♪ paul: good morning. i'm paul allen in sydney, counting down to asia's market opens. shery: welcome to ""daybreak asia," our top stories, asia starts off to a cautious start after whipsaw trading on wall street. investors look ahead to the fed decision. rush's vladimir putin at risk of sanctions over ukraine.

europe struggles to form a unified strategy. and nvidia could abandon buying arm from softbank after struggling to win approval of the purchase. paul: quick look at trading in asia pacific, new zealand still the only market open, struggling , only up about .1% right now. trading in australia today -- no trading in australia today, a public holiday, australia day here. nikkei futures pointing to a weaker open to the tune of 1.5%. week selling yesterday on the nikkei as well as many markets in the region. the s&p 500 pointing lower now .7%. crude sideways away, back to where we were monday morning, $85.31 right now, bitcoin struggling to gain traction, pushing towards $37,000.

keeping and i on that as well. shery: cryptocurrency is looking forward to what happens with central bank policy and we have the federal reserve, widely expected meeting with a potential signal that a rate lift off is on its way, at its march meeting, and the start of a balance sheet runoff that could happen by early summer. let's get a preview from bloomberg economics and policy editor kathleen hays, more voices calling for the fed to put aggressive options on the table. how likely is that? kathleen: let's take the first part. there is no doubt that the march rate lift off is going to be signaled, number one because the fed will have ended its bond purchase taper and that opens the door to left. it will be the first rate hikes is 2018 pit let's look at the bloomberg chart. basically, multiple fed officials are saying three rate hikes this year is a baseline, but there could be more, four or

five, and the market is pricing in, if you look at these lines, pricing in for 25 basis point hike this year, maybe even more. that is out there. they might have to, if inflation doesn't start buckling under. balance sheet runoff, people are looking for it to start in june, maybe as early as may if the fed feels they need to speed things up a little bit. as for the 50-point rate hike -- 50 basis point rate hike, more people are calling for it, a bloomberg opinion writer, etc.. people are saying they need to stop bond purchases now so they can hike rates more aggressively. fritz waller is a governor at the fed and spoke to us two weeks ago. when i asked him about a 50 basis point rate hike, could it happen this year, he said we haven't signaled it.

i don't see a 50 basis point hike in march -- >> i don't see a 50 basis point hike in march. down the road, if inflation doesn't come down, it would be in the toolkit but it would take a lot for us to move in that direction prayed the fed hasn't done a 50 basis point rate hike in a long time. kathleen: there was a request to end the rate hike immediately, and bill dudley said we don't need to do that, they have signaled the march rate lift off, ending the bond purchases right now would not accomplish much. he is not looking for it. one thing people have to be looking for is, the fed is going to be asked about the surge in the covid-19 omicron variant. i am sure somebody's going to ask, are you worried about the markets, look out markets are reacting, and i think people

are going to look for my dovishness in their, but the majority -- dovishness in there, but the majority is, we are going with more rate hikes comments just a question of how many, and the answer i think lies within nation. shery: take a look at u.s. futures. we are seeing downside pressure, down .6% for s&p 500 futures, nasdaq futures also down almost 1%. this, as we saw stocks in the new york session ending lower, little rebound of the afternoon, but not enough to see a dramatic comeback that we saw, for example, on monday. the russell 2000 and the brink of a bear market down 18% from its november high, drawdowns science as we had to the fomc decision. -- drawdown signs as we head to the fomc decision. paul: president biden says he will consider personal sanctions on vladimir putin if he orders invasion of ukraine.

putin has repeatedly denied he is planning an attack. for more, let's bring in our bloomberg congressional reporter. dan, the emphasis from the u.s. remains economic rather than military. is that enough of a deterrent? dan: it is a situation where only time will tell, of course. what you are seeing in washington right now is an increasing level of anxiety over this situation. here on capitol hill, we had to briefings for house and senate staffers today. the white house, the chair of the joint chiefs of staff, the secretary of defense, secretary of state, were all at the white house at one point or another today. there is a sense that the u.s. is putting basically all options on the table, up to and including personal sanctions on vladimir putin. will it be enough to deter him? what are his plans?

apart from that? and there is really no way to know. but we have seen in recent weeks was a vote on the nordstrom -- on -- on the nord stream 2 pipeline and that failed in the senate. there is a thinking of what levers can be pulled come although military aid is still in the background as an option. shery: what are european governments doing right now? dan: that is the big question. the u.s. is all in on harsh economic sanctions on russia, on potent, if russia invades. as a punishment for this build up. there is discussion of that as well. i think the question is, will the european allies go along? that is a tricky question

because the european economy is more integrated with the russian economy. there is a different view, certainly in germany, about this pipeline, then it is viewed here in the states. there is a struggle within nato, within the u.s.-european transatlantic relationship, to get everybody on the same page. there are different calculations on either side of the atlantic. so, you see biden trying to keep everybody on the same page, working in the same direction, but when it comes to economic sanctions and some of them that terry options, there it -- some of the military options, there is a lot of difference of opinion. shery: bloomberg congressional reporter dan flatley with the latest on ukraine tensions. global banks pushing back on rules from china that could alter how and where chinese firms go public outside the mainland. our chief north at the correspondent stephen engle

joins us from hong kong to discuss. steve, what is this about? stephen: we do know chinese ipo's, at least in the u.s. and hong kong, have been a juggernaut of earnings for global banks and wall street banks. this could be a potentially big game changer. and this is a narrative of whether chinese securities are investments -- are investable or not. i won't go down that rabbit hole, but i will go into these draft rules unveiled by chinese authorities in december, outlining approval processes for ipo's outside the mainland. and it is quite complex. let's be frank, sources telling bloomberg news it is quite vaguely written, as chinese law is quite often, if i may be so frank. with the political environment souring between china and the

u.s. and with the data security issue come authorities in beijing are quite concerned that companies that list overseas, big tech companies that have troves o data, that their data vaults are secure and not falling into foreign hands. the structure of these companies when they go abroad allows them to sell securities to foreigners, sidestepping chinese law that prevents foreign investment in key industries and stick -- and strategic industries like media and telecom. what we are hearing from sources who also cite this letter written by a group representing big global banks, the asia securities and industry financial markets association, wrote to the securities regulator in china outlining their concerns. chief among them is the lack of implementation detailed in these new rules. how are these rules going to be upheld, implemented, and how do

these banks comply with them? and they are concerned by the so-called vague wording. here is a list of some concerns told to bloomberg news who have seen the letter and talked to key decision-makers at global banks. they said the rules are ambiguous and will expand beijing's regulatory reach outside china. they will drive up costs, stymie dealmaking and introduce hard to navigate regulations for firms operating outside of the mainland. sources tell us the letter to the csrc, that essentially the banks believe the rules from beijing are well-intentioned, but there could be many unintended consequences. they are seeking clarity on filing requirements for an ipo outside of china as well as what specifically constitutes a violation. complicated, no doubt. paul: chief north asia

correspondent stephen engle. let's look at microsoft rising in after-hours trading, erasing some losses that we saw, right now up percent -- up 1.2%. microsoft did report revenue that beat estimates, and the deal with activision blizzard's "call of duty three" that game will continue to appear on the sony playstation, that information coming from microsoft that we are seeing the shares recovering some of the losses we saw after hours, right now up just shy of 1% paid let's get the vonnie quinn with headlines. vonnie: chinese government spending rose at the slowest pace of nearly two decades last year, suggesting limited fiscal support for an economy that has lost momentum sharply. the finance minister says general expenditures came in at $3.9 trillion, up .3% and the

weakest pace since 2003 according to bloomberg calculations. the biden administration sees the chip shortage stretching, straining businesses from carmakers to consumer electronics. the commerce department is coming to investigate claims of price gouging for semiconductors, including by third-party distributors. however, officials say the private sector is best positioned to address the challenges. the u.s. is loaning 13 port for barrels of crude oil from its strategic reserves, shall and phillips 66 among the largest recipients and wanted -- in what is the second-biggest release of oil from the strategic reserves. the biden administration is trying to contain oil prices at their highest level since 2014. metropolitan police have begun a formal investigation into rule breaking parties held at number 10 downing street. the inquiry was announced hours

after boris johnson's office revealed employees gather to celebrate his lockdown birthday party in 2020. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. ♪ shery: still ahead, how a potential russian invasion of ukraine could impact oil and other commodities. our guest joins us from the sidelines of the asia-pacific conference to discuss. up next, a wise time to look beyond interest rates. thornburg investments' jason brady joins us to discuss that and the investment outlook. this is bloomberg. ♪

♪ >> volatility is back.

the vix at 39. >> yesterday was one heck of a selloff. >> paid is not surprising to me to see these dramatic shifts. >> there is a lot for the market to digest. >> a seachange in terms of fed policy. >> risk valuations on some of these stocks. >> we think you should be buying. >> opportunity for the long-term investor. >> can we have more selloff? >> sure we can. >> we all knew volatility would be up. >> that is something to think about now. paul: some recent bloomberg tv guests discussing the volatility we have been seeing in the markets. it was another jittery session in the u.s., the s&p 500 closing at its lowest since october. our next guest says it is time for investors to find a new driver other than rates.

joining us is jason brady, president and ceo of thornburg investment. as refreshing as it might be to talk about something other than the fed and distressed rates driving sentiment, it is pretty much the only thing in town, what else might be driving markets? jason: in 20 hours or so, we are going to get the fed announcements. investors need to focus on the fed not so much as a primary actor here, but as a group that is reacting. what are they reacting to? the economic conditions that we see. for investors, partly the fed reaction function is earnings. we saw good earnings out of microsoft, a company that has an excellent future. is the valuation good or not is a good question for investors. but we thought we would see 2021 volatility. we did not because earnings rule into some of the valuations in the market.

the fed in 2022 is reacting, not acting. paul: markets are reacting to the fed though. we have seen some wild gyrations. how accurately do you feel the market is pricing in likely fed moves? jason: the market is pricing in a wide variety of potential fed actions. in other words, we are seeing increased volatility as potential outcomes widen. that is a good. that is exactly what the fed needs to do. what the fed had done is lock themselves into a pathway that turned out to be incredibly inappropriate for what is involved economically, not just the u.s., but globally. now they are opening up the possibility, when they finishing tapering, how many hikes, hominy quickly? those aren't -- how many hikes, how quickly? those are reasonable questions in market volatility.

shery: the market volatility on the chart shows s&p 500 trading ranges far above the norm the last years or so. jason, do you buy into this volatility, do you by the depth -- do you buy the dip and how do you gauge what the bottom looks like? jason: for us, the bottom isn't the entire market, it is individual names stop opportunities. i see a market shifting focus from hopes and dreams to cash right now. that sentiment change is very relevant. the good thing for investors is, companies providing cash right now are not tremendously highly valued relative to the market. global dividend pares are excellent places to not just ride out higher rates, but actually enjoy a good income outcome for investors. shery: and does that include

global markets, emerging markets? because we have seen a lot of flows going to developing nations with the idea that perhaps those central banks preempted the fed move and are doing a better job in taming prices? jason: it is definitely the case that certain emerging markets -- again, emerging markets are complex and very -- but certain emerging markets have gotten ahead of the fed and somewhat blunted the reality that the fed policy is also global policy. in past market episodes, the fed rate rises before emerging markets now, valuation in a number of emerging markets are much lower than in developed markets and present opportunity. absolutely. shery: jason brady, great having your thoughts, thornburg investment president and ceo. ray dalio has shared his views of volatile trading. the co-chair of bridgewater

associates spoke to "the david rubenstein show" about whether now is the right time to buy or sell. david: the stock market has been correcting, if that is the right verb, should people be selling everything and getting out of the market now because markets are going down? or is this the time to buy? ray: i am not here to give advice, but will give you the following thoughts. david: we won't tell anybody. [laughter] ray: what has happened is, they produced a lot of debt and gave out a lot of money. so, everybody has a lot of money and it is also easy to borrow money to buy things. as a result, if you create much more binding our, you create goods and services, you have got a lot more inflation. the federal reserve has been behind the curve, slower to tighten monetary policy. as a result, we are starting to

see the rise in interest rates to be able to deal with that. as that happens, all assets compete with each other. now, that free money is still going to be cheap money, but it is going to be a bit higher. so, interest rates or say, bond yields, have gone up about 1%. now, you take that and you just, everything is the present value of future cash flows, but it means if that interest rate goes up 1% come all the other assets have to adjust -- goes up 1%, all the other assets have to adjust. the easy days when they dump money on you and you don't have much inflation, those times are past. now we are in a different kind of cycle. paul: ray dalio of bridgewater associates speaking to our david rubenstein. cashmore of the david rubens -- catch more of david rubenstein

"peer-to-peer conversations" next week on bloomberg and tune into the fed's first decision of the year just after five: 30 a.m. -- 5:30 a.m. in hong kong. plenty more coming. this is bloomberg. ♪

♪ shery: we are counting down to the start of trading in tokyo insole. these are stories we are watching, consumer confidence strengthening in january, suggesting shoppers already to push past the pandemic. data today shows the sentiment rose slightly to 100.4. we will be watched -- be watching for retailers at the open. a heavy slate of earnings coming up, including lg display, innotech and kia.

we are also on bear market watch on the kospi index. it already plunged more than 17% from its july top. in japan come of the topics is in correction territory after falling more than 10% from its september peak. not surprising, given all the challenges companies in japan face, like toyota adding three more days of production halts this month on parts shortages caused by rising covid cases. that spring -- that brings its total output drop to 93,000 vehicles for january. we are watching softbank, because sources told bloomberg nvidia is planning to abandon its $40 billion deal for arm. more on that later. paul: let's check business flash headlines. activision says the "call of duty" franchise is staying on the sony platform despite the game maker's acquisition of

microsoft -- acquisition by microsoft. they are also rolling out the game on microsoft xbox and microsoft says it will honor activision's agreement signed before the takeover. plenty more still coming on ""daybreak asia," every day in business brings something new. so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month when you get four lines or mix and match data options. available now for comcast business internet customers with no line-activation fees or term contract required. see if you can save by switching today. comcast business. powering possibilities. every day in business brings something new. so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month

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♪ shery: expectations for looser monetary policy from china after the lunar new year holidays. also, nick alleging lower, traders waiting the prospect for new supply as china holdings started stripping -- started shipping the commodity from its mines in asia. haven buying, and we have the fomc to look forward to. food futures under pressure right now, refocusing on strong

demand outlook and risk around a russia-ukraine conflict as well, which is why we saw a gain in the new york session. g jeff curry, global head of commodities research at goldman sachs, joining us on the sidelines of they global conference -- of a global conference. let's start with ukraine tensions in the commodities space. jeff: our best case is no disruption. it is very unlikely. there are two sources of a disruption. sanctions are an accident, i am not going to talk to forecast an accident. if we think about the sanction-imposed distraction, i like to call it mutually assured destruction. stopping flows of energy into ukraine or even eastern europe, given the fact europe is

dependent on it and russia's dependent on those sales. in terms of thinking about oil, it is probably worth two dollars a barrel, and natural gas, four dollars a btu. the other went to watch is grain, ukraine is a big exporter of wheat and corn. shery: we have anxiety of the tensions over there already put -- already playing into prices. how do you see that unfolding, especially for europe? jeff: if you did end up seeing a significant disruption, the market is extremely tight right now. inventories are low, which means the market is very exposed to the smallest type of disruption. remember, there is an energy crisis in europe, part of the reason you would argue pugin is positioning himself over ukraine. but even the oil market on a

global basis, inventory is low, spare capacity is being exhausted, which leaves the market exposed. i want to emphasize, oil is different. you can redirect it here. probably the biggest impact on oil would be freight and tankers if you did see a disruption. if you just moved that pipeline oil that was going to europe into the baltics and put it on a pipeline to ships. paul: if i could introduce i hypothetical, what kind of impact would and iran nuclear deal have on oil prices? how much wood resumption of oil flows from their affect the market? jeff: our best case is, 2023, you would see one million barrels a day spread out on the second quarter to the end of the year. that would be significant, but that is over a year from now. it is unlikely you are going to see a deal between now and the midterm elections, but of the

reason it has been pushed back, and the market is discounting it in terms of how the parties are progressing. they are far from having a deal. you are right, that would be one way to overcome that. and it would take a long time, talking three months at least just to get inspectors in there and resolve some of the issues around inspectors looking at uranium enrichment. thinking about it as a quick solution to the problem, it is definitely not. paul: you mentioned the importance of ukraine in terms of being a wheat producer. food inflation is already at a decade high, how sticky do you expect that to be? jeff: our best case is a commodity super cycle that includes oil, metals, grain, the entire commodity complex. metals and grain are more sticky longer-term here when we think

about the potential for a multi-year commodity super cycle. our outlook on brains is some modest upside, not a lot this year, but the weather is bad in latin america, which has exacerbated problems that were already created last year. but i do want to emphasize, inventories of wheat and corn are not as critical as they are with gas and oil. however, the harvest in latin america looks to be disappointed, which means, as we move toward the end of the year, that buffer could be erased. shery: given the rising prices they are, and with oil and other commodities, we continue to see inflationary pressures. and goldman sachs is warning we might see growth shock if we see sharp monetary tightening from central banks. how do you combine this with your outlook for the commodity space, given the growth picture?

jeff: commodities are a late-cycle hedge. they are the best hedge against rate hikes, inflationary pressures, because ultimately when we think about, when you initially hike the rate, it impacts the valuations of equities and financial markets, but the impact on the real economy is a ways out. here is an important point about what creates negative correlation between commodities and financial markets. commodities depend on a level of demand versus the level of supply. if the demand rate slows, you will see pressure on prices. commodity markets depend on demand being above supply. in a declining market come at the end of the business cycle, demand is above supply, which still gives you diversification of commodities going higher as equities are coming off. commodities are a late-cycle instrument to beat back the

sentiment of the portfolio right now. shery: how do you factor in the fact that -- remember last year, western central banks were in and easing posture -- in an easing posture, with the pboc going the other way around, how does that affect the easing space? jeff: china had the foot on the accelerator as the u.s. and europe were struggling to come out of the pandemic. it was the opposite then. you had a flip-flop in 2021 and 2022 looks to go in the other direction. commodities are global markets, they are very dependent on what happens throughout the world, and demand levels in the u.s., china and europe all matters simultaneously. that is why what we are facing in oil and the rest of them is a scarcity situation.

some consumers are going to get rationed out of these markets somewhere in the world and the biggest candidates are emerging markets like india, brazil, indonesia. china, the u.s. and europe, you are unlikely to see substantial slow in growth. the biggest risk in china right now regarding oil is omicron. paul: you say commodities make sense in a lake cycle, -- in a late cycle, i'm looking at lithium, nickel, other products essential to ev's, what tailwinds do they bring to the light cycle? is it what you say, but even more so? jeff: if i were to pick the green metals, and there are six, copper, aluminum, silver, nickel, cobalt, nickel -- cobalt and lithium. nickel and lithium are not our favorite. we call it the climate change

paradox. you need it to solve global warming, but it creates the greatest omissions of all commodities, which makes it extremely tight. our target on aluminum is $3500 a ton copper, $12,000 a ton copper is the new oil, the most strategically important commodity and it is king to this story. paul: aluminum, forgive my european pronunciation, it may be a good way to circle back to russia. as tensions increased, what does that mean for the price of aluminum? jeff: aluminum fell victim to the sanctions over election tampering in 2018. and that is an important point. the russians have seen swift sanctions before, 2018, and it had a profound impact on the global aluminum market. it shut everything down. but because they have seen those types of sanctions before, russia has made preparations to be able to deal with them in the

future. they sold 83 billion dollars of treasuries and have since stockpiled their central bank with gold, even greenbacks, to deal with any stoppage. in terms of looking at potential disruptions in aluminum, it is unlikely right now because they have seen it in 2018. paul: jeff currie, goldman sachs global head of commodities research. still to come, nvidia could be walking away from its $40 billion acquisition of the chipmaker arm. details ahead. this is bloomberg. ♪

♪ paul: we are talking fallout from the global supply chain crunch. top stories, chinese official with the ministry of commerce warns exports could face unprecedented difficulties this year. he points to rapid decline in stimulus by some countries as well as developed countries re-shoring many industries. the official criticized the trend of bringing manufacturing back home as reducing the efficiency of global resource allocation. airbus will enter the booming airfreight market using its massive jets to transport outsized products such as

helicopters and space equipment and jet engines. the company will use five older airplanes to form a new airline, airbus transport. a company's teaming up with lou funds a for a new stake in italy's ita. the brand is said to be attractive for synergies and cargo and passenger sectors. shery: omicron complicates recovery efforts. fresh data from ihs markets shows u.s. delivery times lengthened slightly in early january, combined with a sharp slowdown in services growth and resulted in the weakest composite reading of the u.s. business activity since july 2020. economic recovery in the euro area meanwhile increased at its lowest rate in nearly a year. bloomberg terminal users can read more about those stories in our new newsletter.

paul: let's get to a bloomberg scoop. for more, let's bring in peter elstrom. so peter, tell us about why nvidia is reconsidering. peter: yes, so nvidia announced this deal to buy arm back in september of 2020 and there were high hopes they would be able to pull off this acquisition, acquire arm, and then build their semiconductor empire. but they faced a lot of pushback from regulators around the world. recently, the ftc said they would oppose the deal. there was also opposition in europe and the u.k. in china, they hadn't said anything publicly so far, but we had reported that beijing was also looking seriously at

blocking the deal, so sources now tell us nvidia is preparing almost 18 months after the deal was announced, they are preparing to walk away from the deal, and they're looking at other options. it's a setback. >> peter, tell us a little bit more about the opposition. why were they so opposed to this deal? peter: arm creates designs that are used very widely in the semiconductor industry by a range of technology companies, including high-profile companies like microsoft and google, qualcomm, etc. an neutrality is key to the business model, the idea that there's -- allows customers to use the designs without public -- conflict of interest. if arm would be acquired by nvidia, competitor to many of these companies, that would create challenges for them and

put to risk some of the trade secrets they were concerned about. that was at the core of the opposition from the corporate customers. and they fought very hard against it. they lobbied against this deal. and there was companies like huawei that fought against the deal. paul: so where does this leave arm,a nd in particular, softbank? peter: that's a good question. softbank has investments in many portfolio companies. in the case of arm, what we have heard is that softbank would look at taking arm public if it's not able to complete this transaction, fall back, and perhaps not a bad one, would be to take arm public so softbank would be able to cash in some of their steak, but it would also retain this neutrality that's so important to the business going forward. markets are very volatile right now.

rocky start in a number of different markets, demand for chip stocks has been quite strong. but it's not clear that's going to continue to be the case as we go into this market tunnel we're seeing right now. shery: peter telling us more about the nvidia deal, citi saying the abandonment of this purchase will be negative for the japanese firm. shares are likely to weigh on the outlook. plenty more ahead. this is bloomberg. ♪

paul: just got some breaking news for you on the bloomberg at the moment. diem is looking for a buyer after it plans to issue a coin -- you remember them previously known as libra. this was backed by debt matter, formally known as facebook, a way to return capital, this according to people familiar with the matter, diem in discussions with investment banks to how to do that. the value remains in the diem coin venture and looking for a

new home for the engineers that develop that. so meda backed diem seeking a buyer. let's get a quick check now of the latest business flash headlines. credit suisse says warns of a deeper quarterly loss as china charges mount and business slows its two biggest units. the investment banking business will post a loss and also warned of client outflows and significant slowdown and transactions. flagging more than $540 million of litigation. sources say deutsche bank is wearing a 50% increase to its bonus pool as it looks to compete with talent while looking to keep costs low. there will be a divergence in pay as raises for the investment bank for some back office stuff. investment generated almost double the profit of the other three branches combined.

wells fargo is considering a sale that's 20% stake in hong kong based commercial bank according to bloomberg sources. the u.s. bank is unloading assets as part of turnaround plans, which wells fargo considers as nonstrategic -- nonstrategic and will fetch for $1 billion. shery: breaking news out of japan, getting the ppi services year on year number for the month of december coming in at 1.1% growth. that's the same level by the previous month and also slightly higher than analysts had expected at 1%. growth at 1.1%. this coming at a time where we are seeing the bod releasing opinions about the january policy meeting. one member saying it is appropriate to keep the current on a terry easing, another boj member saying they should add easing as needed without hesitation. of course, we continue to watch

central-bank moves as the japanese yen continues at a weak level of 113, 114 per u.s. dollar. we saw pmi fall into contraction territory this week given the ongoing covid concerns. we'll be watching those numbers as we get the latest on the boj's january policy meeting, as well. taking a look ahead at the trading day, corrections are looming for more major stock benchmarks following new zealand and japan's topics. asia equities editor joins us now. and we are seeing a number of asian markets entering corrections or heading towards bear markets. what is the state of play now for the region's act these? >> yeah, the topics in japan and new zealand's benchmark have entered corrections this week, 10% down from their most recent high.

we've also got south korea's kospi and china's csi 300 hedged towards bear markets, which would be a 20% drop. like the rest of the world, it's basically the federal reserve looking increasingly likely to tighten its monetary policy, cutting off those funds, which have been driving up the markets since the pandemic swell. you know, on top of that, we've got the omicron cases, which are rising and leading to kind of semi-lockdowns in places like here in japan. and then also we've got ukraine, which one of our sources were saying yesterday that it became a bit more real yesterday with the u.s. giving and alert to its troops to be ready to support nato. i don't think anyone's expecting a big, direct impact from that, but it's certainly hurting sentiment now. if a really drives up oil prices, that can have a negative

impact with driving up inflation even further. paul: kury, 20 doubt the kospi, the csi among the two -- you pointed out the kospi, the csi among the two hardest hit areas. kurt: in terms of korea, the issue has been technology. technology has been one of the worst hit areas, globally, with these fears of higher interest rates. so people are just selling off growth stocks or especially technologies, things like that, that depend on easy money to fund corporate spending. and korea's been really hit hard with that due to tech giants like samsung electronics. and also thought tomorrow we're going to have an ipo of lg

energysolutions, and that's been sucking liquidity out of the rest of the market. shery: right. kurt: and china's nearing a bear market. but that's actually one place where asian investors are feeling most hopeful right now because their central bank is moving in the opposite direction to the fed. shery: will be watching that open. let's take a look at the stocks we need to watch at the open in japan and south korea. we'll be watching toyota because they lost production for january, which is 93,000 vehicles. they added three more days of car shortages during the pandemic. we're also watching sony. they will be getting at least the next three games of "call of duty" on playstation. we're also watching softbank and nvidia preparing to abandon a $43 billion arm deal. we'll also be watching lg

display. shares are down 12% here today. paul: coming up in the next hour, the texas chief asia-pacific economist alicia garcia herrera joins us to discuss the imf cuts to its world growth forecast. ♪

shery: welcome to daybreak asia from bluebirds world headquarters in new york. i'm shery ahn. paul: and i'm paul allen in sydney. ages major markets have just open for trade. top stories this hour, a precocious stage -- start. looking ahead to the fed's policy decision. president biden says vladimir putin is at risk of personal sanctions over ukraine as europe

struggles to form a unified strategy. softbank in focus, nvidia could abandon its purchase of arm after struggling to reach approval for the deal. shery: a little bit of a mixed picture in japan equity markets right now with the nikkei under pressure. we are seeing sectors like communication stocks falling and leading the declines. but the topics gaining .2% after it entered correction territory down 10% from its december peak. we have ppi numbers earlier today showing growth of 1.1% for the services sector. we have also the boj releasing opinions for the january policy meeting, saying that it should add easing without hesitation coming from one board member. the japanese yen very close to that 114 level against the u.s. dollar after seeing significant strength in the past given risk off sentiment that we've seen

globally. we are continuing to watch toyota, sony, softbank falling more than 2% and preparing to drop that arm deal. take a look at the kospi right now because it's gaining .5% and really moving away from the bear market territory. remember, very close to that level after dropping more than 17% or so from july top, now at the lowest level since december, 2020. we are seeing the korean won gaining against the u.s. dollar, but this after losing ground for the past five sessions. we've also seen bonds dropping. so we are keeping a close eye on 10 year and three year yields in south korea because we saw very strong 2021 growth in south korea and that's felt in the bond space, as well. paul? paul: new zealand, one of those markets that entered correction territory, but doing ok today,

up .25%, but trading in positive territory, as well, up about .1%. oil has gone sideways back to where we began the week right now, $85.32 for a barrel right now. with so many of the major stock benchmarks in asia now on the brink of bear markets or correction territory, there's been no shortage of concerns from investors from china's slugging growth to the extent and the pace of tightening monetary policy. from our market analysis, let's bring in asia pacific strategist. so many markets, as we see there, close to or in correction territory. what is the path of least resistance for equities in the region now? >> i think right now, all eyes

are certainly on the fed and the fed will announce tomorrow at what will perhaps be a faster withdrawal of liquidities in the market and what the implications mean for asian markets and converging markets in general. i think we are a lot more constructive on chinese equities, especially since they have a much slower pace, easier base to come back from and because the chinese bank is taking a different approach and easing liquidity of markets which should help risk assets. paul: you like china at the moment. how confident are you that wrigley terry troubles around tech, contagion issues around -- regulatory troubles around tech, contagion issues are out of the woods yet? david: i don't think we're out of the woods yet. i still see a bit of a downside. but in terms of monetary easing,

this should take a couple for this midcycle slowdown in china to bounceback, gdp rising and corporate earnings growth more strongly in the second half this year. shery: we have seen some bullish energy calls in the past with the commodities space really rallying. can we continue to see some gains in this sector? david: we been pretty bullish and positive on energy for most of last year and continue to do so, taking the foot off the gas pedal right now. but i think with some of the geopolitical tensions in ukraine and the russian border, i think it makes sense to be exposed to energy. shery: we are seeing massive volatility across markets not only here in the u.s. but across asia, as well. how do you take advantage of those price swings and how do you position? david: we've seen in the u.s.,

these markets sell down and each of those times, they rebounded in the u.s. that could be another one of these times. a little more clarity as to where it happened and the fed is going to be a lot more slow in terms of its rate hikes and liquidity withdrawal. that certainty will give a boost for u.s. stocks. shery: we have seen some concerns of potentially a sharp monetary tightening from central banks causing growth shock and really hurt equities. take a listen to what peter oppenheimer had to say earlier. >> the key thing from here, though, is how much any of this shifts upwards in interest rate expectations and financial positions of growth. that's going to be the key to determine will wear markey's -- keep to where markets will stay like. shery: financial condition

tightening is not a concern to you at this point? david: well, i don't think it's the first rate hike that will be that big of a difference for equity markets, certainly not the last rate hike that will determine whether there's been a policy mistake or not and whether that ends the business cycle or not. we take a sanguine view about heading into this first rate hike, and i think the fed will do what will exercise caution and be conservative in terms of liquidities in the market. paul: when you look at the wild action that we are seeing in u.s. equities, particularly over the last two days, how do you think the market is doing in terms of pricing in the path of fed tightening? david: i think that market is currently pricing in a significant amount of uncertainty. you look at the volatility index , the highest it's been in six months, and i think investors are all over the place in terms

of expecting up to eight rate hikes a year or complete withdrawal of liquidity through quantitative easing. i don't think that's going to happen. i think it will be a much more measured pace and stocks will rebound once there's more clarity in terms of first rate hikes. there's still going to be volatility from now until the end of march. shery: david, good to have you with us. take a look at some of the movers right now in japan. we are seeing softbank under a little bit of selling pressure at the moment. this after we heard from sources telling bloomberg that nvidia is finding to drop from the arm deal that's worth about $40 billion. we continue to watch how that is going to unfold. but at the moment, we are also seeing sony gain 1.5%. activision will be releasing at least the next three games in

its call of duty franchise on sony playstation despite the fact that they are being bought by rival microsoft. so we're watching those stocks at the moment. that's get to vonnie quinn with the stocks headline. vonnie: president biden's that he has no intention of putting u.s. troops in ukraine. biden ruled out deploying u.s. or nato forces, but says he would consider sanctioning russian vladimir putin if he orders an invasion of ukraine. it came after the top advisor said u.s. troops were ready to go at a moments notice. >> we have no intention of putting american forces nato forces in ukraine. but as i said, there are going to be serious economic consequences. vonnie: meanwhile, ukraine's top official played down an invasion. the defense minister called for calm, insisting the threat from

the kremlin hasn't significantly changed in eight years. he laid part of the blame on international media while adding a large-scale attack by russia is not imminent. the imf has cut its world growth forecast for 2022, citing weaker prospects in the united states since china. the funds now exceeds down from an estimate of 4.9% in october. the u.s. outlook on resident biden's spending agenda and the imf calling to escape the grip of the pandemic. almost half the world's nations are trading vaccine targets to curb the covid pandemic. 86 out of 206 countries reportedly had less than 40% of their populations immunized at the end of last year. more than half of those are in africa, where dozens of nations are less than 10% vaccinated. imf officials won at least 60%

of people inoculated by the first half of 2022. global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. paul? paul: still ahead, texas is looking out for at least two that -- rate hikes this year. we've got more on that and the prospects of growth after the imf cuts forecast. but up next, global banks pushing back against china's plans to curb ipo's. he tells next. this is bloomberg. -- details next. this is bloomberg. ♪

>> xi jinping would like to show that he can handle relations with the united states, effectively. so it probably would be a productive time for the united

states to try to negotiate some of our key disputes with china. and yet from the american standpoint, it will be very difficult to divide and administration to do that. >> we are in an important juncture. now what we do at that juncture, so yes it's measured and there are -- the united states is in relative decline. which are measured. and china has been rising. and that's in issue. but that doesn't create necessarily a destiny. shery: bridgewater's ray dalio and u.s. china relations susan shirt. global banks pushing back on draft rules from china that could significantly alter how and where chinese firms go public outside of the mainland. stephen engle us from hong kong to discuss. so this group representing global banks voicing their

concerns to beijing. what are they saying? stephen: yeah, obviously there's some concerns because there are sit -- different systems at play here. and as ray dalio referred to, the souring political situation between china and the united states and china's emphasis on data security as evidenced over the last year and a half on the crackdown on big tech. and this is kind of an offshoot of that and the intellectual property and data and making sure that the big companies that go abroad do not have their sensitive data or strategic data leaked to foreign hands, right? so these new rules, sweeping new rules for ipo's and the regulatory process for approving them were unveiled in december by beijing. now are in this consultancy period, and this industry and financial markets association has written a letter. we are hearing the securities

regular in china and other sources telling bloomberg news that a similar list of complaints are about the ambiguous nature of the laws and how they could potentially be enforced and applied to foreign banks trying to underwrite various ipo's and the like. the lack of implementation detail and vague wording is causing angst in the banking community. one rule actually overseas chinese listings if they or major shareholders have committed a criminal offense of disrupting the order of the socialist market economy. it's kind of vague wording, as oftentimes chinese law can be. also, another stipulation in that law says foreign securities firms could be punished for disturbing the domestic market order. again, a vague and confusing wording that bankers are

concerned that could lead to the revocation of licenses or down on the far end of the scale perhaps, some prosecution of individual bankers. so there is some concern, obviously, among the international financial institutions trying to do business with chinese firms. paul: steve, specifically what are banks asking china to do? stephen: they want clarity. clarity, clarity, clarity, right? that is the secret sauce of doing business. they would like some explanations on the implementation of these rules and how they are going to be enforced. again, long list of complaints are hard to rectify just through these draft rules. so according to these sources, these banks want draft rules, or stating that they are ambiguous. they expand the retail set of china, they drive up costs, they potentially stymie dealmaking,

and include hard to navigate regulations for firms operating in hong kong and elsewhere outside of the mainland. so they admit in this letter that the law is well-intentioned , but of course there could be some unintended consequences. so they want more clarity on filing requirements for underwriting ipo's and the like and what specifically constitutes a violation. paul: cheap north asian correspondent stephen engle there. still to come, investors look past microsoft's record sales and profit figures to focus on a cloud on the horizon. slowing growth in its earlier business. we'll have details next. this is bloomberg. ♪

paul: let's take a look at some of the movers that we've got at the moment. something is getting a little ground after nvidia abandoned the deal to purchase arm. citi felt that could be a negative for softbank, but softbank up almost 1% at the moment. sony rising, as well. this is after news that microsoft will allow activision blizzard to continue to reis -- release the next three popular "call of duty" games on playstation. there have been clouds following the deal between activision and microsoft earlier this week. but those will appear on the playstation, so rising about two thirds of 1% at the moment. nintendo rising, as well, that company rated up north. shery: take a look at movers,

watching texas instruments because they gave an upbeat sales forecast for the third order. it seems demand for electronic components remain strong. we are seeing it gain more than three point 5%. we are watching johnson & johnson because we had mixed results. they reported guidance for 2022 that these expectations feel the stock is under pressure. microsoft, really interesting comeback in the post-market because we actually thought -- saw it fall in late trading after celebrant demand for the r0 corporate cloud computing services. but then they gave better than expected forecast for their business. so let's actually discuss a little bit with the bricks su keenan. it was quite the trip for microsoft. tell us what's happening. su: microsoft reported they exceeded estimates across the board. we had the stock down, so it appears to be is its slowing

crowd growth -- cloud growth and azure is overshadowing everything else. you've got to realize we've kind of hit the peak of growth that we're going to see for a while. the stock was down 50%, almost 60% after hours and then as sharing mentioned, it just bounced back in the last half-hour. what we really saw in the past year with microsoft xl during the pandemic, up 51% last year. hard to replicate that. revenue top 50 billion for the first time in a single quarter, actually up 20%. by the way, the period where it exceeded results, but that wasn't in focus. as mentioned, it was the azure cloud computing growth, 46%. 46%! that beat expectations.

the analysts say there was a number of former bullish. investors wanted to see growth at maybe 50% or more. again, the ceo has turned the company's azure cloud business into a solid number two behind amazon, so it really had to do with future. and yes, microsoft is giving a strong outlook. so why the down mood after hours? and could this impact stocks on wednesday? that's the real question. the green on the screen very important. dan ives over at wedbush saying, by any stretch of measurement, that cloud core number is still very soft. paul: investors were hoping to hear more of that recent activision deal and they got their wish. what's the news? su: $69 billion activision acquisition was indeed a key focus. there were no new comments. bloomberg, however, reporting

that it looks like activision is going to be releasing its next three or more "call of duty" franchise releases to both sony playstation, as well as the microsoft xbox. apparently, according to people close to the matter, these were before the acquisition was announced, and that there is going to be an attempt to honor them, the cfo not addressing any questions about that. there's really nothing new to report, but did talk up the strength of the quarter and th eir optimistic outlook. pc demand was strong. surface and xbox supplied not really affected by those souls skull supply chain issues that we heard about -- so-called supply chain issues that we heard about. windows operating system software so to pc's, many corporate pcs, roast to 25%. -- rose to 25%.

so a strong analyst report. and concern looking ahead to the u.s. wednesday session. it may not be good enough. investors were tending to look at glass half empty than glass half-full right now. paul: all right, bloomberg's su keenan there. let's get a quick check of the latest business flash headlines. texas instruments rose in late trading after failed forecast for the third quarter beat expectations. the chipmaker expects sales of up to $4.9 billion, indicating demand for electronic components remain strong. companies reported a 19% drop in revenue in the fourth quarter. coinbase chairs of trading around a record low, broad market tumble, and fresh warning about its revenue. shares in the largest u.s. crypto exchange are down 50% from their november peak. securities, which cut its price, says the exchange is likely heading to first quarter sales missed. > coinbase is in deep trouble

here, and let me tell you why. they are charging too much money. they're overly profitable right now. in the outlook for commission encryptor trading, whether or not, using crypto, is this going to come to zero at the end of the day? paul: wells fargo is considering a sale of its 20% stake in the hong kong-based lender shanghai commercial bank, according to bloomberg sources. we're told a u.s. bank is unloading assets, which wells fargo continues as nonstrategic, could fetch nearly $1 billion. credit suisse warned a credit -- quarterly loss. in a surprise statement, the lender says it's investment banking business will post a loss. they also warned of client outflows and a significant slowdown in transactions while flogging that it is setting aside more than $540 million in

litigation. coming up next, xi jinping holds a rare face-to-face meeting with the ioc. details on that and china's headwinds ahead of the olympics opening ceremony. this is bloomberg. ♪

>> we're expecting clear steps from russia that will contribute to a de-escalation of the situation. >> germany and france are united, discussions within nato and the eu, but also, as the two european partners in the normandy format, we've made it clear that military aggression, which calls into question the territorial integrity of ukraine, will come at a high price. in parallel to this, we're preparing a reaction and response in case of aggression.

shery: that was french president emmanuel macron and german chancellor olaf scholz. ukraine's far right leader says she opposes sanctions on russia and once the u.s. is starting a new cold war. the french presidential front runner spoke exclusively with bloomberg's caroline connan. caroline: note that the european union, which is asked all countries to abandon diplomacy, is totally absent from the discussion. we were sidelined. we don't even have a folding chair in the discussion between the united states and russia, even though france originated these discussions. this proves a loss of influence that i deplore. today, the united states absolutely wants to bring ukraine into nato, so we are creating the conditions and conflict that has no reason to be. i don't believe in sanctions against russia. they're counterproductive. a new kind of cold war has been

created and the eu followed the united states. the reality is that russia has been pushed into the arms of china. i think there is far greater danger into pushing russia into the arms of china than in maintaining diplomacy with russia and instead absorbing it into a european process. paul: that was french presidential candidate marine le pen speaking with bloomberg's caroline connan about the situation in ukraine. now let's check in on some of the commodities and markets impacted by the crisis on the border of ukraine. more gains, a little more modest around two thirds of 1%, aluminum up 1.5%, jeff curry a goldman sachs was very bullish on the outlook for aluminum. copper also seeing some gains, the ruble continuing to suffer as tensions escalate. goldman sachs says it doesn't

see too much disruption from these headwinds but as i mentioned, the head of commodities research jeff: gives his outlook a little earlier. >> no disruption. it's very unlikely. there's two sources of a disruption. sanctions are an accident. i'm not going to try and forecast an accident in ukraine or something like that. but if we think about the sanctions, i hate to call it mutually assured discretion -- destruction, or even into western europe. just given the fact that europe is so dependent upon it, russia is dependent on those sales. you could get an upside here in terms of thinking about oil, probably worth two dollars a barrel and natural gas, four dollars. but the other one to watch is also ukraine. ukraine is a big exporter.

shery: and yet the anxiety are already playing into prices, right? had you see this unfolding for those countries, especially in europe? jeff: if you did and of seeing some type of a significant disruption, the market is extremely tight right now. inventories are low, which means the market is very much exposed to even the smallest type of disruption. remember, there already is an energy crisis in europe, which is part of the reason you would argue putin is positioning himself over ukraine in the current environment. but even the oil market on a global basis, inventory is very low, which also leads the market very much exposed. i want to emphasize oil is a little bit different. probably the biggest impact on oil would be freight and tankers. you just move that pipe of oil

going into europe into the black sea and put it on ships. the market and be really impacted here. shery: given the rising prices there and with oil and other commodities, you see inflationary pressures, and goldman sachs is warning we might see a growth shop if we do see a sharp monetary tightening coming from central banks. so how do you really combine this with your outlook for the commodities space given the growth picture out there? jeff: commodities are a late cycle hedge. in fact, they are the best hedge against rate hikes, inflationary pressures. because when you initially hike the rates, it impacts the valuations of equities in financial markets. but its impact on the real economy is a ways out. here's what creates the negative correlation between commodities in financial markets is that commodities depend on the level

of demand versus the level of supply. if that growth rate slows, you still see upward pressure on prices. financial markets depend upon that. commodity markets depend on demand being above supply. even a declining market at the end of the business cycle, demand above supply, still gives you that diversification of commodities going higher. the key point here, commodities are late cycle instruments, putting them in a portfolio right now. shery: goldman sachs global head of commodities research, jeff curry. we have breaking news out of south korea. we are getting a daily record of covid-19 cases in the country. the government has confirmed 13,012 more coronavirus cases, also 385 critical cases, as well as 32 deaths. south korean prime minister has been derided by korean media,

saying governments will focus on disinfection and reducing the number of critical cases and death. now the country has topped its daily record with confirmed 13,012 more coronavirus cases as we continue to see the omicron variant ravage the country. let's now get to vonnie quinn with the first word headlines. vonnie: thank you. metro london police have begun a formal regulation. the inquiry was announced hours after prime minister boris johnson's office confirmed that employees have gathered to celebrate his birthday during the first lockdown in 2020. separately, a government report on the party may be published this week, which could add political pressure on johnson. the biden administration sees the global chip shortage to cease the second half of this year, straining businesses from carmakers to consumer electronics. the u.s. congress department -- commerce department is ingress -- invest getting third-party --

investigating third-party distributors. china's government spending rose at the slowest pace in nearly two decades last year, suggesting limited fiscal support from economy that has lost momentum in recent months. the vice finance ministers said expenditure came in at around $3.9 trillion, up .3% from the previous year, the weakest pace since 2003, according to bloomberg calculations. global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2,700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. shery>? shery: chinese president xi jinping and back to beijing, possibly his first face time with the foreign dignitaries since the early days of the pandemic. bloomberg's yvonne man has more. this is a rare meeting for president xi. yvonne: yeah, you may remember, i think it was marched, 2020.

that was the left -- march, 2020. that was the last face-to-face meeting, that was with the president of pakistan, talking about covid measures at the capital. that was two years ago. and now we are seeing this rare meeting at the state guest house the ioc president from the video that was released, seems like both were in front of each other . they were not wearing masks. they didn't seem to exchange handshakes or bump elbows, but i think the fact that there is this face-to-face meeting does signify that china is putting a lot of importance and stress on keeping the winter olympics running safely. the simple, safe, and spectacular olympic gala that president xi said he was going to honor that promise. the ioc president reiterating and praising china for their preparation efforts. but then again, we've talked in great length about the headwinds

that the winter games is currently facing, whether a contained outbreak that we've seen not just in beijing at the capital but also in this closed loop management system at the olympic games. and also, this u.s. led diplomatic boycott. what was heavily scrutinized for turning a blind eye over these alleged human rights violations, also in the spotlight over that video call with tennis star and a libyan function why after her -- olympian feng shui after her disappearance. it's quite interesting to see this face-to-face gathering not just the fact that the president has avoided these sort of gatherings, but also he's left the country for two years now. i believe the last trip was to myanmar. so it does raise some concern that gdp's absence in these major global events could hurt

some of these efforts, whether it's climate change or -- for the u.s. paul: and yvonne, on the eve of the winter a liv-ex and the lunar new year holiday, china is cracking down. what is going on? yvonne: it's a new campaign, essentially. i don't want to stress new because it gets into the details. it's similar to what we've heard before. they want to ensure a very healthy spring festival. what we've been hearing so far is that there is targeted content that violates laws and related accounts and platforms to cultivate this healthy environment, basically. and also, they are going to be preventing celebrities who have engaged in illegal or unethical activities from taking part in illegal broadcasting, also entertainment shows. we've seen this crackdown,

monitoring those groups for do the -- irregularities. nothing entirely new, but certainly a further crackdown of what we saw last year, whether online rumors, celebrities, anything that does lead to political stability and once again, this crackdown seems to be extending just a little bit. whether it's priced in, that's still a big question. paul: yvonne man there. coming up next, the imf cuts outlooks for global growth as looming fed hikes rid asia's economies. you're seeing here some live pictures of the sydney harbor, markets closed today for the australia day public holiday. plenty of action out on the harbor. you are seeing right now the salute to australia in progress. the dollar fairly stable, point 715 u.s. cents.

this is bloomberg. ♪

>> we no longer have the build back better fiscal packaging baseline. and we are also expecting monetary tightening in the u.s., so that's been baked into it. these factors are supplying the downgrade for the u.s. shery: the imf chief after the

funds cut its world growth forecast for 2022, citing weaker prospects for the u.s. and china. and of course, the main highlight this week is the fed's decision on wednesday that could have knock on effects across asian economies. we discussed the implications with the chief asia-pacific economist. it's always great to have you with us, really at a time when the imf is cutting growth forecast, citing weakness here in the u.s. how much leeway does the u.s. from oc have to do more against inflation at the highest in four decades? >> well, the fmoc just needs to do what the market is expecting it to do , basically to hikein march, and then reassess because by the time it hikes, inflation will be lower for the mere fact the u.s. economy is decelerating quite rapidly. we saw that quite clearly in the

latest data. and we are going to see more because there is a lot of high oil prices and geopolitical risk to not go back up. so yes, the fed will do something in march and we will announce very clearly. but then for the rest of the year, we still have to see how growth basically behaves in the u.s. it might be worse and the forecast might be too optimistic, even having cutting it now. shery: so far, we haven't seen those dire inflationary pressures play out across asia. but then last night, we had the monetary authority of singapore coming out and having to tighten i nan out of cycle meeting, not to mention even the bank of japan's governor talking about commodities, pushing inflation higher. we're talking about japan here.

will inflation become a problem even for asia this year? alicia: great point. and finally, we talked about inflation in asia because it's been a while. price in china kind of frightening people. frankly, they lifted their forecast but so much below target that it's too early to say. but for me, the key is prices are very much affected by lockdowns and geo policies and the like. i think that will hurt socially. so we are going to see action by the fact we have prices. let's not forget we have australia cpi data which doesn't look good either. that's going to probably push the rba next week a little bit faster, perhaps even hiking before the fed. that could happen, as well.

i think inflation will come back to the discussion because oil price numbers remain high for longer than we thought for geopolitical risk. paul: we have inflation rising across much of asia. but if we take a look at china, we look at possibly the vergence, continually lean towards loosening their. what sort of measures are you expecting from policymakers, and how important is that production data going to be tomorrow? alicia: well, quite, but i think the verdict is already there. the pboc is adamant on its easing. we've seen it on three cases, if i include our four in different sequences. we went all the way to five-year mls, which means mortgages. so we're there. long-term rates in china are already understanding where we're heading.

we're having sudden fall in long-term rates, which is reducing massively the spread between u.s. and china long-term yields. this is important for china because it means less capital inflow. so in other words, whatever happens with the national data, we already know that the economy will accelerate. so far because of the physical data, we've seen just recently. we know that fiscal isn't working, number of high-speed trains, you name it. we need fiscal stimulus, immediate fiscal stimulus. the only thing they can think to do is to cut taxes. but the fiscal stimulus is going to widen massively. in other words, we are relying on monetary stimulus.

and that's going to imply much lower rates in china and less capital entering china from the rest of the world. paul: can we talk briefly about hong kong, as well? this is a rather unique situation that is part of china, but has a peg to the u.s. currency. caught between two worlds, really, how are policymakers going to navigate this? alicia: great question because it's such a crossroads. hong kong needs to deal with negative base effects because we have quite high-growth, for hong kong standards, given no more than 2%, maybe 155%, 2%, we know that this year, growth was exuberant. basically coming from two years of recession. so now that growth is decelerating because of a natural reason, because of omicron, the fed starts hiking

and hong kong needs to follow. there's nothing they can do. so it's going to be a very difficult year for hong kong growth, absolutely. paul: all right, that was alicia garcia herrero. thanks so much for joining us. and be sure to tune in for our special coverage of the fed's first decision of the year. that will happen just after 5:30 a.m. thursday in sydney. that's wednesday afternoon in new york. coming up next, though, we're on a bear market watch as we approach the china open. that and why are fed rate hackers coming at just the wrong moment for hong kongers next? this is bloomberg. ♪

paul: we're just over 30 minutes away from the start of trade in mainland china. david in glass joins us now. we are on the bear market watch. what are some of the other events we're watching for today? david: yeah, we're just on the csi 300, to be more specific here, about 19.4% down, goes all the way back to this time last year. so we're about just under 30 points away from that level. i'll even put a number to that,

about 4646, checking my notes to be a little more precise on that. the other bit, the opposite floors we are starting to see from media. you have a lot of securities, papers in china now starting to basically call for tom, and not overreact to the drop that we had obviously yesterday, and certainly the grant we've seen, which is taken us to this position. it's going to be interesting to see how this interacts the next couple of hours. the strong currency has been a feature of shows recently. the yuan is trading at record levels with a basket of peers. and not quite on the radar for markets, but there is a briefing on the broader market asset measures, something to watch the next 60 minutes or so. shery: and david, we have seen the upper performance on the hang seng index after becoming the worst performance last

year. but we are right now so much more focused on the fmoc wednesday, and the expectation is we are headed towards tightening. and what does that mean for the outlook of that rally? david: i mean, that's a key question, and you guys have done this sort of economic aspect with your previous guest, so i won't really dwell into that. but what's interesting about, the market itself, but the hong kong economy gets taken with it. just one note on that, banks don't necessarily have to follow immediately after we see the hkma titan policy, which goes into the broader market question that u.s., sh -- you ask, shery. a lot of it comes down to liquidity. and a lot of what's been

happening with the equity market here might have to do with monetary policy, not in the u.s., but across the board on the chinese mainland. back to you guys. shery: that was david ingles. he'll have the china open next. our market coverage continues with the start of trade in hong kong shanghai in change in. ♪

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♪ >> good morning from the asia-pacific. welcome to the china open. i'm david unless with yvonne man. avon: markets waiting to see how hawkish the fed will sound. the imf warning that the fed tightening in china's property downturn is the key risk for the global economy.