tv Bloomberg Daybreak Australia Bloomberg June 7, 2022 6:00pm-7:00pm EDT
haidi: welcome to daybreak us earlier. i met the australia summit in sydney. >> we are counting down to asia's shery: major market open. i'm shery ahn. the top stories this hour -- the flash and global growth again -- warning inflation could persist for years. haidi: the s&p because back last week's losses. australian and japanese futures signaling gains. shery: the toshiba ceo says they have not decided whether to go private rest a public as the company considers buyout offers. haidi: plus our exclusive interview with morgan stanley's australia ceo. the bank holds its annual summit right here in sydney. shery: u.s. futures under a
little pressure. the s&p 500 rallied to session highs during the last hour of trading. this is an interesting and volatile session because we had it down about 1% but mega caps did lead the gains on the nasdaq 100. a gain of .9%. we had treasuries fluctuating, the 10 year yield falling below that 3% level. some clarity on what's happening , leading declines throughout the session, given the target was revising down the profit outlook. given prices are rising. we are looking ahead to the cpi data which will make a difference on the treasuries markets. wti on the asian session continues. in break -- inflation is a
global issue right now. the central bank of chile reading -- raising the key rate to 9% as expected. the annual inflation is at 11%. their target is 3%, so you can imagine the pressure they are under. take a look at this chart on the bloomberg. you can see inflation pressures have risen throughout latin america. the decision was unanimous, a smaller rate hike than the previous one, but still price pressures are affecting central banks globally right now. annabelle: that outside hike from the rba yesterday. ahead of the open in asia, we are looking to track the gains we saw in the wall street sessions. we did see all elect to -- all 11 sectors closing higher yesterday. new zealand looking fairly flat. grant robinson saying the
government is acutely aware of those cost-of-living pressures. fx, still the same story. keeping an eye on the yen, that two decade low against the greenback. some economists say it could be a good thing in the end because it is amplifying the cost put inflation which could help stabilize inflation. we did see the cross move above the 95 level after the outsize hike from the rba. haidi: it was interesting we saw the aussie dollar muted. it seems like fx traders not convinced about how much to get out of the rba but it was astonishing that in a world of careful monetary guidance, you have the ability for the rba to shock by weaving as much as they did. we were looking at somewhere between 25 to 40, it seems like
an outlier at this point. it just adds to the aggressiveness of both central banks. so far, we've seen global banks raising by half a point this year. trying to rein in the surging inflation pressure but also adding more fuel to the fire that we could see stagflation or a pressure as well. shery: even with all these rate hikes, we continue to hear from the central bank that they will continue with smaller hikes as necessary given that they want to get to that 3% target. but pretty far away. annual inflation the highest since 1994. the central bank saying inflation risks continues to stay elevated. the economy cooling and slower than expected, giving a nod to the world bank report that came out today. stagflation or pressures rising around the world.
they lowered their growth forecast from 4.1% earlier this year. really above average inflation, below average growth seems to be a key risk worldwide. let's get more analysis on the world bank's forecast cut. let's bring in kathleen hays and our chief rates correspondence editor, garfield reynolds. let's start with you and the revised outlook. again another cut. >> when the president of the world bank released the report and spoke to bloomberg television in particular talking about the danger he sees to the global economy, those are strong words and it has a lot to do with stagflation. he says the pain of stagflation could last for many years. if stagflation stays high for a long time, that's a lot of pain
on many people. the 2022 forecast is 2.9%. it started at 4.1% in january and as recently as april, it keeps getting smaller because of food and energy prices soaring. thank you war in ukraine. what is interesting is when he focused on asia, while the world bank was downgraded, i can show you this right here -- 4.3% because of the covid lockdowns, east asia pacific excluding china, growth is going to be stronger in 2022 at 4.8%. exports are still week, but indonesia, philippines, all expected to rebound. asian growth seen slowing but slowing to 6.8% from 7.6% the
year before. india's gdp is going to grow. not the whole world is as weak as some of the poor nations world bank is looking at right now. haidi: when it comes to the rba, is this below what it takes for the moment and is this a signaling to the market given the reaction we saw across bonds and equities? >> he certainly echoed that whatever it takes and the central bank will do whatever is necessary to get inflation under control. after months and months of the market signaling it. the rba was behind the curve, they actually got ahead of the market. the pricing for a 50 basis point
hike, that was pretty minimal. that was seen as the least likely mark -- market and he shocked everybody. i think there is a shock coming up just for investors but australian households. they've joined the hawkish crew which is willing to risk hurting asset prices, especially homes in order to contain inflation. central banks no they cannot bring gas prices down but what they can do is make sure investors are used to the idea the bank will tighten and this inflationary mindset doesn't take hold. shery: and we are not done this week. we have those monetary policy decisions. kathleen: the 50 basis point rate hike club has in common
let's frontload the rate hikes and make them bigger so we can put a big hit to inflation right now and keep it from getting higher. in terms of what we are expecting from india, it shows inflation year-over-year is up 8%. surging food prices is a big problem after the war in ukraine. they are talking about frontloading so they don't have to risk causing her session. they know the 50 basis point hike will take them to 4.9%. they say their policy is accommodative and when it is at 5.51%, ultra accommodative. they are talking about this as removing accommodations. it is moving big and it has to
move fast, at least for now. annabelle: normally if they are at a two decade low, there might be some concern. >> in many ways, it is a bit ironic that effectively this is the moment the governor has been waiting for for many years when the stars would align so his policies by weakening the yen, by creating the policy divergencies he's got now could drive actual sustained inflation. every time the bank of japan thought it was getting close to its 2% target, something would happen. brexit would happen or the china growth story would happen and the yen would surge back toward
100. that would hurt. with 130 and higher, bring it on is what japan is saying because this is their last best chance to resolve that long deflationary concern they've had. haidi: let's get you over to su keenan with the first word headlines. su: we start with u.s. secretary -- treasury secretary janet yellen. she said she should not have called inflation transitory last year. she defended the biden administration's $2 trillion rescue plan, saying it is not to blame for the surging cost-of-living. expected to show consumer prices remaining near a 40 year high. >> i think bringing inflation
down should be our number one priority and president biden in recent remarks has indicated it is our top priority. su: to sri lanka, the country's foreign exchange reserves rose likely due to a permanent payment to india. it rose at the end of may. the figure includes a swap facility from the pboc worth about 1.5 million dollars. sri lanka needs $6 billion to tackle the shortage which includes food, fuel and medicine. china meanwhile is warning australia to stop provocations or it will face serious consequences. they denied allegations a chinese jet intercepted and australian surveillance aircraft over the south china sea. australia says the chinese aircraft flew in a dangerous manner but beijing said that is
unreasonable. nasa will launch three rockets in june and july from australia's northern territory. it's the first time the space agency has used a commercial pad outside the u.s. in its more than 50 year history. it is privately run by -- the prime minister says it would be the first nasa launch from australia since 1995. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. shery: coming up, or exclusive interview with the ceo of morgan stanley australia as the bank holds its summit in sydney. we will discuss the new direction under the government and why aussie equities are becoming the furred destination for wall street strategist. just ahead, bond yields sore as
haidi: more than 50 central banks around the world, including the fed, taking aggressive action to combat inflation. you can see half of those 50 have moved by half a point. australia is just the latest to join this 50 basis point rate hike club falling after the most aggressive moves by the central bank in about 10 years. let's get some look at what we see from the rba. i'm joined by the head of australian strategy and economics. what a timely day to be talking about this. the issue is where do we go from here? you look at the market reaction and there seems to be a lack of conviction the rba will go the whole hogg. >> the uncertainty links back to the journey -- this is a bank
that wanted to push back on the rates. we had the last dovish central bank in that system you mentioned. a big if it to get us to our first rate hike in may. an open question in terms of what needed to happen with the tightening profile. there is outside risk to inflation, to the economic consequences that would come from a stagflationary environment. they would go to the party and say we will give you a 50 basis point. from here, we think you will 50 basis point next meeting that the meeting after and we changed our forecast from 1.752 2.6 which is pretty aggressive. haidi: where does that put your investment strategy? we have the world bank talking about these risks. chris: the way we look at it is the locally source risks because cash trade increases are a blend
instrument and will have an immediate tightening effect. we look to sectors like banks and consumer and housing. we are optimistic on the resource front. he like quality of earning in the health care sector and look at growth stocks that might give opportunity as well. haidi: that huge correlation, do you continue on that? chris: we have said since last year you want to be exposed to the source. commodities give a good hedge. they offer real earnings outside over the next two or three quarters. haidi: what about the housing exposure? good the downside be what we are seeing on the broader economy? chris: housing is the economy in a stroll you.
this will have an impact. we think prices will fall 5% from this point on to the rest of this year. a total of 15%. the rba is probably going to look through that. they said house prices are any 5% higher than during covid. that tells you the rba is not going to step in when house prices decline. i think it's a necessary part of the tightening cycle. whilst they start of the cycle could be positive, we think that is a small prize when we think about the economic consequences that will come from a slowing economy in 2023. some of them starting at very high multiples. we see the macro sentiment that will put pressure on those multiples and we think the sector can underperform.
haidi: the inflation pace is a big driver of that. a big part of the narrative for the new government is the transition. do you see opportunities? chris: let's move to the policy. there's a lot more certainty in terms of what this government is going to try to achieve. we are going through our own issues with an energy crisis, the price of energy as it sits today. we are looking for actionable policy. it is still a fairly nascent thing. it is certainly emerging. haidi: good to have you on such a topical day. we have much more ahead. we will be speaking to a host of
shery: here's a quick check of the latest business flash headlines. citibank is planning to recruit pre-thousand new staff in asia as it steps up its presence in the region. groups will work across a range of areas including investment, corporate and commercial banking. most new roles will be based in hong kong and singapore. their asia revenue is more than $10 billion last year. deutsche bank's investment unit says it is keeping its focus on
sustainability after an investigation of greenwashing contributed to the resignation of the ceo. the group chairman will say the lender still acts their focus on investing. they deny allegations it inflation -- it inflated its credentials. the ceo of toshiba says nothing is decided on the potential plans to go private. if there is more value in staying public, that is an option. the industrial giant says it received eight buyout offers. bain capital, blackstone and cbc r among the firms weighing bids. >> we don't know yet. it's just a process of comparing which is best for the shareholders. of course this is not just shareholder but the shareholder value is one of the important element we have to check and compare. shery: a unit of a chinese
automotive empire has put its first satellites into space. nine of its satellites are being orbiting -- are orbiting the earth after being lasted into space. it is one of the first companies to assemble the satellite constellation pioneered by elon musk and spacex. >> we see many synergies between auto venue factory in the aerospace industry. 5g, 5g plus, six g and significant resolution -- revolution of the future of the transport of human beings. haidi: let's look at how to asian markets are setting up the midweek session. after the big drop in the wake of a shock move from the rba, we are seeing upside with futures up, and early gain of .7%.
really calling back some of those losses from the previous week. continuing to watch trading in the aussie dollar, we saw a completeness when it came to the aussie and any gain when it came to a gain. either a lack of conviction for traders. whether they are starting to price in risk to growth. also watching japan as we see the yen trading close to a two decade low. new zealand, lines from the finance minister talking about supply chain issues persisting and the implication for inflation. more to come. this is bloomberg. ♪
ahead of the asian trading day. we have seen the world bank today warning us of stagflation. we've gone from inflation worry to stagflation worries. are there any bright calls out there? annabelle: all of this doom and gloom -- jamie dimon and company telling us to look for storm clouds on the horizon. from renaissance macro research, the head of research there, he says look at two signals in particular. the first is the demand for durable goods. we saw more people stuck at home looking for things like dishwashers. that has leveled off. particularly as we see supply chain issues start to ease. the second factor he is looking at if you pull up the terminal is labor force participation. you can see at the start of covid, we saw a steep drop and
that is starting to level off. the positive factors getting a pickup in those aged 55 plus. haidi: we continue to see a selling and the young going to an overdrive but there is a since we are not seeing that overreaction. annabelle: this is a call telling traders to hold your horses. no need to continue selling off. one strategist saying you need to rembert the boj total assets fell from april, so no need to react to these monetary trends. he's looking at the yen versus its performance and peers and other major exporters and you see continued weakness against the korean won and that helps japan maintain its competitiveness as a secure source of supply chain diversification. shery: the new ceo of toshiba is
saying is nothing is decided on going private and remaining public remains an option. >> in terms of the keeping of a fair process, i shouldn't talk about too much because it is causing all kinds of problem. but i have to say this is part of a strategy discussion we are having. we are not quite yet deciding we want to go to privatization or not. it is part of the process. at the end of the day, it is more simple that we create real business decisions so people can be excited and that is the
starting point. >> do you mean toshiba might stay public after the entire process? >> this is the process of comparing which is the best for shareholders. this is a multi-stakeholder. the shareholder value is one of the important elements we have to check and compare. >> is there anything you can share with the timing and how you plan to handle? >> the next step is we are going to have some kind of dialogue and narrow it down to several proposals to do it, including involving due diligence and all those kind of stuff so people have a binding proposal.
this will be after the agn. after that, it is going to be difficult to say when we can finish this process depending on how much information they need. >> you did emphasize data would be very important. could you explain how that could be toshiba's new growth engine? >> one of the important things about why toshiba can do this and how -- according to my theory, they are pulling together information data out of pc or smartphones. but this is much more data around infrastructures. for example, amazon is doing all
of the recommendations based on your buying behavior, but they have only less than 20% of the purchasing information. e-commerce never goes beyond 20%. 80% of purchasing you may have is done outside of amazon or e-commerce from that perspective. that means 80% of the data is not touched yet. we are targeting those business together with different ecosystem, working with other companies, we are working with more than 200 companies. so this is a whole new experience for toshiba to step into. >> globally, right? >> yes. >> how confident are you about getting an approval for the
nominee of board directors? >> this is an independent board member doing a nomination committee and creating a slate and so forth. from that perspective, i cannot comment on this. and that is supposed to be that way. we do the business plan and execute and show the progress. haidi: the ceo of toshiba there. the regional bank of australia shocking the markets with the outsized 50 basis point rate hike on tuesday but they pointed to a stronger australian economy and an upswing in business investment as reasons to be positive. for analysis, we are joined by the ceo of morgan stanley in australia. you hear from your global banking cohort whether it be
jamie dimon, even the likes of elon musk has a bad feeling about the global economy and jamie dimon talking about hurricane and clouds. do you feel that way when it comes to central banks? >> i don't share the sentiment that we are in as hard a time as we are at some of the figures talk about. the australian economy is different, it is very resilient. you are not as exposed as some of the offshore markets have been. resources have been very strong. the reality is central banks are behind the ball, they should have raise rates earlier and if it wasn't for covid, they would have, so we've got some catch up football to play and i hope i overshoot it right because
inflation across the market, i think the consumer is going to be in a difficult spot if they raise rates to high. haidi: they were talking about a substantially more blunt instrument they use in australia. does that mean the risks are still high? i feel like the market is starting to look for these recession rates. what does that mean for your business? richard: i think there is a risk they do overshoot because i'm not sure interest rates can solve the inflation problem we have. inflated oil, inflated energy prices and the supply chain problem that continues. a number of those factors are not going to be impacted by increasing interest rates. we need to be careful about looking after the consumer for a very consumer-based economy and keeping the consumer in a place where they have some level of confidence to keep spending money is important for the australian economy. haidi: what does it mean when it
comes to dealmaking which has been very strong this year? richard: we continue to see strong activity in m&a and what we see in asia is seen more as a safe haven than it ever was in terms of investment dollars. there's a wall of money being raised, a lot of liquidity out there. i do see a decent amount of emendation continuing, probably more so in australia than other asian countries and the u.s. because we are a safe haven. haidi: what does the election in australia mean for infrastructure dealmaking when it comes to energy market than the grid? richard: certainly what we have seen is the two main parties in australia are closer and closer together in terms of their political stance, so i don't see a major shift as it relates to
markets by having a change of government. clearly we have an infrastructure spend and problems on the energy side. we have enormous job to transition from a coal-based energy supply to more renewable than that's going to take at least the next decade. it will be a high-level of spending as we try to expand the next several years. haidi: how are you setting up for that changing landscape? richard: we have always had a strong energy transition business and there is a focus on the companies best posed to take that energy transition. many companies that are the biggest are those with the best
place to transition our energy. large cash flow, good credit ratings, and we are strongly supporting those incumbents to make that investment to transform our energy industry. haidi: at the same time, you continue to see correlations between growth like energy and commodities. where do you actually see the disruption? richard: the disruption is definitely technology-based. there's always a new technology coming along to do better and differently to upset the incumbents. the energy crisis people have been talking about is largely driven by the fact we do rely on a large amount of coal for our generation in australia and that is slowly going to change. but that is not necessarily
technology driven, but it doesn't matter which industry you look at, technology is disrupting and will continue to do so. haidi: when we last spoke, the labor market was in a much different place. how has the strategy for your workforce changed even though we've seen a fuel shortage in great resignation. that has affected junior talent across financial services. richard: morgan stanley and a number of other leading global banks are a very good destination for young people. we are still finding an inflow people wanting to join the firm here and globally and i don't think that will change. the labor market shortage we are having in the broader economy would clearly need more integration and that has come to a halt. as our borders are now open, we
>> you are watching daybreak australia. we start with the world bank that has flashed its global growth outlook, citing a flesh and prices and the war in ukraine. the lender expects the world economy to grow 2.9% in 2022, down from its april forecast. officials say accelerating inflation and falling growth have raised concerns the global economy is entering a time of stagflation that could persist for years. bloomberg has learned the biden administration is proposing a plan to wean the u.s. off of russian uranium imports. the white house is pushing lawmakers to support the plan
with officials from the energy department meeting with congressional staff to plead their case. it would boost uranium purchases from domestic producers. two u.s. senators have introduced ambition -- and ambitious bills to boost cryptocurrency regulation. it would force stablecoin to maintain 100% reserves and back the token. it targets thank went -- sanctions and bitcoin mining. the bill is unlikely to pass before midterm elections but could act as a starting point for negotiations next year. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. haidi: china is rejecting australia's claims that one of its jets acted dangerously when file -- when flying close to an australian surveillance aircraft
over the south china sea. what is the chinese defense industry saying? >> it has released a statement accusing us cholla of manufacturing confrontation and spreading false information. this is the first response they've made since the incident which occurred on may 26. in that incident, a surveillance plane was on a routine flight over international waters in the south china sea. the prime minister said australia has been conducting flights like this for decades in accordance with international law. australia says a chinese jet flew dangerously close, cut in front of the plane and released chaff which resulted in small fragments of aluminum getting caught in the plane's engine. china says australia has the situation completely backward, telling us cholla to stop
shery: a chinese automaker taking on spacex in the satellite race -- this of city area just launched nine satellites into orbit last week, making it one of the first chinese firms to begin assembling the kind of constellation pioneered by elon musk's company. in an exclusive interview, the ceo told bloomberg how his satellites can contribute to the development of autonomous driving. >> we plan three phases for the future mobility network. the first includes over 400 stations on the ground covering china. the second will have 72 satellites in eight orbits to provide services in space. we will finish the first and second phases by 2025. we will put the third phase based on precise points
positioning and real-time services into commercial uses this year. >> can you tell us more about what specific services will be offered? will that be autonomous driving or other services? >> our precise point positioning services will be put into use the second half of this year. in addition, we are working with up, striving to make plans for precise point positioning service. so far, the research and development of our products are in key stages. we expect to use the solutions integrated with space and ground infrastructure. we are building up the service network in europe and america to prepare for entering overseas markets. >> why did you decide to build a
tow network? why not use some else's network or partner with someone else? >> we think there are many synergies between manufacturing and the aerospace industry. it represents 5g, 5g plus, six g and a significant resolution of the -- revolution of human transport. >> would you allow another car company to use your network? >> we will, of course. our future partners are not just limited to our transport ecosystem and vehicles. we are also planning the ecosystem of partners in other industries. on the other hand, the network can support areas including smart manufacturing, unmanned aerial delivery, city government . we can build an advantage through our partnerships. >> how much will it cost to get the entire network up and
running at full capacity as the company envisions it today? >> the first satellites are completely invented and developed by ag space. they are a low-cost, highly reliable satellites. the satellite has reduced to -- the cost will be further reduced to under 6 million you one with made fracturing and industrial integration. >> how will you finance the cost of constructing this network? >> it comes from the regional planning and we use various fund mate -- fund raising methods to aaron t building up the system. our current cash flow is very healthy. we will introduce more strategic investors who are resourceful in the industry. >> would you consider at some
point a public listing? >> we don't have a detailed timetable yet. with the development of various markets and secondary markets, we will possibly consider when we need it. >> for a lot of viewers, the space company they know best is spacex and i know the focus on transportation is different, but what are some of the other differences you would want people to know about? >> the difference between us is our goals of developing satellites are different. spacex projects provide satellite services. we will integrate the ground infrastructure, precise point positioning, space information network along with free general products. that's all based on the network. that will realize the integration of remote sensing in
the shortest time to provide a comprehensive solution to the future mobility of china. haidi: we've got space on our minds because we are hearing we will have a nasa rocket launch in australia in the weeks to come. this is the third time we've seen an australian launch -- the first time nasa used a commercial launchpad outside the u.s. in its more than 50 year history. shery: very interesting to talk about australia in space x -- space expiration. we are hearing france is joining space expiration, becoming the 20th country to do so. daybreak: asia is next. this is bloomberg. ♪ ve got the next generation in global secure networking from comcast business. with fully integrated security solutions all in one place. so you're covered. on-premise and in the cloud.
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