tv Bloomberg Daybreak Asia Bloomberg June 19, 2022 7:00pm-9:00pm EDT
>> you are watching "daybreak: asia." >> counting down to asia's major market open. shery: cryptocurrency swings highlighting the fragile sentiment in markets. central banks tighten to tim inflation. a cautious start to the week for asian investors with stock futures next as oil climbs. the biden administration set to reject china's claims that the taiwan strait is not an international waterway. annabelle: we are setting up for a cautious start to the week in asia, first with australian futures pointing to the downside, a rough week in the previous sense and -- previous session. the housing market has been weighing on the banking sector. new zealand doing well, still in the red, though. japanese features also a little
higher this morning. yen weakness could be a factor. checking the boy for fx moves. we are seeing the dollar trade in a tight range. a focus on where we are seeing the yen trade. one for five is what we are heading toward. -- 145 is what we are heading toward. we are keeping an eye on the aussie dollar, a little higher against the green back. not really -- that rally could be -- could prove to be short-lived. some strategists saying that moving bitcoin above the 20,000 level could also be short-lived. we are seeing the euro continuing to weaken. we did get results from the french presidential election. emmanuel macron losing his majority in parliament. some traders interpreting as a risk to euro area integration. shery: a lot of things investors need to digest especially as u.s. markets are closed. we are going to see liquidity,
we are headed for the juneteenth monday holiday. u.s. futures are rebounding after the worst week since march of 2020, recession fears bringing anxiety to the markets. the s&p 500 erased $2 trillion in market value. we are talking about being close to that oversold level on the 14 day rsi. a lot of volatility in the treasury space with the 10-year yield settling. we are watching what is happening to those recession fears. it was the figure of demand destruction the lead oil to fall by the most in three months. we are seeing upside in the asian session. haidi: let's get to world and markets. bitcoins latest rebound has a lot of trauma in this market given the selloff. >> that is right.
i think what is worrying at the moment is until now, what you saw is short-term speculators selling out as cryptocurrencies, digital currencies stumbled. now you are starting to see some evidence that perhaps some of those long-term investors are also bailing out and that is according to data, they look at a measure that tracks profit realized from market activity on the blockchain. what that is showing is some of these long-term owners are getting cold feet given the route we are seeing in the space and they are bailing out. this is a market known for its devotees. these are investors that were hanging in there regard this of how steep the declines were. now this ratio is suggesting
that we are seeing some of these long-term investors opting to sell. this is because of interest rates going up, but also some cracks in the crypto space. shery: when we follow the headlines on bitcoin, we watch the 20,000 level, but we have heard from veterans that perhaps the 19,000 level, 19,511 or something like that -- what are analysts telling you about some of those key thresholds that we should be on the lookout for given that it seems the sentiment around crypto is not that positive right now? andreea: the vibe is definitely negative and this 20,000 level is critical, whether it holds, whether it is going to be a support, or whether it is going to provide resistance.
everyone wants to know, have we seen the bottom? are we getting close to a bottom? that is difficult to answer by now, given the volatility. but apart from what we have seen with risk assets selling off because of higher interest rates , it is also some of the cracks in the market with liquidity concerns, withdrawals. we saw a large hedge fund saying perhaps they are going to sell assets. haidi: janet yellen issued the warning that unacceptably high inflation is locked in for the rest of the year. >> we have had high inflation in the first half of this year and that locks in high inflation for the entire year.
but i do expect in the months ahead that the pace of inflation is likely to come down. remember, there are so many uncertainties relating to global development. haidi: does that mean these are here to stay? mark: it certainly means the fed is not going to be dissuaded from its course of increasing interest rates a lot. inflation is number one in the united states, it has become a political issue which makes it more peripheral told -- makes it more difficult for the federal reserve. we can expect at least fabian -- at least 50 basis points, maybe 75 at the next meeting we will have large increases through the end of the year. there is no way jerome powell can afford to relax when he has
a treasury secretary speaking about inflation in that way. it is clear that it is a big problem for the united states and many other countries. until they show they are being aggressive enough to get ahead of that inflation data, there's nothing they can do about it. we will see the treasury market take the brunt of that. we will see the curve flattening more, possibly inverted, because the short and will take most of the pain -- short end will take most of the pain. the treasury market will not befriend with the equity market. shery: is that why we are seeing optimism around the chinese stock markets? we are seeing resilience during the global market selloff. mark: it is a combination of things. china had a huge selloff last year. the valuations we have seen by the beginning of this year where reasonable compared to the rest of the world. we are seeing china's authorities back off from some
clampdown's. they seem to be leaving the markets to their own devices more. which is good for investors. also, the pboc is on a slightly easing bias. they may not reduce interest rates immediately, but they are heading in the direction where they are more likely to do easing than tightening, which is going to -- nursing volume improve again. investors are coming back. ready to retract growing assertions from beijing that the taiwan strait is not international waters.
let's bring in our north asia correspondent. how significant is this? >> it could be very significant. taiwan has long been a potential flashpoint between china and the united states and we heard a couple weeks ago from sources saying essentially that china has brought up the issue of taiwan not being international waters on just about every occasion and in greater frequency in their behind the scenes discussions. that has raised all barbells, more urgent -- raised all barbells -- alarm bells. perhaps this is a deliberate effort by china to muddy the legal interpretation of the seas around taiwan in ways it could suggest china regards the state as an internal waterway, not international waters. the united states practices what it claims freedom of navigation
rights in the south china sea and through the taiwan strait. any reinterpretation of the legal status by beijing could potentially lead to more challenges in those disputed waterways. it is a development worth watching. haidi: stephen engle there. let's get you to vonnie quinn. vonnie: emmanuel macron's central alliance has lost its majority in parliament. their group had -- won 240 five seats with 289 needed for a majority. the far right national rally gained 89 seats. emmanuel macron may retain control of the executive branch but will have a hard time passing that is legion -- passing by the station. in columbia, petro has claimed a narrow victory in the runoff
election with 50% of the vote. he defeated a construction magnate who got 49%. petro focused on economic reforms while hernandez campaigned against corruption. hong kong's financial secretary is staying on in his post. he has held the position since 2017, overseeing a recession triggered by antigovernment protests and assert covid policy. other include the senior counsel who will head the judiciary. the u.k. on track for the worst rail disruption since 1989 after failing to avert a worker strike. it was like tuesday as 47,000 staff don't work. londoners will suffer also a suffered ashy separate labor dispute.
-- londoners will also suffer a separate neighbor dispute -- separate labor dispute. 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. shery: why the boj is like to stick with policies and cornell, but how it will eventually follow the fed higher. that on japan ahead. our next guest is conscious of energy and commodity equities. we ask him why. this is bloomberg. ♪
-- bosses. >> is there anything you would like to apologize for? >> no. >> the committee decided a larger increase in the target range was warranted. >> we believe it is necessary to increase rates today. if you look at our inflation forecasts, inflation is higher. >> we see greater evidence the current level of inflation is becoming embedded in pricing behavior and way to setting behavior by firms and workers and that will be the trigger. >> the calibration of this rate increase will depend on the updated medium-term inflation outlook. >> if we raise the yield ceiling in the current circumstances, we would expect long-term yields rise above 0.25% and that would
weaken the effect of monetary easing. we are not planning on doing that. by the end of the year, i expect inflation to get a 7%. that is a high number. we need to chart a course back to 2% inflation. >> a 50 or 75 basis point increase looks likely at our next meeting. >> if the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at our september meeting. >> an intense few days of policy action and all of that action leading to some risk off sentiment, especially as we see this aggressive tightening. we saw the u.s. markets see the worst week since march of 2020. take a look at asian futures. a little because we are talking about sydney futures down. this after stocks fell to a 2020 low, same thing with the korean stock market and kiwi stocks at
the moment losing ground after falling last week. nikkei futures, a little bit of upside after the nikkei fell to a one month -- fell to a one-month low. we continue to have a weak japanese yen passed a 135 level, that could be helping some exporters. we are watching the energy sector. we saw the pressure on crude prices last week. in the asian session, we are seeing oil above that $110 level. look at this chart. last week, we had the worst week for commodities since march of 2020 and energy was the worst performer in the s&p 500. fears of rising rates, slowing growth leading to concern about demand disruption. our next guest sees pressure on oil prices due to the global slowdown. good to have you with us.
if you have oil prices falling, that might be negative for some companies but perhaps a positive for regions that import oil by companies that depend on prices. what do you like? >> i think the demand destruction theory is strong. in terms of beneficiaries of lower input costs, some of the food producers could benefit. some indonesian food companies. then home appliances, they have been under pressure from higher steel prices, plastic prices, and a limit on. these would be -- and aluminum. you have an economy coming out from lockdown. some of those could be beneficiaries from lower commodity prices. shery: tell us more about china. there is optimism that this market is decoupled from the global selloff and slowdown that we might see. louis: if you look across asia,
china is one of the markets that is bucking the trend on inflation. the cpi is barely above 2% and china is trading at a 15% discount to the rest of emerging markets, which bottomed out at percent discount in 2015, 2016. china's cheap valuations coming out of lockdown and monetary policy are easing, so we are optimistic about china for the next six months. haidi: what are opportunities you see into the chinese market specifically? louis: a number of consumer sectors could benefit. we talked about home appliances coming from a rebound. we think cosmetics and
consumers have been deterred from spending. another beaten-down area is life insurance. the demand has been though. but that area could see recovery in the next couple years. haidi: we do see more room for positive surprises for china. but that is if we get developments in the geopolitical front. louis: that is harder to call, but there is none of that optimism being priced invite now, which will surprise on the upside. some areas could be the u.s. agreed to lower some tariffs that has been put since president trump took office. and then we have negotiations between the csr and s.e.c. on the adr delisting. a way to satisfy some audit requirements and some of these large companies remain listed in overseas exchanges. that could be a positive. shery: what about negatives for the region, especially in places
that looked to be overvalued? louis: two of the areas that we feel have performed well over the last three years are india and taiwan. those are areas which are vulnerable to tightening. the reserve bank of india is expected to continue to raise rates. you have a market trading at two standard deviations above history. taiwan has been a beneficiary of i.t. hardware and demand for technology and some of those companies look fairly valued. we are starting to see a selloff in both of these markets last week and we expect pressures to continue. haidi: louis lau there, great to have you with us. you can get a roundup of stories, today's addition of daybreak, go to dayb . you can customize your settings so you only get the news on the
haidi: a quick check of the headlines. qantas and airbus making an investment aimed at kickstarting australia's industry. qantas ceo says the move is necessary or australia risks getting the behind. carriers will be able to sustain a post-pandemic rebound despite a global economic slowdown. willie walsh told bloomberg third recovery in demand along with removal of travel curbs should continue regardless of financial pressures on consumers. >> there is pent-up demand that has been fulfilled at the
moment, but all of the research we are doing reaffirms the people want to get backsliding again. -- get back flying again. there are headwinds, of the outlook remains positive. -- but the outlook remains positive. haidi: production would likely take years or decades, representatives for air india and boeing declined to comment. shery: look at the crypto space. we continue to see downside after some upside this weekend, talking about bitcoin headed back toward that 20,000 level. this after it fell as low as 17,000 at one point. then we saw it above 20,000. right now, still under pressure.
there's a lot of swings during the weekend. trading has been heavier than normal this weekend would that monetary tightening news last week, not to mention risk off sentiment. investors being cautious. the tone remains negative. there's also crises within crypto like stability concerns. that measure tracking profits sunk to the lowest in a year, a signal that long-term holders may be exiting. we are seeing ether losing around that 1100 level. next, we will hear why one big crypto player thinks bitcoin is the best bet. this as we have seen bitcoin lose about 70% from its all-time high a reached in november. you want to hear that conversation and what michael saylor thinks about that.
china's rates staying unchanged, later we will have more on that policy outlook as we continue to see china's policy makers try to support the economy and target that 5.5% growth this year. the expectation is the key policy rate will remain unchanged this month. this is bloomberg. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts...
everyone on wall street got it wrong and so did the fed and other central banks. you are looking at predictions into the second half. annabelle: let's look at some of the things we were hearing in 2021. jp morgan saying the s&p 500 would gain 5% and we're hearing from economists that treasury yields would be 2% on average by your and and goldman sachs -- by yearend. goldman sachs saying bitcoin could hit $100,000. six months later, it is a different story. that multiyear, there is no alternative, that phenomenal has come to an end. the question is how much we will see the s&p 500 rally into year end. that is the prediction from economists. open heimer is one of them. the average target we are seeing
in june is a 22% jump from the friday close. moving to the stocks and bonds that we are on track for the worst quarter ever for corporate credit. we have seen the worldwide pool of the highest rated corporate debt losing 900 billion dollars this year and we are seeing measures of corporate credit risk spiking. certainly, no other asset class has seen the same slump as bitcoin. it has lost two thirds of its value from that high we had in november of $70,000 and arguments that bitcoin was like old or an independent store of -- like gold or an independent store of value. haidi: bitcoin looking shaky after that rebound and analysts are cautioning that there were slight might be brief for the crypto space. michael saylor told bloomberg he
still thinks bitcoin is 10 times better than anything else. >> we did a lot of back testing and i have looked at the numbers and on august 10 of 2020 when we announced our $250 million bitcoin by -- buy, since then, bitcoin is up 72%. the nasdaq is down 2%. gold is down 9%. the s&p is up 9%. the only thing that looks better than the money supply expansion is single-family homes, up 26%. i couldn't have bought billions of dollars of single-family homes. the bottom line is the bitcoin strategy is 10 times better than any alternative. i do not regret it. we have to .8 billion dollars of bitcoin on our balance sheet and
we feel like we are positioned well when the markets turn around in our only other choice would be to give capital back to the shareholders in which case we would have nothing and we would be struggling to get by without any assets. >> is cash still trash? michael: the money supply has expanded by 41% since january 1 of 2020 when we went into this covid crisis and we know that scarce assets are getting it up in price, everyone wants to buy luxury real estate, everything they get their hands on, trading shortages. we are an institution, we have to take a 10 year view and the only thing that is for sure is a freehold cash over a decade, we are going to have a negative real yield. we have to invest in something and we have chosen to focus on
what we believe is the most exciting investment idea because it is a digital commodity that is scarce and only getting technically better. emily: are you considering buying more bitcoin at these prices? is bitcoin on sale? michael: i think it is on sale. the number that i look at to figure out a surrogate for the book value of bitcoin is the four year simple moving average because it trades billions of dollars a day, so after 1400 days of billions of dollars a day, that number is 21,000. bitcoin punched that in the march 2020 crisis, it touched it around 2017, it is touching it now, generally it trades above there. our strategy is we are going to acquire bitcoin from time to time so we are dollar cost averaging into bitcoin and we're
going to hold bitcoin for the long-term. it would not really matter whether the price was 10% more water to percent more or 50% more. we are going to acquire more bitcoin. >> michael saylor speaking with emily chang. let's get to vonnie quinn. vonnie: thank you. the central bank lack in raising rates is partly to blame for rising recession risks. cps will take several years to return to the 2% inflation go. w you on slowing growth was shared by janet selin -- janet yellen who sit on except be high-priced likely going to stick with consumers through the rest of this year. >> we have had high inflation in the first half of this year and that locks in high inflation for the entire year. but i do expect in the months
ahead that the pace of inflation is likely to come down, although there are many uncertainties related to global developments. vonnie: the u.s. is set to reject china's assertion that the taiwan strait is not international waters. president biden has been briefed on the matter and his national security team is examining beijing's claim. the state department says the taiwan strait is in -- is an international waterway. adam schiff told cnn mike pence could be asked to testify to the house select committee investigating the january 6 riot. when asked if you would be summoned, adam schiff said no one is being excluded. the panel heard from i pence's top lawyer last week -- from mike pence's top lawyer last week.
macau has supported his first covid-19 outbreak in eight months. this comes days after the gaming hub eased visitor according to requirements and cases and mainland china declined. schools and central businesses will be shut until further notice. residents will undergo mass testing until tuesday. 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: china's long prime rates are expected to stay put after the central bank kept policy rates unchanged. we will see my policy support. what are we expecting this week? >> the banks will take their cue from what the pbc did last week, they left their key benchmark one year rate unchanged.
that is the benchmark for banks giving those the company's. the banks would move their own one-year rates down. is the same for five-year rates. there is no change expected. part of the issue is in china, the problems are around restrictions and lockdowns in containing covid. it is not about the volume of credit in the economy. that demand to borrow is not there. it is hard to think that we do have across china's economy. you can see that recognition across policymakers and how they are responding. it is clear that they understand that this is less about the requirement to pump more credit into the economy and more about spending money and relieving those parts of the economy that were hit hard by the restrictions, lockdowns in the consumer sector and impact on businesses. when it comes to credit and the
idea that she lending rates is what needed to turn around china's economy, that is not the case at the moment. haidi: as we see the steeping divergence with the fed, how does that impact flows for investors to china? enda: today's decision is putting focus on the idea that the fed is off in one direction. we saw a big rate hike last week , biggest since 1994. china doing what it is doing with its monetary policy, even though it is on hold, it is expected to ease again in coming months. we are seeing that in investor flows. in may, the fourth consecutive month in a row of investors pulling their money out of china 's toxin bond market, the biggest one of money leaving the country since 2014. there has been easing up of the selling of equities, but the
broadpoint is the divergence between the two biggest economies is changing that yield differential story that china had and is leading to more people pulling money out and that is at a critical time. with china's economy in that condition it is, authorities will not want to see a flood of money leaving the country and that is one of the reasons why the pboc is thought to be saying in the sidelines with lending rates, cutting lending rates in fear it exacerbates that pays a money leaving the country. that divergence story is starting to have an impact. haidi: coming up, institutional investors have never been more bearish on the yen, but a forecaster tells us why they think the boj is right in sticking to its monetary staff. this is bloomberg. ♪
weaken the effect of monetary easing, so we are not planning on doing that. >> speaking last week after some segments of the markets expecting a change from the boj, they did not deliver. it is time for japan ahead. japanese markets will open at the top of the next hour. let's look at how we are shaping up. we saw pressure for asian stocks last week as we had massive volatility from the central bank decisions. the yen remaining under pressure after the boj stuck to that policy, a move that will widen the gap in interest rates with much of the rest of the world, especially with fed rates. we are seeing institutional space in the yen has never been lower at the boj refuses to join
other developed nations in nominal lysing monetary policy. rising asset managers boosting bearish bets against the yen to a record. shery: the prime minister saying the bank of japan's policy of monetary easing should remain on track for now, considering the negative impact that change would have on smaller companies. it took politics reporter joins us. the prime minister under public pressure given not only rates, but a week yen -- weak yen and rising prices. >> he said he things the bank of japan should continue on his contract for the time being. the weakening yen -- weakening yen is concerning for the bank of japan and general public. he says you have to take a more general of you and any rising interest rates could hurt small
and medium-sized enterprises in japan which form the bulk of employment in japan. if you are damaging those, you are damaging the body of japan's economy and that is a dangerous thing to do. haidi: when he continues to back this policy, what potential backlash could we see? what is the government doing on the fiscal side to alleviate household pressures? isabel: i think we are seeing a backlash, we are seeing support for his government is falling slightly. that is ahead of an upper house election next month. that is a key election because if he manages to do well, he could remain in power for another three years. he needs to do well. although it is unusual for monetary policy to become a household issue like this, one
issue is that inflation itself, which people are not used to in japan. there has been deflation for so long that being faced with rising prices is shocking. the population is elderly, so many are on fixed incomes and prices going up for everyday items is tough for them. it is an issue he has to watch carefully and he has promised more help for households. shery: our next guest says a capitulation by the boj would deny japan a once in a generation chance. jesper koll -- desperate call -- jesper kill -- koll joins us now. how much price gains are you seeing in that economy? >> you're putting your finger on
the pulse. there is little evidence of demand pull inflation and that is what makes japan different on the global scene. cost pressures are rising with energy prices, food prices, and component prices going up and the yen weakening but unlike the united states, there is no surge in demand. the economy is about three percentage points below the pre-pandemic level in the u.s., it is a percent above. -- pre-pandemic level. in the u.s., it is 8% above. shery: nursing central banks moving, especially with the fed, then we had the boe. how much pressure is the boj under and will they have to follow what the fed does? jesper: the beauty, the reason for why we have the current
global financial system is it allows, it demands policy independence. you have to do what is right for your country and the governor is one of the most experienced and most well studied and well read people and his view is japan is not yet ready and quite the contrary, he wants to succeed where everybody else before him failed which is to pull japan out of the more than one generation long deflation drop. haidi: where than for the yen? the widening gap is going to get wider. do you think we have reached a level of tolerance? jesper: as a practitioner, as an investor, the two forces that got us from 115 to the 130 range
are still in place. we have a widening interest rate differential, the federal reserve making it clear that they will continue to accelerate rate hikes. then you have japan's trade and current account which continues to deteriorate. both of those forces are likely to stay in place. as far as i'm concerned, we are in for further yen depreciation. haidi: what change do you think japan, given that we have some level of inflationary pressure, what change does japan need most? jesper: i think the governor tells you what you need to look for. he wants to see demand pull inflation. it is quite simple. it is a deflation gap of around 15 trillion yen of consumer
spending and if you look at the gap in domestic tourism, japanese by themselves traveling within japan, that cap relative to the pre-covid level is 20 million yen. i am watching any data point on domestic travel. if that starts to accelerate, then the bank of japan will change its mind. >> jesper koll, it is great to get you with us. you can get more on tv . two in for japan ahead every week -- tune in for japan ahead every week on bloomberg television. this is bloomberg. ♪
>> the international air transport association says airlines will sustain their rebound from the coronavirus crisis even despite an economic slowdown. willie walsh told bloomberg the industry outlook remains positive despite growing inflationary concerns. >> there is pent-up demand being fulfilled at the moment. but all of the research we are doing reaffirms the people want to get back flying again. there are headwinds, i'm not going to ignore the fact that we
are facing challenges, but the outlook remains positive. >> you're not worried about a recession? jamie dimon talks about a economic hurricane. willie: you go back to 2008, 2 thousand nine, global financial crisis, the collapse of lehman's. we saw a deep crisis in 2009. passenger numbers did not decline. we saw growth in 2010. we can look at previous events and one of the great things about this industry, because we have faced these crises before, that we learn from them, we apply the learning's, and we do better next time. i prefer to avoid these, i prefer if we did not see these, but the industry knows what it needs to do. >> so we have learning lessons. there are significant problems in the industry. huge demand, lack of supply, particularly lack of supply of
staff. there are headwinds coming from different directions. this is one of the major ones. when are these problems going to be fixed? willie: some of these problems are structural and will take time. if you look at the u.s. in relation to pilots, i don't think that it's going to be resolved easily because of the regulations around the minimum hours required for commercial pilots in the u.s. that plays into capacity being restricted in the u.s. market, particularly the u.s. domestic market. what is happening is airlines are recognizing that they are not able to build up as fast as they had expected. they are tapering their plans for growth and that is why you see a more cautious industry. all of the headwinds you are referring to will play into decision-making. the excitement about the recovery and airlines want to take advantage of the strong demand that exists, but we will see capacity being trimmed
because of external factors. airlines will not be able to offer all the capacity that they want. shery: willie walsh speaking to bloomberg. coming up, we get the outlook for the chinese economy as we look ahead. later, a guest will be joining us for a preview. plus, stephen ems tells us why he sees another onslaught of rate hike repricing coming to market. the open it in sydney and tokyo are next. -- the opens in sydney and tokyo are next. this is bloomberg. ♪
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we are counting down to the major market open. all of this as the u.s. remains closed on this holiday after a brutal selloff. one of the worst weeks since that of the pandemic. the markets in china have been pretty resilient. christ potentially being seen as a safe haven. we had a little bit of respite when it came to the rebound in bitcoin but that momentum looks like it will not be sustained. let's look at all of this playing into the trading psychology at the beginning of the week. christ we are looking pretty risk off year. japan, australia and south korea will have to open. no cash trading for treasuries. futures are pointing to a selloff. when we do get the resumption of trade, you can see across the region, we will have the yen back at that 135 level. we just need fx intervention
from the government here. that is the only thing that will really extend the slide. they are joining those calling for 140. that is backing that boj easing policy. now we have the nikkei 225 coming up. a big boost for us here. we did see that sector have its worst weekly performance since march of 2020. it is back above the key 2400 level that it hit. that is the lowest level since november of 2020. a lot of selling by the foreign names. something that could provide a boost here. it is that government plan we have over the weekend to slash taxes further.
1300 is the key psychological level here. turning to the open in australia. we saw a pretty rough week for the asx 200. dropping around 6.6%. we are seeing it on the downside. what this means for the banking stocks. the aussie dollar looking a little bit higher against the greenback. there is the value we are seeing. that is because pressures are pointing to the downside. particularly sharing with those particular covid docked as we are seeing in china. >> we will continue to watch the markets there. this is just before another onslaught, repricing starts again.
good to have you with us. tell us a little bit about how you are managing this volatility. >> it is difficult because you are at the bond market. it is quite astounding. i have never seen yields move in such a fashion. that is difficult, looking at stocks and trying to make some semblance of normality out of this. markets are looking at inflation. all of this as it continues to drive rates higher. no matter how much higher the fed continues, the market still continues to price higher inflation. that is one of the biggest problems. that is the worst case for everyone when you think about it. unless we get some type of capitulation either on oil prices or the ukraine war or
some sort of normality in china, i think we will be in the risk off environment. >> talk to us about china. >> prices are actually being reined in. not to mention that we are expecting more policy support coming from authorities as well. correct there is the view that equities are so depressed that the economic multiplier threat when the mainland is open will drive the economy quite strong. i think the big problems was the revolving covid policy door. that keeps people probably guardedly optimistic rather than i'd bet optimistic. i think that is continue to resonate in the background. -- continuing to resonate in the background.
>> i still think it is the u.s. yield curve. the bond market intimidates everybody. we are seeing narrowing differentials between the usc and the inverted differential. this really points to something we care for the majority of the asian effects markets. >> where do you see the opportunities? in particular when you have currencies like the yuan looking a little bit better with this idea that there is this decoupling with the economy there. >> the clearest thing we normally look at is to strengthen inflows.
on the nasdaq, there is very little incentive right now for mainland regulators to strengthen the yuan simply because the export sector has been supporting the economy until the domestic side of the occasion -- equation picks up again. mixed with a little bit of a mixed entry point since we are pretty much stuck in the six-figure range. >>, stephen. we appreciate your time. let's look at the movers. i was watching for a lot of these big granulated stocks. >> we will have some lines coming through from celsius.
this is what sparked that massive selloff last week when it paused stops and transfers. they want their community to know that the objective continues to be stabilizing liquidity and operations but they're also saying that process is going to take time. off the back of that, we have seen bitcoin moving in a pretty -- and around that 20,000 level. if you could just bring it up on the bottom of the screen. but bitcoin has been one of the big movers and it is also dropping off a little bit now. trending down backed with a 28,000 level. these are some of the companies we are washing because they are linked to bitcoin in one shape or another. they are either exchanges or companies that had stakes in exchange and we are seeing them drop as well.
>> that was the latest on crypto assets. let's get to vonnie quinn with the first word headlines. close thank you. emmanuel macron says macron one 245 sees with 289 needed. the far right national rally claimed 89 seats. macro may retain control of the executive branch. but he is pretty much of his second term agenda at risk. gustavo has claimed a narrow victory in the runoff for the presidential election with 50% of the vote. the former mayor also around 49%. metro focused on economic reforms but the hernandez campaign against corruption, there is an attempt to upend u.s. columbia relations. hong kong's financial secretary
said that china has held a position since 2017 overseeing a deep recession triggered by antigovernment protest and a code policy. other candidates include every town. -- eric chan. mikal has reported its first covid-19 outbreak in eight months. this comes just days after the giving hub used their quarantine requirements. cases in mainland china declined. residents will undergo mass testing until tuesday. adam schiff has told that might -- mike pence could testify to the house committee, investigating the january 6 the right of the capital. when asked if he would be summoned, adam schiff said no one is being excluded at this point. the vice president had refused
to give into president trump's demand to overturn the election. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. >> still ahead, china's loan primary do later today. jp morgan joins us a little bit later to discuss using outlook but more fed officials said they remained determined to curb the hottest inflation in 40 years. even as recession risks rise. more on that next. this is bloomberg. ♪
>> >> the committee decided that a large increase was warranted at today's meeting. >> people believe it is necessary to increase rates today because our inflation forecast shows the inflation a pirate -- we do see greater evidence that the current of high-pressure has become embedded in pricing behavior. that will be the trigger. >> the calibration of this rate
increase will depend on the updated medium-term inflation outlook. >> if you raise the yield ceiling in the current circumstances, we expect voluntary yields to raise above 1.25%. we are not planning on doing anything like that. by the end of the year, i expect inflation to get to 7%. that is a very high number. we need to chart a course back to inflation. >> if this persists or deteriorates, a larger increment will be part of the september meeting. >> and central bankers speaking during an intense few days of policy action. u.s. policymakers are rising of -- warning arising recession risks.
>> the recession rates are going up partly because monetary policy could give it a little bit earlier than i did. we do have growth slowing to a little bit below trend growth. we do have the unemployment rate moving up a little bit. that is ok. >> we did hear from treasury secretary yellen saying that these high levels of inflation are locked-in for the rest of the year. what does that tell us about expectations of the fed and the follow-through in asia? >> we had a series of officials making the point that everyone is to settle in and it will take some time before inflation comes back to where it should be. and as a result, economic growth
going to snow. you just had that clip from the cuban fed making the point that the recession has increased. u.s. recession around 70 odd percent. janet yellen making the point that the fed should have pivoted sooner. she said it will take longer for her to come down. you have jerome powell kicking off the week, making the point that they are going to do what it takes to do so. that means there will be economic pain coming down the road. can the u.s. and other policymakers navigate? will there be the hard ending? if the u.s. goes down, they will have consequences for the entire global economy. >> we know inflation is pretty reined in and china. what are we expecting from the
banks? >> they are expected to give their lending rates unchanged. that is following the cue from the central bank. the thinking is that the problem in the chinese economy is not that there is enough -- not that there is not enough credit flowing around. the problems in the chinese economy are the ongoing restrictions and electives related to covid. that is what we are seeing the government spend more money, to support businesses and try to get problems off the ground. the other point is that a lot of money is leaving china at the moment. the thinking is that the banks will keep their lending rates on hold. chrysler stay with the u.s. and
china, washington is set to reject growing assertions from beijing that the taiwan trade is not international waters. let's bring in stephen engle in hong kong. how significant is this? >> china has long called this is part of the economic zone and they have protested on regular occasions when the united states sends their ships through the taiwan strait but rarely have they brought up the issue of legal status as china views these not as international waters with united states practices its claims, its rights to freedom of navigation in the taiwan strait and other areas that might be contested by china. the concern at the white house is this may be an effort by engaging to muddy the legal interpretation of the scene around taiwan in a way that suggests that taiwan regards the
straight as internal waterway. it is significant in the event of any rising challenges in the taiwan strait. at a time with heightened geo-political tensions and a global security environment with the war in ukraine and were rationing up of tensions surrounding taiwan and the rhetoric. >> it will be a very interesting time for president biden to have that phone call. >> absolutely. it is a good time anytime for them to speak. the last time this book was back on march 18. that is when joe biden said there would be consequences if beijing were to support vladimir putin's work in ukraine. they have not spoken since then. we have been hearing from diplomatic channels that they are in work to finalize discussions perhaps as early as july. joe biden was asked directly
about it. he said we are in the process of doing that and this is the question that was posed to him. whether he would be proposing to president xi to reduce the trump your tariffs on some $200 billion worth of goods and you could see joe biden says i am in the process of making up my mind on that matter. we heard from janet yellen, the treasury secretary that told lawmakers that the united states is looking to potentially reconfigure some of those tariffs because of the contributing factors of inflation running at that 40 year high in the united states. >> stephen engle there with the latest. let's look at how european speeches are pending this monday morning in asia. we see these looking difficult. these features are looking a little bit brighter. we saw minors and energy players
leading a lot of those declines and investors in europe weighing the economic growth of monetary tightening. it is now a global theme for traders to be risk off on account of that. we see pretty steady trading when it comes to the european benchmark as well. there has been dead rate hiking path by central banks. also watching french equities after we saw the audience falling into a bear market last week. looking at what the meaningful implications of failing to win an outright majority from manual -- from emmanuel macron will be. >> coming up next, we will also be talking about strict covid measures in china. this could put one third of
>> a quick check of the latest business flash headlines. the head of the airline training history says they won't be able to assist -- be able to sustain post-pandemic event. i asked willie walsh if a recovery in demand should continue regardless of financial pressure on consumers. >> there is clearly pent up demand. but all of the research just reaffirms that people want to get flying again. there are headwinds. the outlook remains very positive.
>> they will make a joint investment in debt kickstarting this aviation fuel history. they plan to invest as much as $200 million to accelerate the adoption of sustained fuel in the country. the move is necessary or australia risks getting left behind. they have to be considering a large order for narrowbody jets and overhauling the fleet. the carrier is mulling a purchase of as many as 300 air buses or boeing 737 max's. production and delivery of an order that size would likely take years or even decades. representatives for both declined to comment. >> around the third of china's feel processing capacities as the country down -- doubled down on its covid zero measures.
>> what is the likelihood of bringing these refiners back into action and how much would that help global supplies? >> bringing the u.s. refiners back would be a big jump for gasoline supplies in the u.s.. you have this issue in the u.s. where it is not so much the crude oil supply that is boosting the price of gasoline in the u.s., it is the supply to refine it. the ability to turn it into gasoline and because of the supply restraints, you have seen this giant jump in the price at the pump for the people at home. that is weighing on biden and the u.s. government. over the weekend, we had the u.s. energy secretary saying there is continued upward pull on demand and the likelihood of sustained high gasoline prices.
that is something that will be looked at very closely. meanwhile, china has this massive, almost the opposite problem. the covid zero policy has cut consumption in that country. it is almost the tale of two different markets you look at those two countries. you have to weigh all of those factors. >> we heard from the energy secretary talking about the continued upward pull on demand and how secluded is that gasoline vices will stay high. what is the market expectation in terms of beyond of the summer season and what will they be looking for in terms of guidance and the way forward? >> we just look at that dry -- that giant drop last week.
essentially, you have the head seeing a hawkish move forward. this will be about whether powell will double down on the cut to inflation. if he does, that could raise interest rates and they would essentially clamp down and push that oil price going forward. that is what they will be watching closely. >> coming up, china keeping rates unchanged. let's talk about the outlook. this is bloomberg.
30 minutes into the trade. japan, australia, south korea. we did have a statement from the crypto lending platform, the network saying the objective is to continue stabilizing liquidity and operations but that process will take time. celsius did pause withdrawals and transferred about a week ago after weeks of speculation and returns that are offering something unsustainable. that helped the spark we saw or that plunge we saw in bitcoin. we are seeing prices headed lower following that rally back to that $20,000 level, changing the board to some bitcoin like stocks and we are seeing changes , oil company is that on stakes in exchanges. celsius saying as well that it does plan to continue working with regulators and officials on those withdrawals. >> i was saying we could see
some direction coming from asia. it is a pretty mixed picture across the board. could we see some direction come from china? that is a bit of a haven for the global selloff recently. cracks that is right. here we go to japan and new zealand. korea is still to the downside. we do have the regional benchmark on track to be seen the most since october of 2020. we can look at the outperformance of that specific index versus the old country road index. we have seen it wide of this month. the reason is that waiting. they are making up about a quarter of the benchmark in asia. while we have seen the msci asia
beating this by about 5%, the csi 300 is up nearly 8% over that time. strategist pointing out that we should see stimulus measures accelerate into the second half. cracks we could see that boost of lending. china is due to decide when is a prime rates are due. economists expecting no change from the banks. no change in policy for the rest of the year. great to have you as always. let's take a look at the loan prime rate and the spread we have been seeing deteriorate. also, the diminishing of the ability of consumers to spend as normal but this is what we are seeing when it comes to the lending bus -- boost that is required. how much further improvement do you see as we see this slow
emergent out of these lockdowns? >> it is actually quite an interesting moment we are at in this time. we had a significant slowdown in economic activity and the data shows we finally got to see some partial improvements in activity led by industrial production as the supply chain normalized and they came back to activities. if we look at the details, we do see some pretty asymmetric performances in the sector. what we are expecting going forward is after the slowdown in april and the partial recovery in may, we would have a more complete recovery toward june. but because of the week space in
april, that would be compensated by a rebound in the second half by about 7.3 to 7.5%. that would bring over for your growth to about 3.7%. cracks a lot of the fiscal measures have been on the level of these local government financing vehicles. it is all about getting infrastructure spending up. how much more stimulus do you expect it get into that peak -- key part of congress later this year? >> we do see room for further policy changing but if you look in the past, with the economy partially reopening, we have seen a stepping up of policy measures that largely focus on infrastructure investment and also support for the top center informed of tech cuts and fee
cuts and so on and a series of measures to support this sector as a whole. we do think that while our baseline is not yet factoring insignificantly, we do see a decent probability, there is a decent probability they might pass on additional fiscal support measures. possibly in the form of additional issuance like what we saw in 2020. >> how much will that help domestic demand? now that those are happening from authorities, it seems to be really impacting how people feel about spending right now.
>> that is very true. the way we see that moving ahead is somewhat asymmetric bit cross the sector. you will still have the export sector leading the domestic sector in the form of consumption and services. what that also means is that in terms of the policy support going forward, we do think that fiscal policy support is more likely to focus on infrastructure investment and also some of the sectors that have been getting more industry support such as manufacturing upgrade electronic vehicles and so on. there has been a proposal for more meaningful transfer to the household sector or in the near term, or the possibility of that
sort of direct household policy support, it is still not that high. quite when it comes to monetary support, how much more can authorities do when the rest of the world including the federal reserve are now aggressively tightening? >> that is a very good point. that is why in our view, the pboc is probably not yet keen to come in with more interest rate cuts because of the global front. therefor, you have the concern. therefor, the relenting facility and the support for banks to
provide additional credit to those sectors the government would like to support. >> it is always good to have you with us. thank you. of course, with a preview of what to expect out of china, let's get the vonnie quinn with the first word headlines. >> china's first weekend of citywide mass testing found the cyrus -- the virus seemingly contained. 13 code cases for sunday with just one outside quarantine for the second day in a row. that is why they are concerned shanghai could be plunged back into lockdown. beijing reported five cases sunday and resumed most public transport services as cases declined. the u.s. is said to has -- is said to have decided to reject trade on the international waters. joe biden and his team are closely examining beijing's claims. the state department says the taiwan strait is an international waterway where
freedom of navigation and oversight are guaranteed. the central bank lag in raising rates is partly to blame for rising recession risks. she said it will take several years to return to the 2% inflation goes. her view was shared by the u.s. treasury secretary, janet yellen who said that on except -- on excessively high prices will likely stick with consumers through the rest of this year. cracks we had high inflation in the first half of this year and that locks in high inflation the entire year. but i do expect in the months ahead that the pace of inflation is likely to come down. there are so many uncertainties related to global developments. course the u.k. is on track for the worst rail contract since
1949. there will be further hit by the underground network rising from a separate labor dispute. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. close paul chan will stay on -- >> paul chan will stay on in his post. taking a look at this. what is his plan when it comes to this new administration? because they believe that the problem which closely. especially after the protest started in 2019. we can see him helping in his new appointment.
cracks what are we expecting in the international community's reaction to paul chan? were they like the continuity? >> there was one that would make a push on covid relaxation and the economy in the coming month. paul chan is likely to be the point of contact to the government. cracks the regulation reported there with the latest on what to expect in hong kong. coming up next, bitcoin rebounding from a 12 they're losing streak. analysts are advising investors to be cautious. what to watch in the cryptocurrency market next. this is bloomberg.
around. and the other choice would be able -- would be given all of the capital back to the shareholders in case we would have nothing and we would be struggling to get by without any assets. cracks that is michael there. let's look at how crypto assets are trading at the moment. we are seeing a down side of for major crypto assets. this after we saw it going rebounding above that 28,000 level over the weekend. it was really a weekend of heavy trading. we know that weekends are pretty volatile. but either is also losing ground toward the 1000 level. they had fallen to that level of 881. there is that negative tone given the monetary tightening. not to mention the different prices we would see in the crypto markets. and broader concerns about the stability. let's get more from the cross as
a team. what are we expecting? how we expecting the crypto assets to trade given this new pressure we are seeing early in the asian session? >> it looks like volatility is the order of the day. we do have a holiday in the u.s.. there is a lack of volume and in saturday afternoon, asia time, the bottom fell out and bitcoin went below that 20,000 level. it has valid since then but when you have something going from 18,000 to 20,000 and back and forth, it really looks like it will be bouncing around for a while and probably on the liquidity in the next day or so. cracks in terms of the long-term credibility of the asset class, are we seeing some of the fundamental conditions shifting?
>> you are seeing a lot of people questioning what is going on and questioning all the counterparty risks going around the system. things like breathing withdrawals. it is put out a statement very recently that this is going to take some time to resolve. just all these different things where people thought they had something under control and there might have been a lot more risk in the pipeline than people thought and institutions may be questioning things a little bit more. it is definitely the momentum is on a downward swing right now but then you still have people saying we are building on this. we are going to make it work, it is just figuring it out long-term. three to five years down the road, it might be a different story but right now, definitely a tough time for crypto. we are seeing many assets facing message liquidation of collateral as well. tell us a little bit about the crises we are seeing in this.
we have been talking about celsius. there seems to be broader concern that there might be some macro risks, some sums -- some systemic risks in the sector. cracks right. most people probably don't think that crypto is to systemic at this point but it is an indicator of risk assets overall, people are now watching crypto to see how stocks might behave on monday or tuesday for instance and when somebody has a big position in crypto and they get liquidated or are having a tough time with it, they might be struggling in other areas as well. will it take down the financial system on its own, that is a little bit extreme to say but it is not a great signal for risk assets more generally. cracks you can get a roundup of
the stories going in traditional daybreak. they are in the bloomberg anywhere. you can customize so you just get the news of the industry and assets that you care about. let's look this when it comes to the first trading day in asia. markets are holding pretty steady. we are seeing australia fluctuating. the biggest losses coming from the kospi. we are seeing quite a bit of foreign investment selling when it comes to those chip stocks. 160,000,000,001. we are seeing australia up by .2%. broadly, pretty flat and calm start of the week of trading in asia. we have a lot more to come. this is bloomberg. ♪
apple stores. dual lingo: event -- dual lingo cofounders have made a last-ditch effort here. they have secured support from a group of new investors with the company inspected to meet on monday to discuss the future. dual lingo was investigated for allegations of financial irregularities, it into the dismissal of his ceo and cofounder. >> we are counting down to the open in china. fresh off the third week of gains. the outstanding resilience we continue to see in the global selloff, giving asian investors hope that we will see that regional equity left in the second quarter. let's preview what we expect, what are we expecting from the china open today? >> there is a bunch of stuff happening. we have biden saying that he will be dropping -- talking to his counterpart, xi jinping soon about stocks.
>> you saw that report about the financial creation getting approval from reuters but local leaders reported that may not come through. you saw them with the market trading on friday. that may weigh on china tech today. we have them saying that they are delaying the release of the immortal game in china. that is another factor that could prove sentiment. cracks we have seen more cracks is sentiment shifting for the markets there? >> it is nice.
this is where the fed is tightening. we could see another hike in the next meeting. and on the other hand, you have china working on monetary policy. you can see there is a bit of sentiment finally with china up more than 7% over the past month. versus the asia-pacific index. and you saw global stock markets come into bear market territory. let's see if the strategy is sustainable. but china is extremely volatile. we could see if there is a negative news coming in. >> when you look at the historic day, does a bear market in the u.s. necessarily mean a bear market in asia as well? is it as bad when it comes to this? quite they have done a study of the past 11 bear markets for the
s&p 500 and they saw that asian equities tend to decline as well. but the tend to outperform the u.s. in a majority of cases in china and southeast asian stocks. among those that are least vulnerable to u.s. financial conditions. that is an interesting finding but they have seen china helping asia outperform in the past. >> there was a preview of what to expect in the market open in about .5 hours. look at some of the stocks we are watching. casino stocks in macau including galaxy into a. that is after the city reported virus infections for the first time in eight months after using quarantine requirements. >> we are watching bitcoin stocks as well. just individual investors turning back to china stocks as
well with that rebound. look at u.s. regions at the moment. pretty positive. a lot of fed speak to be washed later on this week. they are usually volatile weeks. taiwan features are flat at the moment. we are also watching the dollar china trading with not much of a move. we will be discussing business sentiment in china. the eu chamber of congress -- commerce will be joining us. plus, is the worst really over for china stocks? they will talk strategy is markets open. she explains why chinese equities had that uptick in asia. this is bloomberg. ♪
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