tv Bloomberg Daybreak Asia Bloomberg August 9, 2022 7:00pm-9:00pm EDT
kathleen: now for the top stories this hour. asian stocks slipped out for a full on wall street, a key u.s. inflation reading. heidi: revenue will not beat projections as rates evolve quickly. kathleen: the japanese prime minister is set to announce a new lineup of ministers in the coming hours. heidi: we do have breaking news, july adjusted jobless rate is staying on expectations of 3.9 percent and unchanged from the previous month of june. that is adjusted for the month of july. we start to get more wage data given the korean pay rises or at 819 year high --aare at a 19
year high. central banks are trying to adjust to the high inflation and higher rate environment. let us get you straight to the market set up. annabelle: all of these fears around inflation and what the fed will do to rein it in, there is a fear that the fed could be mispricing the extent they need to go to to really diminish of those price pressures that are building in markets. we are seeing the in the new zealand bond space. and burning for the first time since 2016. central banks need to go a lot further in this push to write in cpi. we are risking recession risks at has long end of the curve as well. we are continuing to see the curve in the treasury market as well. the inversion has yet to read
ach 85 basis points. let us check in on what we are saying in the equity space ahead of the open -- seeing in the equity space ahead of the open. we have new zealand trading online to the downside. trading volumes are down today, while off of the 20 day moving average. and wait and see mode ahead of the inflation print from the u.s.. the dollar and aussie dollar and the yen in a tight. range. -- in a tight range. kathleen: let us take a look at what happened in the u.s. today and what is happening in the futures market. it was a big selloff in u.s. stocks. .5 percent on the s&p 500 and a 1.1% on the nasdaq.
it was on news of chipmakers. micron, nvidia, saying that they are not getting the orders. we are seeing a small bounceback now. the s&p 500 as of the close of trading had four straight losses in a row. nasdaq comes after the 10% rebound from the june low. everybody is watching that pretty closely. cpi caution also hit stocks which also hit bonds. as you said that is an inversion that continues with the guilt of 2.8 on the 10 year -- and i continues on the 10 year on 2.8. crypto margaret -- at the crypto market went up because there are reports that a major pipeline
that is shipping energy, oil, gas from russia to europe was going to be shut down for a while. suddenly we heard from a pipeline operator that in several days it will be open again. west texas intermediate crude had a bounceback. in the futures market, they are starting to say it see what happens next. the big ones are inflation and what happens next there. heidi: more to expect from the key inflation numbers, we are joined by our cross asset manager reporters. how does it inform the fed from here? >> we are expecting headline inflation and signs of slowing on the year again from 9.1%,
reflecting a dip in gasoline prices. the core reading is set to go in the opposite direction. wages are moving higher and even if we do get a suggestion or a hint of a peak in u.s. inflation from the headline number, the expectation will be around how much work the fed has to do to control inflation. citigroup talking about a 100 basis point hike. there may be some suggestions in the headline numbers about the u.s. turning a corner. this remains on how much work the fed has to do. kathleen: we move on to china in a different direction. while there be a hiccup in cpi? how much is the cpi going to cool off and what it will mean for the government policy and monetary policy? >> it is a different story in china, we are expecting headline
cpi to pick up today. around 2.5%. reflecting pork prices which are expected to rise around 20% on year. that is a food story, core inflation is not expected to accelerate a bunch. that is because of consumer and services economy remains depressed. ongoing covid restrictions, factory prices are expected to show signs of slowing. that is important for their cost base and take pressure off of the global inflation story. it will lend themselves to the central bank doing more to support the economy. heidi: how are markets positioning themselves ahead of this court cpi print? >> markets are in a wait and see mode.
the number is going to be key, investors gauge where the fed goes from here. we have heard they are resolute in bringing down inflation. one particular part of the market that is interesting to watch is the tech space. technology stocks have had a pretty remarkable rebound from june as the treasury yield came down from the peak in june. what we are seeing now is a headwind coming from the chipmakers that kathleen just mentioned. the companies who make computer chips are under pressure from the waning consumer demand from inflation and rising interest rates. this is a key part of the market that investors will be watching because they could very well undermine the rally that we have seen in tech stocks give it that
the fed is going to continue tightening given that inflation is remaining high. this is the pain trading in the markets, the technology space and the chipmakers are where the pain trade is likely going to be. there could be some support on the u.s. bill that includes the $52 billion in domestic semiconductor research and development. at the moment, we are saying that the markets are very much going to be watching what is happening in the tech space. kathleen: we certainly are. moving on to china, another story, 3 trillion dollar trust industry is under scrutiny from the nation's top auditors. this is as loans continue to mount, posing risks of financial
stability. let us bring in stephen engle. what more do we know now? >> this is an unscheduled surprise announcement of an audit and if we look at the national auditing agency, they look into the banks exposure to antgroup's financial products because of the financial lending. the banks underwrote a lot of that. that led to revelatory action -- regulatory action. it is huge and they have a lot of loans to the ended property sector. we are hearing that national audit offices over the pond month -- past month have been investigating 20 trust funds including the top five.
they are also being asked to report their risky loans do their developers and if they have any plans to dispose of them. it is not known if there will be regulatory action that will follow suit. it shows that the government is very concerned about the shadow banking sector and where property loan losses are mounting. this year, the default of 18 billion yuan of investment products linked to developers. developers face 72 billion u.s. dollars worth of trust payments. there is the potential of further defaults. this is not the only industry we are getting a word of this week increased scrutiny. we were talking about the
semiconductor industry. china's semiconductor industry has not pay the dividends that the government has wanted. they have pumped in more than 100 billion u.s. dollars to turn china's domestic chip industry into a world-class to be less reliant on the labs in taiwan and the patents owned by the united states. they are launching another series of anti-graft probes into chip industries. they want to know where the money is going. they are wondering where all of the investment is going. the top anti-graft agency has announced that investigations into three more top executives who managed the national integrated chip industry investment funds known as the big funds the government, they have not seen the returns so
they are looking to where the money is going. potentially. heidi: let us get you to vonnie quinn. >> president biden signed a legislation that will give the semiconductor industry subsidies. the legislation will spur u.s. chipmakers to create more production facilities and provide billions of dollars for research and development. and will reduce reliance on other countries for advanced chips. >> we have produced 0% of these advanced chips. china is trying to move away ahead of us and manufacture the sophisticated chips as well. it is no wonder that the chinese communist party actively lobbied against this bill. the united states must lead the world in the production in these advanced chips. >> nancy pelosi assist china's
president is acting like a scared bully over her visit to taiwan. her trip was meant to reinforce u.s. focus on the region. it sparked a wave of criticism from beijing and days of military drills. congress would not be intimidated. donald trump is facing legal and political pressure after fbi agents searched his home on allegations he took documents when he left office. prominent republicans claim the search was politically motivated. u.s. energy security has taken another hit after russian crude is flowing to hungry was halted. sanctions prevented improvements, the pipeline was
shut down last week but there is no effect on the northern leg that runs through poland and germany. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. heidi: still ahead, the former u.s. secondary of state joins us to talk about the u.s. just legislation that was signed into law by president biden today and how it could impact global supply chains. wells fargo investments introduces gary schlossberg, these are the markets. this is bloomberg. ♪
>> look at inflation expectations. >> consumer inflation expectations are dropping. >> breakeven inflation rates are starting to come down from their eyes. -- highs. >> if we have reached a peak inflation, what does that tell us? >> we see inflation to client, but to what level? >> it will fall down to the 2% target. >> the forecast from the fed to say that they were at neutral. >> the labor market is strong.
>> less than 2% inflation rate. >> hard to achieve. >> negative inflation. heidi: let us bring on our next guest to says there is a growing probability of a moderate precision in the second half of this year extending into -- recession in the second half of this year extending into 2023. if we aren't already in a recession, do you see a modest one? is this the best option for inflationary conditions? the market has come around to this expectation too? >> the market does look for a recession. a forecast has been one earlier rather than later, growing probability during the second half of the year. then there is the issue, what
does that mean for inflation? for tomorrow's number, we look for the top line figure to come down as energy prices have declined. the real issue is core inflation, it has been moving up. we do think as the recession deepens around the turn of the year it creates a headwind. we see the core rate coming off. housing activity, inventory of unsold home and homebuilders already dipping to build and this will translate to reduced pressure on rent next year. allow inflation to fall below 4% by late 2023. heidi: what is your technique at this point? you have talked about a barbell approach, defensive in energy. >> we take a defensive stance overall.
those sectors of the market that are not economically sensitive event as a winding down of the economic growth, health care is up there because it is not a yield oriented sector. that could create a key issue for consumer staples, and the like. this is not directly tied with the economy itself. for strategic reasons, we focus on technology, given the opportunities with digitalization of the digital economy. -- global economy. high quality, liquid sectors. very liquid sector of the market. >> no one could ever pick the bottom, there are a lot of calls it will be a well before the bottom is in this market. some very big, solid amazon tech names are pretty beaten up. is this a time to buy some of
those stocks? >> the strategic investor, i think for sure, there are longer-term opportunities out there. it is the larger technology companies at the look more attractive now after suffering through the declines, we get the declines, they will be a bit more resilient than the rest of the sector to that slow in the economy. the longer view, technology is quite attractive. it will be a difficult market going forward for the next 6-8 months. given the slowdown in the economy, interest rates are creating a headwind for valuations. kathleen: what does it mean for bonds? 60-40, some people say that does not work anymore. it is hard to say just how high bonds are going to go, particularly when the runoff of the fed portfolio has picked up
a lot of steam. what do you recommend there? >> there is a challenge with the fed selling of securities. that is counterbalanced by the reduce supply coming from the treasury itself -- reduced supply coming from the treasury itself. it remains very well behaved and that will act as a restraint on the longer-term interest rates. we think that they will be moving up at the increase will be modest. the fed is driving the fort rates higher. a full inversion in the yield curve. for now, i think our strategy is to focus more on the shorter end of the yield curve. you have the opportunity of riding those shorter-term interest rates higher. kathleen: thank you very much. you can get a round up of
honda, japan post, and fujifilm. in korea, the jobless rate was unchanged. the labor market is hiding -- holding up against interest rates. household loans grew in june, second quarter earnings are due from ky andshinsegae. >> the u.s. justice is preparing to sue google for illegally dominating the ad market. this is the second case against google. technologies help websites and small businesses reach customers around the world and the competition's expanded options for advertisers. the latest chipmaker to declare a slowdown in demand, as an industry stocks tumbling. fourth quarter sales are expected to be at the low end of
the previous guidance. they were investing $40 billion to build out new u.s. memory plants. we get more details on the cabinet overhaul in japan with the legacy of shinzo abe moving over the lbt. president biden's new chip act, $50 billion to be spent and one of the key architects behind the bill. keep it right here, this is bloomberg. ♪
the top auditor is revealing the 30 chilean dollar trust industry. sources the national audit office has been looking for risks for financial stability. war than 20 firms have been asked to report on risky developer loans and plans to dispose of them. beijing may decide on future reforms in the sector. china and south korea have agreed to start talks on stabilizing supply chains at a meeting of the country loss foreign ministers -- country's foreign ministers. they want to be open and inclusive, according to a statement from china's foreign ministry. they said beijing and seoul have agreed to accelerate second phase negotiations on a free-trade agreement. at least eight people have been killed and six people missing after one of the heaviest rain storms and 80 years hits soul. the storm flooded streets and lead to blackouts across the city. re-of the eight victims drowned in their based -- three of the eight victims drowned in their basements.
kenyan authorities have begun counting ballots in one of the country's closest presidential elections since re-multiparty democracy three decades ago. -- reintroducing a multiparty democracy three decades ago. the race is seen as too close to call between the two front runners. the deputy president and former prime minister. tennis superstar serena williams plans to retire from the sport after playing in this month's u.s. open. williams has one 23 grand slam titles and over $100 million in prize money. he told vogue magazine she and her husband want to have another child and she wants to work on her venture capital firm. global news 24 hours a day on air and on bloombergquint take powered by 2700 journalists in more than 120 countries. kathleen: japan's prime minister uchida is -- kishida is set to reshuffle his cabinet following
the murder of shinzo abe. spring bring isabel reynolds. the reshuffle expected after the summer. why has the prime minister brought it forward now? isabel: the fact is, they haven't had a smooth ride in terms of public support since he took office in october. he has now seen his support nosedive and hoping to pull things together and make a fresh start and deal with all these problems which are causing his support to fall. if we look at them individually, one of them that is probably among the most important is rising prices. although inflation in japan hasn't been as bad as other countries, the population here is very elderly. a lot of people are living on pensions. those people are really not happy, polls are showing, with the way he has handled price rises so far. he wants to show a new lineup and new faces to try to bolster support, i think. haidi: in the recent record wave
of covid-19 cases over the last few weeks, is there more need for economic policy and potentially tweaks they are? -- there? isabel: there could be a need for more spending but it's not clear what will happen. he has kept it fairly modest so far and has focused on the people and most needed. but i think there is a wider spread affect on the population -- effect on the population. we saw in an nhk poll that support fell 13 points, which is pretty unusual, to 46%. the situation is a little bit serious for him at the moment. but with the virus situation, it's hurting the economy in many ways. kathleen: how is kishida going to manage the ldp without abe, who was the leader of one of the party biggest factions. whether you were a supporter or
not, he loomed very large in the japan political landscape. isabel: yes, and i think that is one of his major problems. abe did loomed very large and the party but he was a very divisive figure among the public. a lot of kishida's problems are related to what happened with abe and the aftermath of his shooting. for example, he is arranging a state funeral for abe in september which will be a big event with leaders invited from around the world. polls say most japanese people don't want that to happen. they see it as a waste of money or perhaps they didn't like abe to start with. for whatever reason, they don't want that to happen. that is one of the things hurting kishida's support. that he needs to do things like that to keep the right wing of his party on his side. he is stuck between these two different wings of the ldp and the two different strands of opinion in japanese society. that is making things quite
difficult for him. haidi: bloomberg politics reporter isabel reynolds. we have some news when it comes to lenovo. it was a miss of 16.9% from 17%. expectations just slightly higher. six team $.96 billion, that first quarter net income coming in at $16 million -- $16 billion. an operating profit of $777 million. we were expecting muted revenue growth given that we had a sluggish consumer sentiment and the downside for demand. pc demand in particular looking to remain weak. that according to bloomberg intelligence. the work from home boost is starting to fade as these factors of rising inflation and rising living costs and interest rates squeezing discretionary spending. we did see an upside when it comes to lenovo and a lower
number of models lifting the average selling price. when it comes to shares, they are down about 3% over the past year. but still outperforming, if you can call it that, of the hsi index. speaking to markets, let's get you to bell in hong kong for a look at how we are setting up this week's session. >> checking in on those big moves we had in the kiwi bond space. they are voting for the first time since 2015. it just a reflection of these global recession fears that are sweeping across much of the developed world. there are also fears of downturns in the u.s. and europe and we have to contend with the covid zero policies in china. fears of over tightening. energy shocks. a lot of things are underpinning these moves. what you can see there, that brief inversion we had back in 2015. but the longest period of inversion was back in 2004.
we have seen moves very rare in the markets. let's get a broader perspective and what we are seeing in ossian u.s. treasuries. -- aussie and u.s. treasuries. they are not quite at the level of inversion we are seeing in the respect of the treasuries, at levels not seen since the dot com era. in new zealand, they are centering around concerns of the housing market. we saw the post-pandemic boom and borrowers really taking advantage of low record rates. but the rbnz and rba will have a big test for the health of the households and whether economies can withstand those sorts of moves. haidi: let's get more on that. a commonwealth bank of australia reporting highest cash earnings in four years from continuing operations of 11% on the year.
the senior analyst matt ingram joins us now. when you look at the nuances and the outlook, what does that tell us about the health of households in loan growth going forward? matt: thanks for having the on. household loan growth is definitely going to slow. cba called out slow and consumer confidence and high inflation. those two will have an impact on their mortgage. the cba is in pretty good shape. they grew by 8% this year. investor lines have been very strong. those unoccupied lines could still grow into next year thanks to strong approval numbers we sought the end of june. -- we saw at the end of june. haidi: how do you gauge the sensitivity to rising rents? matt: it was a bit of a surprise that the margin dropped again in the second half by as much as it
did. but the cba is the most sensitive of australian banks. they have about 70% of their loan work for these variables. they reprice on the day and the rights go up. we think it's pretty well for margins into next year. our concern is the first half of 2023 when you see a big uptick in margins on the back of that loan growth. that could produce pretty strong growth. we think that is the outlook for profit next year. kathleen: some analysts expected a buyback in the second half but nothing happened. his capital too thin for this? did they have second thoughts? because there is a lot of uncertainty in markets right now? matt: it's a good question, kathleen. we are pretty surprised there wasn't a renewal of the buyback. they are still finishing the buyback from february and that's probably a big part of why you didn't see a new one. they are sitting on $5 billion of excess capital and they paid
dividends pretty close to the top of the 70% range. we think with changes to regulatory rules, they will be above 11% from the first of january based on those numbers. they are still in really good shape for a decent sized buyback next year. a bee not topping $6 billion from 2021. -- maybe not topping $6 billion from 2021. management are conservative given the macro headwinds. the balance sheet is in good enough shape to buyback next year. haidi: the fixed rate going down was very favorable. do we expect that to continue? matt: 1.5 percent cost drops are really good results. we see inflation is raging at the moment. cba called out the high inflation rate and consumer confidence. both of those things perhaps will inflect inflation -- impact inflation next year. i don't think a 1.5% drop is
realistic. if they can keep the ratio somewhere below 60 or 58 this year, that will be an excellent result. versus their peers, they are in better shape. their transition programs are largely done. so next year, it's a case of controlling headcount and managing that as best they can. haidi: matt ingram with the latest on the cba numbers, our senior analyst in sydney. coming up next, a former secretary of state joins us to discuss the chips legislation signed into law by president biden today. he will talk about how he thinks it will impact global supply chains. this is coming out. this is bloomberg. -- this is coming up. this is bloomberg. ♪
>> unfortunately, we produced 0% of these advanced chips. china is trying to move ahead of us and manufacture the sophisticated chips as well. it's no wonder the chinese communist party actively lobbied u.s. senators against this bill. u.s. must lead the production of these advanced chips. this law will do exactly that. >> having a level playing field with foreign countries where the foreign governments have been providing incentives over the last couple decades. that is why so much production
has moved overseas. this incentive is needed to reverse the trend. even taking it to 10%, that means one in 10 chips would be produced here. kathleen: president biden and the micron president on the newly signed chips legislation. we want to get more on that bill that includes 52 billion dollars to boost domestic semiconductor research and development. keith kroc is chairman at the kroc institute for diplomacy. he previously served as the u.s. undersecretary of state. keith, welcome. you have been involved in this for a long time. tell us why this bill is important, why it will achieve something so necessary for the country. some people from the get are saying, are you kidding me? do chipmakers really need help? what is at stake here? keith: thanks so much for having me on. there are three things that are
really at stake and what this bill is all about. number one, it is securing the supply. the catalyst for that was when we on short tsmc, a $12 billion plant which kicked off a domino effect of investment here. and that is the second point. it is all about investing in key tech sectors. so that the united states can continue its lead. this is a $280 billion bill. $52 billion is for onshore and semiconductors. look. our adversaries, china, is planning a four dimensional game of military, economic, diplomatic, and cultural chess. the crossroads is technology.
and technology can either advance freedom or it can work against it. so that's what it's all about at the end of the day. you saw great bipartisan support and i think there is nothing more that scares secretary xi than a united united states. kathleen: $52 billion is a lot of money. chipmakers are doing quite well with profits. there is some concern that, you know, this money will be spent. but will it be spent most efficiently? how do you answer that concern? keith: yeah. it's very targeted. if you look at, you know -- the united states invented the semiconductor business. and we lost the capability, not the design. we are still the leaders of that. but in terms of manufacturing, only 12% of semiconductors are
manufactured in the united states. so this really brings it back. pretty much all the other nations subsidize it in a big way because it is so strategic. so this is really important and it is important to maintain that lead in design and also in semiconductor equipment. all the tools that go along with it. so since we onshore tsmc, intel announced an additional $20 billion. samsung came over with $17 billion. today, micron announced $15 billion. intel could be doing up to $100 billion in the state of ohio which is in the middle of the country. and ecosystems are coming along with it. so that $12 billion on shoring is going to result in 300 and $50 billion in investment --
$350 billion in investment and the trade that goes along with it. haidi: there will be jobs created but as kathleen alluded to, the productivity of this investment is in question. you already have foundries in place that are struggling to keep up with demand because there is a lack of skilled technical workers. on the other side, you have the argument that this kind of protection is an incentive. you are inducing complacency and a lack of competitiveness within the industry. what can congress do to be able to make these productive investments for the united states? keith: i don't think there's any lack of competition. general secretary xi is obsessed with the semiconductor business. he appointed a semiconductor czar with a trillion dollar budget over the next 10 years. as far as overcapacity, i don't think we have to worry about that for a long, long time.
the skill set is a very important point. take, for example, tsmc's semiconductor -- there are 1500 workers in that plant. 60% are phd or masters degree. my alma mater just came out with the first program to get a masters in semiconductor engineering. this is a really important skill set. it we'got to bring it back. -- we've got to bring it back. and the r&d in this bill is about $200 billion worth. this is something where we can get economies of scale with our allies and defend techno-authoritarianism. kathleen: so in terms of the asian picture, we have seen the likes of some of the korean
chipmakers and companies saying that they are not sure this is going to help them. how do you answer that? keith: it will benefit them. samsung just announced a $17 billion investment in texas. it is certainly going to help them. it will help them come very close to their customers. when you look at the customers here, the majority of them are u.s. companies. it will also help in terms of the skill set. i think this will strengthen ties with our relationship with korea, with taiwan in particular. that is really an important aspect of this picture because taiwan is a linchpin of democracy. they are a role model of freedom. xi, taiwan dispels his myth that the chinese culture can't live with a democracy. haidi: keith, as an economic
representative that represented -- that visited taiwan, we are seeing the reverberations from house speaker nancy pelosi's visit to taiwan. what do you make of this visit and the way that beijing has responded? keith: first of all, i very much support it. the highest-ranking state department official to go to taiwan and 41 years. -- in 41 years. greeted with fighters and bombers. we built the economic prosperity partnership. so, you know, general secretary xi, he amped this thing up. there is no way we are going to let him tell an american citizen let alone the speaker of the house whether she cannot cannot go visit taiwan. -- can or cannot visit taiwan.
it is really important for taiwan. we sent to the message as a friend. it's an important message to the world. it is all about defending that freedom that taiwan represents. kathleen: thank you for this interesting conversation, chairman of the krach institute of diplomacy. prices out now, the year-over-year number came in hotter than expected on the consensus, 8.6% year-over-year, down from 9.4%, the monthly number at 0.4 down from 0.9% the month before. base comparisons year-over-year, there are questions if it will feed into consumer price inflation and see ppi easing
earnings and revenue was below expectations. we have bitcoin kind of sitting in the low 20,000. it is a tough time for crypto right now. we also have some likely security issue on curve finance which is a decentralized finance exchange. bitcoin is sitting in that low 20,000 range. it has been able to go back above 20,000 which it was not able to do in june and july. but it is kind of a tough time right now on earnings. kathleen: thank you so much, joanna. the market opens in sydney and tokyo are next. this is bloomberg. ♪
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we are counting down to the major market open. we will get on inflation. maybe the cpi will pick up, maybe the ppi. we will get the big u.s. inflation. it could be a market mover. >> we have a bank of thailand decision out of that as well. we are getting these change event expectations compared to becky inflation. let's look at how markets are shaping up this morning. >> we are getting the openings in tokyo. we will also look at the latest in treasury futures. there is a little bit of a selloff and a little bit of a move up in yields. we can see now that the u.s. 10 year yield is showing at 2.8.
let's take a further look out as we get the opening on the nikkei. a little bit lower. you can see that there. you can see that a little bit weaker. we have that bond, a little bit of a move to the downside in terms of futures. the bottom line is people are going to have this jobs report on friday. it is all hanging over. asia is waiting for those numbers. ppi in japan came in a little bit stronger-than-expected. 8.6% year-over-year. it is not expected to go into the cpi. i think it is about a lot of these big macro numbers. we move on to the kospi now. i think it will be a cautious trade in asia until we get some large numbers out of the way. we did get the unemployment rate at 2.9%.
this is when inflation was rising. that was probably very good news. the cause that is a bit to the downside. we can see here this one weakening a bit as well. there is a lot of swirling around all of these markets. >> that is a great way to put it. the uncertainty as we get into that big inflation break. this is how we are opening up the start of trade and sydney. not much has changed there. we have all of the action in the bond markets in particular. if you look at what is going on with new zealand loss bond market, the economy could slide into a recession with a rapid rate hikes. this is three basis points above the 10-year yield. this is really part of that trend we are seeing. they adjusted above that -50
basis points lower. we see similar hits across these bond markets. just a word when it comes to the aussie dollar. a double whammy potentially. we will see that play out when it comes to risk aversion with the aussie. let's get our next guest in with us. this may not be the best time to take five. joining us from singapore, i was going to talk with you. if you don't take aside, how do you invest at the moment? >> it is a tough one. you can see global down. i think investors don't want to take sides. i think seeing investors in the
market by gradually. if inflation can come down, it is a bit more dovish. it could actually help a more sustained rally. they want to make sure they have some participation in the market. but at the same time, don't go ahead along with the markets. >> at this point, do you stay fully invested? are you advising clients to keep a bit of powder dry? depending on how the central bank plays out? >> i took some cash in the pipelines.
we need to stay invested but not fully invested. markets will be volatile. we will look to inflation. we had so much bad news priced in already. going forward, the downside might not be significant in the last 12 months or so. >> to what extent does this be? come down over the fed? fed officials may move away from this rate hike pass. how will it affect asian markets, global markets customer >> it is a big hangover for the market, generally in asia.
this is the biggest single event that all of the markers are watching out for. you could probably get some clarity tonight. even then, the numbers don't come down in any significant way. let's wait and watch. the inflation expectation numbers, the treasury market will come down. we have to see that bear out in the numbers. the fit -- the fed policy will have big cloud over the markets. >> you don't stay on the market, you have to start buying. big tech is a good place to start. should i start before the fed stops raising rates?
it is the idea that if you wait too long, you're going to miss these great deals. >> precisely. the markets will move ahead of actual events. you know that final moment where the fed is dovish. you will start tapering. you want to start by gradually. >> a lot of institutional investors are starting to see value again in this portfolio. are you in that camp?
are you seeing bonds offer a more compelling opportunities for that trading strategy? >> i think bonds will start to be more effective, especially the fed rate hikes coming into play. you are seeing some degree of bond market rebounding. this on the hope that the fed will speak to rate coming down. we are big believers in diversification. they should have a balanced portfolio. generally speaking, that would make sense. >> thank you so much.
another important topic is what i want to do. i am wondering what annable has to say about the news. 60/40 is such a big deal right now. move us onto asia and particularly what is going on with the ship stocks. >> it is taking some of the chipmakers here. this is the latest major chipmaker here saying they are concerned about the proper outlook. they are saying that this company is all about the consumer market. we are seeing this mostly lower. japan does get about 30% of their sales from here. this is up around 1%. since i, 17%.
let's look at another when we are keeping our eye on. a little bit unsurprising. they posted a record $1.1 billion loss in the second quarter. we have seen those measures decline in cryptocurrencies over that time. bitcoin also down. >> let's get you to vonnie quinn with the first word headlines. request the u.s. house speaker, nancy pelosi says xi jinping is acting like a scared bully over her visit to taiwan. the white house has tried to distance itself. this has sparked a wave of criticism from beijing. they said that congress would not be intimidated. >> i think he is in a fragile place.
his problems with his economy. he is acting like a scared bully. >> president biden has signed legislation that he will give the semiconductor industry $52,000 -- $52 million in subsidies. and they will support research and development. it will just reliance on other countries. >> unfortunately, we produced 0% and china is trying to move away and us. it is no wonder the chinese communist party actively lied. this law will do exactly that. >> u.s. energy security is
taking another hit after russian crude slowed. according to russian pipeline operators, it says the southern portion was shut down last week but there is no effect on the northern leg. that leg runs through germany. 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. >> coming up on daybreak asia, we will get a preview of that key data drop from beijing. this is one of the top 10 bloomberg right forecasters of chinese economic data. just ahead, china will be previewing the $3 million trust industry. we have the details next. this is bloomberg. ♪
>> you can see the investment psyche across the early part of the asian session. you can see that key u.s. i coming up in the u.s. session. will it surpass to the upside as most investors are using noticeably from what we saw in june? take a look at it playing out when it comes to early trading. the nikkei is already lower. we are watching those chipmakers in asia again today. sydney stocks also trading lower. very much a risk off session so far. >> china's $3 trillion trust industry here.
this comes as losses on loans happen, posing risks to financial stability. that's bring in stephen engle in hong kong. social stability is paramount. what do we know about this latest move? >> social stability and financial stability. that is what they are looking at here. this was a bit of a surprising move. you can look at the landing that goes to the property sector and what we saw there. essentially what we are learning is the national audits office also launched an investigation to answer. we know that eventually led to some regulatory crackdown. we don't know this particular move in the trust industry but what we do know is the national audit office has been exploring the books of at least 20 firms
including the top five in china. they are asking those trust companies to report their risky loans to the property sector and any plans to dispose of them. here are the numbers we have. trust firms have defaulted on about 58 billion you want. 8.6 billion of investment products lent to developers. here is the looking forward aspect of it. developers faced 487 billion you want. just trust payment over the next 13 months. obviously, this is a concern, wondering if this is going to post. >> it is interesting as president biden signs this big chip act. we are hearing about another investigation into china's semiconductor industry. >> xi jinping's government over the last 10 years or so has
brought about $100 billion in to try to build up china's domestic chip industry and go more advanced chipmaking as we heard from -- we heard biden talk about that. essentially, we have seen a flurry of anti-graft investigations because that $100 billion plus of national state directed money has not been to the kind of fruit leaders would have liked to have seen by now. the top anti-graft agency is announcing new investigations into three more executives in the industry. they have to manage the investment fund. in china, they call it the big fund. they had not gotten the results yet. they want to know where that investment has gone.
again, investigations into potential alleged possible corruption is one way to get to the bottom. >> as we await the release of china's latest cpi and ppi data, let's bring in david two. this was an indication of what was going on and now it is more just cpi. what are you looking at for your forecast and how important it is for the economy? >> we have seen this convergence. we need to bear in mind that we had a celebration in highlight ppi that will mainly be driven by food prices. on the other hand, we are going
to see the core cpi remains sluggish. the total demand of the country is not so strong and it takes time to return back to the level between the pandemic. on the other hand, we have seen the pbi fixed rating. that is good news for the economy. we are seeing the profitability in some industries. overall, i think it needs to alleviate the price pressure squeezing the profitability and downstream industries. i think it is a good industry for the consumption grew. >> we were just talking to see
the surprise overhaul or investigation incident trust industry. this could lead to an overhaul of the shadow banking industry. it comes at a time of such enormous economic pressure. his financial stability a concern? >> always. financial stability is always one of the priorities in the officials mind. i believe in the past five years, 2017. i would say the investigation is not a surprise to me because the industry has been one of the great things for the developers. they have bypassed the
regulations now. if you are the officials, you will be worried about it. i think the investigation already started. >> another big event where watching out for is the bank of thailand. all 27 economists are expected to raise rates from a record low have a percent. most are predicting high basis point. lots more to come here on daybreak asia. this is bloomberg. ♪
of risk going into asia. let's look at how fed features in europe are looking. we saw european stocks falling. this is what we are seeing now. more downside. not much of a bright spot when you look at these futures. we are looking at the euro holding. watch the -- watch the steadying here. we will be resuming those close and looking at estimates pointing to u.s. inventories but front and center is what happens with the u.s. inflation. >> always. we are moving onto flight bookings, surging 249%.
that is ahead of cathay pacific later today. let's bring in the asian transport reporter, danny lee. what kind of drivers will shape the first have earnings? >> we will be looking at cargo to see how much cargo revenue they have brought in and compare to the total revenue. this is all about kathy operated through the pandemic and surviving the pandemic. costs are key to them to try to contain costs as beverly rises again. we are looking at a substantial loss. that loss will be smaller than this time last year. >> will they have much to say when it comes to what they want
for the travel quarantine? >> kathy has said it wants a clear roadmap from the government. it was a clear pathway for the government to have preflight testing. very quickly, we will be looking at how much kathy may be able to add with quarantine. >> if you had to give us some kind of grade, where does it stand in the covid recovery compared to its peers? >> it is somewhere behind its peers. they recently reported third-quarter profit in fact. just looking beyond expectations, you can see how
far kathy is behind at the moment. it showed some signs of a glimmer of hope. it made its first profit after a couple of years. there could be some hope on the horizon. quick that was danny lee there. -- >> that was danny lee there. more to come on daybreak asia. this is bloomberg. ♪ millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction. that's a whole lot of happy campers out there. and it's never too late to join them.
intensified media and political pressure after the fbi searched his florida home after allegations that he took classified documents from the white house. republicans claim these are motivators. king and authorities have been counting ballots in one of the closest presidential elections. the race is seen as too close to call. bloomberg has learned china's top auditors are reviewing the $3 trillion trust industry where property is mounting. the national audit office has been risking financial stability. beijing may use the results to decide on future reforms in the sector.
bloomberg has learned china's story about top chip officials after anger over the industry failure. sources tell us top leadership is frustrated that they have failed to produce results. this fashion designer has died of liver cancer. he was 84 years old. he built one of japan's biggest fashion brands and was known for his bold, origami like creations. his most famous work may have been with former apple ceo, steve jobs. 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. >> let's get you to hong kong for a look at the market.
quick thank you. we are seeing a little bit of risk aversion cribbing into the market. a lot of these recession fears playing out here. we are seeing the major benchmarks in the red here this morning but in terms of what we are watching, we have volumes looking very muted this morning. the nikkei is down .8%. we know there is one in china coming up. but also, the u.s.. the headline is it is expected to call here. what that means for the fed is it gives them the impetus to be hiking a lot further and faster. we are seeing investors taking overly cautious role here. another thing we are watching if you bring up the terminal chart,
these are big chip names that have been warning of a slow down here. micron was the latest. a big selloff you're in chip stocks extending into asian trade this morning. you can see the philadelphia stock index is back below its 100 day moving average. >> let's bring in our contributor, garfield reynolds. as an investor, how should one understand this? you have the fourth-largest chipmaker in the world saying that orders are down. this seems to be the story across the industry. is it an industry-specific number? is it a broad market conclusion? what is it? >> this has to be more than just the industry.
anything has to be concerned when you see this level of deterioration. we are not that far away from a few months ago. people were having problems getting new cars because they could not get the chips that they need to run. this is the same thing that goes for all manner of other washing machines. just about anything you can think of. it is not just chipmakers but it is things like nvidia and some of the other electronics companies and even software services companies pointing to weaker demand. even in gaming, electronic gaming. all of that speaks to the understandable concern globally that growth is slowing down. growth is supposed to slow down
when you have his level of central bank aggression looking at the reserve bank of new zealand, just about everybody took the boj. it should be slowing down. the concern is always how rabbit that will slow down and will central banks take their foot off the policy tightening accelerator soon enough to avoid the government slow down into recession. quick thank you for that. that has further to go but we are seeing this play out in new zealand as well. we know they have been at the forefront of aggressive efforts to turn down inflation. his recession a real concern here? >> definitely a concern. along with a range of economies. the u.k. is just about certain
to have one. it is expected to go 50 basis points again. it has to stay at the forefront of rate hikes. just like everyone around the world. they had a problem with too much stimulus ultimately being in the economy. new zealand and australia in particular. that has been about the housing market. it depends on their housing markets in particular. that fits into the wider picture. especially for new zealand and also for australia. with what is going on with china , there are plenty of concerns that the chinese economy will remain under pressure. australia relies a lot on their exports. that is a big part of what is playing.
it is not just about the u.s. or europe, it is also about what is going on in china. china's economy is staying in the weeds but you also have developed economies where inflation is too high. they have central banks were not hiking rates fast enough to risk of recession on their own, and in the china problem and you have a double and a triple whammy. that was garfield reynolds with the latest. cryptocurrency coming under pressure. that is ducking the outlook for cryptocurrencies. look at this exclusive interview. >> it was a rough quarter for most companies. we had some big episodic events that happened during the order. the asset prices were strong and
-- >> the monthly transaction user is actually be. is that your take? if so, what are you doing to start the decline? >> i think are different pieces to the puzzle. one is our core retail customer, it is somewhat sitting on the sidelines in this turbulent market and we are seeing these cycles. they want to come back on and they will engage with certain teachers. there were -- there episodic bankruptcies that happened during the quarter. we were untouched by that. we have incredible risk management. there was an aspect of it where we did not also benefit from the liquidity flows. there is also reality that you have traders making up the book
of activity. a lot of that activity happens offshore. to that extent, we might not have seen as much in the ecosystem. we need to drive more international growth so we participate in the upside. our users are shown a lot of demand for that. >> what is your take on where we are in the crypto winter to mark are using signs of it starting to thaw or are we still in deep-freeze? >> i am smart enough to know not to make a guess like that. coinbase has been through four major cycles. we just know how to run a long-term business. we know how to preserve cash so we are investing in the long term and that is all we will keep doing. >> how much of this is tied to the overall economy and what the fed is doing as compared to crypto industry specific
factors? >> it is a mix. in some cases, they were intertwined because some of the macro conditions caused the run that created some of those bankruptcies. ultimately, the way we approach that market condition is we think about how we drive higher revenue driving activities. how do we cost cut in these types of environments and how do we also make sure that we have the risk management in place so that we avoid any of the contagion that happened? >> that is emily chang speaking exclusively with coinbase president and coo. we are counting down to china's cpi and ppi didn't do in the next hour. we will have a preview and some ahead of reported analysis. this is bloomberg. ♪
>> we want to speak to our next guest who says if the economy remains an outlier, would price increases remain moderate? she says ppi producer prices can is further to around 4.7% year-over-year. she is ranked among the top 10 china forecasters by bloomberg. let's start by looking at the cpi. even though it is going up a bit, it is still pretty low. a couple of forces driving it in opposite directions. what are the dynamics for what is going on and what you expect
to do later? >> thank you for having me today. these are very different dynamics compared to the best of the world. the domestic demand means that this will remain radically low. we will see the headline cpi a little bit closer to the government target of 3%. that is due to the rebound of the prices cycle. >> that is something that goes up and down. not necessary -- not something that you worry about as a trend. his 20's inflation on the cpi side? the consumer side? is that about as high as it is going to get? >> i think there is limited room for an upside. that is mostly due to the china covid zero policies which have
suppressed consumer demand. there is very limited upside for china cpi. >> the cpi and inflation outlook seems to be the least of policymaker problems right now. what do you make of the latest development across property sectors? we continue to see this dress when it comes to the broader sector. now we are hearing about this inquiry, this investigation into the trump industry. >> i think broadly speaking, there are two major pressures for china's growth. you measure the property sector pressure. they will continue to weigh on china's growth. and then definitely the covid zero strategy will weigh economic activity. the problem with the policy sector is mainly that chinese
policymakers are speaking to the medium policy priority of having high quality growth and breaking the addiction. that means the policymakers will definitely have policy intention to stabilize the sector from a risk management perspective but there is no strong policy will to lift growth rates again with property sector as the main growth engine. >> without property as the main growth engine, what is the mean for the levels of the debt that has been accumulated? i am wondering if this investigation into the trust industry is a precursor to a broader crackdown and finally, an overhaul of the shadow banking industry. >> i think this is one of the episodes that could be deleveraging policy.
it is likely to have some impact on the shadow banking sector which might be reflected in slower or less strong rebound in credit. overall, i think the sector has been acquainted under the deleveraging campaign. >> we are looking ahead to a key interest rate decision. the bank of thailand likely to raise its policy. they are expecting a 25 basis point hike. let's get you a quick check of the latest business flash headlines this hour. they have reported a better than projected jump in profits. net income growth $515 billion in the last quarter. they relied on their business to account for global electronics
demand. data storage helping to offset worsening pc sales. macron has become the latest chip maker to declare a slowdown in demand. the company says fourth-quarter sales are expected to be at the low end of below previous guidance. they will invest $14 billion by the end of the decade to build out u.s. memory plants. the u.s. justice department is preparing to sue google as early as next month for allegedly illegally dominating the ad market. in a statement, google said it at technology will help with that as small businesses reach customers around the world and the competition has expanded options for publishers and advertisers. shares plunging and lay trade.
they declined by 4% year-over-year. the number of daily activities were short of expectations. they join a long list of gaming firms that have struggled to maintain growth seen during the pandemic. next, china's stock market valuations take a tumble, putting them on par with taiwan. plenty more ahead. this is bloomberg. ♪
>> the ongoing to political tensions in east asia, china's stock market evaluate and premium over taiwan has all but disappeared. the earnings multiple for the china index has been on a steady decline in the past month. let's bring in bloomberg's managing editor for asia stocks. that is a pretty stunning charge. what is going on? what is the importance here? >> it is very interesting to see how china's stock market valuations have been on a steady decline since the end of june. if you're looking at the chart you just showed, it was at more
than 12 times, see i. now it is just below 11 times. with all of the military drills and the missile launch that have been going on, investors have the same valuation for chinese stocks. that is such an irony. for china, there are bigger things to worry about. tensions are now on our side. the covid zero policy continues to weigh on china's stock valuations as well as the brewing property prices. >> -- crisis. >> you just went for some of the big factors with the downside. what are we watching out for? >> the earnings season is one that the people are closely watching right now. if you were to look at the data for those that have not reported.
this is when the shanghai lockdown happened, the members of the china index are projected to have a 12% drop in the earnings share. that would be the worst since the beginning of the pandemic. to put that in the global context, european stocks are expected to have a 22% jump in earnings per share for the second quarter and the u.s. market for the s&p 500. the gross is on a little bit of a downward trend but we are expecting a percent growth. chinese numbers are going to be really bad in the global context. the silver lining people are looking at is this is a great opportunity for people to screen at the brazilian companies because if you can survive a very harsh lockdown in shanghai, you are probably going to do well. investors have been awarded --
rewarded after the new product surges. we have seen that probably emerge in the chinese market trading right now. >> that is survival of the fittest. it is getting harder and harder to find when it comes to property bonds in china. take a look at junk bonds. they are followed to record those. everywhere you look across the property sector, there are just failures. the property prices is expanding. the average price is sliding into this distressed level. they are falling have a percent. one sent on monday. this is the lowest ever level and it does not look like things will improve from here. >> you can read the latest story from your bloomberg to see that there was a rebound because they thought there might be some kind of state rescue fund and
instead, their luck has gotten worse and worse and worse. >> you will quickly sell yours. i think the latest has been handled by the government. >> right on to some stocks you are watching in hong kong. chip shares still the focus today. pay extra attention to these published quarterly financials. we will continue to keep our eye on other airlines here. that is it from daybreak asia. this is bloomberg. ♪
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