tv Bloomberg Daybreak Australia Bloomberg July 24, 2022 6:00pm-7:00pm EDT
daybreak australia. i am haidi stroud-watts incident. -- in sydney. ? it's gearing up for another big spend hike this week as the central bank claims they will raise inflation. question evergrande just days away from unveiling its restructuring plan. >> monkeypox, a global emergency trying to spur a nation in testing and treatment. the open in the asian session mixed at the moment. we saw the s&p 500 lose ground on friday. we had disappointing earnings results from social media companies. weaker than expected u.s. eco-data did not help with that the session narrative. we are talking about the u.s. business activity contracting for the fourth time in two years. we saw the 10 year yield moving
toward that 2.7% level. oil seen a weekly loss and in the asian session, a little on the upside right now. all of that given that weaker than expected u.s. data. we can than expected european data. in the summer driving season, take a look at bitcoin. we saw that rather continued. we talk about a 15% gain for bitcoin prices over the past month. that has led to the best week since october. you can see that bitcoin has moved this through really well. this leads to more talk about a market bottom for crypto assets. retail investors jumping into the trade over the last 10 days or so. we are talking about buying up nearly $1 billion worth of crypto related stocks. >> let's look at the week ahead. a busy week in australia.
we are watching out for some pretty big names given we have seen the market here has been a standout and turns of earnings revision. futures are looking pretty tepid at this point. not much has changed as we get into the start of cash trading. the aussie dollar is just under 70 u.s. cents. the dollar is pretty range bound. we are seeing a little bit of upside with some of those other majors like the pound. we see the aussie dollar finishing about 2% higher. he was stocks at about .4%. some of the omicron induced labor market tightness may be starting to weigh in there. 1.36 is where we are at. of course, the fed is exactly where it is at. you have to wonder if this market is largely priced in fed
expectations. take a look at this chart on the bloomberg which is frontloading and then a cut is what the market is expecting at the moment. the market is seeing the fed having to ease monetary policy later on this year but before then, we are looking at the possibility of the infliction of all of this on the economy. >> we will get a fuller picture with the second-quarter gdp numbers on thursday and bloomberg economics saying we might see a contraction but in the u.s., two consecutive quarters of contraction does not over session make. we will hearing from european economic research but this coming at a time when we have earnings season, the second week of second-quarter earnings season. we are watching apple. we heard plans of them slower in hiring. we have seen a layoff and other
tech giants. we are watching for earnings from the likes of microsoft and google this week. >> it is not just a slowdown in the u.s.. china is very much in focus. on alert for restructuring plans for the big names we are watching. china evergrande finally coming to some sense of fruition. the debt restructuring deadline, what are we expecting? >> this is the big deadline we have this week. evergrande is one of the biggest developers in china. it is the most indebted. we have tracked that issue since they merged back in 2020. but we are waiting to see whether we get a preliminary plan to restructure the debt holdings because evergrande did default back in january. it pledged to have a plan to restructure within six months of that deadline fast approaching.
we understood that the company said it was on track to proceed with that plan. his book with plenty creditors. as many as 90. they were asking them not to take more aggressive action at that point. we heard that china's cabinet is pushing for his developers to speed up construction of its project. the focus is on boosting the economy. >> that is a systemic risk. >> essentially, this is the cfo as well as another executive. they were asked to stand down here. this was an internal investigation into as much as $2 billion in deposits that were used for collateral in order to
gain loans essentially and they have failed to pay back some of those payments. what has happened is basically a lot of -- they failed to pay it back. a lot of the cash holdings, they are at risk here. we will be watching to see what happens with this heidi and sherry. also, there probably crisis across china. sounding the alarm over this weekend on the rapid spread globally of monkeypox. how serious are these outbreaks? >> serious enough that the head of the who consider this something of global concern. only 3000 in the u.s.. it is not a covid -- a covid like disease where -- it has
tended to be confined to certain groups. largely men who have sex with men. this has been the spread where there have been cases with children. the who feels very strongly that it does require a global response for declaration. the top u.s. medical official came out today to talk about their own particular concerns about. cuesta has been some criticism over the fact that this outbreak has been characterized as something that happens between men who have sex with men. is there a concern with this type of infection that other demographics need to be concerned about a different narrative? >> yes, that is the issue. the concern is that it will be seen as something that is
confined to these groups. this is largely to be contagious but it has been shown to sound the alarms. the concern is very high. but the white house coordinator things it's something that might be able to be contained. testing is ramping up. there is a treatment. so we will see. >> that was in fisher there. let's get back to our top market story. let's get more from our cross asset reported.
there is a sense that a large part of the market is concerned about what the fed will do. the concern is about what the fed will do over the next couple of decisions. whether they will have to start pulling back on the amount of aggressive tightening we have seen. what are the bond markets telling us? >> that is exactly what the bond markets are telling us. they have inflation under control. he is now down back to where it was before russia's invasion of ukraine and that key break, that rate that bond traders are watching so closely is now close to 2%, where the fed would like to have it. they would like to have it entered today. you may have had a pullback in commodity prices that suggests at some point inflation will be coming down.
it is kind of a tale of two different markets because in the equity space, you could argue that bonds keep coming down and it is positive or equities. investors in equities are looking at the possibility of over session. -- of a recession. >> shouldn't we be seeing a stronger dollar? we have eco-data from the u.s. and we also have disappointed tech earnings so we saw the dollar strengthened. right now we continue to feel the pressure. >> we do. with the dollar and what traders are looking at in that market, the responsibility of slowing growth. you did see that consumer confidence in the u.s. coming down.
this is the activity coming down so well you could argue that the fed will continue to hide, that should be supported for the dollar. there is this shift to the possibility of slowing economic activity that seems to be pulling the dollar down. >> let's get over to vonnie quinn with the first word headlines. >> china says all of its leaders have received locally made covid-19 shots. beijing has refused to comment on president xi jinping's vaccination status. 90% of china's total population is fully vaccinated. travelers to hong kong will need to fill out a health declaration to speed up the arrival process.
passengers will need to provide standard details to get a qr code before boarding. visitors will not be able to fill out the paperwork after landing. the australian prime minister says his government has introduced the toughest bio measures to take care of foot and mouth disease. and prime minister says china's sanctions on australian goods should be listed immediately. bloomberg reported earlier this month the chinese officials are proposing to and the two-year ban on australian coal amid supply concerns. curbs have also been imposed on australian wine and beef. global news, 24 hours a day, powered by 2700 journalists in
request the key thing that the fed worries about his inflation expectations becoming unanchored. >> whether they go to 50's or 75's, there will be a situation where we step on inflation. >> i think the fed will have to hold here as long as the market prices in cuts in early 2023. >> they have a tough road ahead of them. they can basically raise rates and change the balance sheet. >> the fed rate decision dominating global markets. let's look at the week ahead. that is our big focus. jerome powell has said that this would be a big mistake than pushing the economy into a recession. that decision comes a day before gdp data is released.
in china, they are likely to show store growth. >> and big earnings also in focus throughout the week. reports of a spending slowdown loom large with results already expected to show a major deceleration in sales growth. investors will also be watching for any news on the state of supply chains from the likes of amazon, qualcomm and a&e. that is your week ahead. the fed's tightening is like extreme dieting. it is always good to have you with us. as many of us already know, if you starve yourself suddenly, you sort of end up gaining weight later. can you explain to us your logic
on what the fed is doing right now? >> very good to be with you and heidi this morning. i would say this is very similar to dieting and a following sense. if you don't follow a good diet over a time and you decide to just crash into a diet program, you are not going to be able to maintain it for too long because of the adverse consequences and secondly, as you said, once you go back to the old track, you're going to see very little change at all from where you were before. what is happening now is the fed having miscalculated inflation for most of 2021 is now saying we are going to raise 75 basis points per meeting and we hope to catch up. you cannot catch up. what will happen is two things.
after extremely low interest rates, the fed is going to combine the rate hike along with quantitative tightening at the same time. so one major problem is a lot of companies cannot make debt service payments and i am worried about the repeat of 1998 and long-term capital management . 2008, we had seven u.s. firms that had to be bailed out and you have the situation i think that the fed was forced to reverse its policy. >> is that why we are seeing some signs of a slowing economy? this chart showing how existing home sales fell for consecutive months. this is why creators are embracing for rate cuts eventually. will we have to go there?
>> i think the fed is going to go there for the rate hike but not yet. with inflation still at a 40 year high level, i don't think they can afford to go back and say it is time. they cannot say that this is transitory. the ability has been shocked so they have to continue to scale with the current policy but as you are going into the new year, problems are going to multiply not only in terms of hosting but also employment. inflation does not come down, especially because a good chunk of inflation is beyond the fed control. it is vladimir putin who decides how much they will supply, how much that will push up oil prices and therefore, u.s. inflation. the fed is in a no-win situation. at some point they decide to
call it a victory and they try to cut back in terms of age but i think that is next year, not this year. >> sounds like you expect global geopolitics to continue to play an outside wall. is that in terms of energy but also tension between the u.s. and china? >> yes. energy we talked about i would say is also part of the u.s. and china relationship. in terms of president biden being asked at the press conference about speaker pelosi making a trip to taiwan, they have indicated that the u.s. military has advised against it. this is essentially increasing the risk with a remark like that because what it means is that the chinese will have to follow-up and if the speaker cancels, we will add in a very
precarious situation and i think what chinese risk in my opinion, that is something that is on the global scale. the chinese investments by global investors have to be thought of as an individual security risk. you have to consider the country risk involved in being in china. >> when you look at inflation rates, is there a sense of complacency there is to mark if you're like most parts of the markets expect that the soft landing can be achieved. quick there is complacency there. let's look at it in one way. the inflationary expectations have been bouncing. rent went up sharply one earlier month. more recently they have come down. so maybe they only raised by 50
basis points next week. it makes no sense to base your policy on the latest inflation numbers. second, the one year ahead figure continues to remain significantly higher. what that says to me is that survey respondents are more sure of what they are seeing in the short term and they cannot make accurate predictions 10 years ahead. a tenure number can keep changing. the one year number remains very high because of the geopolitical risk that you mentioned which is still very present. >> always great to chat with you. we have more to come on daybreak australia. this is bloomberg. is it out -- ♪
they overruled the expert panel. the move paved the way for more international cooperation to stop the virus. the last of the agency made a similar declaration was in the early stages of the covid-19 outbreak. they both promised to toughen border controls. this will increase the border by 20%. the committee investigating the january 6 u.s. capitol right says it will get to the bottom of missing secret service tax -- techs. there were reports that former president donald trump had to be blocked by agents.
sergey brin reportedly ordered his advisors to sell all shares in the company's after learning that elon musk had a brief affair with his wife. it is unclear whether any sales were made. he fell from -- filed for divorce from his wife nicole shanahan. global news, 24 hours a day, powered by 2700 journalists in more than 120 countries. this is bloomberg. >> the fed is said to inflict more pain on the u.s. economy to get inflation under control. let's bring in annabelle. there is a push for washington to help in new ways. >> that is right. this came from the former treasury secretary. he was speaking with bloomberg earlier this week.
we have a lot of analysts say it would take over session and a markedly higher jobless rate. here what they told us on wall street week earlier. >> i think that just the right thing to do is to raise taxes to take some of the demand out of the economy. >> now is not the time for any sort of fresh plans. that does run counterintuitive to what president biden is pushing for with this big plan for spending place. trade is really starting to pare back this week so we could see the last of the science hikes. we might actually see something
around this basis point move and around half a percent higher. this is a d synchronization play a few listen to what citibank is saying here. as china's economy starts to pick up, the rest of the road is slowing down. what we are looking at is the credit impulse. they are expecting that push up. citibank are is turning more bearish. >> this may be premature. there is buzz that may be forming. su keenan joins us now.
i totally understand if you don't want to be called volatile in this crypto market but what are analysts saying now? >> they are saying it is not an easy thing to do given the boom bust cycle that crypto has gone through, and he's -- any moving higher can be followed by a sharp move down. a lot of investors are reluctant to give out a clear sign that you're looking at a lot of green on the screen. bitcoin has held 22,000 levels in recent sessions. you can see there has been a lot of fun fishing and the sector. it is especially difficult because the recent rally was fueled so much by young people who never invested in anything before. crypto is illiquidity asset.
right now, so long as we have the fed tightening, it will be difficult to see a sustained rally. secondly, there has been a big loss in confidence with the chart pullbacks. >> what is likely to drive the next big move? >> many a look into the equity market. -- looking to the equity market. what you will really need to see is a bigger risk on appetite to substantially move crypto higher than it is right now. in other words, waiting for that risk appetite to turnaround. the wild ride that bitcoin has been on has had a chilling effect on the latest pullback. we are just watching for equities to settle out. bank of america showed bleak sentiment and potential investor
capitulation. class note which has been tracking the bitcoin trends says a ton of excess leverage has been purged from the system. there is still a question as to whether we are seeing seller exhaustion but last note believes there are multiple genuine signs that a bottom formation could be underway. >> the fed is willing to tolerate over session to bring down inflation. he told us that slowing down rate hikes no would only risk a longer, deeper recession down the road. >> i think chairman powell has been right in recent months, since march. we need to put concerns about labor market and what it is doing a little bit to the side
and focus on getting inflation down. that will take reducing spending growth and the labor market will play out as it will. >> how political is this at? -- set? ? >> they can take all the hits they want unemployment and labor force and climate change and what have you but job number one is inflation. if they don't get that down, i think they realize they are political toast in some sense. i think that is true of any fed. >> you are convinced they would not tolerate over session. >> yes, they should. >> what kind of recession?
>> i am tempted given today's news and yesterday's news to say whatever it takes. the alternative is to let your foot off the brake before inflation has come down. let it settle. that is just a recipe for another recession down the road. that is a recipe for prolonged pain. that is not good for the american public. they are going to have to -- what they ought to do is stick with it until they get inflation down. they can go from there. >> whatever it takes. what will it take? what rate on funds and what rate of unemployment? >> i think the historical record is clear that they need to get the real federal funds rate at or above zero. that begs the question of what
the real rate is. you have the michigan survey at 5.2. the new york fed consumer survey, very good methodology and 6.8. split the difference at 6%. if near-term expectations stay at 6%, they will have to get there. if they start falling, what we have in store is a rendezvous between the fed funds rate and expected inflation but i doubt that expectations are going to fall to 3.5 or four by years end. >> how quickly with a need to get there? 6% is still a long way to way. >> i don't think slowing down the process does them a lot of good. no matter what, whether they go
50 or 75, they will still be in the situation with the effect on inflation is into next year. >> they might as well get there fast. >> coming up, foot and mouth disease, the australian industry council joins us next. this is bloomberg. this is bloomberg. ♪and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects.
>> the australian government is ruling out the option of closing it borders in tunisia as it ramps up measures to prevent a potential outbreak of foot in mouth disease. paul allen is here with the details. the risks are huge. >> yes, the livestock industry worth about 22 billion u.s. dollars. the risk -- the damage could be up to $80 billion for the economy. the country is on alert at the
moment after traces of foot and mouth disease were found on animals. it can be carried on shoes or clothing and it can live on those materials for up to 24 hours. this is a very popular tourist destination for australians. we were saying they were little controls at the airport to durable -- at the airport to deal with this outbreak. new measures are in place. and the prime minister singh that these are some of the toughest security measures they have put in place for foot and mouth disease. >> you have not shut the border with indonesia. why is that? >> indonesia is a very valuable trading partner. there is 2 billion dollars worth of trade between the two countries. indonesia took half $1 billion worth of cattle and beef
products in the form of live exports and the border has been closed before. there has been -- there was a live export ban back in 2011. that caused tremendous damage to the trading relationship. the feeling is this is a better approach. enhanced by security measures of working with indonesia to try to manage this outbreak because closing the board would create a whole bunch of all-new problems and potentially worse ones. >> joining us in the studio is patrick hutchinson. great to have you here with us. i'll be at under some challenging circumstances. depending on who you speak to, the narrative is either an overreaction or we are not doing enough. what are your thoughts? >> we are going through a pretty tough time at the moment. i think we will have some cooler heads. clearly what we will be doing is far more work at the border.
we have to be making sure we are checking bags, checking mail. the high-risk high probability issue tends to be smuggled meet illegally in people's bags that get into the animal food chain. that is what happened around the world for the last 25 years. >> is there a more sophisticated way and a better way of doing this than just rummaging through and travelers looking at the bottom of their shoes? it feels like we have had technology progressed past this point. >> we have seen technology advances that have been occurring during the u.k. 2001 outbreak. we should also recognize there is a lot of endemic problems around the world. the biggest beef exported in the world is brazil. -- exporter in the world is brazil. we have been putting a lot of
time and effort within our own farms and processing facilities and our own supply chains as well as with our border security but we can always do more. that is what we have been calling on. it has to be about the more effective ways of understanding risk rather than gutting a motion which is what we are seeing a lot of on social media at the moment. >> you have called for the likes of small stock traceability programs. something like covid tracing problems we have seen. >> yes. we already have that for cattle. we have had that since 2001. it is the leading traceability system for livestock in the world and it is the envy of the rest of the world so we are rolling that out. we have already started to see that happen in new south wales. i think that we will see that
come in very quickly and we are exceptionally supportive of it but it is part of the whole. we don't want to see that impact anyway. >> does this match the devastation with african swine fever? >> it is -- it affects the same well. sheep, goat and pork inevitably covers every part of our meat export trade around the world so i think we are clearly working exceptionally hard as an industry on exotic animal
disease, outbreaks, if they occur here, we are ready and we have been for the past 20 years but most importantly we don't want to get here in the first place. i think what the government is trying to do here is meet the needs that we require. the key thing is we have to have cooler heads travailing and we can't just do knee-jerk reactions such as closing borders which inevitably will not help us in any shape or form. >> it comes at a difficult time when it comes to inflationary costs. is that something you are particularly worried about question mark >> what we are seeing -- worried about? >> what we are seeing our pressures in australia but we are also seeing them around the world. we had three fantastic seasons after four years of drought. we have been very cyclical with
what we have been able to manage. i think that overall, if we can keep the disease out, i am sure we are doing everything we can. i think that overall, the industry looks fantastic as of 2030. >> are there lessons learned when it comes to best practices with covid-19? contact tracing in order to be able to see this? >> a lot of farmers, a lot of industry. i think our farmers are ready to take a breath and realize that
the investment they made over the past 20 years is going to be it. >> great to have you with us. patrick hutchinson. australian meat industry council ceo. will they be forced to have terrain and that tightening campaign later on this year? we have seen some movement when it comes to the australian bond market. we are seeing s&p futures also extending losses into that new week. a pretty weak start of trading. key reebonz also seeing a pretty similar move. we have more ahead on daybreak. this is bloomberg. ♪
>> it is a big week when it comes to earnings here in australia. the market has been a standout in terms of earnings revisions. take a look at this chart that really shows some of these expectations. this has been the best week we have seen in global stocks and about four and also coming at a time correlated with when it
comes to a little bit more weakness in the u.s. dollar as well but look at these asian-pacific earnings revisions. australia is really the standout. as we saw that were breakout in ukraine. >> our guest coming up in a couple of hours says that australia is one of the best foreign markets given the aussie dollar. if you look at this chart on the bloomberg, also showing that australia and taiwan are offering the highest expected dividend yields in all of the asia-pacific region. something to watch out for as we watch all of these markets. >> india is number two. they have raised their annual sales forecast and up to the demands for digital services.
the company says revenue will grow 14-16% through march of next year. a slowing global economy will stifle technology spending. india's second largest private sector lender meets estimates for the second quarter on robust loan demand and widening interest margins. net income grows to $864 million in the quarter compared with a year ago. the bank has been growing rapidly in response to higher demand. google has fired a software engineer from the intelligence unit. he told the washington post that he believed it was the english model for dialogue applications. google says that he shared confidential company information with third parties. they have led the --
nope has led the north american box office. the studio is up to $50 million projections. request coming up in the next hour, take a look ahead to the big tech earnings. robert shane will be joining us. we have also been talking through the risks of monkeypox as the world health organization declared it a global health emergency. that is it for daybreak australia. this is bloomberg. as a main street bank, pnc has helped over 7 million kids develop their passion for learning. and now we're providing 88 billion dollars to support underserved communities... ...helping us all move forward financially. pnc bank: see how we can make a difference for you.
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