>> good morning and welcome to daybreak australia. >> we are counting down to asia us to bring market open. >> i am shery ahn, the top stories this hour. u.s. stocks fall. consumer and tech weighing on the s&p 500.

>> jay powell defending the fed while admitting he is uncomfortable with inflation. they see tapering around the end of the year. >> the biden administration set to aim its warning on hong kong at investors as fears of shrugging off the risks. look at the markets right now, on wall street, we are seeing u.s. futures down .1%. the s&p 500 saw the afternoon sale, we had fed chair powell because dovish testimony. this is really giving rise to those growth concerns. that is below that 1.3% level. we have the dollar rising. demand has been up for a third out of fourth sessions -- four sessions.

what was really interesting to me, take a look at the bloomberg. today, interesting, both are small caps as law -- as well as large tech. it might be that we are going to see the 10 year yield decline. when it comes to the nasdaq 100, that rotation to growth continues. when it comes to the month of july, bloomberg data has risen an average of fort hunt -- 420 -- 4.2%. you can see that passing the

50,000 level. >> this is not just the case that the longer-term growth propositions is just too compelling, i want to look at the contrast when it comes to asia tech, specifically china tech. there are some out in the markets. these valuations could be potentially lower. there is a pretty interesting case of value. take a look at that bloodbath. we are still down over 30% with that drawdown from its peak. >> it is quite interesting because we are concerned about inflation. you put inflation, rising prices and valuations are becoming stretched. it really is quite something. >> we continue to watch the fed.

even as past pressures want to uncomfortable levels, this is the second round of testimony this week on capitol hill. >> think we are experiencing a big uptick in inflation. bigger than many expected. bigger than i expected, this is a shock going through the system with reopening the economy. it has driven -- we don't have another example of the last time we reopened a trillion dollar economy. one way or another, we will not be going into a. of high inflation -- a time of high inflation because we have tools to address that. >> our next guest says the markets sustained their

goldilocks merit of -- narrative. on the other end, rates being too hot -- high or too low. great to have you with us, all the way from minneapolis. the fed said this is a very unique type of inflation because we have not really been here before in these circumstances. does that make it more difficult for the market to stay in their goldilocks state of mind? >> earnings are starting to come true. fed commentary, they are parsing every single word. the fact of the matter is they have never been here before. we shut the economy down overnight. then we proceeded to try to

reopen things. the interesting thing as we have got to this point is to figure out how much stimulus is actually in the system. investors have a lot to look for but there are a lot of positives going on in the economy itself. >> are you doing any kind of inflation hedges if you think there is a debate as to whether this is a one-time reset? >> one of the best long-term hedges against inflation is equity markets and especially lending into the growth of that because inflation for the right reasons which this one would be is indicative of growing economies that allows for pricing powers. we have seen some of that pricing power. if it levels out at a reasonable level, you can sustain this

uptick. being able to pay higher wages, people can spend more and it can feed on itself in a very positive way. >> on a day like today, we have all of the growth stocks as well with the nasdaq 100 falling. >> you definitely have some fears about whether growth is rolling over because you had the fed both yesterday and today. fed chair powell said he does nothing growth will moderate. he pointed to lumber. everyone is pointing to that having done a round-trip. that is evidence that you are starting to see some of those supply chains open up.

you can find toilet paper which you could not last year. there are things in the supply chain that are working themselves out. >> what about the emerging markets? is there anything interesting out there? >> there are a lot of things interesting in markets globally. emerging markets are really interesting. there always tougher. in terms of looking at emerging markets, it will looks at active management over there. there are some interesting things going on at the private capital and it focuses on emerging consumer groups. there are lots of little nieces -- niches to play. it complicates the investment. >> grated have your thoughts.

let's turn to the markets. we have seen a volatile week here in the u.s.. it was really seesawing for the s&p 500. >> the regional index is on course for the best week since february if we have seen gains continued. we have to be ok amp up, the hawker stones of the boj. this after tokyo registered a new six-month high. they were lowering their outlook because of virus curves across asia. switching up the chart, when it comes to southeast asia, they are running short on ammunition with the spread of delta. that has weighed on the outlook

for markets but we have some investors that remain constructive on the region including the jp morgan asset management. this may to further economic scarring. we will be closely watching that. >> they were warning friday about the risk for companies doing business in hong kong. president biden spoke minutes ago about the changing situation in the city. >> the situation in hong kong is deteriorating. the chinese government is not keeping its commitment for how it may deal with hong kong. >> for more, let's bring in nick. does this entail any specific action?

nick: they are not planning to take any specific action. there is not much they can do that exquisitely tells businesses they should not do business in hong kong. what we are told is this is essentially born of a feeling by the biden administration that multinational companies don't sufficiently appreciate the risks of doing business in hong kong. also, other actions that china has taken, anti-foreign sanction laws that actually enforces multinational companies -- u.s.-based sanctions and potentially facing the risk of that class from the chinese government. it is just a warning, saying these are the risks you face that independent judiciaries in hong kong had. it has been an eroded rule of law that the chinese coming this party is more in control.

-- more in control of what is happening in hong kong. >> are we starting to see a decoupling of these two economies? >> it interesting because the united states has had many times we are not in conflict with china, we are in competition but the language out of the biden administration is that this is one of the defining challenges of the 21st century. when you portray a competition as one of the great generational challenges the united states has ever seen, in some ways, there is fear among the business communities to be fair, they are essentially asking companies to choose between the two of them. the coupling will be a lot harder than that, coming is like apple are lying on chinese manufacturers. it is a huge amount of what goes

into the iphone and ipad. pulling out that production capacity is something that would be extremely costly and would take a long time. we are not seeing companies pulling out because of what the u.s. is demanding but essentially the administration has made a priority of bringing this into other places, more from the countries to the united states. >> melbourne goes into lockdown again. the plan since the pandemic began. the latest restrictions in australia next. this is bloomberg. ♪. .

>> you are watching daybreak australia. i am vonnie quinn with the first

word headlines. the german chancellor has placed help for devastated floods in western germany. angela merkel because the situation a catastrophe. more than 60 people are dead and dozens are missing due to the torrential rain. internet services are also impacted. africa has the world possible to vaccination rate and is forging ahead with the johnson & johnson vaccine. that is despite the fda warning earlier about attacking the immune system. they are donating millions of doses to the conflict. a federal court in kansas has willed that pfizer should pay $345 million to avert antitrust litigation. it all stems from an alleged

scheme to catch purchasers of the epipen. the proposed settlement would result against pfizer and ensure pension funds and consumers targeting for drug company. jeff bezos's company blue origin says that this 18 euro student will fly above ground on the flight to space, becoming the first. he will take the place of the anonymous bidder who is opting for a future flight due to a scheduling conflict. he will a comedy bezos and two others on the flight schedule for july 20. -- scheduled for july 20. global news, 24 hours a day, on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. courts australia's second-largest city, melbourne has gone into a snap five-day

lockdown to contain the latest outbreak of coronavirus. only half of the population is under stay-at-home orders. joining us now is rebekah jones. you guys are old hats at this. lockdown number five. what is the thinking from the government? will these five days be enough and wealthy people comply? ? , heidi. yes, we are no stranger to lockdowns. the fed government here in delivering the news late afternoon said there was just one chance to go fast, go hard and/or early on these lockdowns. that is what they are doing. that is certainly the thinking of the state government.

to not deviate from the playbook they used before the lockdown. on the streets, we are home to some of australia's largest pension funds. they are trying to figure out whether this snap lockdown and the link in particular will be enough. >> what is going on in new south wales? the state government saying they are expecting a spike in cases today. >> that is right. yesterday's numbers were quite encouraging. 65 new cases but critically, 35 of those were infectious while out and about in the communities. that is why we are expecting to see another big jump in cases today. that will take the total cases to more than a thousand. staying at home is crucial as these people are out in the community. this advice to stay at home

unless absolutely necessary was a little bit vague. just near my house, there were two drycleaners. one of them was open, one of them was closed. three of the new cases we had were delivering them, supplying materials to a construction project going on currently. construction, infrastructure projects, they are all still running, the lockdown in sydney stretches the definition of a lockdown sometimes. >> there was also anxiety and rightfully so in case of the -- the case of the northern territory. is that what we are looking at next? >> absolutely. more than ever before, the

messaging from the state and federal governments has been important. one instance we are looking at is the northern state of queensland. they have not had a widest citywide lockdown for any significant length of time. although the cases are starting to trickle. another area of interest is the isla state of tasmania. they experienced this outbreak between passengers on this cruise ship in 2020. they quickly got it under control. certainly, state borders, orders, whether or not they need to stay poorly at home, what is open, what is close, we are seeing diversions between sydney and melbourne. looking ahead, this will prove catastrophic in the long-term. -- they are trying to see if it will prove catastrophic in the long term for australia.

>> another country struggling with cases is japan while the countdown to the summer olympics is on. i spoke exclusively about the visions for the game and the preparations and of the opening ceremony. >> unity and diversity. i am very right say that it will be the most gender balanced games in history and following in the footsteps of the rio games. a team rep resenting refugees will also participate. tokyo will be the first city in the world allowing this. we want to make the games and event to serve as a beacon of hope to show that the world

comes together to face difficulties like this. >> one week ahead of the opening ceremony. how are you feeling about going ahead with the olympics? >> can i talk a little bit more about the recovery? the idea for hosting the games originated with the great japan earthquake that occurred in 2011. we aim to encourage the region through the power of sport. also at the same time, to express our gratitude to the world. while we regrettably cannot have spectators this time, we are preparing to create a new way

for audiences around the globe to enjoy the games. we are working to strengthen online information. during the games, this would be online every day. i would like to invite members of the media, you and around the world to view the attractiveness of tokyo. >> how are you feeling now just one week ahead of the opening ceremony? >> whatever the circumstances are, the success of the games in light of the excitement and the competition created, we are welcoming all of the athletes

and those people from the ioc and the international federation and those who are working for the games. in order to make this happen, we will work with everybody to make sure these are safe and secure games. is there anything the tokyo government is doing separately to accelerate the pace of the rollout? >> yes, we are accelerating the pace of vaccination as much as possible. the point is that the start of vaccination was delayed compared

to other major countries. we are accelerating dramatically. >> that was our exclusive conversation with the tokyo governor. we are hearing that intel is exploring an idea to explore boundaries. this would be a one that would turbocharge the semiconductor giant's plans to make chips and it would rate as the largest acquisition ever. now the report says the deal is not a guaranteed one. they could proceed with a planned ipo. it is owned by an investment arm of the abu dhabi government and it is headquartered in the u.s.. the dow jones is reporting that

intel is exploring a deal to buy global foundries. >> we do have some breaking news when it comes to production numbers. those shipments are coming in at 76.3 million tons. we are seeing some numbers out for copper as well. when it comes to iron or, we are seeing pretty steady demands off of those june import numbers in china. their fourth-quarter goal output numbers coming through more or less in line with expectations as well. we do have lots more to come on daybreak australia. this is how we are setting up when it comes to this side of

trading. all of this as we continue to get investors trying to make up their minds as to where this inflation trajectory is headed. and there you have it - wireless on the fastest, most reliable network. wow! big deal! we get unlimited for just $30 bucks. i get that too and mine has 5g included. impressive. impressive is saving four hundred bucks a year. four bucks? that's tough to beat. relax people, my wireless is crushing it. okay, that's because you all have xfinity mobile. it's wireless so good, it keeps one upping itself.

>> june new zealand manufacturing pmi coming in with a strong number, accelerating from the previous month. i believe that's the fourth highest reading we've seen since the start of that index back in 2002. we are really seeing that index stay above that long-term average for six straight months now. we continue to see manufacturing and gdp growth accelerate in the

second quarter from new zealand. the bank of new zealand that compiles that number saying there strong demand and considerable supply-side challenges remaining, continuing to push the pmi number higher. it comes on the back of the reserve bank of new zealand becoming one of the first banks to raise rates post-pandemic. inspectors -- they expect to have lift off as soon as next month after announcing that fallback on quantitative easing early this week. the kiwi dollar has rocketed this week. in the meantime, let's get the first word news with vonnie quinn. >> cuba's communist ruler say they will ease restrictions on food and medicine imports. the prime minister vowed to lift tariffs on medicines brought to the island by travelers. the concession is designed to help alleviate the shortages

that sparked protests over the weekend amid rolling blackouts and soaring inflation. and the country's president hariri said they could not agree on the way forward. lebanon's political crisis is adding to the country's already dire economic situation. u.k. promised her boris johnson has proposed creating a new breed of local mayors to exert more power over england's towns and counties. to tackling inequality across the u.k. as well as planning reforms and designing transport. the european union has rolled out its climate plan as it looks to cut pollution by 55% by 2030.

the e.u. said it plans to bring shipping into what is already the world's largest carbon market. it will impose costs on dirty home heating but says expects tough negotiations ahead. >> we believe this can be done. they should understand that meeting our goal of at least 55% reduction is a legal obligation. >> 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 vonnie quinn. this is bloomberg. shery: the investment banking boom continuing this week with morgan stanley being the latest to work a windfall from dealmaking activity. our wall street correspondent joins us. give us the highlights. >> the investment bank had stand out performance that beat expectations on a lot of levels, except for one key area, fixed income trading.

today when morgan stanley released the results at $1.60, the drop was just about in line with what you saw goldman sachs and jp morgan. but equities came in higher than all of this year. so you see the big u.s. banks gaining market share in equities , all areas we know that banks across the rest of the world are finding a harder time winning share in that business with u.s. hedge funds and the biggest asset managers in the world. so what can we look forward to? investors are looking for a story to hang onto. there is still a cost control question. the coo of morgan stanley today really try to make investors focus on the long-term. while also investing in europe with acquisitions and technology to focus on the longer-term competitive story.

haidi: when it comes to the broader economic story, how much uncertainty is over recovery? >> that's a great question. it's not that these long books are not recovering, the better question is, the consumer, how much are the actually borrowing to grow those loan books once again? bank of america, j.p. morgan, they have faced harder times in their net interest income so revenue related to lending, you do see divergence, and that is when it comes to high net worth loans versus the rest of the consumer book. we are seeing a really large jump at j.p. morgan, goldman sachs, and bank of america when it comes to global wealth management and u.s. wealth management, but not the same story when it comes to the

broader consumer portfolios. haidi: our wall street correspondent there. the st. louis fed president thing's is time to taper. jay powell is not ready yet. will have more on those differing views and what investors should be doing with them. this is bloomberg. ♪

>> time for morning calls ahead of the asian trading day. the rbnz has set on two bands of tightening that several economists polled by bloomberg do not expect the cash rate will go beyond 2% this cycle. the prediction is for the rbnz to hike key rates to 2% by early 2023 but a rate strategists said there are risks in either direction to that outlook. there could be pressure to hike as mortars reopen in new zealand. over at citigroup, they're noting that rbnz when it comes to inflation, they put up their timeline for the hike at 2% by the first quarter of 2024. haidi: those numbers will come

out from new zealand in the next five minutes or so. the st. louis fed president said it is time to end emergency measures to support the economy. he spoke exclusively with bloomberg's michael mckee. >> i think it's clear that some of the inflation will be temporary. how much feeds into a more persistent process is really the question that the committee has to wrestle with going forward. i think we are already above our target on core pc inflation. according to the summary of economic projections katie is -- the committee is predicting 3%, excluding food and energy prices, that's more inflation than we have seen in a long time in the u.s. and i think some of that will hang on and persist through 2022. we had hotter reports than we

anticipated recently, so there is some possibility that we would ratchet up our expectations for inflation in 2021 and 2022, so this is a different situation than we have faced in the past. on the labor market, i think we have made substantial progress. we have come a long way from where we were last december. all indications are by anecdotal reports that the labor market is going to continue to improve. a lot of people are looking toward september or october when schools are back in session for further improvements. so i think we are in great shape on labor markets, as far as having been able to make progress since last december. it's not fully healed or fully done, but have we come a long way since december?

i think the answer is yes. >> in terms of that progress, do you think tapering have to come sumer than most people anticipate, perhaps pulling it forward to the fourth quarter of this year? >> the committee will debate that in earnest now at the july meeting. i would emphasize there are lots of parameters around a taper decision. the starting date is only one part of it. the pace of tapering is another part. we can talk about that if you want. but i think the most important thing that i've been stressing here is the idea that you probably don't want to be on automatic pilot in this situation. this is a really fast growing economy, lots of things happening both in the u.s. and globally. i don't think we have the luxury

of being able to just go on to automatic pilot and say that we are never going to change the pace of purchases. we have to be more state contentious than that because we are not quite sure where this inflation process is going to go. we need some optionality on the upside with respect to possible inflation shocks. shery: the st. louis fed president speaking with our michael mckee. views can differ on whether fed tapering should begin now but he said the real argument is whether now is the time to announce a taper plan that will only begin months in the future. a chief u.s. economist joins us now. great to have you with us. when do you expect the fed to come out and lay out a plan for tapering? >> i think they would be foolhardy not to do it in july. and i think they will. the whole argument of whether or

not it is tied to take -- time to taper, you can make the argument there are a lot of twists and turns between now and then but there's certainly nothing that says the fed can't say -- look, the fed never gave the promise that it's going to get easier policy as the economy expands. it just made the promise -- for them to begin to talk about tapering, given the reduction in the size of the deficit, they are making financial conditions even easier by continuing to provide indiscriminately, meaning they are just taking it in. it's time for the fed to come out and say, look, here is the plan, we are going to start in six months. of course in six months time if

the economy is in a different place, we won't do it. if it is, this is what we are going to do, and it makes all the sense in the world. shery: he is insisting the rates are transitory but then were seeing core ppe prices also continuing to rise. so to borrow his words, is the fed on autopilot right now, are they behind the curve? >> they are not yet behind the curve. if that were, the curve would be steepening instead of flattening. i think the curve will steepen, and the disconnect is that the fed seems to think that inflation will be accelerating the second half of the year or later this year to the same extent it did back in 2020.

a lot more people working and getting hired. people expect a surge in hiring in september and october. in any event, it's a different, stronger economy. by the fourth quarter of this year and first quarter of next year, were going to start to see around of generalized wage hikes , i'm talking about generalized wage increases, which have not been accelerating, they have been decelerating as they should be at this point in the cycle. you do get an inflationary process taking hold, and the fed does have the tools, but how willing is it going to be to use them and hurt the market? haidi: it would be nice to see

that corporate sentiment passed through to wage increases. i want to put up this chart that may be shows that we still have some way to go yet when it comes to fulfilling the loss potential. payrolls would roughly be about 10 million jobs away from where we are now. is this the correct old post? >> -- goalpost? >> if you are halfway there you can say you've made substantial progress. in addition, i looked at the unemployed due to covid job loss , and that peaked in november of last year. that number has come down, covid related, people that have lost their jobs and the jobs are gone. but i find look at the pace

those jobs have come back, and 2009 recession terms, we are back to early 2013. it's going to take a long time to get all the way back, and some of these jobs are never going to come back, and small businesses have closed, firms have gotten more technologically savvy in terms of replacing neighbor -- replacing labor. but you will make more substantial progress. the case of being back where we were, it's a late 2022 story. haidi: great to have you with us, staying up late there in london. we do have some breaking news that adds filled to the fire of these expectations of the rbnz being the first major central bank to have rates lift off. the number coming in at 1.3%,

jumping above estimates of .7% and accelerating from the first quarter of .8%. were seeing the year on year number three point 3% more than expectations and worth knowing, we have a lower base for that number so that is distorting it somewhat. a global rebound in oil prices and housing rent, all part of the inflation market that globally we've been seeing some strong rises and that just adds to expectations that we could see the rbnz moving to hike rates as early as next month after they put a halt to quantitative easing in this week's meeting. continue to watch the kiwi, the outperformer on the central bank divergence. very different from the boj. shery: it seemed almost no

inflation whatsoever as opposed to so many other countries around the world that consistently undershot inflation target of 2%. not surprising the bank of japan is marching to a different tune from other central banks. focusing on a new green lending program. kathleen hays is here with the preview. kathleen, what should we be expecting today? kathleen: definitely no hawkish steps. underscoring the virus cases are searching but the governors on track to do that rate hike this year. that was the message there, but not at the doj. they will keep that key short-term rate, they'll keep the 10 year yield curve target at around 0%. but were looking at economic

projections, quarterly projections are coming out. want to see how does this reflect the emergency state, no spectators at the olympics. will that make a difference in what the boj is looking for? our bloomberg economics team is looking for a slight decrease of 3.8. they had it at 4.0% back in april. inflation may nudge up a little bit. commodities and oil prices are rising. finally, perhaps with these hawkish prices in asia and the fed getting ready to taper, will there be questions about whether it means anything at all for the boj. haidi: we are expecting more data on this initiative to

combat climate change. kathleen: it's interesting, in june they put this on the table. now they've had time to hammer out some details. the idea is, a lot of central banks are trying to figure out how they can affect climate change. one way to do it is to make sure firms don't make bad investments, or just try to encourage him to make green investments. the idea is they will offer special funding to banks to support these new, cleaner investments. a key question right now is how much will they give them? the idea is that so far banks will be offered 0.1% to extend affordable loans to businesses that qualify. already in tokyo our economics team has been talking to people at the boj and the banks who have been in meetings with the boj. but they are hearing is some banks are resisting this green lending program because they are

afraid the prophets could get squeezed because people might say you're getting special funding from the boj, i don't have to pay so much to borrow for an environmental investment. then some officials are saying wait, it's kind of risky to be extending loans when we haven't even determine exactly what this will be. so far the bank of japan is apparently leading the whole definition of what constitutes a green investment, leaving it to the banks themselves. they are becoming one of the leaders and walking seriously down this path. haidi: you can also turn to your bloomberg for more on the boj decision later. get commentary and analysis from our expert editors. this is bloomberg. ♪

shery: take a look at this etf rush, were talking about inflows into etf's in the first seven months of this year, almost equal to the whole inflow of a record year of 2020. 488 point $5 billion of inflows into etf's and we could be equaling that $497 billion that we saw back in 2020. we could be surpassing that number in the next few weeks or

even days. that's inflows going into vanguards vanguard etf, another vanguard etf pulley and $21 billion. courses has been dominated by the big three, asset managers like blackrock and vanguard. that could be a little bit of a risk in the future given that they control 80% of the etf market already. that means about 22 percent of ownership of those s&p 500 companies, up from around 13% back in 2008 alone. that could lead to more regulatory concerns and more oversight coming their way. we are watching this because we also have that new allure this year. haidi: of course we have the eight etf's in our investment

group pulling in $15.3 billion this year amid the frenzy. it's also the effect of these interests in thematic investments. focused on electric vehicles and robotics and such. you have to back that up with performance. it's the poster child for active investment in etf's. maybe that's a factor alongside the stock performance and also fear of missing out. let's get a quick check of the latest business flash headlines. i don't know if we have time for that. shery: given those etf's collectively have lost money in the last two months, it's not surprising. will be talking everything, etf,

stocks, with sean darby, chief global equity strategist. also a focus on female founders, we will talk about equality. this is bloomberg. ♪

haidi: welcome to "bloomberg daybreak: asia." sophie: we are counting down to asia's major market opens. shery: our top stories this hour, asian stocks set to follow wall street lower escrow concerns returned. treasuries gained along with the dollar. jay