>> a very good morning it welcome today break australia. we are counting down to asia's major market opens. >> and good evening from bloomberg's world headquarters in new york, i'm kathleen hays. u.s. stocks rebound while the treasury well deepens and the treasury digest the fed chairs possible 50 basis point rate hike. >> crash investigators reveal the pilots failed to respond to

radio calls as they boeing 37 -- 737 nosedive. it's the countries's worst air disaster in almost 30 years. >> the omicron ba.2 subvariant take hold in the u.s. causing more than one third of covid cases last week. >> let's get a quick check on wall street. how about this? stocks as inflation hedge. the new narrative as people try to explain why the s&p 500 is up in the past six days as the federal reserve suggests they can go on their most aggressive rate hike path in years. you can see the s&p 500 gained just over a point. the s&p 500 futures are closing a little bit weaker, perhaps some doubt. the nasdaq gained 10%, the s&p led by just -- consumer discretionary. and speaking of tech, look at

the golden dragon index. it is up again nearly 8%. alibaba got the ball rolling. they up to their share buyback program to $25 billion overnight with china regulator saying some firms are going to have to issue new audits so they don't get delisted from the stock market. the two year yield has the biggest jump in basis points, since 1984. >> this is an interesting chart because people are worried about the curve. when you look at this line, it looks like it is ready for inversion. jay powell said yesterday, it's what he looks flat.

and look how steep it still is. with all this in mind, let's see what they said today when he once again advocated for a 50 basis point rate hike. >> faster is better and i think 50 basis point moves will definitely be in the mix. >> this exquisite interview. >> you wonder what it takes to look at the drivers of inflation. and if it will have much of a meaningful impact, particularly with the commodity supply-side issues continuing with the ongoing war in ukraine.

kathleen, take a look at how asian markets are shaping up. it is shaping up already to be action filled when it comes to this part of the world. taking a look at the australian 10 year, the bond yield rising seven basis points. early indications and extent to the selloff. we did hear from the new zealand finance minister will put rate hikes. they have been quite ahead of the curve and signaling the courts and the impact seen on households and businesses. of course, they are trying to manage price stability.

futures are looking pretty flat at the moment. take a look at the big move on u.s. markets. that selloff in treasuries intensifying. let's go to the asset reporter for more analysis. tele-some about the median term trends. >> i was looking at the year-to-date gains of the s&p 500 today because if you look at that, it is only down 5.3% right now. just two weeks ago, it is down 12%. they have been regain a lot of momentum. the fed chair jay powell saying that we could see a 50 basis point rate hike at the next meeting. and we have the bond market kind of signaling perhaps that inflation could be more persistent and the fed is going

to tighten policy. interesting to watch this dynamic between stocks and all of these headline risks stacking up. >> the narrative story of stocks as an inflation hedge, it's going to hike rates. and there is were in ukraine. but they are saying that stocks will lead to companies. >> a lot of strategists that i speak to our extra bullish on stocks right now, particularly u.s. equities, and bring it back to the u.s. consumer. they say a lot of the bet right now is forced on that. in terms of where the market can go. there are some technical analysts. there was a note today that perhaps we are at the bottom. that was his take away from the technical signal he is seeing.

he thinks, perhaps, we are at a bottom. >> so much turning around in the crypto space. how about the stealth rally underway? >> interesting to see the stealth rally and bitcoin reaches the highest point in three weeks today, up about 5% at one point, trading just below 43,000 u.s. dollars. i still see bitcoin as primarily a risk asset. people are still kind of questioning if it is an inflation hedge. investors are really viewing this as a risk asset. you often see when tech stocks are rising, that kind of speculative trade is rising and bitcoin is also rising and we have some data that perhaps the case for bitcoin bitcoin hasn't into moved in over a year.

perhaps investors are holding onto their bitcoin and it could be a good sign. they are not selling it. >> emily grow fail -- graffeo there. vonnie: officials say the pilots of the china eastern plane it not respond to calls after tipping into a nosedive monday and crashing. investigators say it is too early to pinpoint the cause of the disaster which is believed to have killed all 132 people on board. dozens of domestic flights were canceled across china as authorities ordered a sweeping air safety review. chinese health officials say every province should set up two or three makeshift hospitals to treat covid infections after china updated the coronavirus treatment guidelines to be designated for people with severe conditions and sent milder conditions to isolated facilities.

33 makeshift hospitals have reportedly been built or are under construction. hong kong is set to resume sending compulsory testing notices as the declining number of coronavirus infections allows authorities to round up the key tools for tracking down and quarantining close contacts. they say it will help identify cases early because transmission chains have the initial testing focus with a high number of positive cases. mckenzie scott has donated 430 $6 million to habitat for humanity. -- has donated $436 million to habitat for humanity. it is the biggest known gift to date that is set to giveaway portions of her $55 billion fortune. it will help address historic inequities. global news 24 hours a day on air, powered by more than 2700 journalists and analysts in more

than 120 countries. this is bloomberg. >> the challenges continue to mount despite the fact that china's tech crackdown is easing. one investor runs the largest china take etf in the u.s. st. louis fed president jim bullard reiterates his call for interest rates to rise above 3%. hear more from our exclusive interview. this is bloomberg. ♪

>> fed president jim bullard said that monetary policy needs to be tightened quickly to keep inflation under control. he spoke exclusively with michael mckee. >> faster is better and i think the 1994 tightening cycle or removal of accommodation cycle is probably the best analogy here. that one was quite successful. the fed moved 300 basis points in a single year. then made some adjustments afterwards in 1995. the result was we had the 2% inflation target over the next 10 years.

the economy boomed in the second half of the 1990's. so i think this is a situation like that where we came out of the pandemic, we got surprised by inflation. and what you have to do is move the policy rate up discreetly, a fair amount. not to be too disruptive, but i think 50 basis point moves will be in the mix. and then get to a level where we can be neutral. right now, we are putting upward pressure on inflation. >> the markets in futures are pricing in 50. but the fed doesn't like the surprise of the markets. should we assume that that is what you're going to do? >> i'm just one person. i don't know where the rest of the committee will be in the chair.

i thought it was a good speech yesterday that laid out the situation. we will see where we are when we get to may 4. >> the economic data have been closely watched, but from what you're saying, it doesn't sound like it really matters between now and may. that we are too low in front of the fed funds rate and those are the only considerations? >> that is the big picture and i think that's right that we don't really need a lot more data here. but you never know in this world and in this business. obviously, we have geopolitical risk out there. i guess my feeling on that is that we can't wait for that to get resolved. this could go on for a very long time and certainly geopolitical tensions, even if the war ended tomorrow, the tensions would last for a long time. the best contribution we can make is to get our house in order and make sure that the u.s. economy is doing as well as we can achieve.

and that will be the best we can do to contribute to the global situation. >> without going r-star on everybody, the idea of neutral is a moving target. people think of different levels. one analyst some done up your policy right now as the fed is going to keep hiking until something breaks. is that the best way to think about it? >> that is not a good way to think about it. we will go to neutral where we are not putting upward pressure on inflation. you have close to 8% here and more to come in the inflation reports ahead. we want to get to neutral so we are not putting upward pressure and we are putting some downward pressure. history tells us that the faster we move to that situation, the better chance we will have of moving inflation back to target

and getting a boom in the u.s. economy. >> what is neutral to you? >> on the funds rate, i have 2% because my r-star is lower than others. i'm willing to go with a zero r-star which is lower than other estimates that are out there. so 200 basis points on the function, but i want to go to 300 this year to get mildly restrictive and then that will help us turn inflation around. and hopefully we get some moderation inflation from other sources. >> james bullard speaking with michael mckee. let's bring in president and portfolio manager joining us from san francisco. a great to see you. you have been in this game for a long time. the federal reserve is sending the signal that we are going to either move aggressively or very aggressively with high

inflation. we have war in ukraine. marti prices, especially oil, continue to climb. what gives? how can stocks keep rallying in this environment? will we see a boom that turned into a selloff again? >> good to see you, kathleen. we don't have answers to a lot of those questions and that is why we have such volatility right now. there is no question the fed needs to raise rates. they probably need to move aggressively area in my view, they've waited too long. will they be able to do it without throwing us into a recession in light of what is going on economically into geopolitically throughout the rest of the world? and you have inflation and recession. not predicting that is going to happen, but that will be a risk. there is no question that inflation has gone up. i suspect we will peak sometime in the next few months.

and then probably come down from there. but where do we settle? some of the inflation is transitory. it is the number 3%, 4%? i don't know. i don't think it's one or two. and at what point can you have reasonable inflation like we had in the 1980's and economic growth? at what point does inflation really turn into a negative? >> stocks as the inflation hedge, because stock prices are linked to companies that could raise prices and in a sense, you like companies to control cost pressures. are you on board with that idea? >> to some degree, yes. in the early stages of inflation, who doesn't like it? people make more money, higher wages, and they pay more in taxes because they make more money.

as you go through this cycle, it gets harder to control. costs go up and maybe your purchasing power gets eroded over time. it doesn't look so good as the number goes up or inflation is prolonged. i think we are in that early stage at the moment. certainly, growth stocks would be one inflation hedge. i think you have to be careful there. it would be growth at a reasonable price. what is reasonable price when the market has been trading at 21 or 22 times earnings? will investors be willing to pay those multiples for equities that have more risk in them? or maybe the ability to raise prices? it is the big question and i think there are several ways to fight inflation. one would be to have an allocation toward growth stocks. we would favor companies that can control costs as well as have some pricing power. i think on the bond side, caches

earning -8% right now. so whatever you can get to mitigate that would be a benefit. on the bond side, we advocate short duration high-quality balance sheets. that way, you're able to roll up interest rates as your existing bonds mature and given the degree of liquidity and evaluation occurring with all the paper money and liquidity, it would print several trillion dollars in the last few years. an allocation of gold and silver would be helping anchor purchasing power and preserve capital. so we would advocate that sort of approach right here. >> quickly, what about commodities exposure as another stagflation head? >> absolutely. the thing you have to be careful with in commodities is which commodity, which company? or if you invest directly through futures or buying physical whatever it is.

definitely, those sorts of companies would meet our definition in terms of assuming they can control costs. some firms are better at that than others. they would have pricing power and especially with a supply demand mismatch situation that we currently have here now, it may extend for quite a while. those companies should be increasing earnings and revenue. that would theoretically come down to better shareholder returns. we certainly would advocate an investment in those areas. the assets themselves also act as an inflation hedge. definitely a return vehicle. you may need a strong stomach because of volatility, but definitely somewhere that would be another strategy to use. >> does cryptocurrency play a role in that? do you need to see that correlation with stock performance about the hold up?

>> we don't really know, do we? the lifecycle of crypto has sort of mirrored the run in equities for the last 10 to 12 years. as well as a run in bonds. to make an argument that again, short-term correlations could be all over the place. if you're going to look at the history or lifecycle of bitcoin, it is correlated pretty strongly. there was a point made in the last segment that interestingly enough, bitcoin tends to go up when tech stocks are doing well. that would indicate a possible correlation there. i think at this point, we really don't know enough. it's a legitimate asset class, it is not tax efficient to trade. it is something that people are attracted to from a momentum standpoint. you definitely have increasing usage of digital currencies. i think that israel.

-- that is real. it is separate from value. the other thing is it hasn't really demonstrated itself as a hedge. i know a lot has been made for bitcoin as a proxy for gold. again, i don't think you have enough history to make that statement and i would argue that it really hasn't acted simply at all. but we don't know enough. as a money manager, it is a fast hitting area to watch long-term and we will see how it performs in multiple cycles and multiple scenarios. >> michael, great to have you with us. president of permanent portfolio family of funds. more to come on daybreak australia. this is bloomberg. ♪

>> now for a quick check of the latest business flash headlines. struggling to meet production forecast because of a shortage of semiconductors. the disruption is expected to last until the second quarter and the carmaker expects marginal growth in deliveries this year after previously seeing sales. the market cap is back above the $1 trillion mark after shares rose for a sixth straight session and the company opened its plant outside berlin. they will make electric suvs with an eye on the expanding ev market. >> this is a great day for the factories and i would just like to thank everyone who helped. it really made a very big difference. and to the community. tesla will make sure that this is a gem, you know, a gemstone for the area, for europe,

germany, and the world. >> still ahead, a top china etf investor gives us a wider sector outlook after beijing promised ease act downs. -- crackdowns.

>> taking a look at the day ahead for australia and new zealand now, new zealand is removing all outdoor gathering limits as it continues to move toward covid-19. indoor gatherings of up to 200 people will also be allowed. yet he and government says it will cut red tape for small businesses in next week's budget. the measures are specter to save companies about 800 billion aussie dollars a year. and new zealand will go directly from auckland to new york.

the route is one of the longest in the world, 17.5 hours southbound. china stocks rallied as investor sentiment was boosted by alibaba's decision to increase its share buyback. they also got a look from a report that chinese regulators have asked them to prepare for more order disclosures to ensure that they remain listed in new york. the cio at crane shift, great to have you with us. can we say that we are seeing this story get to some sort of bottoming out for these companies? >> surely we have seen a vast disparity between the price action of the companies and the fundamentals where we are at in the case of like tencent which will be reporting earnings later on today. there are two standard deviations off of the five-year averages. i think we have the market that is really baking in a worst-case scenario. the delisting, continuing china

internet regulation, and a decrease in u.s. and china relationships. we have the sum of all fears baked into the price of these securities. >> if you want to pick when it comes to growth prospects and recovery prospects and companies that would be relatively shorter through a regulatory crackdown, what are you lacking at the moment? >> we take a basket approach with our china internet etf that has become the kind of gold standard for the space. we do like the basket approach at the same time. when you look at the leaders in the space, alibaba, tencent, and you recognize how far disconnected from fundamentals they have become, it's one of the situations where you do have to stick your head in the sand and by. alibaba's move to vastly increase their share buyback

program not only shows the confidence of management, but also an indication that they are willing to put the money to work , which we can imply that the worst of the chinese internet regulatory cycle is behind us. >> it seems sort of obvious that it is given the things the government has said recently, but you can't help but ask about the war in ukraine, the fed tightening, the government meeting growth target. could it be that we will been pack list up for now? -- we will patch this up for now? >> i think the statement was sent with a lot of conviction. we see that message reiterated. i think it is an indication that

a message has been delivered from the upper echelon of china's government. that the way this regulatory cycle was implemented, maybe it went too far as well as addressing other concerns in terms of the slowing macro picture in china and the situation in real estate. there are other factors at play. the value growth rotation, higher rates in the u.s. i think the three main culprits, chinese internet regulation, the u.s. china diplomatic situation. the worst case outcome for all three of those silos was baked into these names and we are starting to see those probabilities change in a positive fashion. >> what do you say to u.s. investors that say china is not investable. and if it is, which of the etf's would you suggest? >> i think the way most foreign investors have looked at china

is really between the u.s. and hong kong chairs. and over the last almost year and a half, that has been a very difficult place to invest. at the same time, we can contrast that with what investors in china think about capital markets. certainly the shanghai and shenzhen returns 9% and 11% last year versus down 13% for the hang seng. i think there is a disparity between what the chinese think about china, what foreign investors think about china. that is why we recommend blending the two. because they do disconnect like we have seen over the last year. i think the foreign sentiment is starting to uptick. >> does the domestic growth story concern you when it comes to what levels of growth we might expect in the coming years?

>> i think over the last two years, china's economy has been driven by it being export driven manufacturers, keeping china's gdp in a very strong place from a relative perspective. over the next year as we see global tightening and global stimulus pulled back, that will invariably slow the export engine which means domestic consumption has to take up the slack. i think a loosening of covid policy should help unleash domestic consumption in china and i think that domestic consumption occurs with the companies we hold accountable. >> brendan, great to have you as always. the deepening route and treasuries is an unpleasant situation for markets according to goldman sachs. the managing director says bond exposure won't help hedge risks in this environment and it will cost investors and drive risk.

investors may have to accept more risk in their portfolios in the near term. >> and investors looking for a haven can still consider u.s. financials. that is a deal with the bank of america strategist that remains overweight financials. they hold relative value. the strategist said financials are now rich with cash and have low earnings volatility. they have ensured investors they are on track to provide up luminary restructuring plan by the end of july. the stress developer urges patients with a call this evening. our anchor has more. did investors get answers from the company that they needed to hear? >> it seems like it was more reassurances, more than anything after what we heard in the last 12 hours or 24 hours, that they were unable to deliver and publish their results in time.

also the stock bill is suspended as of monday. if you are unable to deliver on earnings and publish at the time, is there going to be a delay in this restructuring process? that seems to be what was centered around this call, that evergrande reassuring investors saying that the promise we made back in january to deliver april luminary restructuring proposal in six months is still on track at the moment. they ask investors to not take any aggressive action at this time as they work around what they are calling a holistic approach and holistic solution here to pay back all of its creditors. they have been in contact. in speaking with 89 offshore institutions and individual investors asking for their views, they told people on the call that they hold 22.7 billion dollars in offshore debt which includes $3.3 billion in project

financing and private debt. as for not being able to publish the results in time, this is due to drastic changes in the operating environment that made publishing these results a bit more difficult. it raises a lot of questions. if you can't access results, it's hard for investors to gauge how much liquidity is remaining in this company. and if the company can deliver on projects with paid bondholders. >> the property services unit is investigating how to billion dollars will have security for pledge guarantees seized by banks. what are the implications? >> this is a pretty unusual development. it certainly raises a lot of issues in corporate governance. and this was an unreported $2.1 billion of these third-party pledge guarantees that wasn't

enforced by these banks. the lenders involved and the third party, this basically wipes out most of the cash position. if you take a look at the end of june, the data suggests cash holding stood at $2.2 billion in cash. and the property services unit was seen as the strongest part of the group as well. this could be a specific story but it also raises questions on if it is a common practice among these developers themselves. bloomberg intelligence think this could be a signal that there are more hidden risks out there. and also they may share the same management team which obviously brings up the issue of conflict of interest. they are calling this a major incident and are now investigating the matter.

>> bloomberg markets coanchor yvonne man. coming up next, ba.2 continues. details ahead, this is bloomberg. ♪

>> one third of last week's

covid 19 cases were caused by the omicron ba.2 subvariant. it is a notable increase from the week earlier when the string was estimated to account for just under one in four cases. let's bring in bloomberg's health reporter. why have cases been rising in western europe? and whatever the reason, it's definitely ba.2. is that what is happening in the u.s.? >> in western europe and in the u.k., cases started rising at the end of february. experts were thinking that it was because of a couple of different factors. it is shown to be more transmissible and the original omicron strain. and this is also coupled with waning immunity, so we know immunity from vaccines and prior infections is starting to go down. and at the same time, mask mandates and restrictions are being lifted pretty much all over the globe.

so those three factors were happening around the same time and it created this perfect storm, of sorts, for cases to start going up again after they had plunged from peaks in the winter during the original omicron strain. the same set of circumstances is happening in the u.s., and that makes it a very real possibility that we could start to see the same thing here. the u.s. has a lower vaccination rate and booster rate than the u.k. and some parts of europe. that is consideration as well. >> we're starting to see ba.2 cases starting to take up. what do we know so far? >> over the last week, cases rose 33%. that is still not as concerning as it was in the winter and

during prior surges because cases aren't as high as they were then. but it is a significant increase over the last week. and that coincides with ba.2 increasing in prevalence in new york city and in new york state. and generally in the northeast and new england. it is now accounting for 50% of cases in this area. and so that is the same pattern that we saw in the u.k.. >> some people barely got sick with omicron in the new york area. is ba.2 more like omicron? you don't want to get it but not so much like delta or the previous variant? >> that is what we are hearing. that it is not any more severe than omicron in terms of causing hospitalizations. that is from data out of the u.k. that they have obviously experienced a little bit earlier than us. experts are worried about the

risk of covid. that is definitely a concern here. >> let's get to first word news with vonnie quinn. >> u.s. monetary policy needs to be tightened quickly to ease inflation pressures. he reiterated rights to rise above 3% this year. this is in favor of a half-point hike that was announced. >> what you have to do is move the policy rate up discreetly a fair amount. not to be too disruptive, but i think 50 basis point moves will definitely be in the mix. and to get to a level where we can be neutral and then from there, we can decide if we want to be restrictive and put further downward pressure on

inflation. but right now, we're putting upward pressure on inflation. it's the wrong place to be given where inflation is. >> expected to announced new measures against russia. his national says along with fresh sanctions, they will also introduce efforts to crack down on the invasion. biden will attend an emergency nato summit, a g-7 meeting, and a session of the council. russian opposition leader alexei navalny is calling on people to oppose vladimir putin after he was sentenced to nine years for alleged fraud and contempt of court. in a series of tweets, he said the best form is not sympathy, but action against what he called war criminals and putin's regime. his nine year jail sentence will be added to the 2.5 years he is currently serving. myanmar's government is out of the u.s. after antony blinken declared it committed genocide.

the foreign ministry denies in an engaging in any genocidal actions saying his remarks were politically motivated. they say me and mark killed over 9000 and forced others to flee to bangladesh in 2016 and 2017. 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. >> china has ordered a sweeping two-week safety review in the wake of the crash on monday. the cause remains a mystery at authorities are revealing that the pilot of the doomed aircraft did not respond to multiple calls from air traffic controllers as a plane went into a nosedive. it's get the latest with our north asia correspondent stephen engle. do we have any more clarity on the circumstances that led to this rash?

a lot of these investigations take some time. we do see chinese authorities taking action. >> there are circumstances that led to the crash or are aligned with this crash, not necessarily the cause. it is way too early to say that one is the cause. and i am here north of seattle, i made a phone call talking to them about how the 737, the most successful range of aircraft, if you strip out the separate talk -- troubles as of late. people are puzzled how this could happen. data showing that in the stable dive. and that data shows the plane

was traveling at more than 640 miles per hour. that is 966 kilometers an hour. and at times, may have even exceeded 700 miles an hour. at 35,000 feet, the speed of sound is about 606 he three miles per hour. at one point, it did exceed the speed of sound. and the sources i have spoken to say it is incredibly difficult to put a fully intact airplane like the 737 into a complete vertical dive if it is fully intact. so these questions remain, obviously. and what happens is when an airplane is traveling at that speed, crashing into the ground, it obliterates everything, including, potentially, the flight invoice data recorders. the black boxes that are, of course, orange. and those have not yet been found and that will be critical, of course, for determining what caused this mystery crash.

the aviation administration of china has ordered a two-week extensive comprehensive review of safety practices. we are hearing they are also changing the age requirements. and even those in the jump seat as a result of this crash and we will just have to see. thousands of flights were canceled on tuesday because 72% of domestic flights were canceled. we will see if this investigation shines anymore light. >> and get a roundup of what you need to know in today's edition of daybreak. bloomberg subscribers can go on their terminal and is also available on mobile in the bloomberg anywhere at. -- app. get news in the industries and assets that matter to you most. this is bloomberg. ♪

>> a quick check of the latest business flash headlines. nvidia told investors that it is focused on maintaining growth with new product while embarking on more aggressive stock buyback plans. the priorities are to use cash to expand the business.

a potential sale, interest from industry players including china's group and sources say that other leaders include 20% of the units as well as germany's elevator. posting a 40% jump in fourth-quarter profit beating analyst estimates. the world number three smartphone maker has a plan to buy back $1.3 billion of its own shares. lg energy solutions have one point $7 billion plant expansion in michigan. the battery maker will get $56.5 million and a 20 year tax break

worth more than 130 million according to a public memo. >> let's take a look at the markets as we get ready for the aussie futures to turn into fresh real prices. actually, let's start on new zealand because we can see a bit of a decline there. new zealand is dealing with clove -- covid problems. by contrast, it looks like the sydney stocks are set to move higher, probably getting a little wind in the back of the sales after the s&p 500 rose for the fifth day out of six. nikkei looking to move higher and it had six days of increases despite the fact that it has its currency at a new six-year low. you can see the s&p 500 futures, we will see what that does for asian trade today. coming up in the next hour, we

discussed market strategy. that's it for daybreak asia. this is bloomberg.

♪ >> we are cutting down to asia's major market open. >> i'm kathleen hays in new york and welcome to daybreak asia. our top stories this hour, following wall street higher while the treasury selloff deepens. investors react to increasingly hawkish signals from fed officials. investigators revealed chinese to pilots failed to respond to radio calls before their boeing 737 cra