haidi: a very good morning. we are counting down to asia's major market open. shery: welcome to daybreak asia. our top stories, the fed lifts rates a quarter-point and signals more hikes to come. this, as it kick starts a campaign to tackle the fastest inflation in four decades. asian stocks set to extend gains

with chair powell confident the u.s. economy can handle tighter policy, but a flatter yield curve suggests otherwise. and russia says a neutral ukraine with its own army is a possible compromise, while kyiv pushes for security guarantees. the u.s. promising more military aid. haidi: of course a positive lead when it comes to wall street's reaction to fed chair powell's carefully calibrated statement, really reinforcing his view that the u.s. economy is resilient. we're expecting to see maybe a little more turbulence, but certainly some upside pressures for equities. we are seeing .4% higher out of the gate when it comes to trading in australia. we have seen those moves following what we saw in treasuries overnight when it comes to australia and new zealand. bond yields across the shorter end and the longer end of that curve, as we have treasury yield flattening. that is still where we are seeing some recessionary concerns. kiwi stocks up by 1.5%, despite

gdp numbers for the end of last year coming in softer than expected. but clearly more forward-looking is that rebalancing and rebound after auckland came out of the lockdown. we are also getting the us trillion jobs numbers later on today and we are expecting to see both participation and jobs gains continue to see that tightening labor market, and giving more space for the rba to really stay patient. chicago and nikkei futures are looking pretty soft at this point. we have the yen falling to that six-year low. it has not given that much of a lift to exporters so far but we are watching that in the session. shery: in the meantime, u.s. futures up .1%. this, after we saw u.s. stocks rally and finishing your session highs, posting its biggest two day rally since april of 2020. we're following treasury futures, not really doing much. we had treasury yields jumping with the curve flattening.

the flattest level since 2008. in the asian session we are seeing a little bit of a lift for crude prices, around $96 a barrel for wti after we saw oil falling in new york, libya asking opec-plus to boost supply faster. we are also seeing the hong kong monetary authority raising the base rate to .75%. this was very much expected, given that hong kong has its currency peg with the u.s. dollar, so it effectively imports monetary policy from the u.s. and adjusts its rates in step with the fed. the hong kong monetary authority raising the base rate to .75%. this of course after the federal reserve is now planning to raise rates repeatedly this year, and next as well. this is setting off alarm bells that it could push the economy into recession. our global economics and policy

editor kathleen hays is here with a more on this story. so how strong is the economy right now to withstand these rate hikes? because chair powell seems to think it is strong enough. kathleen: i have to agree with jay powell. retail sales were mixed today but we see jobless claims down. all cons of things making the economy strong. but there are big risks. when the federal reserve was talking about the risk of pandemic, at this meeting he substituted in the risk from ukraine. we have all kinds of things hanging over the economy. however, when you get ready to have one on the most aggressive rate hike paths in at least a generation, is one of our bloomberg macro writers put it, then you get worried. it's one rate hike to kick off, 25 basis points. now six more rate hikes are expected this year. that will take the key rate up to about 1.9%. seven of those 16 dots you see above 2% by the end of the year.

that means some people are looking for at least one, maybe several 50 basis point rate hikes this year. that gets pretty aggressive. here is another issue. the fed sees rate hikes next year to 2.5%. the neutral rate is 2.4%. this is a danger signal for many people. we just spoke to a former fed official, he's now at piper sandler. his point, and many people's point is when you get the key rate above 2%, then you are in risk of recession, because in history, that is what has happened. in fact, another thing that is very important when we look at this, is the recession risk and jay powell's view of it. when you look at their view of gdp growth and unemployment, the fed did revised down its gdp forecast a bit, announcing 2.8%, going down to 2.2% in 2023.

when it comes to unemployment, they see unemployment at 3.5%, 3.5%, 3.6%. jay powell says the labor market is very tight. he seems to think there will be enough momentum in the economy and perhaps he is also implying more people go back to work when there is more childcare, when the pandemic is completely over, and that is what will make a difference. jay powell is pretty confident the economy will be fine. >> 2.8% is strong economic growth. it would have been one of the strongest years of the last expansion. so while it is lower than last year's 5.8%, it is still quite strong growth. we feel the economy is very strong and well-positioned to withstand tighter monetary policy. kathleen: jay powell, did you look at this great chart? i'm sure he is aware of this, and i am joking. but when you push that peak rate in 2023 up to 2.75%, and the key rate is going to be so much

higher than what was considered the neutral rate, that is a signal a lot are worried about. it is very interesting that the u.s. stock market gained after they -- many said it was because jay powell seemed so nonchalant and confident about the economy, that no recession would come out of this, that the stock markets took that too. we will see what happens next. haidi: of course he is looking at all the bloomberg charts. [laughter] markets uncertainty is in focus. markets are certainly taking that guidance from fed chair powell positively for now. we have seen obviously the positive reaction when it comes to wall street. does that follow through in asia? are these recessionary fears evident anywhere, other than obviously in that yield curve flattening? >> you know, i think ultimately what powell says is going to have a huge impact on the

markets. we have to see what is coming through during the day for asia, would generally what we saw in the u.s., as soon as he started talking about the economy and where he sees it and the fact he still sees it as very strong at this point and he has no real concerned about the recession in the near term, that really lifted the markets here for us today. i think that would likely seep through into asia in the morning but really it will come down to what else we hear about in asia and what comes through in china and other parts of the region as well. shery: let's talk a little about china because new york surging more than 30%, the best day in over two decades or so. divya: yes, that was incredible. just looking at these numbers and those percentages. as the golden dragon china index was up more than by -- up by more than 30%. alibaba was up almost 40%. legal and the other day it had a stronger gain was on its first day of trading back in 2014.

clearly that obviously had to do with a lot of what the chinese government said overnight for us. but also deftly got a bit of a lift after powell's comments as well. so we had a really strong rally that is two days of gains for chinese stocks listed in the u.s. the question becomes we still have two more days left to the week, and all of all the -- all of the volatility we have seen, we just do not know what will come next. shery: let's now get to vonnie quinn with the first word headlines. vonnie: president biden says the u.s. will send thousands of antiaircraft and antitank missiles to ukraine as part of a new aid package to help the country fend off invasion russian forces. the white house is touting $1 billion in security assistance authorized for ukraine in the past week. it follows an address to congress by ukrainian president

volodymyr zelensky. >> we need you right now. remember pearl harbor. terrible morning of december 7, 1941 when your sky was black from the planes attacking you. just remember it. remember september 11. vonnie: ukraine and russia showed some signs of progress in their cease-fire negotiations. the kremlin says ukraine's proposal to become a neutral country could be viewed as a compromise. president zelensky said russia is adopting a more realistic position than previous talks. despite the developments, ukraine temperate excitations by pointing to russia's continued attacks, claiming moscow's more positive tone is more about using pressure from sanctions. japan will revoke the so-called most favored nation trade status for russia, and adds to the punishment tokyo has imposed on moscow for its invasion of ukraine. the prime minister has called russia's aggression an inhumane

act. japan also plans to freeze assets of more russian oligarchs and set up a system to accept refugees from ukraine. a strong earthquake struck northern japan near fukushima. it measured 7.3 in magnitude and hit late wednesday, killing one person and injuring dozens more. a bullet train also derailed in the region, although no injuries have been reported there. the affected area it was devastated by an earthquake and tsunami in 2011 that left 16,000 people dead. 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'm vonnie quinn. this is bloomberg. shery: still ahead, hong kong and shanghai hotels went from losses to gains last year, despite continued challenges presented by covid. we will speak in an exclusive conversation. next, fed chair jerome powell will likely continue to sound a

hawkish tone with regards to inflation. we will look into that with the former head of research at the u.s. treasury department. this is bloomberg. ♪ this is bloomberg. ♪

>> the economy is very strong.

2.8% is strong economic growth. we do feel the economy is very strong and well-positioned to withstand tighter monetary policy, and against the backdrop of an extremely tight labor market and high inflation, the committee anticipates that ongoing increases in the target range will be appropriate. every meeting is a live meeting, and we are going to be looking at evolving conditions. really what we are looking for is month by month inflation coming down, and the probability of a recession within the next year is not particularly elevated. we believe our policy is the appropriate one for this forecast and we believe we can bring down inflation. it might take longer than we like but i am confident we can use our tools to bring inflation down. if we do conclude it would be appropriate to move more quickly to remove accommodation, then we will do so. shery: fed chair jerome powell signaling more rate hikes to come and discussing the strength of the economy. let's delve into the fed's lift off and bring in our global

economics and policy editor at kathleen hays who is standing by with our next guest. kathleen: with us now is director of the economic management at columbia university. head of the economic research at the treasury department healers ago that years ago. 20 years ago -- treasury department years ago. you have been going over what they said and did. seven rate hikes this year, four more this year. when you look at the dots, you can see there is a much more aggressive forecast for this year. several people are saying 50 basis point rate hikes. what do you make of this? guest: first of all, my first take on this is it is completely appropriate. as chair powell said in the press conference and to congress, with 2020 in hindsight, they should have started doing this earlier.

seven rate hikes by the end of the year, frankly that does not even get you to neutral. you are showing the chart which i know, but 175 at 2% inflation, full employment, probably closer to 2.5%, 3%. it is one of those get billing moments. there is no need to panic about inflation. let's be clear, long-term inflation expectations are still pretty well anchored, but of course short-term expectations have gone up a lot. kathleen: this recession concern is there automatically. boy, if you're going to keep raising rates, you have to raise them enough to slow down the economy and demand. could that cause a recession? the chart we were just showing is looking at the peak rate next year, expected to be 2.75%, and that is above the fed's 2.40% neutral rate. as roberto just told us,

empirically, that tends to open the door to recession. what do you think? patricia: look, any time you steadily tightened monetary policy, there is always the risk of recession. sometimes you don't even have to get to neutral to do it. and right now, frankly, the economic and political outlook is just so uncertain that i think the risk is higher than normal. and if they are going -- and if there are going to be more big supply shocks, which there is a chance of, then risk of recession increases regardless, even if monetary policy slows down a bit. and by the way, the fomc clearly in their projections are complete he well aware of this if you look at the risk sections. they are on the upside on growth. but let me make -- they're all on the upside on inflation and downside on growth. past policy decisions, not so much about what they are starting to do now. monetary policy is pretty darn stimulative. or, has been, and actually still

is. secondly, a soft landing is not completely impossible. it is the reason the chair explained in the press conference. the excess demand for labor right now in the united states is extraordinary. the on employment rate does not measure that -- the unemployment rate does not measure that. at least some of the tightening in monetary policy reduces excess demand for labor. then it will have an impact on gdp growth, but it might have a smaller than expected impact on the unemployment rate. kathleen: working on the markets desk, i have to ask you about balance sheet reduction. powell also said first the fed said incoming meetings they are going to start quantitative tightening, balance sheet reduction. then he said it could happen as soon made. that is the next meeting. is it needed now? do they need to manage long-term rates a little bit and try to manage the yield curve?

patricia: i do not think they are going to do this to manage the yield curves. but i do think it is consistent with their policy stance. the fomc has been very clear all along that the balance sheet policy is very much a reflection of the stance of monetary policy. they are moving more aggressively this time for a very good reason. incredibly rapid economic growth, excess demand, and higher inflation. so their balance sheet policy should reflect that as well. i do think they are going to be very predictable. but they are, rightly, starting earlier. i mean, the chair suggested may pretty heavily. and probably more in terms of quantity. than they did last time. both because these markets are bigger, their balance sheets are bigger, but they also bought a lot more. and so my guess is that they will set up a schedule that is both larger quantities of rolloff and they will do it

faster, meaning they tend to phase in these rolloff's overtime. and they will do that more quickly. they took almost a year last time to phase them in. kathleen: and of course you know very well the mechanics of the federal reserve. in an hour or so we're going to get more insight on the senate banking committee vote. of course we knew -- tell us about how important this role is, and what sort of character it needs to be the top wall dog -- top watchdog for wall street? patricia: certainly. it was wonderful that the dodd frank act added this. as the fed operated for many, many years without this position. they can certainly continue to do so in the short run. but having someone in that position who is an expert on regulation provides an extra level of leadership. as regulation is not decided by

the vice chair for supervision, it is decided by the entire board. but to have a senior leader who this is one of their primary responsibilities, is critically important. so i certainly hope they fill the role fairly soon. i think that they have other governors who are expert at supervision, but frankly, adding more senior expertise, former regulators, of course former treasury officials, have commonly been the sort of individual that you would choose. and i certainly hope that they renominate someone soon. shery: patricia mosser, it was good having your insights. thank you very much for your time. you can get a roundup of the stories you need to get going in today's addition of daybreak. it is also available on mobile in the bloomberg anywhere app. you can customize your settings

so you only get the news on the industries and assets that you care about. this is bloomberg. ♪ this is bloomberg. ♪

shery: take a look at the senate banking committee panel right now. the nomination for fed vice chair. this is a senate panel that has advanced that nomination, and we know at this point that the nomination for lisa cook has been tied over, so that is setting up a floor fight. we also know the senate panel has advanced philip jefferson's nomination for the board of governors as well. so, remember, we had been expecting these nominees to be voted on by the senate banking committee, but that has been

really held back because of the nomination who withdrew from consideration for the fed vice chair for supervision. so we're now expecting also chair powell's second term as chair to be advanced by the panel. the deadline for $117 million coupon payments for russia closed on wednesday with no sign that debt holders received their cash. sonali basak joins us now. so what does this mean? sonali: it is really interesting that we know if russia default on this debt payment, then this is the first time they would do such a thing on a foreign debt in over 100 years. remember, the last time we saw this was in 1998 was with the ruble debt restructuring, but it was a different time back then. and that really did help russia

restructure. this time around we have heard a lot of bondholders are trying to sell. remember, even with not having payments from the clearinghouses, the bankers, and from russia itself, they still have a 30 day grace period to figure it out. so that is the next couple of weeks for a lot of uncertainty. the russian finance minister has also told a local paper that they have communicated with their bank and u.s. banks, although we do not know which banks, on those payments. but if russia is not able to access their reserves, than there will be difficulty in facilitating those payments. this is very unclear to people, because the u.s. treasury does not bar these payments to be made until the end of may. so in theory, this should be a payment that should go through, if indeed it is made. shery: we have run out of time but that was sonali basak with the latest on russia's debt

payments. we will have plenty more to come on daybreak asia as we follow the markets. we may see a little bit of a pop in the asian session given the huge rally we have had on wall street. this is bloomberg. ♪ this is bloomberg. ♪

♪ >> i think that the fed has largely abandoned monetary orthodoxy. it is trying to be too cute and how it is managing this. >> the rate hike at the talk of rate hikes are going to affect inflation and have no effect on the real economy at all. >> now, trying to deal with inflation coming down, but can you do that without a rate hike

leading to unemployment. i think we are going to see higher unemployment. >> the fed says inflation is going to gradually moderate in the back cap of you -- back half of the year. it does create a challenge from a planning perspective. haidi: guest on bloomberg tv earlier discussing the impact of rate hikes. central bankers in asia are readying their own fight against higher prices. the interest -- the indonesian finance minister and another guest spoke with bloomberg exclusively at the hacienda business summit -- asean business summit. >> it will affect the consumption-driven recovery. this needs to be responded to. for indonesia, some commodity price increases have not been transmitted to consumer prices because the administrator --

because of the administration of price policy by the government. some of it exit -- some of it is explained by the stable price of rice. that is creating a buffer for us. but as in the food price, including cooking oil and soybeans. >> i was the philippines looking at inflation with your growth target, might it be at risk? >> these prices will push our inflation rates quite a bit higher, but we are that he to tackle this. but first, we are going to gauge the effects on the poorest members of our society by providing subsidies for the poorest 50% of our households as well as subsidies for public transportation.

so, while we are also looking at different monetary tools to address this crisis, it is very unfortunate this crisis is coming right after we are just getting over the covid pandemic. fortunately, the philippines has a lot of tools. we have decided we will not suspend tariffs on fuel. however, to ease the eventual inflation of food, we are going to drop tariffs on food items that we import. haslinda: minister, you have to look at oil surging to $139 a barrel, and some say $185 may becoming. if prices are not raised, there could be losses as much as $500

million. do you think there is a need to raise prices, and if so, how big an increase? >> we are going to decide what administered prices can be adjusted with this kind of a changing global environment. we will be very selected -- selective, we will be very measured and we will look at our own recovery but also, at the same time, we have to be committed to the consolidation of our fiscal. the combination will reduce the deficit below 3% on the one hand. and on the other hand, we are going to make sure the recovery will be built on a strong foundation, and the ability to [indiscernible] haidi: the philippines finance

secretary and the indonesian finance secretary speaking exclusively to haslinda a min -- amin. breaking news, tesla delayed more than $1 billion of bond offerings backed by leases on its electric vehicles print this, according to sources speaking to bloomberg, saying tesla had already placed a significant portion of the bonds with fund managers before the marketing was halted. this, as we continue to see market volatility. we have seen a third issuer in the past week, three issuers counting tesla halting that sale amid market turbulence. short haven't term interest rates are sharply higher, causing financing plans to be halted until markets of columned. sources tell bloomberg tesla delayed that more than $1 billion offering of bonds. let's get vonnie quinn with first word headlines. vonnie: the fed signaled hikes

at all his remaining meetings this year after hiking interest rates for the first time since 20 18. policymakers voted 8-1 into -- in favor of raising the key rate by 25 basis points to tackle inflation. st. louis president jim brewer dissented, in favor of a half-point rate hike. >> it is clearly time to raise interest rates. and balance sheet shrinkage. as i looked around the table at the day's meeting, i saw a committee that is acutely aware to return the -- of the need to return the economy to price stability and to use our tools to do exactly that. vonnie: a tribunal ordered russia to suspend operations in ukraine and ruling unlikely to carry real-world ramifications. it was found that ukraine had a right not to be molested by military operations by moscow.

if moscow does not abide by the order, the court has the power to refer it to the security council. there is insistence that chinese companies provide complete accountability to those listing in new york. the accountability board maintains a high board and it follows wide-ranging efforts to stabilize financial markets after regulatory and debt fears. 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'm vonnie quinn. this is bloomberg. ♪ haidi: a 7.3 magnitude earthquake has struck northern japan, injuring dozens of people and knocking power plants off-line. the quake hit know the fukushima prefecture, which was devastated in 2011 by that earthquake ensign on the -- earthquake and tsunami. our editor has the latest. what is the latest?

>> we know so far that at least two people have been killed and about 90 people, mostly in fukushima and miyagi prefectures have been injured. structural damage so far has been relatively light, despite the strong magnitude. and the shaking felt in the area. the bullet train service in northern japan, parts of it have been suspended after a train derailed. they said they are not quite sure when operations can resume. some power plants are still off grid. they are assessing the damage. we could see a sustained impact, although it doesn't look as significant as the headline, the intensity of the shaking, shows. shery: 20 we know about the

fukushima nuclear power plant? that was the biggest fear when we heard where this work -- earthquake was emanating from, giving rise to thoughts about 2011. kazumori: last night, the fire alarm went off in one of the compounds, at the water pump used to cool one of the nuclear reactors. however, the water pump got restored shortly after. it is basically what has been said so far, that there hasn't been any damage that is of significance. shery: our managing editor kazumori takada joining us from tokyo. shanghai hotels went from losses to gains last year despite continuing challenges presented by covid. our exclusive conversation with a ceo is just ahead. this is bloomberg.

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♪ >> we are unable to tell how the academic was developed. and that is why we are taking careful and prudent steps to make sure we protect the people first and foremost in hong kong, make sure the spread is being curbed. and then, we design the next

step forward. shery: the hong kong secretary of transport and housing frank chan talking about the city' is reopening. hongkong and shanghai hotels so revenue rebounding at 20% last year. however, company results were severely impacted by covid, particularly in the home market of hong kong. with the city facing its deadliest wave of infections, the outlook may still be challenging. joining us exclusively is clement kwok, ceo of hongkong and shanghai hotels. good to have you. congratulations are in order, but at the same time, very challenging times in hong kong. how are you preparing for potentially more restrictions and even a lockdown? clement: good morning. yes, last year, given circumstances we faced with hong kong still being locked down, we were pleased with the recovery saw. that we saw. we had a good recovery with

hotels in the u.s. and on mainland china as well. it hong kong, business was not too bad for us during the year despite the lack of national travel because we had a lot of good revenues from our food and beverage outlook -- outlets and our shopping arcade. we have very good-quality retail tenants there. but for this year, with further lockdowns in hong kong, we are back to a more challenging situation. in terms of how we deal with that, first, we have a great staff. they are very loyal, they are willing to make adjustments and work toward what the needs are. we are able to control our cost and where possible, we try and maximize local business, the so-called steak asian business where we have local guests -- staycation business where we have local guests. but even in hong kong, the stay cation business is slow because the bars and restaurants are

closed and there are limits to what you can do. shery: you mentioned shopping at the arcade, is it feasible at this point? clement: we are a long-term owner operator of our hotels and assets. once you have built the location, you can't easily move them around. we already have the hotels built in fantastic locations around the world, and we just have to make the best of what we have got already. but we have diversification. we have non-hotel properties. we have a very good merchandising business, where we retail food items. so to every extent possible, we have diversification already. haidi: have you seen any impact on the ability to find talent? as the labor force shrunk in terms of the talent available? clement: yeah. there is huge pressure on labor markets globally. what we found with covid is that

a number of hospitality workers found other things to do, and would not necessarily returned to the hospitality sector. it is a constant challenge for us. i think what would benefit from is that we have been investing in our staff a lot over the years and our service length is very long and staff is very loyal. so, we are finding that while the turnover number is higher, staff who have been with us for 10, 15, 20 years, people who know the dna, they are scaling with us -- staying with us. they formed the backbone of our team. but it is an issue everyone in this industry is well aware of that we are trying our best in terms of keeping our staff engaged, in terms of our training programs, our staff well-being programs. one example is that with the recent wave of omicron in hong kong, we put together a special,

eight-week program to give care and support to staff a may be affected during this lockdown. haidi: at what point will you have to make those are decisions -- those hard decisions? i don't want to go to the negative outcome necessarily, but what is the worst-case scenario if we don't see alleviation of these restrictive measures? clement: we have pretty much been through the situation already the last couple years. the first year, i think our staff were very willing. they understand and where possible, i think they were willing to do that. we have actually become quite good at saving costs when we need to. last year, for instance, 20 21 was not a particularly good year , although we had the recovery. but our operating results if you exclude the new projects that we put dan, was positive after that we put in -- we put in, was

positive. we are confident we have the ability to manage this. we have a strong balance sheet. we have a lot of liquidity. we have a lot to finance and most of all that lot of -- we have a lot of finance and most of all, we have a long-term investor. there will be headwinds that come along the way and if you can stomach those headwinds, don't be a long-term investor. that is what we tell folks all the time. shery: people do have long-term investments and you have long-term investments in terms of new hotels in london and istanbul, where production was delayed because of covid. clement: we have had construction delays, no doubt about it. we have tried to manage those as best we can. we have factored in extra budgets where we need to and we believe we have that under control.

i would have to say that we are incredibly excited by the quality of what we are building in those locations, in london we are on hyde park corner at the bottom of park lane. and the views from the hotel include green park and the gardens of buckingham palace. and in istanbul, we are overlooking the whole town. we think these are assets which would be very well-received by customers when they open and we are hoping that will be in about eight year -- about eight year -- about a year. it has been challenging to build these things in tough covid at the same time, but we are hoping the end result be worth it. haidi: you have any updates on the project in myanmar, a challenging location? clement: that project is suspended. . we are taking a wait and see attitude.

we have already invested money into that project and put a lot of effort into the design. it would be a great hotel and we hope that one day, we will have a chance to serve the people of myanmar, and the international audience as well. but i think patients will be needed there. shery: clement kwok, it was really good having your insights into everything in the hospitality industry. thank you. the ceo of hongkong and shanghai hotels. we have plenty more. this is bloomberg. ♪

♪ shery: breaking out of japan -- we are getting core machine orders. month on month, a contraction of 2% for the month of january, falling into negative territory after rising 3.6%. we continued to see global supply chain constraints easing, but at the same time slowing exports, and an extension of coronavirus restrictions that we saw in japan through early march. that created risks and downsides for those numbers. year on year, the number has grown 5.1%, but that is below expectations of growth of more

than 8% and is coming in line with growth we saw the previous month. but for the month of january, month on month contraction of 2% for core machine orders. haidi: let's check business flash headlines. the u.s. has ejected china's pacific network from its markets. the fcc commission is the latest in a series of bands on chinese telcos over security concerns. earlier, they told the sec their operations were not subject to chinese government control. earnings reported beating estimates after navigating chip shortages to capitalize on strong outgrowth demand for apple. net income of $1.55 billion for the quarter and expects full-your business growth to be little changed. it is reviewing operations in china after a covid lockdown

halted reduction. ceo frederick o'day are says the bank plans to stay flexible and russia and seeks to reduce risk in the country but stopped short of joining european rivals who are pledging to exit the business. the socgen exposure in russia mostly comes from its unit rosbank. ken griffin teamed up with the owners of the chicago cubs for a takeover bid for the chelsea football club. in the latest offer ahead of a friday deadline, the owner is selling chelsea in the wake of the russian invasion of ukraine and intense scrutiny. . hsbc promised to phase down its financing of the fossil fuel industry, sending a warning to oil and gas clients. the moves is in line with the bank's move for its year-end

emissions target. hsbc remains a main funder of oil and gas, helping companies raise $52 billion. shery: i am quite excited about the china market open in about an hour because we have a surge in chinese adrs after the meltdown this week. it seems to be a roller coaster ride for these stocks. alibaba gaining more than 36%. 40% gains, the nasdaq golden china index dropping -- jumping the most since 2001. let's look at what the chinese government is promising as the premier made a statement to keep markets stable, saying they will

ease regulatory crackdowns on tech giants and other guarantees include support for the battery sector. the statement also says china has made progress in talks about u.s.-listed chinese stocks on both sides are working on a cooperation plan. this is adding to optimism we saw in the broader markets, as we had chair powell talking about the economy in the u.s. being strong enough to withstand rate hikes. haidi: we are watching stocks in the japan open just a few minutes from now. senso electronics is in focus after the appointment of one of its unit ceo's. trans corporate energy -- cosmo energy, also watching east japan railway, a strong earthquake wednesday night derailing a bullet train and knocking

several powerplants off-line. we are still getting an assessment of damage and the impact. construction and insurance stocks will be in focus as a result of that. the market opens in seoul and tokyo as we see asia waking up to the fed's move and an equity session that was very positive overnight. this is bloomberg. ♪

shery: welcome to daybreak asia. haidi: asia's major markets have just open for trade. our top stories this hour. the fed signals the u.s. economy can handle tighter policy. russia says a neutral ukraine with its own army as a possible compromise while kyiv pushes for

security guarantees. the u.s. pushes a hard line on chinese listings. shery: strong gains for japan and south korea. the nikkei's being led higher by real estate and financials, energy stocks are weighing down the index. the japanese yen cold debt that six-year low, very close to the 119 level. investors focused on the rate divergence with the fed that just hiked rates by 25 basis points, and we are expecting the boj decision as well and we are not expecting much change. we have seen machine orders earlier today see the first drop in four months. take a look at the kospi, gaining more than a cent. the korean won rallying against the u.s. dollar, heading towards the 1200 level.

we have seen the korean won rising for the first time in three days or so, given the strength of those jobs numbers we saw earlier in the week. we continue to see a little bit of upside when it comes to the currency. we heard from the finance minister earlier today, that south korea will take steps if the pace of the drop is too excessive. perhaps not surprising we are seeing a rally. haidi: talk about an excessive drop, that makes me think about the yen sitting at six-year lows. take a look at the equity session in australia, strong gains not just from financials, a lot of these major asian lenders including the big four seeing gains on the back of the fed rate hike. we're also watching the tech sector which is up by over 4%, australian stocks higher

robustly for a second straight day area when it comes to the 10 year yields, we continue to see a little bit of back-and-forth. kiwi and aussie notes declining on the shorter and longer and. following that curve flattening. we are watching the aussie and kiwi dollar, the kiwi dollar seeing a little bit of weakness as we continue to rebalance what sort of demand we see for the greenback. that has been the safe haven currency demand of choice. that 10 year is holding pretty steady at this point. looking at new york crude, that is pushing higher as well. watching the move on the energy markets.

the fed plans to raise rates, it is setting off some alarm bells that inflation could push the economy into recession. kathleen hays is here with more. see that worry of course across the treasury, what is fueling that concern? powell seems pretty confident. kathleen: as we would expect, he did also in his press conference , if we had hindsight we would do better on inflation. here is what we thought. i think he's genuinely confident there is enough momentum in the economy that these rate hikes you are seeing being laid out in front of you, six hikes expected this year, that it won't be a problem for the economy. on another level, not just what you are seeing on the 2022 line, it actually shows there are people on the fomc who expect

some 50 basis point rate hikes. that can be more aggressive. 2.75%. the fed considers a neutral rate at 2.4%. as one guest just told us, empirically when the terminal rate is below that rate, it signals recessions. jay powell says the labor market is strong, unfilled positions, he is not worried. a lot of people seized on the aftermath of the press conference, the fed sees gdp coming down from about 2.8% this year to 2.2% in 2024, but they see unemployment staying at 3.5%. i think a lot of people are pushing back against that. you can see, it is not something -- if not a done deal.

another thing economists are saying if the fed gets going and they see something happening that they don't expect in the later market -- labor market, that will be a signal to not be quite so aggressive. one more thing i would like to put in is the balance sheet reduction could start soon, as soon as may. two guests said they are not going to use it for managing the yield curve, you can't really do that. but jay powell himself said balance sheet reduction, when the fed starts selling bombs, that could maybe replace a rate hike. how the fed figures that out, as we get into that phase of fed steps in 2022. shery: let's discuss the implications of potential changes coming up. joining us is the baron's global strategist. it's good to have you with us.

first of all, give us your assessment of chair powell's performance. he had a challenging job, especially after the markets last week. guest: he had a challenging job, projected confidence, he had a plan, he presented the committees wisdom through the dot plots. a steady increase through next year. popping off at 2.75, 2.4% in the long-term. those of us looking at the supply chain disruptions would welcome an outcome like that. it feels to me at least that the companies they see day-to-day, it's going to be a much bumpier ride than that area in particular, the supply chain disruptions that will come out of the commodity shock from the russia-you rain war are likely

to keep prices higher for longer and make the needle they are trying to thread that much harder to thread. shery: chair powell did make reference to that you rain war. -- ukraine war. how you are assessing the impact of sanctions on russia, not to mention the potential russian default. that deadline is this week. i know you are an advisor to the russian finance ministry, so you must know very well the innerworkings of the country's economy. guest: i was an advisor in the 1990's under president yeltsin. things have changed since then. these are dramatic sanctions that will be painful for the economy, not just shut off from financial flows, but trade, medicine and food. spare parts. airplane maintenance. a whole lot of things are going to be difficult to replace.

the country is going to be sent back close to what it looked like in the 1990's when the soviet union fell apart. i was surprised when chair powell mentioned disruptions, because he talked about it, but i'm not sure he emphasized the disruption to global supply chains. that is what we're looking for in the near term. the shock we have seen are likely to spread to other markets, other countries where there is not necessarily direct exposure to russia, spike in food prices has consequences in egypt, spike in nickel has consequences to the green transition. all of the things have yet to play out, and that is what is going to make the fed face greater challenges as they try to paste the level of policy normalization. shery: it's going to be hard if not impossible for russia to come from this isolated financial and geopolitical wilderness that is currently in.

will the -- for the economy to get back to some sort of level footing? guest: i think it's going to be a long time. the talk today of a potential peace deal, we hope for all of that. anything short of a russian withdrawal, russian apology, russian reparations check is going to keep these sanctions from the u.s. and europe on for a long time. there might be some way to negotiate the flow of medicines, spare parts, that sort of thing. but it's going to be a long time before russia becomes integrated, invested short of something much more dramatic. haidi: the flattening of the treasury curve, going above the neutral rate.

how large is the probability of the next recession? guest: i think it's unlikely. again, the companies we look at how strong balance sheets, continue to have fairly aggressive capital expenditure plans. if you look at that u.s. consumer, savings rate is high, the confidence is high. we will see if that wobbles with this news of the war. i think the u.s. economy is in pretty good shape. more concerned about europe where the growth is not as strong and the impact from russia is greater. haidi: always great to have you with us. we appreciate your insight. let's check in on some japanese stocks. energy suppliers in focus, we had an earthquake derailing some of those power plants and

knocking them off line, thermal power plants off-line and widespread lockouts. we are watching these railway lines. one train was derailed as a result of the earthquake. let's get you to su keenan. su: thank you. we start with a u.s. accounting watchdog, insisting that beijing provide complete access from companies that trade in new york. the oversight board statement sets a high bar for deals, allowing chinese firms to maintain american listings. it follows beijing's wide-ranging promise to stabilize financial markets after a selloff. ukraine and russia showed some signs of progress in their cease-fire negotiations. the kremlin says -- president zelensky says russia is adopting

a more realistic position. ukrainian officials tempered expectations by pointing to russia's continued attacks, claiming the positive tone is more about easing pressure on sanctions. japan has recalled the most favored nation status for russia. it had to the punishments tokyo has imposed on moscow. the prime minister has called russia's ingressive -- aggression and inhumane act. in indonesia, they say they will consider the strength of the economic recovery before finalizing a decision. the state budget is under strain from subsidies on basic commodities. the finance minister told bloomberg they could see the

fiscal deficit coming higher than earlier at -- estimates. >> what can be adjusted with this kind of changing global environment? we will be very selective. we will be looking at our own strength of recovery. 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 su keenan. this is bloomberg. shery: still ahead, the apex ceo joins us to talk about higher office -- prices and supply chain concerns. the u.s. increases military aid to ukraine but confirms it has not barred russia servicing bonds. details next.

this is bloomberg. ♪

haidi: let's look at stock futures. u.s. futures look like they will extend gains, and that messaging from powell the seem to convince most portions of the equity markets that the economic outlook in the u.s. is strong enough to withstand the tightening. when it comes to europe, we're seeing a little bit of upside. equities are rallying in the wednesday session as we see these tentative signs of

optimism in the talks between russia and ukraine. we had china pledge to keep market stable, that revived the huge rebound when it comes to chinese adrs. futures looking modestly higher at this point. shery: let's turn to the geopolitics behind some of those market moves. president biden ramping up u.s. military aid. it follows an emotional appeal from low to mere zelensky. >> president biden, you are the leader of the nation. i wish you to be the leader of the world.

be the leader. shery: let's get more details. dan, tell us about the aid that u.s. has offered ukraine and what does ukraine want when it comes to more help from the biden administration? guest: pitting groups drones, not the predator drone's. they are significant in helping ukraine to fend off the russians. more aid on the military side as well. russia has not been able to take the major cities and have had all sorts of problems on logistics, etc.. raises the state -- raise the

stakes. haidi: president biden called president putin a war criminal. does this raise the tone significantly? guest: it certainly fits with a lot of the u.s. rhetoric on the ground, and it makes it unclear, even if this is resolved, how the u.s. engages putin. if he is indeed guilty of war crimes. if there is a deal, what kind of culpability will there be afterward for targeting civilian buildings, we saw a theater attacked in mariupol. it comes down to the question of what kind of relationship is possible with russia and putin, if in fact there is a negotiated

solution to the war. shery: what do we know about the progress between negotiation so far? guest: their appeals to have been progress. -- there appears to have been progress, with the contours being mapped out. russia has said a possible compromise is a neutral ukraine which means ukraine would not join nato, but also one with its own military, which is interesting because one of putin's objectives when he launched the invasion was to demilitarized ukraine. for ukraine, keeping an army, blinken said any withdrawal news to be irreversible. where is that middle ground between ukraine being allowed to defend itself to make sure

russia does not innovate again, while also -- invaded again, while also vowing to be neutral? it is progress from where we were a week ago. haidi: will the deadline for a $170 million upon payments for two of russia dollar bonds closed on wednesday, no sign holders received cash. there is always some confusion when it comes to bond defaults and payments, clarify where we are at at this point. guest: the payment was due today. there is a grace period of about 30 days in which there will be questions about money, can it be paid in dollars, can it be paid in rubles?

should it be a default, it will be the first time in more than 100 years. right now was happening in the market are a lot of questions around where is the money right now, and is that going to be able to transfer through a series of counterparties over to the investors in bonds? what we do know is some investors have already begun selling some exposure prior to this event. shery: to what extent have investors sold their existing holdings? reporter: it's interesting, because this is not a liquid market. some investors have sold anywhere between half and two thirds of their positions in some cases, for some of the

primary debtholders. what they are doing is they will find a buyer who will be able to put down a certain amount of the debt, which today was trading as low as $.20 on the dollar. they were sold for $.20 on the dollar or a little lower than that. it will be interesting to see, the russian finance minister has said to a local paper that they made the payment to the bank in dollars, and they don't know if they can access the reserves. that is where the question will come to play. the u.s. treasury has said until the end of may, late may, that u.s. investors can get their payments from the russian federation. haidi: that grace period clicks

in thursday. we have more to come. this is bloomberg. ♪

shery: take a look at the surge. when it comes to today's trading session, gains as much as 9.5% given alibaba soared 20% in hong kong, the most since its listing in 2019, beijing promising to back down from its tech crackdown. haidi: let's take a look at how we are seeing trading off -- across the rest of asia.

markets in tokyo have been open for about a half-hour. this is the picture, strong gains out of the asx. sydney stocks led by tech and financials. we're just seeing as a small business owner, your bottom line is always top of mind. so start saving with comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to $500 a year. so boost your bottom line by switching today. get the new samsung galaxy s22 series on comcast business mobile and for a limited time save up to $750 on a new samsung device with eligible trade-in.

haidi: labor market data coming out from australia. 77,000 jobs being added to the economy, much higher than the 37,000 expected. the unemployment rate hitting 4% from 4.1% as was the expectation, big move down. the participation rate which economists say will be key when it comes to how the rba will move in terms of policy and

willingness to go faster than expected, we are seeing that also tech higher to 66.4% from 66.2, also more than expected. part-time employment was a contraction of 44,000 jobs. we see that sizable jump in labor participation and it could exert upward pressure. wage inflation, we hear from the government saying that missing puzzle piece is plenty of buffer. it is encouraging to nazi just the unemployment rate -- not just see the unemployment rate goes down, moving in the right direction. we had a number of omicron related disruptions to the labor

market. building a strong gains. shery: perhaps the virus disruption in singapore numbers, growth of 9.5%. that might sound like a big number, but we are talking about and easing from gains of more than 70%, coming in below expectations. when it comes to month on month numbers, it's a contraction of 2.8%. we have not seen a contraction in nonoil domestic exports month on month in singapore since august of last year. this just shows you the slowdown we are seeing in those export numbers. at least when it comes to electronics exports, you're on your -- year on year, it is still a slowdown. we had seen that slow down

january as well. softer demand coming from china. let's get to su keenan with the first word headlines. su: jerome powell raising the key interest rates. james foley dissented in favor of a half-point hike. >> it is clearly time to raise interest rates and begin the balance shrinkage. as i looked around the table, i saw a committee that is acutely aware of the need to return the economy to write stability and determine to use our tools to do

just that. su: president biden says he will send drones and antitank missiles to ukraine as part of the new package to help the country fend off russia. it follows an address to congress by the ukrainian president. >> remember pearl harbor. the terrible morning when your sky was led. just remember it. remember september the 11th. su: the united nations tried you know has ruled -- the international court of justice found ukraine had a plausible right not to be subjected to military operations.

if russia does not abide by the order, the top court has the ability to refer to the security council. 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 su keenan. this is bloomberg. haidi: the 7.3 magnitude earthquake striking northern japan has killed four people. our news managing editor has more details. what are we hearing about the impact and damage? reporter: the prime minister spoke a few minutes ago and said four people have been killed and a hundred or so injured. the infrastructural impact, we

are still seeing information come through. some power plants are still off-line at the moment. some of the area have had to hold services, the bullet train got the rails. they are saying that they are not clear when services would be resumed. overall, compared to the state of the damage, it is significant despite the strong magnitude of 7.3. shery: 11 years ago the key concern was the nuclear power plant. what do we know about the nuclear reactors? reporter: a fire alarm went off about an hour or so after the earthquake raised concerns, however the fire was contained,

the reactor was restarted. as far as we know, there has not been any significant damage that would raise concerns about the power plant itself. shery: our news managing editor joining us from tokyo. of course, we have seen companies being impacted by the earthquake. take a look at those stocks trading at the moment, because we heard from sony there were no casualties in the northeastern japan locations from the earthquake, while they are still looking into the impact on production. take a look at the broader markets, we are seeing the upside after we saw wall street stocks rally in the new york session. the nikkei as up 3%, the

japanese yen is at the lowest level in six years. close to the 119 level, i can't remember the last time it was that week against the u.s. dollar. factor in the rate differential as we head towards the boj policy division -- decision. the kospi is gaining ground at the moment, and the korean won is also gaining against the u.s. dollar. we have heard from the finance minister and south korea that they would take steps if the drop is excessive. haidi: a record surge, we're seeing record deaths, the spread

of omicron took it from around 50,000 in about a month, and in fact the prime minister just a week ago said he saw the peak of 370,000, clearly they have exceeded that. coming up next, we speak to the world's biggest area exporter, the company reported a 7% drop in income. this is bloomberg. ♪

haidi: the world's biggest area exporter has reported a drop in earnings saying russia's were in you and and higher costsk -- let's bring in the ceo. always great to have you with us. tell us about the price pressures. guest: with has been a tough first half, and we continue to perform well. still a good outcome. the world still wants nutritious dairy. we are the milk increasing on we

are forecasting -- we have had -- it's been a challenging first half but we are pleased with the results. haidi: the war in ukraine, the russian invasion. we know across -- guest: the medium-term underpins a strong price for milk, but there is complexities, increased

oil price. grain is more expensive. we have a joint venture in russia, we have a team of seven in moscow. we have suspended supply to russia at the moment in the medium to long-term, and at the moment 1% would go to russia. we have supplied and scale, and we are able to -- find high-volume for those products. shery: are you thinking of walking away from russia? guest: it's too early to tell. ploys, customers. we continue to monitor the situation. we have not made any situation -- decisions yet, but we have to consider. shery: you have shut down a

joint venture in india. what does that tell you about the dynamics in that market? guest: india is a great area market. given a revised strategy we came up with six months ago, india was no longer in our sweet spot. given we have supply, good homes, good reach and good markets. shery: where are those bright dots? we continue to see covid lockdowns across the country, and china as well. guest: active living, health and wellness portfolio. premium proteins, particularly america and japan had a good time. continue to see good demand.

it's the food service and consumer business, the ingredients business has performed strongly year on year and grown. it's hard to pass on a 30% price increase. haidi: we see the ending of fortress new zealand, has that had a big impact on the operational side of your business? guest: obviously, we have learned from omicron. we have managed to maintain our factories, them open. we managed to cover them when it comes to responding. we're looking forward to reuniting with our colleagues, but we managed to keep the operations going. haidi: what can you tell us in terms of the chinese demand story, and how that has been impacted by covid zero and the

fact that that economy is becoming more and place and that way? guest: continue to have good demand. the food service business. has been the input costs, not a demand problem. the team will continue to find new summers -- customers. they had a campaign to put mozzarella on dumplings. we are still being creative. shery: always good having you with us. thank you so much for joining us. we have some business flash headlines. foxconn's unit reported earnings that beat estimates after navigating tip shortages on

strong iphone demand. they saw a net income of $1.55 billion in expect full year business growth to be little changed. foxconn says it has resumed some operations in shenzhen after a lockdown halted production. hsbc has promised to phase down its financing of the fossil fuel industry, sending a warning to its oil and gas clients. the move is in line with the bank's to a net zero emissions target. hsbc remains one of the major funders of big oil and gas, helping fossil fuel companies raise about $52 billion. a swedish investment firm has agreed to buy a private the company for $7.5 billion in the biggest takeover of a firm by appear. they are financing the deal with one million new ordinary shares

and the remainder in cash, taking advantage of the stock performance since its ipo in 2019. the transaction is set to close in the fourth quarter. we have more to club -- more to come. this is bloomberg. ♪

shery: the beijing policy put is alive and well, pledges and written commitments provided historically for equity markets. they may need more than just words. let's bring in yvonne man and david ingles. not just words, they have written commitments, so how strong of a signal is this? yvonne: strongest yet we have heard from official policymakers. the checks so many boxes that investors had so many weston's about, the growth risk, regulatory crackdowns, where are we in this cycle. the property market close to a collapse. all of which was highlighted in this one meeting as well as -- the timing was quite crucial to

try and stabilize and calm these markets. you saw how hyperbolic things were after we saw this, like what we saw back in 2018, it came from the top. from the premier, and he said was the government should actively introduce policies that benefit markets, followed by statements from the pboc, all the way down to the insurance and banking watchdogs as well. they need to boost the economy in the first quarter. they promised relief when it comes to these fronts. there is also a mention that the tech crackdown, but they need to rectify should be ending as soon as possible, they say, also ensuring policy stability after a year of regulations were a lot of these tech companies have been battered. monetary policy as well, proactive, new loans. china may not expand the

property tax, perhaps relief on that front. for those that were thinking policymakers didn't really care about what happens to markets, perhaps are changing their view, but as you said these are all words. they need to take action in the next week or two. haidi: china is signaling some concessions for foreign listings? yvonne: that is a we are hearing so far between the u.s. and china when it comes to these delisting concerns. they said progress is being made, they are going well, and both sides are going to formulate a cooperation plan. the financial times is reporting china may be planning on concessions. the result could be that some of these u.s. china listed companies would have to provide some audit information to u.s. regulators. they also mentioned they might

clarify a red light greenlight system, information that cannot be disclosed abroad. we have heard from china hawks like marco rubio who said if they do strike a compromise, companies need to maintain listings, but the deal should not allow for these enormous loopholes that make it meaningless. shery: i am so jealous of you guys. it will be an exciting open. david, what are you watching? david: first, why? what now, right? we wait, we see how solid the floor many analysts say have been put into the market. to yvonne's point, a lot has been said. what's to be the policy as far as actions, pboc devising those plans. on regulation, how do we know

when attending? do we wait? as far as markets, lots to look at. volumes, turnover, flows, foreign participation in the market. you had a massive disrupt in price yesterday. how quickly the sell side rejig's some calls. jp morgan said this was on investable. a lot of things to watch out for, but certainly you might see another strong day. haidi: how big of a whole are these markets in? is it a bottom where we do see some action, but the fundamentals have not really changed. david: now they have not. just a good example, the hang seng index had to rally over 1000 points just to get it back above 20,000. as far as the whole is concerned, it's cheaper and hong

kong that it is in the mainland. as far as the rally from the bottom, could be a decently good year, it will be an incredibly stunning year if we see hong kong back to those levels, quite impossible when you look at the asia tech index which has to rally 150%. to use an analogy, the shark is out of the water and gives investors a chance for strategies and valuations, shift back to neutral. we will see what happens. shery: david ingles and yvonne man, who get all the action in their show, some of the stuff we are watching when markets open and half an hour. alibaba and tencent are preparing to cut tens of thousands of jobs in 2022 on china's regulatory crackdown, and watching property taxes

given the market slump and growing pressure from a renewed virus outbreak ends geopolitical turmoil. that is about it for daybreak asia. our markets coverage continues. ♪

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♪ >> this is my kitchen table and it is also my filing system. over much of the past few decades, i have been an investor. the highest calling of mankind, i have often thought, was private equity. [laughter] >> i>> learned from doing my interviews i leaders make it to the top. i asked him how much you wanted, he said to 50 come i said fine. i didn't negotiate with him. i