sophie: counting down to the major market open. our top story this hour, china makes his smokes -- most substantial move yet to curb you and strength. commodities looks set to repeat the recent surge despite china's

effort to cool prices. the commodity index up 12% since march. india could beat 10% this year despite a virus situation is not yet under control. haidi: we are heading into rba decision day, were getting some data when it comes to pmi numbers. this is the final reading coming in at 60.4 and we are seeing a resurgence when it comes to the manufacturing sector here in australia on the back of the strong economic rebound. no policy changes expected, and weighing on the rba today will be the new cases we continue to see, number of cases out of victoria and melbourne, still under that lockdown. the seven-day lockdown

announcing 63 covid cases adding another nine cases in 24 hours. we know that testing and vaccination levels have been bumped up since the new outbreak about a week ago. were expecting them to extend that snap lockdown. let's look at what were setting up for in trading over the next hour or so in new zealand. at the moment trade is pretty flat. australia, we are looking into the rba decision. sidney stocks closing at record highs into the close, but still trading a little higher than expectations of a little bit of gains going -- going into the start of trading today. the rba expected to make some remarks about where normality might fall with the possibility of future qe as well.

nikkei futures, a downside of about .2% in trading. dollar china is one to watch as well given that we've seen some pretty strong jawboning and visible measures from chinese authorities forcing banks to hold more foreign currency to try to dampen a substantial move we've seen in the surging yuan. u.s. stocks are closed for the long weekend and futures in the u.s. as well. let's get back to the top story on the renminbi, forcing lenders to hold more, the first time they've done this in more than a daca -- a decade. tom, what are the details of this? tom: the first time they've done this since 2007, like you said, more than a decade.

it's a big step for the pboc. it's to reserve reserve ratios for foreign exchange from june 15 from 5% to 7%. so a 2% increase. the idea is you withdraw some of that foreign currency, primarily dollars, out of the onshore market. that pressure is the yuan weaker. as you point out, the move follows the attempts over the weekend to talk down the currency. clearly officials are concerned versus the u.s. dollar, a five-year high against a basket of trading partners. sophie: there could be a delayed reaction when new york comes back online. tom: commerzbank saying it's largely symbolic, they think longer-term the trajectory for that you want is higher -- y for

theuan is higher. particularly the u.s., that's proving support for the currency. you have the likes of scotia bank saying 6.2 for the currency going forward. standard chartered saying they think this could be one of a series of measures by the pboc. they think this may not be a one-off. so continue to watch for action on this, but again, the move building on the jawboning were seeing on this. haidi: the longer-term demographics worrying as well. i know lots of people that are only having one child. so what do we know about what they are trying to do? tom: to your point anecdotally, those i've spoken to, none of

them have said they want to have three children. most wouldn't even consider having to because of the cost. the details of this, the politburo signed off on the move, you will now be allowed as a family to have three children. we don't know the exact timeframe, but it does follow decades of very gradual reforms to these very rigid family planning policies we've had in china. 2016 was when they changed it to allow two children. that allowed a small increase in the number of birth that it wasn't sustained. looking potentially at a shrinking population before 2025, with all the economic and social implications of that. 12 million new babies born in china, that was the smallest number since 1961. economists and others are saying you need changes around education, housing, subsidies,

support for families, maternal care and more, the raising of the retirement age to deal with this democratic -- demographic challenge for china. sophie: let's get to yvonne man with the first word headlines. yvonne: before the latest wave of infections -- infections forced more lockdowns across the country, after a rare recession that tip the economy into a contraction for the last fiscal year that ended in march. india is expected to grow 10% this year despite the pandemic. singapore's prime minister has pledged to reopen the economy as the city embarks on a mass vaccination drive. in an address to the nation, he said the government would likely start easing restrictions on june 13. he's aiming to get two thirds inoculated with at least one

dose by july. and a two week lockdown begins on tuesday. the prime minister said the belief is that boosting health care capacity, increasing cash aid and ensuring businesses have continuity. is the third package this year. malaysia is facing a worsening outbreak that slept hospitals low on icu beds. and a stimulus package to support the economy as it battles another wave of coronavirus. details are still in early stages but the newly appointed finance minister is behind the initiative and it could be monetary, fiscal, or both. the economy is expected to expand 3.9% after a rare contraction. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm yvonne man and this is bloomberg. sophie: still ahead, what could

be australia's mars -- first major political signs? first, the biggest risks ahead as we enter june. this is bloomberg. ♪

sophie: bubble stocks have seen positive performance in june or july in recent years. for more analysis let's bring in alex long at apple capital. we did see an appetite for this emergent may. do you expect a risk on start for the summer? we've seen china's credit inflows turned negative.

alex: i think june will be crucial because we have surprising data in may. unemployment data in the u.s., but the news will be crucial because we have to wait for more data to come out. in the meantime -- including cryptocurrencies. so i think there will be more upsides. sophie: when it comes to the u.s., you're seeing outperformance at a longer run. would this be a buying opportunity in this region, and if so, where does it look the most optimistic for you? alex: i think i wouldn't go to

china right now for a few months , but we're seeing strength in the last two weeks, and that is a good sign. i think the renewed strengthening in the renminbi come the technical picture right now in china. haidi: has the selloff in tech abated then, whether in asia or the u.s.? it feels like longer-term there is still opportunity in these opportunities and their growth ratios. alex: i think it's a little bit in our favor because of inflation and the possibility of interest rate hikes earlier than

expected. and also because of inflation fears. i think the longer-term prospects will be better. it will probably offset some inflation measures. so i would still be holding onto my tech exposure. haidi: in terms of the rotation into old economy shares, or going to see that continue even as parts of the commodities complex seems to be reassessing whether the rally has gone too far? alex: i think the commodity

stock actually may not have so much upside, but financial, i think's be ok. first of all we've seen some easing in the commodity market. the banking sectors will be ok in the longer run which may be a safer bet. i think they will do well in inflationary environment. another sector is equipment because people know about the chip shortage problem and that's another source of inflation.

sophie: this is underpinned by the cyclical demand were seeing which has chipmaker customers like samsung boosting their investment spending. where are you finding value in the space? you have names like asml looking pricey compared to others. alex: they have the lead in the space and it has outperformed. i think people will still look for stocks to outperform and the current spending increase, so i think it will be ok. sophie: i understand you have

crypto holdings enjoying resilience for the month, enduring a smaller drop. is either looking increasingly attractive to you? alex: i have some exposures mainly in ethereum. i think it will be ok because we still on them as a hedge. [indiscernible] but crypto is not my bet. i would hold some in my portfolio but i would probably keep it under 5%. haidi: alex long from apple

capital, we appreciate your time. coming up, we will preview the upcoming rba decision as cases continue to rise. this is bloomberg. ♪

haidi: bank of australia is expected to keep policy unchanged at its meeting on tuesday. there will be plenty to talk about when it comes to going forward especially with respect to the lockdown. alexandra, do we expect them to follow -- to expect any hawkish nish in the changing tune today? alexander: we expect the rba will not follow its peers, we

expect they will continue the communication that they will not change policy with a 2%-3% target. it's not expected that will occur until 2024 at the earliest. it has however said it will be at the july meeting when it decides whether it keeps the target and whether it will shift for november 22 -- 2024 and what it might look like with the current trenton set to expire in september. sophie: so the meeting is very much in focus. in the time leading up to that, we have victoria under lockdown. alexandra: the victoria lockdown is a timely reminder, as were in the southern it was for her

winter. it's expected to emerge from lockdown at the end of the week. the rba expects the economy will expand by 4.75% over 2020 one. we're seeing first quarter gdp on wednesday in comments expect 1.1% but i think we should remember that after what we saw in the dollar last year and some of the indicators, we should expect some volatility remaining in the dollar. for example, some indicated that q1 was a little soft. economies expected to drag 1.2 percentage points, whereas if we look at the data it looks quite robust.

so we're seeing a lot of movement in the data after last year. sophie: alexandra with the preview of the rba. economist still see gdp growing faster than most major economies this year. what does the data tell us about the prospect for recovery in the u.s.? >> we know india is heading into the current outbreak stronger than we thought. strength in construction and manufacturing and finance offsetting tourism and travel. the big question is how do they recover from where we are now? unemployment is at its highest level in the year. consumers are still cautious. on the plus side, vaccination rates are increasing. the government is spending more.

and the trade story is on a recovering path as well. even though economists are downgrading the forecast, indy will be the fastest-growing major economy. haidi: does it change the outlook for the are b.i. at all? >> i think the expectations are that will have to be fairly cautious on growth. maybe another 1.5 trillion of bonds to keep down lending rates. there may be more measures in there to have and medium-size businesses, probably not expecting much of that with the inflation story. like alexandria was saying earlier, the rpi isn't necessarily going to be the same track with south korea and new

zealand, modestly leaning toward an eventual exit. is likely the message on friday, is a question of what support they will roll out. it's a question of what they can do for small and medium-size businesses. haidi: let's get a quick check of the latest business flash headlines. an internal document says 60% don't meet the -- only 37% of nestle's food and beverages get a rating above .5 out of a maxon -- maximum of five. one unit is said to be drawing investor interest, several wealth funds with 20 investors

looking to back the commercial property management unit. one asset is playing to go public in hong kong later this year. australia may see it second-biggest ipo this year. shareholders are looking to raise about $470 million in their offering. the company will start taking investor orders on friday and begin trading on june 23. it may help revive the strong start for the year after several offerings were recently drawn. some operations across north america and australia have been halted after security attack was suspended. they don't believe employee data has been compromised but it warned the issue will take some time to resolve. russia reporting that

[indiscernible] an ipo is not high on the agenda. porsche and volkswagen declined to comment on the story. coming up, will speak to the company that found what could be australia's first major -- our guess will join us from perth next. this is bloomberg. ♪

sophie: checking on commodities early in the asia session this tuesday, head of the reading, after oil prices cap to two month gain. gold with spot prices trading above 1900 at the start of the session. an iron ore prices and futures in singapore just below that 200 level after a very volatile month prior. haidi: sometimes buried treasure

can be hiding right under your nose. that something our next guest knows all too well. just 70 kilometers from perth. the market has been in deficit for years and carbon emissions in gasoline powered vehicles. alex, tell us about this mine and where were at in terms of development. alex: good morning. we made a discovery just outside of perth as you mentioned about 15 months ago now and it's shaping up to be what we consider australia's first major palladium discovery and host a number of green meadows, critical metals that everyone is talking about right now including copper, cobalt as well as some platinum and gold.

it's in the early stages of expiration and we still have a number of years of work ahead of us, but certainly it's an exciting niscovery in western australia. haidi: how many years before that comes online? alex: typically it can be anywhere from four-seven years from discovery through to production. at the moment we haven't yet completed our feasibility studies are any of the studies you need to do. the regulatory processes you need for commencing production. so there is a decent journey ahead for us to get this asset into production, but as you mentioned, the commodity prices berman is very strong and we are moving it forward as rapidly as possible. sophie: the demand for palladium

has continued to grow. the market looking at a supply deficit in the second half. what is your outlook? alex: the palladium demand is forecast to be relatively flat. the growth of hybrid vehicles, battery-operated vehicles obviously don't require a catalytic converter. hybrids with a catalytic converter have been palladium rich for a of years. that certainly underpins the next few years in terms of the demand side. in terms of supply, you're talking about a market dominated by two jurisdictions, russia and south africa. there is a strong push for jurisdictions like australia as well as safer jurisdictions to secure some of this metal and

start producing domestically. from that aspect we are positive about the outlook. the other looming demand on the horizon is hydrogen. certainly there's more enthusiasm around rain hydrogen at the moment and we see a major role for palladium to play, all of the platinum grade metals will be important to produce green hydrogen as well as convert into fuel cells in vehicles. sophie: looking ahead, what would be the sweet spot for palladium production for your mine vis-a-vis prices? alex: our ultimate aim is to create a mining operation and define one that will be robust through the cycle. resources shaping up, related in

the third quarter of this year. it's shaping up with a large accumulation of as well as other metals so we also have a very shallow deposit there that's basically starting from the surface. we expect our profile to be competitive in the near context and certainly that's what we are formulating now and moving ahead in terms of defining this project. haidi: alex, your stock is the best performer this year on the metals and mining index. is this a logical place to be, given that you're still he from coming online, or does it speak to the overall exuberance in commodities prices we are seeing at the moment? alex: i think no doubt the commodity markets and equity markets in general are very strong, providing us a strong

position. what we found is very unique. we're talking about a once in 20 years type of discovery and particularly for to be in western australia, the premier area in the world, it's even rarer again. from that context it's understandable the valuation that we currently have. we're just starting to scratch the surface in terms of exploring our new mineral province. we found this deposit in a completely new part of western australia and there's a huge amount of upside surrounding the immediate area and an 8000 kilometer area around that area. from that aspect it certainly a very exciting discovery. it's got a huge amount of upside and were quickly looking to test our expiration efforts. haidi: how much domestic demand

do you see for palladium? and how much domestic support is therefore this rather -- whether it's across state or federal ranges? alex: the australian market is fairly small in the global context but we certainly envisage a material demand for palladium as well as platinum. from hydrogen, and that could be sooner than what is commonly accepted in the marketplace. particularly in the happier industrial applications, trucks, trains, i think that's an obvious place for penetration for the hydrogen space. we anticipate that our deposit

will be valuable and certainly the source being away from australia as to the credentials of the project. sophie: you seem to be sitting on a comfortable cash pile. alex: at the moment were sitting with about $130 million in cash for investment at the end of the last quarter. that certainly a comfortable position for us to be and allows us to do what we want to do effectively in terms of exploring new products. for the time being, we are fairly comfortable with the current balance sheet position but i think the priority for us is to get our discovery through prefeasibility study level and then will be looking to raise

more capital. sophie: thanks so much for joining us, alex, exclusively from perth. i've next, asia's natural gas prices are hovering in the low 50's ahead of the opec-plus meeting. more ahead on that. this is bloomberg. ♪

yvonne: china has eased birth restrictions, allowing all couples to have three children. the move is to slow its declining birthrate. the meeting was decided by xi jinping. it was also to raise the retirement age. china has raised the ratio for banks with exchange holdings in the most visible measure yet. financial institutions -- is an increase of two percentage points and marks the first time the pboc has made such a move in more than a decade. the recent rally has taken it to a three year high. leaders of australia and new zealand have urged china to allow outside observers access

to shame -- st. john in a move that's likely to draw criticism from beijing. expressing concerns about the human rights situation in the province. the comment on the erosion of rights in hong kong and territorial issues in the south china sea. new study has found that one vaccine can effectively control covid-19 in a mass inoculation were 75% of adults in a small brazilian town recovered with the second shot. the study may offer clues on how much of the public needs to be vaccinated to move past the pandemic. studies show that desk, hospitalizations and cases drop sharply after second shot of sinovac was given. naomi osaka has withdrawn from the french open after disagreement about participating in mandatory press conferences. she released a social media post about the decision saying she suffers a depression and social

anxiety disorder and media engagements made it worse. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: asia natural gas prices are hovering in the mid to low teens, even as demand in japan and china continue. the volatility outlook for power consumption is facing a large downside risk. asian nations are struggling. let's bring in our guest, how do we see the covid situation across asia impacting the markets? >> what we are seeing today, lng deliveries are coming down, most notably from the large --

largest supplier contacts. a lot of suppliers staying within the pacific, unlike last year when the covid-19 pandemic broke out and india went into nationwide lockdown. because of the current outlook for asia, prices are staying within that path. sophie: are we still going to see big growth in lng supplies? >> interesting, the narrative for the role of natural gas finds itself evolving. natural gas is cleaner than oil and coal, but what's happening now, natural gas still has a role to play moving forward in

different use cases in the transport sector, in power, in heating and industry. the major all and gas companies are coming under increasing pressure to look back at their business model and evaluate natural gas in their portfolio. lng supply still needed to meet the growing energy requirements especially in asia at these major oil and gas companies will need to look back at their portfolio of the proposed lng projects they have and whether they're going to progress them along the way due to the amount of demand they can carry forward for these projects. haidi: meanwhile, some chinese properties have been told to stop buying australian lng. does that have broader market implications? >> the chinese australian lng

trade is actually pretty straightforward. a lot of the australian energy bound for china comes under long-term contracts. these have somewhat limited flexibility in terms of the amount of lng that can be sent elsewhere. it's usually only a certain percentage of contract volume. these cargoes are still going to be bound for china contractually. there's nothing much anybody can really do about it without going against the contractual nature of the agreement. however, cargo brought into china may fall to a certain extent. china has been taking the most spot cargoes in the pacific based on recent analysis, mostly excess supply coming out of australian lng plants. so the flows from australia to china, china is still ultimately going to be australia's biggest

market for lng, surpassing japan. it's just a smaller proportion of chinese buyers potentially turning away are opting to get other sources of lng from austria, so it could be to the benefit of others, even as far as u.s. energy cargoes being supplied by the major oil and gas players into the country. sophie: thank you for that. you can turn to your bloomberg for more insight on energy later. get commentary and analysis from bloomberg's experts and tune into bloomberg radio for more analysis from the daybreak team, broadcasting live from our studio in hong kong. plenty more ahead. stay with us. ♪

sophie: a quick check of the latest business flash headlines. reorders purports families are -- a porsche ipo is not high on the agenda although volkswagen

is considering scenarios for doing so. porsche and volkswagen declined to comment on the story. j bss some operations across north america and australia have been halted after cybersecurity attacked affected systems. it has warned of delays to some transactions and saying the issue will take times to resolve. and a venture capital fund is aimed at helping startups to enhance value. it aims to attract $150 million in capital and will focus on both in areas like -- will be hearing from an interview on wednesday at 10:40 a.m.. haidi: sticking with japan,

capital spending numbers crossing the bloomberg. cutting investment at a quicker dicing a decline of 7.8%, orson expectations of a contraction of 6.8%, already an extension of the contraction in the fourth quarter last year. capital spending excluding software for the first quarter with a dive of almost 10%, worse than expectations. extending losses from the previous quarter as well. it does suggest the results are much worse than expected and a signal that the economic recovery going into the end of 2020 was less than earlier thought. it continues to add support to the bloomberg economics take that we could see a contraction in gdp in the second quarter, pulling the economy back into recession.

sophie: one analyst says he supports investigating the origins of covid but he is concerned what information will be found if things turn adversarial. >> i definitely support more investigation into the origins of the pandemic because i do think it's important to understand what happened. i'm concerned that if it turns to adversarial, then we will just have a hard time getting information that we need and it will be another example of how we fail to come together as humanity against the virus. the virus will exploit every difference, including national conflicts. hopefully there can be a way to arrange a credible investigation that works because chinese cooperation will be essential to figure out what happened. sophie: the president has called -- manus: the president has

called for redoubling of efforts with the report to be given in 90 days. i want to expand on what you say, that we don't want anymore conflict in terms of investigation. what kind of data, what kind of information would you see as being progressive in the next 90 days, that you see as being constructive? >> i think the president's right to say this is a serious issue to investigate we want to understand what is out there and share that. there is a commitment to transparency around that, which is a very good idea. think they will look at a few things, like when and where the infection started. they like to understand aspects of the genetics of the virus and see whether there is evidence of what the virus may have been linked to, if there's evidence that there are mutations introduced into the byron's go through each of the parts of the case and see just how strong it

is. i don't think that's a problem. i do think that it's important for there to be a global conversation about how to do this. i'm just worried that even if it's the right thing to do, if it becomestoo adversarial, what happens? manus: people are traveling and barbecuing in the u.s.. the number of deaths have fallen , this is inextricably linked to vaccinations. how would you describe the current state of vaccination? i'm seeing different campaigns in australia giving away free flights to america, get your vaccine shot and get a beer. where are we on the rollout and the success of that? is this where we run into vaccine fatigue? >> it's definitely good news that we are seeing cases falling

dramatically so far in the united states. but we haven't vaccinated enough people in this country to really protect against future surges and people who are unvaccinated are still at risk. there is evidence they are still getting sick and going to the hospital and at risk for death. there's a lot more work to be done in the united states to protect the country from coronavirus. i do think the fact that 62% of americans have gotten the first shot is a good thing, and were headed in a direction that's probably going to need to be closer to 80%, according to the models, in order to head off a fall surge. manus: when could? ? we hit 80% -- when could we hit 80%? >> it's not up to me, depends on if people are willing to take the vaccine. i think the most important thing here is not to let the number of cases, even if it seems to be

going away, the coronavirus is still waiting and it will take advantage of people who have lost their immunity from may be a mild infection, never were infected, didn't get vaccinated. it will take advantage of that in the fall as the weather get -- gets colder. now's a time to make hay as the sun shines, as they say, and get more people vaccinated. it means thinking about communities at higher risk, spending extra money to work with community partners, although strategies are essential now to avoid a problem later. sophie: the doctor at johns hopkins university school of medicine. we're seeing nikkei futures pushing higher ahead of the rba decision. wti trading ahead of the opec

plus meeting. will be assessing what is driving commodities. this is bloomberg. ♪

>> hello. welcome to daybreak asia. >> taking a look at markets opening across asia, the top stories this hour -- u.s. futures job data later this week.

raising requirements for bank for more than a decade. can [indiscernible] commodity index up 12% since march. there are signs the rally is running out of steam. >> another month of exports growth with shipments rising 45.6% for may as auto recovers. the pace of the missing estimates sees the trade balance narrowing to $2.9 billion. let's turn to the open in soeul . gains up to tens of a percent for the cost be -- the kospi. we are checking in on the korean won. we are seeing a trade around

the stronger levels again. the greenback this morning as well. the government, saying cbi may temporarily move above 2% of the second quarter. that is looking limited. let's which the board for a check on the open in tokyo. we saw tokyo stocks ending on a down note, still clenching and monthly gains in both the nikkei and topix. the nikkei, heading back to 30 k. that will depend on how soon economic activity in japan can normalize. check out the yen, steady after rebounding from a two-month low. heidi. >> let's take a look at trading in sydney. the aussie dollar, going into decision day. aussie structs have been trading close to record highs. -- aussie stocks have been trading close to record highs. the aussie dollar is seeing a

little bit of upside. mostly range bound going into the position. no policy tweak expected. we are expecting some narrative around the road to normalization. we are also getting property numbers out of australia. jumping 2.3%, accelerating the growth and price as we saw the previous month. when taken on a quarterly basis, this is the hottest quarter we have had for australian property prices since 1988. we're continuing to see these big jumps across most capital cities. sydney seeing an increase of 3% for the month, over 9% for the quarter. those low interest rates as well as the economic recovery are pretty strong consumer sentiments in the housing market. >> no change in policy settings expected at today's reserve bank of australia. the central bank will be holding talks on whether to undertake further qe. our next guest says he is not

expecting too much given last month's update on the outlook. we have the global market strategist at j.p. morgan asset management. we are finally seeing australian stocks getting some love after a terrible year. do you think the road to normalization is raised in at the moment -- priced in at the moment? >> i think the equity markets are illustrating the rebound we are seeing us really are, the relative outlook in terms of the region. notwithstanding most recent news. we have the building and the consumer side with the unemployment rate falling. really fitting into relatively strong gdp numbers. obviously the hype commodity prices are helping. i think there still room to go further into the australian equity market.

>> let me bring it to the question of the day. which dampens what we have seen in the u.n. and measures around commodities rallying as well. how do the moves from beijing affect broader assets? is there a concern particularly on the commodity side if china continues to do what it wants? which is to try and get prices lower? >> no, the one loser is china. they want to low price. you're still seeing quite high demand. it should keep prices at a relatively high level.

you might see some sentiment change from chinese officials to try to bring it down. it's not the first and we've seen that. the outlook for commodity prices varies across the sector. if you think about iron ore, copper, there's still strong demand and limited supply that's been affected by covid. which really underpins those prices. >> you still have inflation as a top risk on the inflation front. how are you factoring in the risk of the lockdown imposed in the region as of late? is it something to worry about? >> yes. we look at the inflation outlook and with the banks are telling us. there's a risk that it will become sticky in terms of last year. the ongoing destruction of the supply chain from covid around semiconductors.

inflation remains a bit higher than expected. we do believe inflation will come off the hyatt has seen. it will start to come down eventually and supply will come back to mee the accelerated demandt. -- meet the accelerated demand. we do bring forward those expectations around tapering earlier than the reservist -- the reservist telling us. we took a couple of months to get a good idea whether it will feed inflation consistently higher or not. thinking about the underpinning factors driving inflation of the moment. >> what does that mean for the trajectory of yields? we have seen them pretty much range bound. >> they haven't done much since march of this year. bull markets reflected growth

and inflation outlooks on the back of that. we saw a lot more movement between real yields and breakevens. at the moment, they are moving apart. with the breakeven's rising a lot more than they yield space. that divergence is not something we have seen for some time. our view is given the unknown quantity around inflation, there's still rall risk -- real risk from the vaccine rollout and the virus. but also the upside from fiscal stimulus. . the inflation is likely to push yield higher. it will probably be more of a slow grind at the beginning of the year. nothing will trigger something massive until we see those inflation numbers becoming persistent. another thing we would watch out for is court reaction, we look at the earnings season coming up, we hear a lot more from companies on supply pressures.

it could potentially pass costs to consumers as well. >> we are starting to see maddie you -- valuations come down across asia. are you looking at this part of the world? >> the focus is really on the earnings outlook. given that valuations are still elevated around the world when it comes to equity markets. there will be a valuation drag across the market this year because of the upside of earnings to upset that -- offset that. the risk that comes with the asian story around the lockdown you are seeing imposed, the potential supply chain destruction, we still focus on china for the long run story, outstanding the technology stocks and the official action that's been taking. when it comes to asia, it will be positive, they are much more

in tune with their global reopening towards korea and china. we need to offset that entire one. we need to offset that with the covid numbers coming out. our preference is to think about developed markets in this context. it will be a lag story that will catch up later on. the earnings outlook is much more strong in europe at the moment. >> on europe, we have seen this docks -- the stocks gain. they are going into a season historically weak for european stocks. can the ecb hold off about talking about tapering? >> it will be a laggard on tapering. there's much more news in the u.s. and other developed markets. thinking about the more sustained things that come through inflation and the bond fixing program. the policies they put in place

may be reduced a little bit. they also maintain the bond buying program for much longer. the fed is doing so to support the economy. we are in the early stages of the reopening. we expect more laggard from the european recovery from. i think there's a lot more potential in europe. it's a market that's been there for a long time. the valuation around the growth story -- around the cyclical story is somewhat appealing. >> kerry craig, thank you for joining us. you can also turn to your bloomberg for more on the decision later. get commentary and analysis from bloomberg's expert editors. i want to bring your attention to a stock moving in tokyo.

the japanese baby bottle maker, jumping more than 7%, climbing to a may 25 high, on the back of china's policy around easing limits. it may benefit the company in the long run. optimism is unwarranted for now. pigeon, with a price of ¥3265. >> the economy expanded faster than expected last quarter before the latest wave of infections forced lockdowns across much of the country. gdp rose 1.6% from a year earlier parking the second strict order of expansion after a rare recession. sending the economy into contraction in the last fiscal year. ending in march. singapore's prime minister pledged to reopen the economy, as the city embark on a mass vaccination drive and cases come

under control. the government would like to start easing restrictions june 13th. malaysia has unveiled a $9.7 billion package to help people and companies through the two week nationwide lockdown that begins on tuesday. the prime minister says the relief is aimed at boosting health care capacity, increasing cash aid, and ensuring business continuity. this is the third package this year. malaysia is facing a worsening outbreak with a blow on icu beds. considering a stimulus package to support the economy as it rattles another wave of the -- battles another wave of the coronavirus. the finance leading the initiative. bloomberg understands it could be monetary, physical, or both. the pakistani economy is expected to expand to 3.9% this

year after a rear contraction. -- a rear contraction. -- a rare contraction. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. >> will take a look at commodities -- we will take a look at commodities. when gordon will be going -- mr. gordon will be joining us. ♪ this is bloomberg. ♪

♪ >> the most visible measure yet to curb the game. the financial institutions will need to hold 7% of their foreign

currencies and reserve, up to two percentage points. the first such move we have seen in over a decade. our executive editor joins us from beijing. what's the messaging behind this? >> the messaging i think is, please watch out. the authorities are ok with the yuan depreciating. not too quickly. it's been depreciating steadily. ever since it was clear the economy here would be rebounding from the pandemic. last week, we saw a go past 6.4, hit multiyear highs. the pboc came out trying to talk that you on down -- the yuan down. we are seeing the volume of the rhetoric being up. >> china also wanting to address demographic issues, even the current to child restriction -- two-child restriction.

is this enough of an incentive? >> china's got this very large problem. the population may be in the next few years will tip into shrugging mode. -- shrinking mode. the government is trying to do everything it can to reverse that trend. it allowed families to have two children in 2016. the announcement yesterday allows families to have three children. the impact will be relatively muted, given the other big sort of them -- sort of demographic trends we have come a women working higher levels of education, it's becoming more expensive than ever to have a child. letting folks have three children is not going to do that much. >> what are some of the policy measures they could take? you pointed out more support for working women. there's lots of concerns over education, the health care system, over social welfare, as well. >> yeah.

childcare, early childcare especially, kindergarten has been one point the government has talked about, making them more broadly available, providing some sort of financial assistance to families with young children, and moms we need to would work. another thing china can do is some sort of incentive, for families to have more children. and longer paternal/paternal leave after the birth of the child. >> our executive editor, john liu. up next, asia's coronavirus pipet would economies are struggling to reopen. -- asia's coronavirus pandemic. economies are struggling to reopen. this is bloomberg. ♪

>> as the economies in the west

reopen for business, asia's powerhouses are struggling to catch up due to slow vaccination rates and the rising infections. it will shift away from the strict containment approach. hong kong's easing restrictions for vaccinated senior corporate experiences, facing a backlash. we are joined by haslinda amin. as well as our northeast asia correspondent, stephen engle. let's like about singapore first permitted to starting the new vaccination program, with students to be involved come june 1. what else is being done to speed up the rate of inoculations? >> basically, it is a shift in strategy to ensure singapore is not left behind. it is shifting away from a policy of zero-tolerance for new cases. to a policy of living with a virus. the problem said last night is that it will be endemic. the new normal could entail a yearly booster shot.

this revolves around testing, tracking, vaccination. you're talking about 400,000 students can now go online, register for a vaccination from today, and also all eligible to get vaccinated at least by august 9. -- at least with the first shot by august 9. it's a different strategy this time around. singapore says we have to, and the new normal, countries with sensible safeguards will be able to reopen the economies, reconnect to the rest of the world, grow and prosper. singapore will be among these countries. that is the strategy. it will open up the economy progressively. they are not in a hurry to do that. they will ensure safety first. >> stephen engle in hong kong,

there are accusations of special treatment for some executives being vaccinated? >> yes, that's right. this government's been struggling to convince people that it is for their good and the greater good to get vaccinated. this government spent the money early on. to secure doses of vaccines from sinovac as well as biontech to cover their entire population of 7.5 million. to date, according to yesterday's update, carrie lam said about one million people out of the 7.5 million, 13% of the population have received both doses of either those vaccines. that is not enough of course to achieve the so-called herd immunity. they have launched yet again another campaign to get people and convince people. launching a campaign to give civil servants two days paid leave, one day for each shot they get, encouraging other companies around the city to do the same. but again, people are not taking

up because they are kind of angered there are few incentives to get vaccinated. if they travel, they still have to spend two weeks to three weeks in a hotel. i checked the prices, it is expensive to stay three weeks in a hotel in hong kong. upwards much more than 3000 u.s. dollars. they are saying it is unfair that the government yesterday announced that seniors negative's can apply to be -- senior executives can apply to be exempted from that hotel quarantine when they come back to hong kong, as well as bankers and the like. that was announced on friday. saying this is again the out of touch elitist government policy that is ad hoc and its response to the covid virus, when they are really just -- when there are really just domestic infections found everyday. hong kong's use to criticizing the government. this is another case of that. >> let's talk about taiwan. the covid alert levels, we are seeing level 3 come when you measures coming this week, so challenging.

>> at the end of april, this is an island that had 100 cases of covid. now there are more than 8000 cases. dave had this massive wave -- they have had this massive wave, they have not secured vaccinations from around the world, and the economy has started to significantly suffer. with the government yesterday did is lawmakers approved lifting the cap on stimulus spending, they earmarked 15 billion u.s. dollars, that's already been spent or earmarked already. they are now raising them a doubling the cap to $30 billion. they are really weary of the virus without all the vaccinations, not coming to the island until this month or beyond, it is going to significantly hurt the economy and we are going to go from a soft locked potentially to a hard lockdown. and already, restaurants and retail areas are suffering from a drop off in customers. >> i malaysia, they are going backn -- in malaysia, they are

going back into lockdown as of today. will the government soft and the blue? >> it is a third stimulus this time around. already, economists are saying when it comes to gdp growth for the year, it is likely to be cut my 4% from the govern estimate of 7.5%. it is really difficult to see how this is going to play out. they talked about 8000 cases in taiwan. we are looking at more than 9000 cases a day in malaysia. so, there's no end to this at this point in time. and it's not just malaysia seeing a resurgence in cases, it is impacting the likes of the philippines as well. it's increased restrictions from manila and other surrounding areas. >> our chief international correspondent from southeast asia and stephen engle, our chief correspondent for north asia and hong kong. coming up, the record south

korean exports jump. we will break down the numbers for you, next. this is bloomberg. ♪ wanna help kids get their homework done? well, an internet connection's a good start. but kids also need computers. and sometimes the hardest thing about homework is finding a place to do it. so why not hook community centers up with wifi? for kids like us, and all the amazing things we're gonna learn. over the next 10 years, comcast is committing $1 billion to reach 50 million low-income americans with the tools and resources they need to be ready for anything. i hope you're ready. 'cause we are.

paul: this is "daybreak asia." i am paul allen with the first word headlines. china has eased his restrictions on couples having more than one child. the decision was made in communist party meeting by president xi jinping. the decision was also made to raise the retirement age. china's latest census showed a decline in the country's working age.

china has made its most visible measure yet to curb the yuan's gain. institutions will need to hold 7% of their currencies in foreign reserve, an increase of 2% in the, first time that pboc has made such a move in over a decade. a new study has found that the sinovac vaccine can effectively control covid-19 in the mass inoculation were 75% of adults in a small brazilian town were covered with the second shot. the study may offer clues on how much of the public needs to be vaccinated in order to move past the pandemic. deaths, hospitalizations and cases dropped sharply after a second shot of sinovac was given. australia's softball team has arrived in tokyo among the first foreign athletes to flight in for the olympics. all members are fully vaccinated and will be confined to one floor of their hotel. and a nearby stadium.

one newspaper that's -- and a nearby stadium. global news, 24 hours a day, on air and on bloomberg quicktake, powered by over 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haidi: we have the japan manufacturing numbers coming through for the month of may. up to 53, finally above expansionary levels from the 52.5 seen in the previous reading. this after we had a complete mace in capital spending earlier on today. looking like japanese firms are cutting back on spending. the pmi for manufacturing looking a little more robust. sophie: we are also getting pmi data from across southeast asia. may manufacturing pmi down to

50.1. output and new orders in vietnam lower from the previous month. in the philippines, we are seeing a slight pickup in manufacturing pmi at 49, but it is marking the second month at contraction as the philippines capital remains under quarantine until june 15. north asia pmi, south korea's may manufacturing pmi also seeing some slight softening, to 53.7. that is the lowest reading since january. in taiwan, we saw the pmi number slip to 62 versus 62.4 in april. that is the lowest reading since march. we did see a pickup and output, raising to 65.5, the highest level since january of 2020. we want to bring in enda curran. your view of the pmi readings. >> a pretty solid set of

numbers. well in positive territory although there is a hint of cooling. the new export orders will be one to watch. taiwan was better-than-expected given not just the covid lockdown but also the power shortages. more of a mixed picture in --, a lot of numbers holding up as he mentioned. for your malaysia and philippines, we know there are restrictions being put in place in activity in these countries and that is going to have some economic impact. all told, it is a bumper set of numbers. the asian manufacturing story is still on track it is. . a question of whether or not we start to see some softening. and there is some hint of that from china yesterday. haidi: the gdp numbers from india suggested that just before the pandemic hit, there was some good momentum. what are the chances of that

being sustained in the recovery? enda: quite right, clearly india was doing better-than-expected, 1.6% in the quarter, there was good performance for finance and real estate manufacturing. the thing is how they do come out of the ferocious wave they have been battling. we know that consumers are going to be cautious. the question becomes can vaccination pace pickup enough to get the economy freely moving again? we know the government is spending more money. we also know that the trade story is improving. it does point toward india coming out of the current lockdown in an ok position. even as economists downgraded their forecast, we had the o.e.c.d. last night looking about growth of 9.9% for india. that is a downgrade of where we

were a few months ago of 12%, but still the fastest growing rate for any major economy in the world. india had momentum going until this very swathe. the question is whether this momentum can be maintained and they can vaccinate more of the population to reach that critical mass needed. haidi: enda curran, our asia correspondent. the pandemic recovery is leaving many regions behind, that is according to the o.e.c.d.. they boosted their forecast for global growth, but at the same time i warned that leaving standards will not return to precrisis levels for an extended period. the secretary-general of the o.e.c.d. give us his outlook. >> we feel it is pretty solid, pretty robust, but it depends crucially on whether we can keep up the rhythm of vaccinations.

it is vaccination, vaccination, vaccination. that is going to define how robust the recovery is. and the other question is, is it going to be vaccination only for the wealthiest countries? or are we going to generalize it? we need a very important effort to be able to get vaccines into the arms of people in. , we will not be able to say that we have overcome the crisis. >> the wealthiest countries are going to be looking at 60%, 70% coverage in the next weeks and months. i mean, they are well on their way to done. how long is it going to take developing nations to get to that kind of vaccination

coverage? >> the answer is how smart and how generous the developed countries will be. if they are smart and generous that means it is the same. being smart means being generous. being generous means being smart. then we should find mechanisms like covax. we should get only a fraction of the trillions that have been thrown at the virus. just a fraction of that will do the trick. it can vaccinate everybody in the developing world with between 50 billion and 100 billion, wearers upwards of $16 trillion have been dedicated to fighting the virus. so, only a fraction will do it.

matt: we know that there is going to be uneven recovery because of this discrepancy in the vaccination cases. they are going to take years to catch up to the levels the e.u. and the u.s. are looking at now. what are the risks of such an uneven recovery? >> the risk, now it has become almost a cliche to say that nobody is safe until everybody is safe. and also because of the enemy is mutating. the enemy has variants. it's changing its shape. it's changing its dna. therefore, we should not allow it to do just that, we should try to beat it as early as possible.

by the way, it is a false dilemma to say that we should balance the economy, the lives of the livelihoods. the question of health and the question of the economy. clearly, the very obvious choice is get the virus. beat the virus first. because the virus is having immediate consequences on the economic side, and the social side. those will stop the moment we stop the virus. sophie: that was the o.e.c.d. secretary-general speaking with matt miller. let's look at how asian markets are faring this to morning. equities trading near a one-month high near the top end of the range since february. trading going into a summer

stretch that is seasonally strong for the region, with health the typical out performer. earnings remain very much key. we are seeing materials gain ground across the board, leading gains on the nikkei. banks falling. commodities broadly higher this morning. oil adding more than 1% tuesday after a two-month gain. with oil on the rise, the opec-plus forecast a tighter global market. we get the outlook from ubs executive director, wayne gordon, who sees robust returns among the commodities complex, ahead. this is bloomberg. ♪

>> the redhead crossing the bloomberg terminal right now, china boeing no tolerance for commodities speculations. >> where do we go from here? >> commodities markets getting mixed messages. >> regulators stepped up their fight against soaring prices. >> that can be interpreted as,

we want to raise commodities imports. it would have the opposite effect on prices. that would raise international prices and make china's life a little more difficult when it comes to controlling prices. >> remember when they started to intervene, we saw commodities continue to go up. >> we have seen the manufacturing level not yet at consumer prices, and that will ultimately pressure the central banks to raise interest rates. really the cost of getting stuck with chinese factories a let's bring in wayne gordon from ubs global wealth management. you are seeing upside moves. good morning, wayne. what is the main driver we have been seeing for commodity prices? is it demand shock's? supply shortfalls? or speculation?

wayne: i think most of it is from the demand side. the supply-side continues to play a supporting role. but as we saw with pmi's out of china, particularly things like steel, pmi's continue to print very strongly. manufacturing pmi's are still about 50. we have this combination of this recovery in goods demand, which is really starting to gather momentum. at the same time we are still seeing the supply-side issues such as what we are experiencing down in chile, with respect to labor issues in the copper mining side. all these things are combining to bring us to what we think is higher commodity prices over the next six months. sophie: you have brent nearing 70, wti testing $67. yet companies are not boosting output to take advantage of

these higher prices. how does this allow for opec+ to increase supply in the second half, and what does that mean for crude? wayne: i think crude is one of their calls. we expected crude oil prices at least trading at a high of $70 as we go to the start of next year. actually, we are not that far away from that. the key things that i took from the technical reading from ", firstly, the -- built up from 2019 is completely gone. we have oil inventories around average levels, actually heading a little bit lower than that. the market has clearly tightened up. the strategy at opec has played out and is working in that regards. the second point that will continue to force up crude oil prices was the decision in holland to begin to crack down

harder on the producers of oil, with respect to the emissions it generates. that will only further drive investment in the oil sector. we haven't seen a significant pickup in oil investment over the last 12 months or so. partially it is covid. so the fact that the regulatory side is very uncertain. net-net, we can expect the market to stay in deficit and that will push prices harder to clearly as a vaccine rollout really gathers momentum. we see this particularly between places like europe and the u.s. as people start to travel more. airline traffic will begin to pick up intercontinental and we will see a pickup of 3-4 million barrels. haidi: i want to get your views on base metals. iron ore rallying in particular. this chart shows projected earnings. of course, australia is a

beneficiary. the mining index now at the highest level in over 13 years. now that we had a breather, is the rally still intact? are we still talking about a supercycle? wayne: i still challenge the supercycle idea a little bit largely because the last time we had a supercycle, it was due to urbanization and industrialization of china. obviously, with this shift in the transition economy to a lower-carbon output more generally, it is going to take significant amounts more of nickel, copper and other metals, as well as a pickup in infrastructure such as commodities that produce steel. generally speaking, we have these structural demand drivers in play the next couple of years. the argument i would make is that on the copper side, we

could see more supply coming into the market in 2022, which could cause prices a little bit -- but until then, we see the market very tight and these prices continuing to prevail. on the steele side, clearly the more we discussed the reduction of emissions, in particular, china attacking emissions pretty heavily now, and they will continue to do so over the next few years, clearly, that is going to pave the way for higher demand, for higher-quality commodities, as well as natural gas to help in this transition. particularly for things like gas, i think that's been largely forgotten in this strategy over the next 5-10 years. haidi: you talk about china. i want to get your fx views. what happens to the yuan now that we have had clearly from

the pboc that they want to stop the rise? wayne: at least on the pboc side, i think they will basically slow the appreciation of the cny. i am not certain these actions will bring a depreciation of the cny. of course, it is a monumental action in the sense that after talking about their concerns for some time now, this is actually real action on the table. however, when we think about our view, we do see a weaker dollar over the next six months. but, after that, we think real interest rates in the united states will start to rise. we think interest rate differentials will begin to -- in the dollars favor.

we think china has to deal with the appreciation particularly against the dollar over the next few months. i think it leads -- from our perspective, we expect the dollar to strengthen in 2022. the euro-dollar, for example, goes to 120 five then turns around and goes back to 120. that gives everyone, at least those countries which are pretty concerned about appreciation of the currency. haidi: wayne gordon, executive director for commodities and fx at ubs. 20 more to come on daybreak asia. this is bloomberg. ♪

haidi: the world's number two tennis player, knowing osaka, has withdrawn from the french open after a disagreement about participating in a mandatory press conference. she posted on social media that she had suffered from bouts of depression since 2018 and would take time away from the court. for more, we are joined by our tokyo bureau chief. casting a glance at the social media reaction, there is an enormous amount of sympathy and support for naomi for doing this. >> absolutely. that's from other athletes, as

well as fans. when it comes to naomi osaka's sponsors here in japan, we haven't heard much from them yet but we have been watching their shares since they open and they have not taken a hit. her withdrawal from this tournament is something she said she never imagined or intended. a few days ago when she posted about her decision to pullout of those media appearances, a move that was intended to alleviate the pressures on her mental health. it did lead to a couple of days of intense negotiations with organizers and they were unable to come to a compromise. so it is a setback for naomi osaka, but it does send a message to organizers of similar events, if they want her there in the future, if they want her star power, they will need to make compromises in terms of looking after the athlete's mental health. sophie:. sophie: how has the french open responded? sophie: ahead of her message to

withdraw after she said she would go to the press conferences, the french open got together with other grand slam tournaments and released a joint statement warning that if she opted out of media events in the future, she could face a default or even suspension from the grand slam event. today after her decision to withdrawal, the french open released a statement saying "it is unfortunate, but she is welcome next year." when you look at statements from organizers and from osaka. you get a sense perhaps that there is a generational gulf in the way that we talk about athletes' mental health. she says perhaps pulling out of these media opportunities was one of those things. but the organizers did not see it that way. sophie: sophie jackson, our tokyo deputy bureau chief. three. that is a number of babies china hopes families will have.

our coanchor, david, is here with a look at some of the numbers. david: yeah, the declining birthrate -- [inaudible] sophie: china's population policy very key. coming up, we are getting more insight on that -- let's look at what is going on with markets perhaps. we will get more insight on china's changes with our china analyst, gabriel wildau. that is it for "daybreak: asia." our market coverage continues as we look ahead to the start of markets opening in hong kong and xinjiang and also look into the open of malaysia. the country there is entering a lockdown. time for "bloomberg marketsthis is bloomberg. ♪

>> welcome to bloomberg markets china open. david: good morning. counting down to the open of trade in the chinese mainland. let's get to your top stories. china taking its most significant step yet to curb the strength in the currency. the pboc forcing banks to raise fx reserves for tht