idea maybe oil prices had peaked. just drifting around in the 110 to 115 zone. we are already heading back toward 122 and we could be going higher. oil is likely to be a major sticking point for markets in june. . that will feed into fixed income. treasury markets had combed down
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quite a bit. you see oil prices spiking should we got used to the markets finishing fairly well this month. june could be a whole different story if we see inflation coming right back into focus because of oil. david: let's listen in to what chris waller did have to say. >> i support tightening policy by another 50 basis points or several meetings. i am not taking 50 basis points -- 50 basis point hike off the table until i see inflation coming down closer to our 2% target. david: what i want to understand is how you look at 2023 now and they even have any indication what they might do that? -- what they might do that? then. >> that is a quickly moving
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situation where you have superhigh inflation. you have lots of supply chain blockages. they are reducing their balance sheet as well into a situation where they can see growth risks are pretty high. i the time we get to the end of this year, we could be looking at significantly lower growth for 2023 although interest rates have already increased quite a lot. people will be saying recession is becoming a much higher probability for next year. they will be wanting to keep their options open. one positive aspect is the fed controls the monetary policy through their interest rate mechanism. if they have raised rates to quickly, they can change their strategy and start to reduce rates again. they are showing themselves to be fairly nimble this year. they will need to be going into
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2023. we could have a situation where you could have a rate hike followed by a rate cut with a quick period. we have seen it before with central banks such as new zealand and we may have to see at with the fed. they will be alert to the fact a recession could happen much quicker than they were anticipating should we could end up with a situation where rates peak and start to fall in the space of couple of months to haidi: we are getting the china pmi numbers. we are expecting to see the downside pressure on activity and sentiment even as we are expecting to see some of the pretty optimistic measures for shanghai's reopening starting to happen. >> we have a number of policy pledges coming from the senior government leaders which is improving sentiment and also pledging to deliver growth in this current second-quarter which most economists say is
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almost impossible given the lockdowns and complete shutdown of commercial activity we saw in shanghai in the month of april. now we have more granular moves by the shanghai government allowing cars back on the road and ride-hailing taxi services and trucks will be back on the street as of tomorrow. people will start spending more. we need to see how much this translates into purchasing managers index for manufacturing and nonmanufacturing witches is services which also includes construction. we have granular data and anecdotal evidence. rebar inventories are falling which shows construction activity is perhaps picking up and that will help lift the nonmanufacturing pmi. this is a metro chart that shows how much public transportation has fallen off and that does impact nonmanufacturing pmi. that was one of the reasons it
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fell as low as 41.9 in april. the consensus is 45 for nonmanufacturing in may. we are expecting it to go for 47.4 in april to 48.9 in may. the key question is how much is this going to pick up? in 2020 in february, it was 35.7. we saw a sharp pickup in and you fracturing pmi -- pickup in manufacturing pmi. no one is expecting a v-shaped recovery this time around. how do we put the floor on is the big question. haidi: stephen engle looking at the pmi numbers due out later and mark cranfield. let's get you to paul allen. paul: russia is planning a mechanism to sidestep u.s. sanctions any potential default to the proposal would allow foreign investors to open
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accounts in russian banks in rubles and hard currency. russia is back in the fall countdown. -- in default countdown. effectively triggering a 30 day grace period. president biden will hold a where oval office meeting tuesday with fed chair jerome powell. it is the first meeting between the two since november when biden announced his intention to nominate powell for a second term. the fed has signaled it plans to continue raising rates in june and july to cool price pressures while shrinking its massive balance sheet. australian prime minister anthony albany has -- is set to name his ministry. the labour party recorded a historically low vote and margin. the greens made record gains. china's plan to sign a sweeping trade and security deal with 10
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pacific island countries has been dealt a setback to beijing had been hoping to sign regional agreements. according to australia's abc news, the plan was shelled after some pacific nations expressed concerns about the proposal. fiji signed a three bilateral pacts with china. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm paul allen. this is bloomberg. david: still ahead, australia's prime minister is set to name his going across the line to secure the majority government. we will look at the challenges ahead for the new prime minister after the country voted for change. we will be handling an investment strategy with china easing some of its virus curbs. economic support notwithstanding in shanghai. this is bloomberg. good morning. ♪
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>> we are in the middle of a bad market rally. not quite out of the woods. i think the market is going to be range bound trying to figure out how soon inflation is coming or how quickly inflation is going down. >> for the moment there are quite a few dynamics at play which are a bit different in the u.k. and the u.s. because the labor market across europe is not quite as height. we have to look at this inflation as more the cost of sanctions. haidi: on shifting market sentiment. investors meeting cautious as to whether central banks can raise rates to rein in inflation. our next guest says he is still finding opportunities third
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joining us as the head of investment at fire trail. we heard from our fed governor saying he wants to see 50 basis points on going for the next several meetings. what does that mean for sentiment and how pricing is going to work itself out? >> equity markets have already derated significantly. as np touching bear market territory last week. central banks get monetary policy ultra easy to very conservative stance given the events of the last two years. we are seeing them tighten in response to high inflationary pressures. not surprised their jawboning significantly. they are concerned about stagflation. getting closer to the neutral rate of two and a half percent as a priority for the fed.
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haidi: do you see much more reaction from investors? >> quant models would suggest qt is the equivalent to hiking funds as well. you are in tightening territory. what the fed wants to do is see financial conditions tighten materially because of the significant amount of fixed rate loans in the united states. high interest rates are not hitting the consumer at the moment. they want to slow some of the supply chain pressures coming through. that will happen through lower bond prices. i imagine they are pretty happy with it. this jawboning is likely to continue until we get to the 2.5% level. haidi: how are you choosing to navigate what feels like a lack of durability in? >>. growth is slowing. a lot of the as under the price already.
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downgrades, we are starting to see those come through as well. volatile market if you look at the vix. we think timing markets is extremely difficult. where find finding great opportunities across value and growth. we are a firm that thinks you should be fully invested throughout the cycle. a lot of the good returns, when things turn from bad to less bad. that is what the market is looking for, some easing in inflation. we are in a perverse environment when a take-up may be welcomed by risk assets. haidi: bonds, are they playing a more relevant role? >> with the selloff we have seen, they are more attractive for u.s. dollar investors and with the rise in the u.s. dollar, four assets are less attractive to u.s. investors. they are a lot more value than they were 12 months ago but it has been a significant air market and bond market, an
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increase in yields we have not seen since 1994. the question remains with a flat yield curve, our bond investors happy to extend duration or will we see the yield curve invert? haidi: tsmc is one of the few asian assets you are keen on. what is your modeling in terms of how that plays out? >> in terms of semi conductor exposure, we on tsmc. we also own micron technologies pin there are significant come -- we also own micron technologies. there are significant numbers there. significant demand. we are still up in mystic about the outlook. tsmc, micron technology. haidi: europe is where you have your heaviest bias. the inflation numbers come through from the art of the world are just extraordinary.
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how does that play into what you are looking at for your portfolio? >> in terms of european companies and inflation protection within the portfolio more generally, we have exposure to lumber through a company that is u.s. timber. in terms of europe, we are exposed to schneider electric. we have tech names like right move in the u.k.. we have hello fresh has an example. we are finding great opportunities across growth and value. soybean, midland in the u.s. and in terms of high energy prices, we invest in renewable diesel via a company called darling ingredients. haidi: the rentable strategy has not changed with the rise in fossil fuels. >> renewable diesel in particular is highly correlated to the energy price. it is obviously a much greener
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play. renewable diesel is a 100% substitute for traditional diesel. i terms of greenhouse gases, between 60 and 90% less. it is a fantastic renewable source of energy for companies looking to reduce their carbon footprint. we see a significant runway in demand and supply growth. haidi: we appreciate your time should head of investment strategy at fire trail. david: we do have in 20 minutes a nice segment coming on supply chain issues as it pertains to fossil fuels and new resources of energy. before that, a couple of things i want to tell you about as we count down to the open of trade in tokyo. a lot of data points coming out. the jobs numbers in about a couple minutes pin retail sales, a snapshot of the consumer and factory allport to out -- factory output do out.
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softbank revising some of its plan. a company canceled, local bond offering on monday. when other stock -- one other stock. the biggest automaker. third year in a row, outselling vw by more than a million cars throughout april. other things we are tracking as we approach the open. in terms of equity and risk appetite, are you going to get a lot more as far as dollar weakness is concerned? those themes for you next. this is bloomberg. ♪
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haidi: a quick check of the latest headlines.
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indonesia's go to group -- the ride-hailing operator says growth earnings rose to $357 million in the last quarter. net losses more than tripled. it is the result of last year's merger between indonesia's most valuable startups. antony says largest drug maker has posted a surprise quarterly loss. earnings dragged down by a one-off payment of more than 507 million dollars for legal cost associated with the u.s. unit. revenue rose 11%, below expectations. the board declared a dividend of three rupees per share. lic saw fourth-quarter profits soar 18%. shares down more than 10%.
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the ipo was the largest ever, raising $2.7 billion. still to come, clinching a majority government in australia. we'll take a look at what that means for the policy agenda and the mandate to govern particularly as it relates to climate change issues. that is coming up next. this is bloomberg. ♪
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haidi: we are just adding market indicators for japan. job to ratio coming in exactly as expected picking up slightly from march. jobless rate falling to 2.5%. expectations had for that to be unchanged. we see that tightening when it comes to conditions in april. we had the listing of the virus curb. we do see the impact of the lockdown and fighting demands for manufacturers pin bloomberg economics expecting further tightening as we get into may. we have the long holiday.
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boosting services and customer traffic increasing after restrictions lifted in march. two and a half percent unemployment rate in japan. let's get you to the asian market lookahead. annabelle: japan futures coming online in singapore. investors are concerned about the outlook for inflation. something we were hearing earlier from the fed governor chris waller. he said 50 basis point moves are on the table until price pressures are reined in. in new zealand we are seeing modest gains similar to what we are seeing. just on inflation we did hear from the rbnz deputy governor and he is saying the economy is facing the risk of a recession. it can withstand further rate hikes. it is looking to be a mixed trading at the set up.
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taking a look at the terminal chart, you can see what is interesting. the well-known saying sell in may and go away. it does not seem to have happen so far this year in asia. looking like it would hold onto some modest gains today. still is unclear whether we have seen the bottom in markets. exit investment managers saying another 10 to 15% drop cannot be ruled out. david: they are not taking soon entre. was flying high in april and shut down in may back on top in june. paul allen is in sydney. paul: e.u. leaders have agreed to pursue a ban on russian oil paving the way for a possible fixed package of sanctions targeting moscow. the sanctions for bid the purchase of crude oil and petroleum products.
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according to two people familiar, temporary exemption for pipeline crude is included in the package. fed governor christopher wohlers -- taking a 50 basis point hike off the table until inflation comes down to the 2% target. he says the economic models suggest positive tightening will be equivalent to a couple of basis point rate hikes. shanghai has taken its biggest step yet toward reopening after nearly two months of strict lockdown. residents will be allowed to freely leave and enter their compounds from wednesday with transport services also reopening. infections in shanghai fell to 67 on sunday. half the level from the day before. india is investigating the local units from china's dte and zebra for alleged misconduct according
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to documents seen by bloomberg should the government is screening auditor reports for fraud. india find its competitor for alleged violations. sources say the local books of more than 500 chinese firms are being expected and a report is expected in july. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm paul allen. this is bloomberg. haidi: prime minister anthony albanese has clinched a majority. china's plan to sign a sweeping trade and security deal with 10 pacific island countries has suffered a set back after some have expressed concerns. ben wescott joins us now. let's start off with adding that over the line when it comes to the parliamentary majority. what does it mean in terms of the mandate to govern and how
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much we will have -- will we have to work with the minor parties? >> it will be a big relief. in the lower house of parliament he can pass any bill he wants in any parliamentary procedures with a clean sweep. australia has two houses of parliament. in the upper house, there is a cross encz that has veto power over his agenda. that is likely to be 12 stances from the australian green party. a former football player from the australian capital territory and a couple of other tasmanian's who have asked for greater action on climate change . anthony albanese says he wants 43% cut to emissions by 2030 or the green say they want 70% to they want no new coals or gas lines. it could be a tough battle to see how much action on climate
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change he will be willing to take. david: the new ministry will be announced today. it' get me exc -- get me excited to you would be right -- get me excited to you would be >> right to be excited. the most diverse in australia's history. we are expecting to see the largest number of women ever in an australian ministry or cabinet. it is going to be i diverse cabinet but we are waiting to see the final look of that. that will be sworn in on wednesday in canberra. haidi: the prime minister, the first foreign-born minister we have had in australia was in the pacific islands trying to do a bit of damage control almost immediately after the election. we have seen the situation where some of the nations are walking
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away from this proposed security and trade deal put forward i beijing should -- put forward by beijing. does this mean the deal is dead in the water? >> the chinese government has said this is not the end of that agreement. they are hoping to take it back to the pacific islands. it is important not to lose perspective on how significant china's actions in the pacific have been. six months ago, the idea china might want to strike security or trade agreements in the pacific was very much a theoretical international relations conversation. china has struck not one but two agreements in the pacific and came to the point of suggesting the multi-nation security and economic agreement in the pacific. you can see how worried australia and by relation the united states is by the speed at which anyone moved into the
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pacific to visit days after being sworn in into her new position. china is on the march in the pacific and it remains to be seen whether australia can repair relations quickly enough to remain the partner of choice in the region. david: are asia -- our australia government reporter. we our talking oil prices. we have e.u. leaders moving forward to band russian crude. we will assess the impact on price. anthony bernstein joins us in a couple of minutes. this is bloomberg. ♪
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haidi: we are tracking the fallout of the global supply chain crunch. these are the top stories. china's biggest cities are slowly emerging from lockdown. traffic has started to pick up as the cities reopen but it is well below the weekly average in 2019. truck traffic the last week was 21% below the same period last year. russia's seaborne
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total of 34 tankers loaded 25 million barrels from the country's export terminals with most of it heading toward buyers in asia. european union leaders have agreed to pursue a partial ban on russian oil paving the way for a sixth package of
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sanctions. david: get more on that. he put together this graphic for you. a network of pipelines. centers of transport, russian oil brought the rest of europe average flows, about three and a half million barrels. that is ending 11 days ago. you get an understanding of what the trend is looking like. there repo. let's get the implications of some of this in a simple way disappearing. that is on your supply chain. and i trade for more on the market, let's bring in the senior oil analyst. he is here with us on set to your -- on set. your initial reaction. [indiscernible] david: we are just having a little bit of audio issues. we will get you sorted in a moment. we will take a short break as we get things sorted and continued this segment talking about oil. asian markets opens here because the region. we will be back. stay with us. this is numbered. ♪ -- this is bloomberg. ♪
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david: who would have known? american crude back 118. france settling above 121 for the first time since march 8. the crazy days of early march. let's get a sense of the energy markets. neil beveridge is with us. we were talking about e.u.
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sanctions on russia. what is in the price, what does this doing what is this not to. -- not do. >> we have seen the e.u. commit to turning down seaports of russian crude but also -- some of the states like hungry that are so dependent on oil. there will be an exemption for those states. some russian crude flowing. the trajectory for crude supply is downward. about 2 million barrels a day we are expecting over the course of this year. david: brent is moving up. have we been expecting this? >> the market is reacting to what we are seeing in terms of supply and demand data. inventory coming through. it is a tight market. russia is sending more that screwed into asia, -- more of
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its crude. we have got a european economy and u.s. economy where you are seeing this recovery post-covid. what is incredible about brent is we are $122 at the moment and china remains in partial lockdown. if we see a reopening of the china economy, you will see prices move significantly higher. haidi: this idea of a perfect storm. falling inventories and then you have got demand destruction in china that fades away. what is the ultimate upside for prices? >> under the short-term, we are going to see prices move higher but you are right that the risk is the higher we go, the greater the risk we induce some sort of energy led recession.
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if you look at the real percentage of gdp, it is coming up to around four and a half to 5% of gdp. that is the level you will see demand destruction kick in. the risk will become self-fulfilling i the sense higher prices lead to weaker demand. we will ultimately top out of the cycle. it is possible we see brent go up as high as 150 a barrel. haidi: we were talking earlier about how the sanctions flow -- the sanction flows are heading to asia. if these sanctions go through, is there sufficient demand for asian buyers to absorb the? >> i think india is showing remarkable capacity to ramp up imports. china is being a little more cautious in terms of who is allowed to buy russian crude. the logistics are tricky. it takes 90 days to send a tanker from the russian ports
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through the baltic and into asia. that could be a limiting factor. we have seen tanker rates significantly higher. that could be a potential bottleneck. david: what do we learn from this entire episode? do you expect to pick up in capex moving forward? >> what we have learned is there is a massive premium on oil. russia is a huge supplier of energy to the world. if you restrict energy flows, you have to make it up from elsewhere and that moves moving higher up the cost curve. russia is at the low end of the cost curve. what we are seeing is rude investment -- is investment running at $350 billion. a lot of producers worry about peak demand, decarbonization. reluctant to make the long-term investments that are needed. we are also looking at opec sitting on maybe as low as 2% spare capacity. as opec and in use to ramp up
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production, you will see the capacity coming down. it is a tight market with little that is going to hold oil back other than demand coming down. only way to men comes down as energy led recession. david: i cannot help but tight back to what is happening in this part of the world. what does -- what if china recovers? the hope obviously is china recovers. is there enough oil in the event china does a u-turn? >> this would light up the market. in two q, we see jet fuel down, gasoline down. forecasting almost no growth out of china this year. were china to reopen, i think that would shed a light under oil markets and we would see a significant move to the upside. the timing remains highly uncertain. once china comes back, there
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will be a further leg up for commodity prices. david: great to see you in person. we will see you next time. we are just in time for industrial output numbers out of japan. we will be getting pmi numbers out of china. 1.3% down. sequential drop. in april, industrial output, 1.3. the estimate was for -1.2. retail sales a little bit better than expectations pick department sales up 4%. the consumer is healthy. same cannot be said and would even tie in with what we saw in south korea with industrial profits. showing a contraction. will put this together when the numbers come out of china in under two hours. haidi: we are expecting to see a downside in the pmi numbers.
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a big chunk of when the major production hubs were under lockdown. we are getting better numbers out of shanghai. 31 local covid cases from may 30. we continue to see the positive cases coming down. what we see is the expectation shanghai will start letting people in the low risk areas leave their house and compounds dismantling the last of the remaining lockdown curbs. we have seen this lockdown for two months sticking to their homes. the resumption of taxi and ride-hailing traffic. cars will be allowed on roads in low risk areas. we will see subway and bus ferry services. hopefully that revival of this usually very bustling cosmopolitan city. climate, energy and environment ministers make pledges but they also shifted to assuring
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short-term energy security. let's ring in our bloomberg nef aipac head of research for more. dead the berlin meeting result in any tangible measures in terms of addressing these high energy prices? fossil fuels continue to be more expensive. it is potentially jeopardizing the transition. >> thanks for having me. as you mentioned, the market reaction suggests there is no tangible path. what they did is called on opec to increase production. we heard canada's national resource minister talk about trying to reconfigure existing infrastructure. the terminal in new brunswick to be able to configure to export omg from canada to europe. to challenge these measures takes a lot of time. the market expectation is demand
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for fossil fuels is going to go faster than the ability of the u.n. partners to replace russian supplies. david: the g7 and i'm going to read this because i want to get this right to the g7 committed to achieving predominantly de-carbonized electricity sector kurhs by 2035. what does that mean -- sectors by 2045. what does that mean? >> it is a torturous language. it is certainly a stronger language. it still shows differences among the members. those differences are due to physical reality but also political issues. on the physical realities on the one side in g7, we have france and canada who already get over 80% of electricity owned renewable sources. this is very easy to fulfill.
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we have japan which gets over 70% of electricity from coal. a heavy reliance on thermal power plants. in the case of the u.s. where coal dependence has been reduced the last couple decades thanks to shale gas and renewables, there is political hesitancy saying we are going to phase out coal. because of that they have to come up with these complicated sentences. haidi: also complicated while china pushed for climate measures are asking opec to more oil. how do you rate the results of the meeting? >> i would say if -- it is a 39 page communique. it shows a lot of effort by the german presidency. considering current geopolitical
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circumstances, i think it shows what was realistically possible. is that enough? probably not. david: i guess on that note -- [laughter] on that optimistic note, we can continue the conversation next time. hopefully pick up on something on higher ground. always great stuff. head of asia-pacific research. we are under five minutes away from your major markets. australia and japan and south korea. an indication of treasuries and we will have european futures coming online. we have talked about industrial out what complex in and japan not good. in two hours we get china and we going to inflation numbers. investment strategy amidst all that. this is bloomberg. ♪
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>> this is "daybreak asia". we are counting down to asia's major market opens. energies are going to be so cheap going into the asian session, given the expectation of more eu sanctions and how that's going to play out for already tight oil markets. david: pointing out, 121 was it in 122 was outside the scope of possibilities. and that's really one sector we are tracking as we look ahead to these opens. it annabelle: brent crude coming online in 15 seconds close covid. japan, korea and a pit of signs that some heat is perhaps coming out of the market this morning
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with investors still continuing a focus on their inflation bid. take a look at the set up we have for the nikkei today, coming online with a strong side, more than 2% on the upside. brent crude coming online higher. we did have that eu ban on imports of russian oil. that is expected to cover 90% of the imports by years end. treasury bond futures, the markets are close to u.s. -- closed today for u.s. memorial day, but there is a little bit of weakness. taking a look at korea and australia, we have the kospi coming online as well. a bit of weakness at the start of trade. australia unchanged, still above the key resistance level we had seen yesterday and it closed at a three and a half week high. new zealand trading to the upside, half a percent. david: we will see if that follows. that's a strong open over in tokyo. david is with us on set. senior investment strategy for equities. good morning, how are you? >> good morning.
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thanks for having me. david: it seems to be the case when you look at price, volume and see the technical indicators. >> we've actually been seeing that positioning has been so like, that when you consider how or why the global equity markets in the u.s. have plummeted so much this year. it's really been 100% due to valuation multiple compression. and earnings expectations have actually continued to rise. so, at some point, something has to break. either earnings start falling, or we see markets go up. because we actually haven't seen any evidence of broad-based earnings weakness. we are quite constructive on markets today. david: as far as multiples, let me pick up on that.
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it has been a while, at least 15 years since we've had to deal with inflation. rates go up and you think of discount rates over multiple. do you think they are cheap enough given what the fed wants to do? david w.: we do think we are at a point of maximum fed hawkish nurse. we are also at a -- hawkishness. we are also near at the top of the 10-year treasury yield. we actually are ok with longer duration equity assets, but we wouldn't go with those hyper growth names that don't have earnings. we still think that cash flow is a great way to protect yourself in case there are bumps in the road between now and the end of the year. haidi: you've pointed out to metrics to what could be fed hawkishness and pete owing on in the bond market.
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what is the peak inflation? particularly with energy? david w.: that's fair. i think we have certainly felt the impact of inflation on equity markets and that four or five point rating of the s&p. but what we would want to stress is that if inflation doesn't have a silver lining, it is that when we add back inflation or that core deflator back to the real gdp numbers, we get a very high nominal gdp growth number. and when we have high nominal gdp growth, that tends to be correlated with very strong revenues delivered by corporations. and it's because of that that we feel the likelihood of a earnings recession is extremely low anytime in the near future. haidi: david, let me pose to you
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a question going into this week. on top of many investors minds. the biggest pain points for markets will missy tightening take place, or do you think there's a certain level that has already been priced in? david w.: i think to some extent it has been. we are expecting an expeditious move to higher rates and also a rolloff of the fed balance sheet. clearly a lot of the heightened anxiety in the markets has really stems from the feeling that there is no safety net, i guess, that spring -- being spread across capital markets by the fed. that being said, when we look at u.s. equities in particular, what we really like is that there is actually a quantitative
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easing program of its own, which is in the form of share buybacks. there's probably going to be $1 trillion of share buybacks executed this year, and there actually is no other market that is enjoying that sort of downside protection, if you will. by the way, when we look at share buybacks plus dividend yields, we get roughly a 4% yield in terms of return on capital for shareholders in the u.s., which is why we actually think that u.s. equities are particularly interesting at this time. david: i mean you don't make these choices and the price. with the equity markets you up the exposure, you have seen peak whatever. is it equities over asia or within asia, china and japan? david w.: what we have been telling our clients is that they should continue to have u.s. equities form the bulk of their
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equity exposure. we are recommending, at this point in time, roughly two thirds great to u.s. equities. and, we also do like china and also japan at this particular juncture. china only because we don't see the news getting much worse from here in japan is a really a level play on modest inflation and a currency induced strengthening of competitiveness. david: just your outlook on china, it seems like your economy is going through a rough patch. it might take a few more months before we get back to normal. does not seem to be indicative of an earnings revision on the way out. david w.: asia has seen the worst earnings revision of any region in the world. but what we like to recommend
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with china in particular, is when the news is really bleak, that is when one wants to establish a position in chinese equities. because, it's very clear that policy support is on its way. haidi: senior investment strategist for equities. let's get you to paul allen and sydney with the first word headlines. paul: president biden will hold a rare oval office meeting on tuesday with fed chair jerome powell to discuss the economy and rising inflation. it's the first meeting between the two since november when biden announced his intention to nominate powell for a second term. it's a signal that plans to continue raising rates in june and july to cool price practice -- price pressures all shrinking the massive balance sheet. russia is planning a bond payment mechanism for sanctions and a potential default. the proposal would allow foreign
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investors to open accounts and russian banks in both ruble and higher currency. russia is back in the countdown after coupon payments in euro and dollars failed to reach the accounts as of friday evening. effectively triggering a 30 day grace periods. lee set to name his ministry after clinching a parliamentary majority one and one week after the election. the labour party still recorded a historically low primary vote at margin. the greens and the focus on climate independence made record gains, grabbing electorates from the main parties. china plans to sign a sweeping trade and security deal with kane pacific island countries that have a setback. beijing was hoping to sign a regional agreement during the foreign ministers trip. according to australia of abc news, the plan was shelved in some nations expressed concerns about the proposal. several bilateral packs were
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signed with china. india is investigating the local units of china's alleged financial misconduct. according the document seen by bloomberg, the government is scrutinizing the report that was just fighting the competitive one for foreign-exchange violations. sources say more than 500 chinese firms are being inspected in the report is expected in july. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. haidi: let's take a look at some of the things we are watching move in the early part of the session. we said that energy would be a key theme today. annabelle: that's right. certainly lifts we are seeing a wti and brent crude is boosting the energy giants here in korea and japan. the eu is agreeing to a partial ban of russian oil imports.
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the caveat is that it will exclude imports that are coming via pipelines, but the ban is expected to cover 90% of imports by year end. the improving covert outlook and china's helping the situation here as you mention the combined cases in beijing and shanghai now below 50. david: the opus to get pmi above 15. ok, just on that note here, we will tell you what's coming up in the show. china moving to stimulate its faltering economy. extremely long this supporting measures. ubs joins us in 20 minutes. they will talk about their thinking on the economy. you're talking oil and oil priced on the up. eu leaders backing the ban under russian crude. we will discuss the plan and the details in the sanctions, next. this is bloomberg. ♪
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haidi: taking upwards in may. lockdowns easing economic activity. economies think that factory and services will staying contractionary territory. stephen engle is here. what are we expecting from this? we are likely to see that continue downward pressure from the lockdown. stephen: they are expected to stay in contraction territory. pessimists still outweigh the optimists. but it likely shows improvement in manufacturing and services in the official pmi's that we will get out later this morning. april was probably on the floor because of the lockdowns and shanghai on the restrictions in beijing and other sporadic lockdowns and other parts of the city that have really affected consumer spending, but also of
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course the supply chain for manufacturing, which is going to take some time to fix and get going. the one interesting note from bloomberg economics is, we are very unlikely to see a v-shaped recovery in the pmi, like we did see back in february of 2020 when manufacturing pmi went down a 35.7. the very next month, up back above 50, above 50 for the next 18 consecutive months, this time around supply chain's are constrained in bloomberg economics really points to the fact that a lot of the stimulus, there has been a lot of talk of stimulus and a lot is really focused on reviving manufacturing. but because of those supply chain snarls, it will take a lot longer to start seeing a faster recovery. so it could be a long process. in fact, nonmanufacturing, which is services, will probably -- if they are not getting the stimulus, shanghai is a service
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driven economy. so, unlocking shanghai will not necessarily impact that so much because it's a services let economy and a lot of the stimulus is not going to services industry other than tax incentives for buying cars and breaks in construction. again, the numbers are likely to be below 51st services and manufacturing where we get those numbers later today. david: steep -- speaking of shanghai, 31 cases. i like this part of the story talking about how their moving because of rapid lockdowns. shanghai residents reacted which years with some even setting off fireworks. what we know about the easing of these restrictions after two months? stephen: it will let residents a lower risk areas to come and go from there residential compounds. after two months of essential lockdowns, many of the main parts of the city. they are also going to let taxi
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and ride-hailing services to resume, they will allow cars back on the roads and low risk areas. at subways, ferry service to slowly resume from wednesday. of course we also got that announcement earlier this week, yesterday or sunday, that all manufacturing in and around shanghai will begin as of tomorrow, so june 1 in a number of other restrictions will come down. this will not be a tsunami of economic activity for manufacturing because it's going to be a slow road bag getting supply's going again. but consumer might come back, that's why we saw some of those retail stocks really surging yesterday. see if we get the momentum as people use that pent-up energy to spend. david: it was one of the leaders in yesterday's session there. stephen engle, our chief north asia correspondent will be tracking these consumer names as we approach the open. coming up, on terms of the pmi, the state of the economy. we have ubs in about 10 minutes
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and ing will also be joining us later on in the program. stay tuned for those conversations. from china to oil, we are looking at prices on the up, why not, climbing on the back of news here that they eu leaders and essentially that agreement to pursue the russian oil, blocking deliveries by see in most by pipeline. let's bring a david stringer, our energy and commodities editor. what do we know? >> what we know is that eu leaders have agreed to at least a partial ban on russian oil imports. it sets the stage for sanctions on russia. let's say this is partial. it will ban deliveries of crude oil and petroleum part of member states, but there are temporary exemptions for pipeline crude. what is that mean? what it means is immediately about two thirds of russian oil
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ports will be suspended to eu and officials say that by years end, if you combine the impact of the sanctions with promises that we have seen from countries like germany and poland to wean themselves off russian fuel imports, by years then we should see 90% of russian oil sales to the eu. >> we have seen supplies for russia headed for asia. is there a chance we could see that extra supply by asian customers? >> that's an interesting question. as you say, we've seen -- across the spectrum, a few additional purchases of things like coal from india, obviously china, huge consumer of both an importer of oil and gas, so yes, there is a question of what can russia do, where can a fine alternative markets for some of these fuels? and you would think asia is likely to be one of those
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destinations. david: -- >> we were talking a little bit earlier in its predicting the upside in prices because the higher you go the more chance there is of that demand destruction at some point. but at this point, are we looking at a pretty perfect storm with summer driving summer time demand about to kick off, you've got inventories falling, potentially more sanctions now in the works, as well as china reopening? david s.: it certainly looks that way, on the supply side we've got the eu coming out and saying, within a matter of weeks and months there will be restriction to supply the goebel market. and then on the demand side, as we just heard from stephen, china, the biggest energy consumer opening up this big metropolis of shanghai, beijing,
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a list and demand as we get people back and work, industries firing up, both on the demand and supply side and all of the indicators are really positive for prices, and what we see this morning's wti up a touch from friday. of course, didn't settle on monday with the u.s. holiday, but already we are seeing positive momentum. haidi: our energies and commodity editor david stringer there. that's look at european futures opening. this is the picture across europe at the moment. we really will be watching what goes on when it comes to the energy sector. euro stock sector looking pretty smart at the moment. the highest in about a month on the optimism over easing china curves. of course we have rotations of more easing restrictions from shanghai, the return of road traffic and mobility as well. msci europe up 7/10 of a percent.
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futures looking pretty flat at the moment after that inflation rate. but of course, the big news will be eu leaders backing more of these sanctions on russian crude and how that potentially plays out when it comes to energy stocks. but it was the fourth day of the longest winning streak since march for the stock since -- stoxx 600. that sentiment can be maintained after so much pressure this year european equities. you could get a round up of all the stories to get your day going for a daybreak. bloomberg subscribers go to dayb on the terminal. it's right there on the mobile and the bloomberg anywhere ad. you could customize it as well. hit the news on the indices and places you care about. this is bloomberg. ♪
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>> i support tightening policies
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by another 50 basis points for several meetings. in particular, i am not taking 50 basis point hikes off the table until i see inflation coming down closer to 2%. david: that was christopher waller talking us through what they plan to do and would still on the table, cash treasuries resuming trade, as you can see, we were up tends on the five years. just to be that up over two years. with that being said, general direction is on the way up. these last few days they have come up the top in mid-may, so we will see a happens when it comes to the shape of the curve and overall trend when it comes to yields. its top gun, no pun intended. 10 on the short-term and that teeters out as you look towards log data treasury. point 3022% on the 30 year yield. haidi: some of the latest
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business flash headlines. emerging a keefe player and a panel meeting on tuesday that would decide whether the russian creditor will pay out. sec filings showing more than $100 million of securities to bank, including barclays and jp morgan in the third quarter. that added $1 billion from the creditor. indonesia's go to group for revenue growth has extreme incentives out $1.1 billion ipo. the ride-hailing and e-commerce operators as growth earnings rose to 306 east $7 million in the last quarter and net losses more than tripled to 444 million. that is the result of the merger between indonesia's most valuable internet startups. credit suisse is reportedly in the early stages of considering its options to strengthen capital. russia is saying the sides of
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the increases likely to exceed one billion in the sale of the unit is a possibility. credit suisse said in a statement that it is not currently considering raising -- raising additional equity capital. when it comes to the supply chain pandemic now, some manufacturers have been better prepared and more savvy than others. toyota has emerged as one who has managed to continue outpacing volkswagen, despite coming up short of a production target last month that the company had backed due to the spread of covid-19 in japan and overseas. companies with retailers to manufacturers expected to hold greater levels of inventory as global supply chains fall for a shift in shadow g. a lot of this -- it's really interesting to me because how much confidence do you have in this business environment to be taking on more inventory, but you also could get caught short. david: especially for a company -- that's a very relevant
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question, particularly for toyota. when you look at what they have done as far as changing what should be your ideal inventory level just in time to exchange the just in case. i think we have a graphic that shows you what toyota has managed to sell more, their inventory days is also starting to move up. it's getting them much longer to turnover inventory. it's a very good metric to watch, not just for toyota, but for other carmakers. haidi: it's a holding onto inventory, not just carmakers, but other manufacturers and retailers. it's the elan logistics that are privy to be such a pain. getting the groups from one point to another with the truck. the traffic much lower in china. david: absolutely. when the pmi data comes out and about an hour, there is a metric there,
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haidi: this is daybreak -- annabelle: this is daybreak asia. check on markets for japan, korea and australia. seeing the moves in the treasury futures feed and that sentiment in this part of the world as well. putting to a selloff of trading resumes after the u.s. memorial holiday on monday. we are seeing the nikkei turned negative. we also did have some disappointing output data coming in with a -- a decline of 1.3% in march. that was the estimates of 0.2%. korea looking a little bit flat this morning, but it is being led lower by its heaviest weighting that samsung could climb around 1%. australia also in the red as well. there's only one or two sectors that are gaining today that's materials and energy, which is unsurprising given the gains we are seeing. commodity prices across the board. you've been talking about oil,
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prices heading into june with record highs well within reach. finally, new zealand backing the trend here today. higher for a second session, but really, if we do see asian stocks broadly eke out gains, they could be seeing their first month of monthly gains this year. david: and we are already in june. ohno. not quite. we waited a long time for this. great stuff. thank you. paul allen is in sydney for first word news. paul: thanks, david. eu leaders have agreed to pursue a partial ban on russian oil, paving the way for package of sanctions targeting moscow. the sanctions for bid that the crude oil and petroleum products from russia delivered to members stay by sea. according to two people familiar with the negotiations, the temporary exemption for pipeline crude is included in the package. shanghai has taken its biggest steps yet towards reopening after nearly two months of strict lockdowns. residents in low risk areas will be allowed to freely leave and
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enter their compounds from wednesday, with transport services also reopening. infections and shanghai fell to 31 on monday. that's half the number of the day before. japan's factory output dropped in april for the first time in three months as china's virus lockdown spurred the disruptive supply chains. decline one point 3% from march and economist had expected if all of 0.2 percent. output slid almost 5% from one year ago and retail sales rose slightly from the previous month in the later market showed signs of tightening. india is investigating the local units of china as zte and vivo for alleged financial misconduct. according to documents, the government is scrutinizing their order to report. india just recently find their competitor for a foreign-exchange violation. sources say the local books have more than 500 firms are being inspected in the report is expected in july. global news, 24 hours a day, on
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air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. haidi: low risk areas leave and reenter the compounds as they take their biggest steps yet towards listing a strict two-month lockdown. also laying the groundwork for a return to normal after the government showed in unwavering commitment to the covid zero policy. let's bring them ahead of asia economics and china. our chief china economist at ubs, always great to have you with us. we see plenty of life returning, hopefully, to shanghai. this after a slew of measures announced over the weekend to support the economic revival after this city came to a standstill over the past two months. how optimistic are you about the recovery? what are you expecting to see in today's pmi numbers, given they will still reflect the bulk of that lockdown? >> i think after the government
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talks about minimizing the impact of zero covid policy on the economy, there has been some measures of easing, especially on transport. now, of course, also for contact intensive activities and shanghai. i think that we have seen the bottom in economic activity should start to recover. however, i think there will be regular pcr testing, and also it's a step to opening. we should not be expecting a fall back to normal very quickly. so it's going to be a gradual rebound. that means activities at this moment are still below the normal. and so today's pmi is probably just a tad better then the april 1, and it could come in around 48. i think the activities are not yet back to normal. haidi: how effective would you rank the policy measures from the provincial and city levels
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all the way up to the pboc and some of the other fiscal measures that we've seen in being able to maintain some semblance of growth, given that we continue to see the gdp forecasts? >> i think the authorities, especially after the premiers meeting last week, and the matter with 33 measures, a lot fiscal and monetary, i think the fiscal policy front, the ones that are going to be more effective are going to be infrastructure spending, less contacting intensive, and they are bringing forward investment and bond issuance. but a lot of other measures, for examples, tax cuts, and also more monetary easing in terms of liquidity and property easing, the effects are going to be really constrained by the mobility restrictions of people cannot get out of their homes,
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they certainly cannot go by property or automobiles. i think the local government measure now and shanghai is to ease that restriction and allow people to get back to the street and go on with their business, it's going to greatly increase that effectiveness of monetary and fiscal policy. david: a lot of people talk about whether china would still be able to meet their growth target. i want to phrase that in another way, given all the spending measures that they've announced, and indirectly, this attack collection because of the economy. do you think they will meet their fiscal deficit targets? wang: the simple answer is that i don't think we will see 5.5% growth or the deficit target. but of course, within the deficit envelope that the government said, there was already space for more easing, if they -- actually, they were
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not on the budget, but they could ease another one percentage point of gdp and fiscal expansion could be 3% according to cheap -- according to gdp within the envelope. so those targets, the budget targets in the gdp targets were set before the russian invasion, and also before the omicron related to tightening. so i think all of that will be adjusted. so we should not really be looking at five point 5%. ubs forecast as may be downgraded to 3% this year, which requires a notable rebound in the third quarter and fourth quarter. that would already be very good. on the fiscal side, china has a lot of fiscal room, so collection comes down in its natural and the current environment and could increase spending and continue to cut tax. david: break down that 3% number for us. i know there's a model that goes into that. what part of that is the function?
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-- is consumption? wang: consumption will be weaker. less than half of it comes from consumption. we are looking at consumption growth around 2% year on year, and then for investment, it's going to be something like 4%. so investment has to do a bit more with heavy list -- heavy lifting, even though corporate will lift and property is pretty bad and infrastructure is going to be pushed up by at least 8% this year. haidi: as long as beijing adheres to covid zero, does that mean the risk of an extended inflationary risk exported for the inflationary risk to the rest of the world remains? wang: china has not been a big part of the global reflationary issue. a lot of that has come from the
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disruption, the supply disruption elsewhere. and in the u.s., for example, it's related to the u.s. labor force in the chips manufacturing earlier, and then also the russian invasion and higher commodity prices. so i would say that until now, china has not been a big part. and recently, in the last month or so, month or two, the disruptions related to shanghai lockdown in a earlier -- engine lockdown, has had a bit of an impact on the supply chain. so if it goes longer, i think it could start to have an impact on global inflation. at the moment, what has been improving is actually truck transport and port activity. containment in 10 days of may has actually improved going up year on year. so i think the impact on the global supply chain will be limited. the impact is mainly domestic
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for consumption. david: head of asia economics and chief china economist. more insights in the next hour of bloomberg tv here. at this time from ubs, ing will be joining us about the open of the markets to talk to us about when the numbers break as we await the latest pmi numbers for may in case it wasn't obvious. let's turn our attention to the bond markets. almost every corner of the 63 trillion global debt market has seen a little bit off the bottom. in fact, this graphic you will see on your screen just to take you through a massive draw down on the floor. you see if you squint, you will see the pickup on the right side of the screen. seeing effects and rates reporter is with us. why are some of the big money managers coming back in and starting to buy at these levels? >> it's quite a turnaround. for the first time since july,
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bonds are giving a positive monthly return, definitely breaking the drought. it is driven a lot by simmering fears around u.s. recession, people are seeing a lot of value in bonds once again. especially when you consider the ferocious rise in benchmark borrowing costs in the u.s. gym 3.20%. even now, is trading above 2.8%. that's actually screening a lot of the big money managers out there. the black rocks of the world who are looking at things and saying, this might be a chance to really get back in, so it's driven a lot of the rally that we are seeing. haidi: are there pockets of risk around debt, how are investors navigating that? >> is not all sunshine and rainbow. investors remain super skittish on china in particular because the property travels there, because of covid, the lockdowns
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that have been well discussed, and people here are also worried about the effect of china to the rest of the region. you have other pockets like sri lanka, as we all know, they have their bond falling into default, so investors here really have taken to what to buy. haidi: bloomberg seeing effects and rates reporter ruth carson. treasuries global credit bonds all gaining. investors once again seeing the value of fixed income in their portfolio as we get more on the story just ahead. this is bloomberg. ♪
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haidi: china plans to sign a sweeping trade with 10 specific island countries is a setback. some expressing concern about specific elements in the proposal. the debate coming after the u.s. and australia strongly pushed back against these assets to more island nations. head of a news national security. great to have you with us. we appreciate your time. are you surprised by the outcome? i guess there was a feeling that maybe this would be after we saw the deal with the solomon islands. >> i think there is a really
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important corrective to the view that china is on some grand sweep through the pacific, dominating everything before it. i think instead we are seeing some overreach on the chinese government on this occasion. the idea that the grand deal with much of asia, everything from economics to development, to culture to security, it was clearly a bridge to the -- to the -- to the occasion. i think we will see continued attempts at bilateral deals. perhaps not as wide reaching as the rather disturbing bilateral deal between solomon islands, but the bilateral deal has give china access to the resources. what i think, and this is where the new australian government comes into the picture, i think there has been sufficient pushback on the occasion to hold the line. haidi: the new foreign minister
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was going out to the region days after being sworn in, and really talking about without exclusively mentioning be -- beijing, no strings attached friendship. what can they do? what's the correct strategy here, bearing in mind we are talking about our biggest trading partner? >> the new australian government, the labor government of the prime minister and the foreign minister, does have its work cut out for it. there is an opportunity to provide not only the kind of security assistance at pacific countries need, and development assistance, which is what the australian government is starting to do, but also to build the relationship of trust and inclusion, and frankly listening to countries on issues like climate change, which is such a high priority for them. so i think the new australian government has an opportunity now to work with others, perhaps
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bringing in partners like japan, the europeans, united states, new zealand, to create alternatives to china for regional development, and to really build that sense of regional community. but at the same time, china is going to keep walking through to make inroads. there is an ambition here for some kind of regional dominance, which is really not healthy for the region small country, in my view. david: it's not a perfect example. david here, by the way. but i look at the example of china's influence and how it has built that out in different ways across southeast asia, for example, depending on that relationship with the particular country. what is china bring to the table in that part of the world? because we answered that question correctly. we know what the gap is, and we know that perhaps australia could come in. >> there is no question that
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small developing countries across the indo pacific, the pacific, indian ocean, southeast asia, they all need infrastructure, they all need support or development, governments help, etc. there's no question that china has a lot in terms of quantity to offer. but i think the value proposition is beginning to be recognized for what it is, and that is, compromises to sovereignty, compromises to democratic prosecco's. compromises to transparency. i think in some ways our friends in the south pacific may do well to watch the experience of the indian ocean countries like mild eaves and sri lanka, more than -- maldives and sri lanka for the chinese development. i think the happy outcome here would be not to see the blanket,
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but for small countries to help set the standards of the terms themselves for what they want and need. i think what we have seen this week is the beginning of that pushback, a rejection of the kind of blank check security and economic agreement, and instead, work and willingness to engage with china on detail. haidi: how much multilateral cohesive strategies acquired from australia and its allies on this matter and in this region, given you say this has huge implications for u.s. out -- u.s. allies, and smaller in middle nations in this part of the world? rory: the southwest pacific's geo strategically important. perhaps the world took its eyes off the ball since about the 1940's, but the game is back on
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and you are right, this is relative to, for example, japan and taiwan if you take about, and theory, japan's ability to cut the sea lines of communication between australia and those players in the regional crisis or between australia and the u.s. the coordination that's needed now is going to be have to -- is going to have to be something that includes this pacific islands, ideally engaging in the group but not engaging in a way that china has been doing, which is kind of to impose one agreement on the whole community, but to work at multiple levels for australia, japan, the u.s., japan, new zealand and so forth, what we now need to do is renew the relationships work within civil society at many levels of government, and help bring visibility and accountability to
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the engagement these countries are having to their development. and, being willing to be a little bit more frank about china's ambition. the new australian government is in a better position to they do that because we won't be called out in the same way we were on climate change. i think instead, without friends and allies, we could be a little bit more clear about the political strings that come attached to china's involvement in releasing security cooperation. it's going to be a very visit -- it takes time. david: thank you so much for your time and your input. head of a and needs national security college. just ahead, investors on the chinese market will have a lot to pick through. the amount of month -- the amount of numbers to come through. they believe it continue the
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positive session in the preview is next. this is bloomberg. ♪
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david: the bottom is behind us according to one hedge fund looking at the chinese market. our chief china market correspondent is here with us to
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talk about this. it was the signal? >> it's peak bearishness. something we have been talking about for a few weeks at the worst of the selloff in the stock market is over. the markets are, at the end of the day, psychological. when you have more people -- yesterday we had them say about the risk, if you are under great you will miss out on the rally. now we have the hedge fund in china saying she had no exposure at the beginning of the year and now she's increasing it to more than 60%. really people starting to come back into the market. and when that starts tapping, others will be less afraid and it's really just a sentiment thing, because nothing has fundamentally changed. we will get the pmi out of china today to see what the macro picture was like for may, but it's very much a sentiment driven market at the moment, and the bearishness is at least declining. haidi: will the be temptation to
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look at the pmi numbers from yesterday's news and looking at the reopening of shanghai, traffic returning to the streets in the covert situation getting better? >> what's happening on the ground is that even if shanghai is reopening, there's still a lot of pressure on households, a lot of pressure on property developers. you saw another company struggling to repay their debt. we have a great story out from the credit team showing that companies previously considered strong are also struggling to refinance and on the ground the pictures still very tough. haidi: our chief china market correspondent. that is it for "daybreak asia". looking ahead to the start of trading in hong kong, shanghai and shenzhen. stay with us. bloomberg markets the china open is next. this is bloomberg. ♪
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