tv Bloomberg Daybreak Asia Bloomberg June 13, 2022 7:00pm-9:00pm EDT
haidi: you're watching daybreak: asia coming to you live from new york, sydney, and hong kong. annabelle: counting down to major market opens. shery: tech stocks -- treasury yields and the dollar surging on growing expectations of fed hikes. banks see 75 basis points this week but some think a full percentage point should be on the table. and worries about systemic risk in the crypto world. bitcoin plunging to an 18 month low as platforms suspend withdrawals. annabelle: counting down to the
opens in japan and australia and it is looking risk off starting with the moves in the debt space. watching the australian markets as well. we are seeing a bit of catch-up in the rate sensitive three year and the -- at a 10 year high. tracking moves we saw in treasuries and the kiwi 10 euros sticking at the 2014 high. the japan bond looking -- their previous session because of that the boj again picking up its program of bond buying defending its yield curve control program. checking on where we are heading with the yen. we got a warning from the boj yesterday with governor kuroda saying a week yen is a negative for the economy. we saw a pullback from the 135 level and we are still watching it to hit 135 15. the weakness has been a weakness -- a boost. japan nikkei futures in chicago
coining fractionally higher. you have to look at the last close. that was pointing to a selloff of 3.4%. in that context, not looking that great. new zealand and australia taking their cues from the moves we saw on wall street. shery: looking at u.s. futures, some positivity returning to the future space. after the s&p 500 fell 22% from the record high and trying bear market territory. nasdaq futures in ground but after the nasdaq 100 slumped 4.5% and the new york session. the vix trading above the 30 level. signaling perhaps -- right now, we are watching the judiciary yields closely. this is leading to the global bond selloff. we sought the 10-year gilts at the highest since 2011.
relay the rest session signals continue to spread -- really, the recession signals continue to spread. they asian session under pressure but still above the $120 a barrel level. haidi: let's get more on the market selloff. mark cranfield and kathleen hays join us now. global stocks in a bear market. there seems to be no bottom in terms of the sentiment five. look at what australian bonds are doing this morning and how futures are indicated what the open will look like. >> we are into liquidation phase across asset classes. when you look at what happened yesterday around the world, there were equities, bonds, currencies -- everything was being dumped. a clear sign that people are trying to preserve capital.
they are trying to save whatever p&l they can. the sentiment is dire wherever you look. underlying everything is u.s. treasury market. we had an enormous jump, could be the biggest today move we have seen in the treasury market since the 1980's. that is a significant change in the input people have to do when they are calculating other asset classes. for a long time, risk free rates were close to zero. people did not need to think about interest rates as a component as to -- as a component of whether they should buy something. that is a higher yield than you have on most dividends in terms -- look at asia for example. there are hardly any asian markets where the average dividend yield is about 3%. u.s. equities are already a big
counterweight. if you look in the currency space, it will prompt people to become very defensive in which currencies they play particularly in the g10 space. the dollar will be so outstanding as the currency to hold. this move still has further to go in terms of people rebalancing their portfolios. this is only the early stages of this. we could be thinking about right into the second half of the year where people have to readjust and reposition for interest rates that are much higher than they thought at the beginning of the year. shery: especially since we are seeing more calls that the fed should be more aggressive. even to 100 basis points. >> an economist made a very good point. he thinks 75 or 100 does not fit in the history of the fed. markets are already selling off mightily.
would it reassure the markets that the fed is taking these inflation challenges head-on and getting ready to beat them. jeremy siegel, a professor of finance at the wharton school at pennsylvania university saying today he thinks the markets are telling the fed, please come and surprise us. show us you are not behind the curve. >> they have already said 50 in june and 50 in july. given how bad the announcement was on friday, i think what chairman powell can do is bring that 50 forward. there might be an initial selloff on 100 basis points, i think there would be a subsequent rally because the fed is getting hold of the narrative which it has lost over the last year. >> let me share with you comments from a couple other wall street fed watchers.
a former fed economist, steve from standard charter bank said he thinks the fed could do the 100 basis points hike, to have a paul volcker moment but he thinks it is only a 10% chance. mike was an economist at the fed board of governors. he has moved his call to 75 basis points he is not at the 100 basis point level but he says it is not a trivial risk that the fed could do that. the market is looking at at least 250 basis point hike by -- two 50 basis point hike by september. stocks tumble and bond yields a that is one thing they say is working in terms of forward
guidance. at this in time he said howell does not look like he has consensus on the fed for a series of 50 basis point hikes. so how could he get anyone on board for a 75 or 100 basis point hike? bottom line. what we are seeing in the last couple of days and weeks -- the intensity in the markets. the liquidity in the market. what does the fed have diluted by being more aggressive? it seems -- haidi: we are seeing this furious repricing in the bond -- in the markets. is there a sense that traders are working -- is more going to be required from the fed and other central banks? >> i think it is a readjustment of where neutral might be.
for some time people were quite comfortable that the idea of neutral was behind -- was between 2.5 and 3% and now they are considering it could be as high as 4%. the derivatives market's pricing has changed and people are putting a higher threshold on where rates should be. the neutral rate could be a lot higher than where they thought it was a few weeks ago. another thought the fed will be taking into consideration. people are now thinking of possibly a 100 basis point hike should be on the table. a fallout from this readjustment is we are seeing a lot more volatility in the currency market. dollar-yen has been a huge story. we may see dollar-yen start to fade because yen crosses are coming into view. aussie yen, euro-yen, sterling yen are getting hit hard so the
yen is gaining traction against other g10 currencies and that may cap dollar yen in the near-term. a lot of changes going on that will play out in the next few days as we get closer to the fed meeting. we may see the yen has a reasonable week as people become extremely defensive and have to cut their positions in the yen crosses. shery: mark cranfield and kathleen hays with the latest on the monetary policy and the action on the markets. let's get to vonnie quinn. vonnie: bank of japan governor kuroda says recent abrupt weakening of the yen is bad for the economy. he pledged to work closely with the government hours after the gun hit its lowest level since 1988. the depreciation is fueling concerns among households and businesses. i had to the boj policymaking this week, a new poll suggests the majority of the public did not think that governor kuroda
should be at the helm of the bank. a 59% of the respondents to a survey believe he is unfit. the ends weakness as a result of the boj stance of keeping interest rates at rock-bottom levels. day two of hearings into the january 6 attack on the u.s. capitol focused on what then-president trump new for the riot. the attorney general william barr and jared kushner said in videotape testimony that they advised the president against claims but donald trump pressed on and raised money from supporters in fundraising appeals. democratic representative called it a big ripoff. u.s. national security advisor jake sullivan met with china's top diplomat. they held talks as tensions grow over taiwan. the white house says they discussed regional and global security issues at a meeting in luxembourg. senior u.s. official says sullivan reiterated washington's
one china policy while expressing concerns about beijing's actions across the taiwan strait. 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 am vonnie quinn. this is bloomberg. shery: still ahead, we will hereby asset management says the stimulus will likely delay any risk of a global slowdown until 2024. jp morgan is among the market watchers predicting a 75 basis point fed hike on wednesday. joyce chang joins us now. -- joins us next. this is bloomberg. ♪ ]
>> we are unlikely at this stage to go deep into a recession. it is possible, i would put 5050 odds. that is ok. haidi: morgan stanley ceo james gorman. our next test says re -- our next guest says recession -- always great to have you with us. where do you see the trajectory of risk particularly as we talk about the possibility of 100 basis points from the fed? joyce: the focus will be on the central bank meetings. we do see 75 basis but we also see two more 50 basis point hikes in july and december before a 25 point pace.
we are seeing this across the board in central banks. the ecb has revised its inflation projections and noticeably higher for 2023. the market is running well ahead of england's guidance as well. brazil is hiking. and australia. the focus is on the central banks and the drumbeat of upward inflation surprises have continued to make central banks move more aggressively. when you have poor liquidity, the risk of recession -- what do you do about valuations that are fundamentally attractive at the moment? joyce: we do see valuations are looking more attractive but we are still neutral on duration. the liquidity in our opinion is not march 2020 but probably
running about 30% below what we were seeing pre-pandemic. and that is across a number of different markets, treasuries, the commodities markets and the oil market as well. i think you are in a situation where we will continue to see volatility and some over shoots. the liquidity could also get worse. i do think volatility is here with us to stay and we are probably in a time of slower growth, higher inflation, and more volatile and shorter cycles. shery: your positive on energy and commodities. i wonder how you are factoring in the repositioning of the restrictions that were lifted in china when it comes to covid-19. joyce: we do think in china -- you take some steps that are important both growth respect -- both with respect to the measures being put into place to support the economy and the
reopening. a contraction deep in the second quarter, 5.5% but a rebound in the third quarter. still looking at growth well below the 5.5% target. 3.7%. i think it remains to be seen how quickly the reopening can go. we are seeing still in some of the major cities, that this will be challenging. shery: how supportive is the easy -- how supportive is that in the regulatory environment? joyce: it is a long-term part of the strategy. we are seeing at the margin some easing in what they are doing in certain parts of the property sector and on some of the ipo's and medical equipment but i do think the train work the market had gotten used to before the pandemic which was really that you had policy moving in one direction, you will still see
the regulatory tightening measures shy don't think they will be loosened nor will you see stimulation -- stimulus packages. it is still a point where we are looking at growth in china to stabilize but still continue to go lower over the medium to longer term. haidi: we continue to see the weakness and the japanese yen. -- in the japanese yen. if competitors don't complain, we could continue to see that weakness. this bloomberg chart showing the level of the yen and we still see weakness. how a negative -- what impact does a week yen against the yuan have with japan being an expert competitor against china? joyce: the yen is that a 20 year
low against the dollar. a50 year low in real terms. when we look at the yen story, the week yen -- limited demand for local goods. you are seeing the policymakers taking notice. they are announcing some measures to provide additional support. i think the week yen will stay with us. in the region, cny has been a big mover and that dominance has taken over over the last few years. i don't see the situation turning around for the japanese yet. haidi: is there a sense we will need to see central banks going beyond neutral into restrictive to get inflation under control? that seems to be the feeling when it comes to the fed or the
rba. joyce: i think you are seeing signals about taking policy into moderately restrictive territory. that is not inappropriate given where we have seen the inflation numbers. what is the trade-off to growth going forward? what type of recovery are we looking at in the second half of the year after having a first half that had a lot of unforeseen challenges because of russia and ukraine and the shock from energy prices? moderately restricted is something the market has definitely moved to in the pricing. shery: joyce chang, global research chair at jp morgan. always great to talk to you. plenty more to come on daybreak: asia. this is bloomberg. ♪ omaha! omaha! or you could use workday. omaha. the finance, hr and planning system used by over half of the fortune 500.
fallout of the global supply chain correction and here are our top stories. sources say the u.s. government is quietly encouraging shipping company to buy more russian fertilizer. the effort as part of a difficult negotiation involving u.n. to boost deliveries of for lies or and grain products from russia and ukraine that have been disrupted by the ongoing war. a leading edible oil maker is considering a third price increase this year due to soaring import cost. edible oil prices have been seen rocketing worldwide. an iron ore tumble on monday after china reimposed some covid restrictions and major cities fueling worries about demand and a smooth recovery. shery: take a look at how things
are trading with oil reversing some gains we saw in the new york session. wti at the moment down 0.2%. brent is not trading yet. bloomberg terminal users can read more about those stories on ni trade nl. here's a check on the headlines. citigroup has doubled its number of senior black executives. mid-level managers also having -- have jumped to 777. wall street has struggled to consistently fulfill promises about representation. citigroup says more progress needs to be made. elon musk has warned his staff it has been a tough corner for tesla as a company struggles with supply chain and china. the alert came in and internal memo. companywide emails push staff to
sprint to the finish. sources tell us a joint venture between paramount global and reliance industries have -- the result is an end to the streaming ambitions. after a bidding war, disney did secure broadcast rights for tv. the deal -- each deal is said to be worth up to $3 million according to media reports. a pause and withdraws from crypto lender celsius is sending fresh shock waves across the digital asset market. the key player in decentralized finance halted swaps and transfers after weeks of transfers -- speculations over its ability to deliver yields as high as 17%. cryptocurrencies are still reeling after the implosion of the terra coin. haidi: the celsius freeze really
seeing the latest legged when it comes to the bitcoin selloff. we are looking at levels about 22,000. that is really down as much as 17% and the lowest since december 20 20. we saw other cryptocurrency assets declining with the broader selloff. ether off as well. the index is down by about 23%. analysts are waiting for a number of indicate -- are wading through a number of indicators. we see the average investor base -- which means according to ubs,
peril. >> markets are reacting the way they are because they believe the fed will be forced to get more aggressive than expected. >> 75 basis point hike are out of the question. >> i think there would be a subsequent rally with a hundred basis point hike because fed would be controlling the narrative. >> this is a time to be selective. >> pockets of stocks that have been proven. >> europe and china look good to us. credit space in the u.s. looks good to us. >> i am still cautious. >> it does not have to be all about the u.s. haidi: bloomberg tv guests weighing in.
asia is bracing for the start of trading. >> we are facing a risk of session day, you can see it reflected in the space this morning. the focus on that three and 10-year yield in australia because markets are open after a holiday in the previous session. the 10 year high -- the 10-year yield is tracking gains and the kiwi tenure at a 2014 high. japan bond is a different story. the boj pledging to stick with the program of yield curve control and picking up bond buying. today they will purchase three point $7 billion of five and 10 year notes. we want to look at what is happening in the emerging market debt space. local bonds flocking to a
two-year low and central banks in the region are -- i'm talking about india and thailand. there is a quagmire because there is global inflation picture not looking great but they are also focused on local issue and growth being slow to catch up. shery: let's get analysis from hayden briscoe. thank you for being with us. we have seen asian bonds the worst performers in terms of local currency debt. are there any opportunities around cheaper valuations? >> with the emerging markets now, value is being restored. we started getting carried back, back to long-term averages if you look at markets around the world. asia, it is more about african
yields at the moment. it has been hiking aggressively for close to two years. asia is late to the party. we have had slower inflation. but we need to watch china right now. the second half of this year, if they have any chance to hit their growth target they will have to double down on fiscal and monetary policy spending to boost the economy and i think that will have reverberations around the world, particularly for emerging markets. so watch china right now. [indiscernible] maybe the global slowdown could be prolonged. shery: where you are seeing more prices coming from china, how are opportunities in the region? >> equity markets have started
picking up. on the bond markets it is probably more supply coming to the space. yields could drift higher. but we have not gotten inflation under control in china. when we look at the china bond market, still performing really well. as more supply comes through in the short term if we are going to try boosting fiscal policy again. haidi: which markets around asia do you see as the main beneficiaries if we see the stimulus driven recovery from china? >> info linkages are in the region are getting tighter. enter asian trade is more important than what they are doing with the rest of the world these days. south korea in particular, japan, vietnam, those who are
heavy industrial tends to pick up right away when you see the boosts. right now we still have some other issues, particularly with the trucking strike in south korea and all of the parts for cars is creating a bottleneck for global markets and another round of inflation will probably reverberate in the developed markets. the thing to focus on is developed markets are taking on emerging market like characteristics. we are seeing more volatility so we are asking ourselves, are you getting rewarded for those as much the emerging markets? they have been hiking rates for close to two years. haidi: how does that play in a market like australia, which has looks like they are well-placed to benefit from an equity perspective and a stability
perspective? it seems like there is a lot of repurchasing to what expectations from rba will be and if it will be neutral or more restrictive than what we see now. >> you are spot on. it has to be a lot more restrictive. everyone has to back away from yield curve control and zero interest rates and move to quantitative tightening. in europe we are seeing this where you thought it was unbelievable to hike rates again, now they are playing catch-up as well. australia is well-placed in the export cycle to pick up in the second half of the year and then have a lot of flexibility as they accumulate trade surplus again. that will give a buffer in terms of not hiking to aggressively but inflation is definitely here to stay and will change central banks thinking. unfortunately they are thinking
of the demand issue and this time it is a supply issue and they do not control that. so it is a tricky stage. shery: boj seems to be thinking differently from other central banks around the world. we have seen purchase operations and we expect another today. do you see more in those above the 10 year that we have not seen in the longer part of debt before? >> we think they need to withstand the control. the boj is already talking about the yen and the volatility impact on the local economic backdrop and we think as you get closer to 140 or 150, we've been in this environment with kiwi for over 20 years. inflation is coming to japan and they are going to have to think
about expanding yield curve control just as australia did, i think we should think about boj heading in that direction. that is probably the only thing that will keep the yen from continuing to selloff. shery: hayden briscoe, thank you for being with us. with all of the monetary policy changes around the world and the tightening we see aggressively in some countries, we continue watching bitcoin. risk off sentiment spread across crypto assets. bitcoin falling below the 22,000 level. this is already the lowest in 18 months. we have not seen these levels since december 2020 and concerns of the risk in crypto ecosystem leading to pressure on the crypto world we have seen freezing of withdrawals from a
platform giving rise to concern. haidi: let's look at the latest when it comes to the twitter deal and elon musk. we hear he is set to speak to twitter workers at a virtual meeting this week. this would be the first time he is addressed them since lodging a takeover of the company. many employees have voiced frustration and confusion with elon musk. we previously heard twitter was planning to comply with elon musk's concerns -- demands. workers were told the company will host an all hands meeting and elon musk will be a guest speaker. this will take place thursday and workers can submit questions for him starting wednesday. so he has already been the topic of discussion at several internal meetings that we will watch what he has to say in
responding to staff questions. vonnie: india's retail inflation slowed to around 7% but remained above the 6% target, putting pressure on policymakers to stay hawkish even as supply chain reductions we can the recovery. prices cooled since april. pakistan needs to further strengthen budget to access loan to help. they are seeking a payment to help avoid potential default and laid out plans to trim budget deficit goal by raising taxes as they try to meet imf conditions. surging food and fuel prices stock inflation. russia continues the assault on ukraine, pushing troops out of the center in one of caves last
footholds -- kyiv's last footholds in the area. the volodymyr zelenskyy has pleaded for the united states to send more all tilray. -- to send more artillery. 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. this is bloomberg. shery: still ahead, s&p expecting oil prices to stay high, even if recession hit. our conversation with global vice chair is next. this is bloomberg. ♪
seeing improved supply and top exporters like brazil. we are watching base metals and we continue to have concerns about demand with renewed restrictions in china and crude prices under pressure. we saw prices improve and that new york session despite the risk off given the fundamentals but that is not keeping up in asian session. this after s&p global saying oil prices could remain elevated even if the global economy slows down. danielle year again says supply remains tighter than during other recessions. he spoke with david westin. >> the oil market says demand remains strong and supply remains week. sanctioned russian oil, uncertainty about when china
comes out of the covid thing. the markets are tight. so even though you expect what is happening to the overall economy is slowing, it's not showing up yet in demand and oil. >> will we have a recession of the oil is over $120 a barrel? >> i think they would interact with each other. if we have a recession, demand will go down. as it always does. then the price would come down. but i think the circumstances are different in that the supply situation is so razor thin and basically we have a disrupted global oil market. >> let's talk about that supply situation. it appears president biden might be visiting saudi arabia. do you expect him to press the crown prince to increase production, and if so, do expect the crown prince to go along? >> first of all, if he is not
going to talk about oil, it would be hard to understand why he was going to saudi arabia. i think the crown prince has been waiting for biden to acknowledge him. he was waiting for a call and now he is waiting for a visit. if he goes, i think they will put oil to the market a little more but the news is there is not much more oil in saudi arabia and uae to significant the -- significantly change the market. it would be psychologically important but if they go down to where spare capacity is low, it will make the markets nervous because then where is the last security blanket? that is the last one that exists for the oil market right now. haidi: elevated oil prices have given the makers an opportunity
to boost this year but higher budgets will not be spent entirely on oil and gas production. they also drive investment. let's bring in our oil analyst. how much of this transition plays into plan? -- into capex plan? >> one thing to note is capex [indiscernible] is it because oil companies are allocating more of their free cash flows? another thing is the gradual
shift in the allocation of resources into energy transition. five years ago they changed into [indiscernible] last year it grows even further. last year oil company investment into -- [indiscernible] shery: does this mean oil prices will continue going up? >> oil companies are struggling to produce oil production. but demand has been resilient to
a higher prices. in china they have already seen a sharp rebound but that could change. if demand in the coming months, we expect to see oil prices stay higher for longer. haidi: how much for more electric vehicles on the road? >> they already displace oil use but they are not the only factor. the rising number of ride shares
reopening. beijing saying there is the risk of further spread from clusters and authorities delayed the reopening of most schools in the nation's capital. shery: given all the uncertainty we continue watching the long dollar holds. greenback strength rose to the highest level since the early months of the pandemic as the traders weighed if the fed will intensify monetary tightening. the yen tumbled to a 24 year low against the greenback. let's get more from ruth carson. what are the next big levels to watch the japanese yen? >> another day, another low. it is still in dangerous territory, even though it pulled
back a little. the next level a lot of people are watching for is the 140 against the dollar. for context we were at 110 against the dollar and now we are at 135. until the boj potentially gives up the yield curve control policy they have, strategists [indiscernible] our hard to find. haidi: we are hearing investors and corporate's complaining about the strength of the u.s. dollar and how it is eating into profit. will there be more greenback strength to come? >> it's not just corporate america. australia through europe would suffer as well.
treasury yields rising and it's hard to find shelter. the world reserve currency is considered a safe haven and others are saying now it is hard to look past the dollar but to brace for more dollar strength ahead. shery: up next, chinese adrs driving market optimism. and cyclical divergence between u.s. and china driving portfolios. we will discuss that next. the market opens in sydney and tokyo next. this is bloomberg. ♪
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shery: we are counting down to asia's major market open. a knock down in global markets with the s&p 500 entering spare market territory. the yen at a 24 year low and asx 200 coming back from a holiday. haidi: dollar strength starting to play out when it comes to asian fx and a lot of repricing going on across asset classes but we are also interested to see bond market expectations and where the rate will end up. >> we will have the open of cash treasury markets in a few moments and we will pay attention to the three year yields because we saw the biggest to day job since 1987 in the previous session.
how it affects the rest of the region, it puts the yield jeff or uncial in focus with the boj. -- it puts the yield deferential in focus with the boj. it is playing into yen weakness. we got the intervention from the boj governor yesterday and that is pulling us back from the 135 level. japanese stocks outperformed in the last few months but the nikkei is in its third straight day of losses. looking at the open in korea, watching the cause dax closely. we see it -- we see the kospi at a 2020 low and watching it slip further away. the korean won led the losses.
more weakness this morning. in australia, asx 200 coming online. weaker at the start of trade. a catch-up because of the previous holiday. the aussie yen the focus, moving back to the 93 level. a few days ago we were watching 100. shery: we will watch what happens with the japanese yen and aussie dollar. cyclical divergence between the u.s. and economies. let's bring in the investment strategist at sydney private bank. we are seeing divergence between the fed, boj, pboc. what are you watching to gauge where opportunities could be? >> the region we like china most
is because it just went through a deep recession and is now coming out of it. in the process of exiting it, recovery is expected to be bumpy because of lingering covid control policy risks so it will be a bumpy road but i think china has turned a corner and that is the key opportunity for us in the second half, likely to see global volatility still elevated. shery: divergence between the fed and boj, we have seen a week yen but beneficiaries have not done that well. >> equities is supposed to be the beneficiary but at the moment, this has all been driven by movement in the u.s. yield and boj has done all they can
keep the yield curve control policy in place so i think the question is if they will be able to maintain policy and will u.s. yields start coming down. that's a function of the inflation. so there are a lot of moving parts. haidi: one of those is the recovery in china. you call it meaningful. does that mean we will continue to see emerging opportunities in china? >> i think so. the pandemic control policy is likely to become more measured and selective as they get smarter with the partial lockdowns so i think the shanghai style of lockdowns will
become less likely but if we have another wave, we might see more partial restrictions. then politically imperative lockdowns will begin and the policy will likely have more flexibility. that is the largest domestic risks to me. for the external risk, i think it depends more on if the u.s. goes into recession on i think even if it does, it will not be a deep one so i think chinese equities will be more resilient and continue pricing in recovery. at the moment, the pent up demand is not, we made some progress in tech regulation but not the valuations.
we have recovered 1/10 of what was lost and there was still a long way to go in the road to recovery. haidi: receive repricing when it comes to sovereigns. australia 10 rising for percent of the first time since 2014. is there a sense that you are getting a lot of questions about where the mutual rate will end up and if we will see clearly restrictive tightening measures from central banks, not just getting to neutral? >> i want to talk about inflation first. we saw good inflation continue to rollover. we peaked at 12% of good cpi in the u.s. in february and out at 8.5%. service inflation continues to
climb and supply on markets but i think it's a repeat of six months ago. i think the inflation cycle moves like this each time and it's basically a matter of time before we see the drop from demand bring down prices so i think that will probably happen later this year. at the moment we are probably at peak hawkish this in terms of fed but i think this week they will still go with 50 basis points but maintain firm language will they do so. shery: so it makes sense to have recession hedges now be raised by traders at the fastest pace since 2020, defensive trade [indiscernible] given the aggressive tightening could lead to perhaps a slowdown later this next year and rate cuts in 2024. >> i think rate cuts might come
earlier, possibly late 2023 we could see it be price more aggressively into markets. at this moment i think we should be very careful. if you continue piling on to the long dollar and short equity trade, you are prone to get squeezed. so investors who do that should be careful with those types of trades. ultimately i think this is still going to be a more positive markets for bonds before coming more for equities because all it takes for bonds, treasury yields to come down, for inflation to roll over and expectations to be more anchored, what it takes for equities to find the bottom, we
need to see signs of a demand bottom that might come later. haidi: we are just getting the numbers when it comes to new virus cases that a beijing. 74 local covid cases for june 13. the most since may come up -- may 29, where it was 99. beijing reporting new cases and saying the risk of further covid spread is a real possibility when it comes to a cluster emerging. and some restrictions are being reimposed in addition to mass testing this weekend to deal with the outbreak. let's look at the big movers so far. we knew it would be a painful
session for asia. shery: that's right. the tech sector a few minutes into trade and softbank is already one of the biggest decliners. these of the text sensitive -- interest sensitive names. in the crypto space, the slump in bitcoin is testing the most devout of believers. and we are seeing some names of companies that are linked to bitcoin exchanges. a big drop. shery: let's talk about south korea. the trucker strike is widening. >> over one week and we are getting a damage assessment from the government that says it could cost $1.2 billion and get
worse this week because companies have already reached storage limits. some companies are already forced to hold back. vonnie: india's retail inflation slowed to 7% in may following a 6% target. it puts pressure on policymakers to stay hawkish. our b.i. already raising rates by 90 basis points this year. the are bia already raising rates by 90 basis points this year. pakistan needs to further strengthen budget to access loans according to the imf. they are seeking an immediate payment to help avoid default. the government laid out plans to trim and raise taxes to meet conditions by ims.
fuel and food prices are stoking inflation. russia is continuing to assault ukraine in one of the last footholds in the area. volodymyr zelenskyy calls the fighting fierce and ukraine is pleading with the united states to send more artillery. jake sullivan says china's top diplomat has held talks over to one. -- over taiwan. sullivan reiterated washington's one china policy. 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. this is bloomberg. shery: breaking news as the asx
200 is dropping about 5% after coming back from the holiday. every sector is in the red in tech and materials leading the declines. asx 200 supported by energy and material companies but oil now on the downside around $120 per barrel and broad market risk off sentiment offsetting tight supply fundamentals we are seeing even in the energy space. bonds continue downside with the 10 year yield in australia at one point topping 4% for the first time since 2014 and now around those levels. the aussie is seeing a little upside after falling to a one month low against the u.s. dollar and australia will be watching main job numbers coming out later this week and what that will do to the heart fish
-- the hawkish rba. we continue to see yen weakness play out. still ahead, focusing on china. why there is optimism about a covid zero policy shift. but next, more on the possibility of the 100 basis point fed rate cut to combat the hottest u.s. inflation in four decades. this is bloomberg. ♪ because you'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. you can run things the way you want
>> we are unlikely at this stage to redeem the loss. it is possible that we go into recession, obviously. but that is ok. haidi: james gorman their. we are 15 minute into the asian trading. we knew it would be a cut down session for australia after the holiday but take a look at the loss for the asx, sliding over 5% and this is with -- this is
the lowest since march of 2020, the most since march 2020 and the lowest since november 2020. material and tech stocks are the laggards. nikkei 225 already down and we are watching signs of extensive decline in the yen and have not seen the peak dollar so we will be watching for the next level when it comes to the yen. the topics up 1.7%. the kospi south korea probably a better performer of the region about 1.2% but stocks are falling into a bear market. volatility surging as markets across asset classes are trying to reprice where central banks will go from here. a 75 point hike from the fed on
wednesday looks likely. looking at u.s. equity futures, 3/10 of 1% higher for the s&p and tech potentially getting a bump but we have seen the strong dollar plaguing u.s. corporate's, eating into the profitability during a time where we see so much volatility from every angle. shery: the curve adverting, signaling perhaps uncertainty is worse now and it could be in three months from now. in the treasury yield space, the two-year at the worst and above the 335 level. 10-year yield the highest since 2011 and we are watching them closely because it is not often
we see the two year yield surpassed the 10 year yield and that could signal recession concerns but all of this really given that we have seen the cpi surge on friday and now the fed considering a 75 basis point hike potentially, and many firms were quick to change their calls with goldman sachs. let's get more with kathleen hays. even potentially 100 basis is being considered. what could we expect? >> the grant has shifted. we got the big inflation report on friday. 8.6% year-over-year. it will show it is starting to
ease a little and it didn't. so what it has shifted more is the market. you just talked about the surge in bond yields. stock prices continued to plunge and the 75 basis point rate hike or 100 basis point, it's tough to say anything about this except that it could be considered if needed. on the 100 basis point rate hike, most say it is not necessarily likely. jeremy siegel of the wharton school says he thinks market behavior is a cry for the fed to get more aggressive on inflation to show us you are not behind the curve. >> 50 in june, 50 in july, given
how bad the announcement was friday, i think what chairman powell can do is bring in the 54, even though there could be an initial selloff on the 100 basis points, i think there could be a subsequent rally because the fed is getting a hold of the narrative that it lost in the past year. kathleen: markets are already pricing in a 75 basis rate hike and 250 point rate hikes -- and two 50 point rate hikes. but some think there is a 10% chance the fed will want to show it is not behind the curve with a 100 basis point hike and jp morgan said there is a risk with the 100 basis point move. what would the fed have to lose?
are they ready to do something like this, given how markets have reacted? when the pandemic was just hitting, liquidity in the bond market looked iffy. we are conceding concerns about that on the bloomberg turn normal. -- we are seeing concerns about that on the bloomberg terminal. a lot of people are saying it could happen. haidi: a new poll is suggesting the boj governor's popularity is crumbling. will that affect policy? kathleen: a pull out today says 59% of those asked if he is fit to be head of the bank of japan and this is happening as the yen
tumbles. the import and food prices and energy prices are being exacerbated by the war in ukraine on are getting worse so the japanese don't like to see this. governor kuroda said he thought japanese were getting more intolerant of increasing prices -- were getting more tolerant of increasing prices. this caused backlash. he apologized. he is saying the rapid tumble, not the weakness, is why the boj is not expected to change policy at all when they meet at the end of the week. shery: looking at futures in europe, we have seen concern about tightening from the fed and ecb sending european stocks the lowest since march of 2021.
we are seeing a little upside for some futures but a broader mixed picture after seeing archery in european shares. we could be getting closer to bear market territory. the s&p 500 is already there. let's get to annabelle with more on the market. >> it is risk off. asx 200 coming back from a holiday. slumping 5%. aussie yen at 93 level. approaching 100. a few days ago. three year yield at a 10 year high. aussie tenure above the 4% level , similar for the kiwi. that means it's putting more pressure on the rba and policy
trading session for japan, south korea and australian, and it is a risk-off day. not only are investors continuing with inflation fears, another line dropping on the terminal that shanghai's district is planning additional covered testing. so these continuing lockdown fears and china also adding to fears of this part of the world. we are seeing the nikkei come online into his third straight day of losses in dragged lower by tech names. the dollar-yen heading off the 135 level we have in watching. we have seen the boj sticking with plans to maintain yield curve control and announcing additional bond buying operations. meanwhile we are keeping an eye on the three year yield. we are seeing it move higher again. it did jump the most in a two day session since 1978, so some
significant moves here. shery: for more on the latest, let's bring in garfield reynolds and ruth carson. let me ask you about what you want to talk about because there is so much happening in the markets that i do not even know how to focus my question at this point. garfield: there are a couple things to focus on. the one i'm watching the most at the moment is what is going on and yield curves. overnight it touched the deepest version we have seen since 2000. worst in the pandemic meltdown in 2020. so i'm not saying what is coming
is necessarily worse than either of those two events. that is possible. but i am saying the market is under stress in a way that has really been in the modern era. and that fits with what is going on. it is easy to lose sight of it, but you think last year we have massive stimulus policy in place and we had central banks from the fed downwards saying it is ok that inflation is rising because that is to be expected. we expect it will be transitory. then we will be removing stimulus and there will be gradual, and everyone will be able to relax about it. then we had the war in ukraine. then we had covid lockdowns in china. reit's traders --
we are getting short-term interest rates soaring. we do get longer-term rates soaring as well but not buy as much because investors are effectively saying recession is on the cards. haidi: we are seeing that negativity towards equity pervasive, and that is playing out to a comes the yen crosses as well. does that demand for the asian pears as well as g10 potentially curtail how much dollar-yen can continue to strengthen? ruth: there is definitely some chatter about it. it is trading below 134 now. it is acting as a bit of a safe haven asset, something we have not seen the yen due for a while. that is settling down in fx volatility, at least for now, and it is rippling through the
rest of asia emerging markets. the yen is down .4% but at this time yesterday it was down 1% against the dollar. we shall see, is all i can say. shery: bowman stacks -- goldman sachs still believe in the yen will strengthen. one, because the u.s. economy will slow down, or two, we will see authorities intervene? they are calling a rising risk of change. what is the likelihood of that? ruth: it is the multimillion dollar question a lot of traders want to answer just when the boj, or should i say, japanese officials would or could intervene. yes, goldman is one of the few at the moment. the number that has been bandied about is 140. that could be the level where we start to see some real action from japanese officials.
haidi: how do we see what is going on with the yen impact centrally broader asset markets? garfield: in a lot of ways it has already had its impact on passing markets. i do not know which would likely to be more shocking from here when it comes to the yen. if its rapid decline actually forces the boj to tweak policy, which would be the final nail in the coffin of the idea central bankers can get on top of what is going on in the real world. or if the boj does stick with its unlimited bond buying and maybe buys up every 10 year bond
that is out there, and that is going to cause even more disruption for japan, then again for global bond markets, global currency markets. haidi: you can turn to the bloomberg for more analysis on that. let's get back to bell on hong kong, and the steep selloff we are seeing in australia. annabelle: that's right. we are seeing the kospi pull back some ground after it slumped around 2% in the open. what is interesting is the play between the foreign in retail buyers. we are seeing retail buying picking up, but still losses in both of the indexes. the korean won also picking up a bit of ground after it slumped are the most in two years.
australian very much in focus today. we had the asx 200 coming back online after a public holiday, coming off a little of the 5% slump at the open still losses across the board in every single sub index. we are seeing trading volume at around four times the 20 day average. the 10 year yield also in focus about the 4% level and the aussie yen as well trading around 93. shery: let's now turn to vonnie quinn for the first word headlines. vonnie: day two of hearings into the january 6 attack on the u.s. capitol focused on what then-president trump new before the riot. attorney general william barr and trump's son-in-law jared kushner said in videotaped testimony they advised the president against false election claims but trump rest on, and raised about $250 million from supporters. jake sullivan and china's top
diplomat have held talks as tensions grow over taiwan. the white house says they discussed regional and global security issues at a meeting in luxembourg. a senior u.s. official says he reiterated china's one china policy while addressing concerns about china's actions among the taiwan strait. this will add about 300,000 people while still excluding domestic helpers and those planning to emigrate. the second batch of over $600 in electronic vouchers will be distributed in early august. at the boj policy meeting, a new poll suggests the majority of the public do not think the governor should be at the home of the central bank. the survey found 59% of respondents deem him to be unfit for the job. the yen's weakness is largely the result of the boj's stance of keeping interest rates at rock-bottom levels.
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 vonnie quinn. this is bloomberg. haidi: coming up, we will speak with hong kong's carrie lam about her legacy and hong kong's future. that is later on tuesday right here on bloomberg television. ♪
annabelle: checking on commodity markets, we're 30 minutes into the trading session. also brent crude coming online at the top of the hour. we are seeing it turn positive. fears were concerns around tight inflation or supplies, much tighter than during other recessionary periods. there is also the hope that china will continue to relax covid curves as we just saw on the past 10 minutes. they are introducing more mass testing in shanghai. gold is also another factor. holding at a three month high. we are of course continuing to monitor this investor fallout from inflation fears with the fed as well, seems to be hiking as much as 75 basis points this week. haidi: chinese markets open in the next hour. they have not been unscathed from the brutal global selloff. our next guest still likes
chinese stocks including adv's -- ev's and alibaba. joining us now is junheng li. great to have you with us. the selloff we continue to see across asset classes and particularly in developed markets, does this make you more aware of the risks or is there more of a reason see that policy divergence and the growth story diverge for china and is an opportunity? junheng: i think there is inflection in the sentiment in the market as well as in the economy starting towards the end of may when premier li hosted this meeting, what they call an emergency meeting with tens of thousands of local officials emphasizing the importance to rescue the economy, relax lending to private sector, small businesses. and immediately after, shanghai
was reopened rather unexpectedly. a lot of people including me were anticipating a reopen in the middle or even end of june. but rather they decided to have people return to work and reopen the production, manufacturing facilities on june 1. so all of this sent a rather powerful signal to the capital market. seems like right now there is a big policy shift within the top leadership in the cabinet that perhaps the colossal loss inflicted by the covid lockdown is too great for xi to stomach for the time being. and it seems that not only lockdown has ended, but also the crackdown on the private sector, big tech has ended for the time being. so all of those has encouraged a
rally. we have seen u.s. listed adr's. shery: one of the interesting things to me about the chinese stock market is it is a strong correlation with consumer sentiment. what is the state with chinese consumer at the moment, and do you see that feeding through to increased appetite for stocks? junheng: yeah. if you look at the valuation of alibaba, excluding the non-core business, it is trading at a very depressed level. high single digits. it is a similar valuation with coinbase. alibaba is the barometer of the consumer retail in china. so that tells you something. when a stock is sold off at this level, 80% from its peak, it does not really take a lot turn the sentiment. any positive headline, any
improvement in confidence is going to go a long way for the stock to work on the long side. so in that regard, we are very constructive. we are cautiously optimistic on chinese adr's. just think about this. you add up all the market cap of u.s. listed adr's, there are less than $600 billion. it is less than one company, tesla, a single company, a car manufacturer. so that is the level of selloff. shery: what about the fact that we continue to see pressure from u.s. regulators, perhaps less from chinese regulators, but what about disclosures of financials and so on that it is still an ongoing issue? junheng: i don't think you can look at this issue independently. it is a component of a broader
negotiation against the backdrop of very intense and per lat -- perhaps escalating geopolitics between the u.s. and china. everyone knows that the simultaneous the list of all chinese adr's from the u.s., it is impossible. there is no market that they can go to, whether it is hong kong, singapore, or any china renminbi market can stomach that large liquidity. so there will be a compromise to be made by the china side. but that is getting done step-by-step and it is a part of broader negotiation. shery: how much are you factoring in the potential of more stimulus to come as well? this chart of course showing the one-year policy rate. we are going to get a decision by the pboc this week, this whole policy support idea. how are you factoring that in? junheng: i think there is some
room for continuous credit easing on the china part because china is not worried about inflation. there is a surplus of pork production and pork is a big component of cpi. chinese cpi as of today is around 2%. versus u.s., about 9%. excluding housing cost, chinese cpi is perhaps even lower than 2%, because china is just recovering. there is a demand caused by the major lockdowns. so investments, there's still plenty of room to cut rates in relax. that is what we see on the ground. a lot of companies, including publicly listed companies in the u.s., they are saying the lending has resumed, they are seeing supportive tax refunds from the local government. so all of this are rather
positive. shery: the policy divergence between the u.s. and china, which is that due to the yuan, and the broader sectors, what do you like and what don't you? junheng: chinese capital markets is rather close. so you can pretty much do whatever it does. we think the renminbi appreciation trend, that is unavoidable. we want to focus on something that has a structural uptrend on its own and can do well regardless of the global fx movement. so we like tv in a sense because we think that is a hedge against inflation. so globally we have seen fuel costs have gone up so much. in the u.s. over the last year to date, gas prices have gone up 70%. in china it is probably 30%, 40%. depends on the city. however, the kerry cost of
we have seen for the last 1.5 decades is coming to an end. it's clear the fed put is over. we are looking for companies generating free cash flow. that is a company whose business will not be significantly slowed down by a slowing economy. >> we do see 75 basis points but we also see two more 50 basis point in july and september for they slow to 25 basis points per meeting. we do see that valuations are looking more attractive but we are still neutral on duration here. >> asia is coming late to the party. we have had much slower inflation, a lot more stable. so watch china right now. a mindset something like 2009, 2010 where it stepped in and that 10 -- and potentially saved the world. shery: bloomberg tv guests weighing in on the fed's
possible rate hike and how to position in the markets. we continue to see calls for more defensive trades, to really go for quality assets. we are talking about long dollar calls, not to mention downside stock protection as well. these recession hedges rising at the fastest pace since 2020, as we continue to see a sea of red in the stock market, the global bond selloff continuing. perhaps a rebound when it comes to u.s. futures, but this after the s&p 500 also fell into bell market -- already fell into bear market territory. haidi: we are also watching the yen. we have been hearing from the finance minister saying the are watching levels when it comes to yen with some degree of seriousness. this comes on the back of what has been so much weakness and downside momentum. the finance minister saying there watching the impact on the economy and will take action as appropriate and it comes to fx and the greater sense of urgency. what is interesting to me is the
fact if you take a look at the correlation weighted index, you are seeing a rebound in the yen. almost as investors rediscovering the yen as a safe haven, which sounds a little crazy given it's really been behaving in the reversal of that over the past few months. but it does look like we may be seeing more demand, particularly when it comes to some yen pairs as well within g10 and within the asian fx space. let's take a look at the other corner of the market that has been so beaten down. belle trying to find a floor when it comes to bitcoin and broader crypto, but it does not seem like we are there yet. annabelle: no. you have to feel sorry for the people who bought a hike on bitcoin because it is back around $22,000, the 200 week moving average. how that is playing out the stocks we are seeing on the board, these are some companies that control bitcoin exchanges in asia and we are seeing those slide as well. haidi: we are now seeing bitcoin
trading below $23,000, the lowest in about 18 months. it comes as they froze all withdrawals, adding to concerns of a bigger meltdown the crypto ecosystem. we see the latest route in stocks and bonds, also a key factor in the selloff of crypto. under 23,000 but it went under $22,000 earlier. su: looks like we are going to test that level again. quality bear market blues. this is really -- call it the bear market blues. let's go into the bloomberg, because you see the correlation with tech stocks and crypto has gotten tighter over the recent months. and if you drop into the bitcoin charts, you will see bitcoin down about 20% this week, falling to below $22,000 earlier. that is what is testing the long-term holders. if we look at price charts, a
key catalyst is yet another crisis that has raveled -- rattled the confidence encrypt io. celsius is one of the biggest lenders of crypto and said it was pausing withdrawals and that rattled the confidence of the market. bitcoin now trading below about two thirds of its value after hitting that high, nearly $70,000 in november. let's look at the top seven crypto billionaires who have seen their fortunes shrink, from about $70,000 in november to now. the list includes top five billionaires in the winklevoss twins. shery: we head towards the open in mainland china and hong kong. this is bloomberg. ♪
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