>> good morning, welcome to daybreak australia. we are counting down to asia's major market open. >> the top stories this hour. and s&p 500 holds a three day drop as they dial back following the fed rate hike. >> the market fallout from russia's invasion of ukraine ways on jp morgan.

the ceo says the war and inflation poses challenges. >> the central bank cutting rates, to boost the economy after the covid lockdown. >> we are seeing u.s. futures muted at the open after the fall on the s&p 500. we saw a gain ground for the first time in four sessions. technology leading the advance. it was interesting to see investors pulling back despite the fact we saw ppi numbers jumping the most on record, perhaps more focused on the core cpi numbers. we have the 10 year yield down, that also sends a dollar to the biggest loss. we are watching the canadian dollar which rose to around the 125 level. we are talking about a 50 basis point hike.

oil was also trading higher in the asian session, it was still about the no four dollars a barrel level. the focus was on financials because two look at this chart. we had a jp morgan reporting earnings, the first quarter results not looking great, that is because of the $400 million lost to the russian invasion of ukraine. you would expect financials doing well. financials are actually lagging. we were focused on what jp morgan was doing because russia's fallout is being. jp morgan is one of the biggest players in the commodity space. there were involved in the fiasco where nickel was trading on the metal exchange. we are watching them closely, we do have reports coming out from goldman sachs, morgan stanley, citigroup, and avalanche about earnings as well. >> when it comes to the war in

ukraine it does continue unabated. president biden pledging $800 million weapon supplies. we also heard that you would be providing more support from europe's -- the eu would be providing more support from europe including from the mayor of mariupol, over 20,000 people are dead. russia's military committed war crimes by targeting civilians. we are seeing a ramp up of not only sanctions but the additional support. >> let us see how all of this has played out in the market. let us bring in our bloomberg cross asset editor. let me start with the result

coming out from jp morgan, it was a key focus in today's results. >> two things, a reported 524 million-dollar loss which was tied to its exposure in russia. it also said it had put aside a sum to cover bad debt. that is the first time it has built up money in this way since 2020. jamie dimon is putting his money where his mouth is. they are citing the war in ukraine and higher inflation and putting aside the special reserve of money to cover itself. jamie dimon did not expect a recession this year but he acknowledged that there were storm clouds on the horizon in inflation and because of the challenges presented by the war in ukraine. you also knowledge that the consumer is in good health and that they are starting to see a

bit of a bounceback in loan growth. >> that is what we saw when it comes to trading and equities. is there a sense of traders and investors are dial back the aggressive expectations of the fed? >> that is what we saw last night. it has to be said that it is probably more as we have the inflation numbers. the earnings season is shaping up as a main focus. what we saw from jp morgan, whether that is going to play out for other banks and other companies reporting given the supply chain, it is worth noting that managers are entering the earnings season but with the most pessimistic outlook on

outlook according to the -- the most pessimistic outlook on the economy and looking to add hedges as the fear of stagflation increases in the market. we also mentioned one area of support may be china looking to control the amount of money that banks keep in reserve. they would do this at a proper time. the government in china is concerned about the slowdown that they are seeing in the economy, especially given the new round of lockdowns. that is going to be something that investors will be looking out for today. the potential of another interest rate cut from china. perhaps even sometime this week. >> we saw jp morgan raising reserves, are we expecting from

other lenders this week -- what are we expecting from other lenders this week? >> falling in line with jp morgan in the sense that jp morgan so investment banking revenue decline. in stock trading down, not as much as it had been expected before. probably because of the volatility in russia which offset a poor order. -- poorer quarter. citi is the one that would look for commentary on russia, it has the most exposure in russia and is trying to wind down its consumer operations there. at has about $10 billion of loans and other assets tied to the country. this is something that investors and analysts will be focused on. the banks also have exposure in the country but citi is the top one. >> let us take a look at the

asian markets, going into this holiday, head of the easter long weekend in australia, this is what we are seeing. us trillion futures are looking high, we are expecting cash trading to start with the an early gain of one quarter of 1%. helping the three-day slide, technology stocks leading gains, trader styling back some of the fit expectations. new zealand seeing an upset -- upside in equity trading. new zealand delivering the biggest interest rate. increase in 22 years perhaps we could see more aggressive moves. we had the big move when it comes to the kiwi bonds as well, rallying following a more aggressive policy. we did also see the currency extending those declines as well.

the bowe bergdahl are and putting a pause on the nine-day rally rate we are still seeing a bit of upward pressure when it comes to the dollar at the moment. under 1.26, seeing a little bit more price activity that we have seen over the past few weeks since the jawboning happened from the japanese government. australian metrics moving in sympathy with new zealand. signals are being made that it is ready to cut rates for the second time this year. let us bring up kathleen hays. how strong is the messaging we are getting from the state council? >> it does seem to be picking up and they met wednesday, late in the afternoon, they came out with a statement where they're going to use their monetary policy tools including the rrr rate and the step up financial report for the economy. this of course, as the chinese

government is dealing with an economy where the growth forecast for this year keeps getting cut more and more as the virus outbreak worsens and the lockdown extends and reaches out. you can see this is the schematic we are watching. the rates that are expected to move first, possibly by tomorrow is the mlf. it is now at 4.95%. 15 out of 20 economists see a cut, i would say about 15, 10 basis point cutgo ago to 4.85 good others see a five-point cut. giving more liquidity. that was last cut twice last year, the question is could the beginning to be ready to do that again? not enough forces pushing back

at it, they think it is time to have a double whinny approach. >> so many forces pushing back at the bank of korea. >> they are facing the higher inflation, they are looking at home prices. the economy has been hit by supply chain concerns, there are questions over the economy and economists are split because the bank of korea is meeting without their governor, having one in place for the first time ever. our survey suggests they would do a 25 basis point cut, 1121 -- 11 in 21 economists see that happening right they do not have the former imf asian deputy director who faces his confirmation hearing in korea's parliament. they are going to have a deputy

governor presiding. that is why the expect them to be rather cautious here. look at the inflation rates before we top this off. it is well above target. the producer price index and the sumer price index near the highest levels in 10 years. the target rate is 2%. that is why they are expected to do another 25 basis point cut. they had three last year, there were one of the leaders in fighting inflation. and they are staying ahead of the curve when it comes to the federal reserve other banks who are hiking. you are talking about the bank of canada, they will not be aggressive. >> everybody is moving at this point. let us get over to the first word headlines. >> the u.s. is sending ukraine

in hundred million dollars worth of military hardware. president biden announced this on wednesday after a phone call with the ukraine president. and includes heavy artillery systems and army personnel carriers. this signals a more intense military commitment after earlier shipments of mostly defensive weapons. finland has started the process to leave russia's nordic nader -- neighbor to nato. they bid to join the organization could be decided in the coming weeks after the release of a paper that cited better security guarantees. local media reports sweet it may also follow suit. >> new york city law enforcement officials have arrested frank james in manhattan. this is in connection with the brooklyn subway station of entered more than two dozen people. james faces a federal terrorism chart and could face life in prison if convicted. a germanic manhunt that stretched -- a dramatic manhunt that set the city on edge.

the nation's decision to suspend payments on foreign debts has taken the sovereign to process. since sri lanka has set current -- foreign currency to see, the s&p has also lowered the country's levels to the lowest possible. global news 24 hours a day, on-air and at quicktake, powered by more than 2700 journalists and analysts in over 120 countries. >> we have more on the big u.s. bank earnings, jp morgan is warning of storm clouds in the horizon. a look at the broader earnings season and how to navigate that volatility. the chief strategist from chief asset management. this is bloomberg.

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shery: the start of the earnings season, let us bring in our next

guest to expects an reversed first quarter for earnings. matt, good to have you with us. before we look ahead, what happened today, we have the ppi numbers jumping at a record. yields fell and stocks rose? >> it is the counterintuitive fitness of the market -- it is the counterintuitiveness of the market. what you see is a marriage of the sticky and non-sticky part of that number. when the curve is coming in like that there is a point to say this is going to impact the economy outside of 12 months. you saw the fed being stuck and it has crated a recession so there is a risk off scenario coming into the treasury. with the spike in yields, at the beginning of the year, from an

international perspective, treasuries look a bit more palpable. even though they negative yielding debt has plummeted, down the 2.5%, it is -- $2.57 trillion. the geopolitical tension, you create a c pavement there. that is what you are looking at. it is never just one thing in the market. haidi: we have seen a consistent trend of yields rising and even more given the then's hawkish in his -- given the fed's hawkish ness in this. >> you saw a little bit of a lack of stock which is not a natural. it grows in general in the industry and the whole sector. as you saw the analyst pointed

out, the yield curve has had less of an effect on earnings and the is on the financial sector because they diversify the revenue screen -- stream. the buyers of the financials, the quality ones are increasing dividends. we see less buybacks in the financials and an increase in dividends. jamie dimon talked about being cautious and i think that is a good tale to note. no one did not build the ark before the storm started -- noah build the ark before the storm started. the two political tensions, uc -- the geopolitical tensions, you see one black swan, you think you see another. haidi: you have been a long on commodities as a theme for two

years. are you adding to the allocation and what is your preferred exposure? >> we have liked energy for a while, we like the industrial metals. we have elevated our agricultural. it is multipronged. this is not just a short anomaly, the covid pandemic out of the supply chain is exacerbated the moved there without were due for a wild. -- the moods that were due for a while. it has been under invested in for many years, you have the supply chain issues, it is not going to get fixed anytime soon. the demand is very strong although that could prevail which could cause a little bit of pull back. even manufacturing, along the supply chain, it goes in time. it loses its usefulness for people on that side. that creates a perfect

confluence where the commodities have been under invested, and after a while you have to say there is a good value in them. lowering the correlation is out of the portfolio, try to mitigate risk from the recessionary markets in general. haidi: under invested in technology as well which has not been in year given that it has seen growth looking relatively robust. look at this chart which tracks the nasdaq 100 and the underperformance compared to the broader s&p 500. it is worth relative to the s&p 500. trailing by nearly seven basis points. how selective would you be when it comes to big technology? you said you would be adding allocations of value. >> that is a great point because we do look at value, not just at reward, but risk as well.

you have to balance it out. we saw a lot of risk in the technology, it got a little bit ahead of itself. there are some select buys, at broad-based you do not want to do that. we would rather be more selective. with a that is pretty into it in how you would want to be in the economic framework. you want to be nimble, selective. you have to understand the broad spectrum. some companies are very good. almost utilities in the technology sector. we still like higher dividend paying companies. there is good to be a push to see more of that which will balance out some of the technology buybacks. shery: we appreciate your input. you can get around up of the stories you need to know to get your day going in today's addition of daybreak. subscribers can get that at dayb .

the assets that matter to you. this is bloomberg. ♪

haidi: quick check of the business flash headlines. slower demand for software and i.t. services. shery: the exit from work from home arrangements, forecast revenue and in march 2023 to increase up to 15%. profit for the fourth quarter also towed estimates at almost $750 million. google is spending $9.5 million to get more workers back to the office. it will invest in campuses and data centers throughout the u.s. this year and is expecting to add 12,000 new jobs as part of the investment.

technology firms are balancing moving employees back to in person work without causing unrest among staff. haidi: taking a look at the day ahead, this is what we are watching when it comes to new zealand. house sales fell more than 53% -- 33% of the year. this is a sign that the property market is moderating and we are seeing aggressive tightening from the fed. in australia, we are expecting jobs data for march. as solid a list in employment following strong numbers in the previous month. washington is pushing the islands do not sign a security pact with china. coming up next, president biden pledging an additional $800 million to ukraine to help fight russian forces. the eu also providing military support as well. more reports of the coming of civilians, up to 20,000 people

are left dead after the recent seizure. delaye -- after the recent seige. at xfinity, we live and work in the same neighborhood as you. we're always working to keep you connected to what you love. and now, we're working to bring you the next generation of wifi. it's ultra-fast. faster than a gig. supersonic wifi. only from xfinity. it can power hundreds of devices with three times the bandwidth. so your growing wifi needs will be met. supersonic wifi only from us... xfinity.

shery: breaking news when it comes to data from new zealand. manufacturing pmi coming through. the month of march coming in at 53.8, incrementally higher than the previous month. february, 53.6. expansion still being seen but we are getting a lot of uncertainty when it comes to the pace of the tightening that we've seen from the new zealand central bank.

the rbnz delivering its biggest interest rate increase in 22 years with that massive move to 1.5%. we've seen the kiwi dollar pairing those gains that we saw her earlier. the aussie trading the highest since 2020 against the kiwi. that's been driven by expectations that are being reined in and the market as to how much further and quicker's rbnz can move from here. shery: we will be watching those moves. let's turn to the geopolitical tensions still ongoing. the u.s. set to expand the size and scope of weapons it's providing to ukraine in a new $800 million package of military assistance. let's get the details from jodi schneider. what is the significance of this renewed aid? jody: it's a big package. new firepower for ukraine from the u.s.. president biden announced it

today after talking to the ukrainian president on an hour long phone call. he basically outlined it. it includes new helicopters, ammunition, artillery, and other military hardware. it's a more intense military package than the mostly defensive kinds of weaponry that the u.s. had set ukraine before. it pushes the limits of what the u.s. can do without direct intervention which the biden administration has said it will not do in ukraine. haidi: what's notable about the timing of this package as it -- as we get into two months of this war. jodi: almost the two month mark from that invasion of ukraine by russia. what's also interesting about the timing is that this comes as the russian front seems to be moving away from kyiv, the

capital, into the eastern region. it's really a test of the ukrainian forces there. that's why we are seeing things like helicopters and artillery weaponry being sent from the u.s. to try to protect ukraine protect itself at this particular stage of the war. president biden said in his statement with that package that this was a continuing effort to allow ukrainians to defend themselves as fully as they are capable of doing against these new russian attacks. shery: jodi schneider there with the latest on russia and ukraine. breaking news out of argentina. the central bank has raised the key rate by 250 basis points to 47%. argentina is suffering from runaway inflation that comes at the highest in 20 years.

consumer prices yesterday being updated, rising to 6.7%. when you're talking about the annual rate, 55.1%. we are seeing that sort of inflation that we haven't seen since the early 1990's. you've seen how the rate has been increased by the central bank and now it is standing at 47%, a rate hike of 250 basis points as we continue to see political uncertainty in the country between the president and vice president and the ongoing talks with the imf in order to make good on their $44 billion deal. let's get to the first word news with vonnie quinn. vonnie: thank you. jerzy with $7 billion of assets.

he was sentenced by the eu and u.k. last month. representatives did not respond to requests for comment. janet yellen is calling beijing to account for its relationship with moscow. she criticized china for practices that she says unfairly damage the national security and she's worn beijing to help end russia's worn ukraine her face a loss of standing in the world. >> the world's attitude towards china will embrace further economic integration. it will be affected by china's reaction to our call for action in russia. vonnie: chris willard says the u.s. economy can handle aggressive policy tightening. he told cnbc that he prefers to frontload future rate hikes with the aim of getting the key rate above neutral by the second half of the year. the neutral rate lines around

2.4%. china's central bank is expected to take steps to ease policy in the coming days. a survey shows the colonists expect the key policy rate on friday. it's expected to reduce the reserve requirement ratio for banks after china's cabinet said the pboc woodcut at an appropriate time. china's previous rrr cuts came days after similar statements. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. haidi: let's take a look at the after hours trading when it comes to the big financials. we are seeing the fed embark on an aggressive tightening cycle and raising rates. this is what we see when it comes to trading across the big majors as well. jp morgan particularly making

headlines when it comes to the exposure to disruptions from the worn ukraine. we also are really looking to see them try to revamp areas of the business like the junk-bond businesses, looking to increase reserves on the rising possibility of a potential u.s. recession as well. we did see that result being mired by the $24 million loss tied to the market fallout of russia's invasion of ukraine. stock holding pretty steady. some modest gains. bank of america rounding out the big financial players. jp morgan setting the scenes. loss tied to the fallout of russia's invasion of ukraine, driven by funding spread widening. this has been such a massive repricing story. earnings will be mediocre but

stocks have performed poorly your today and that tells us all of that is being repriced in. great to have you with us. given the lackluster failing that we are seeing from the bank, does that mean there is more room for a rebound? >> there's opportunities for a rebound because banks tend to move the way the market does. if one is expecting to see a rebound in earnings over the next couple quarters, they are going to be disappointed. there is reason for that. it not up -- now appears the banks are going to increasing their loan modest provisions again. they reduced the loan loss provisions which were significant increases in their earnings and now the opposite is likely to occur. the other thing which seems to be problematic is that if the

fed does tighten the way it hopes it will, it reduces the size of the balance sheet. the capital market businesses are likely to suffer. that would be their investment baking activity in terms of raising funds in the equity markets, the debt markets. it would affect the acquisition business. the third issue that you have to be aware of is that if the economy explodes, the mortgage rate -- rate increases of that nature slow down the consumer. it appears from jp morgan's statement today that it did slow the consumer in the credit card, housing, and automobile market. you are looking at headwinds in that area also. you really do need a strong resurrection of the economy to see bank earnings show

meaningful improvement over the next month, couple quarters. haidi: it sounds like you are more worried about the medium-term impact on the consumer and net income as opposed to what we see as being a temporary or short-term impact of the worn ukraine and that exposure to commodities repricing. >> my approach to the situation is considerably different than what you get from the supply constraint group. my belief is that you grow the money supply of the nation in order to pay for its federal debt -- when the central bank is used to by the federal debt, you link the supply at above average rates. that is a high level of inflation. that's been true since the days of the roman empire.

that's what we've been doing for the last couple years. i don't think that inflation is going to go away quickly. it's going to require quite a bit of effort on the part of the fed to hold that inflation down. i think that requires a recession. that's devastating. banks do not do well in recessions. shery: when it comes to valuations, what are those important components that you have to see in order to get some repricing of where they are headed the rest of the year? we were assuming that you automatically have higher rates, higher stock prices. jodi: -- >> i think the hierarchy has been well-established. loan quality is number one and most important. if there is an erosion in loan quality, you will see the valuations of the stocks come

down and vice versa. if quality improves, valuations go up. for reasons which have always eluded me, interest rate changes tend to impact bank valuations. it's basically earnings changes. the problem i have with the interest rate theory is that it just doesn't make sense. if you take a look at interest-rate movements against bank earnings, the correlation isn't there. the correlation with earnings comes if the banks so more products. people don't seem to understand that banks are like other commercial entities. they taken raw material, money. they manufacture that money to create products, loans and investment banking. they have to sell those products. that drives earnings and stock prices. interest rates tend to dominate

bank valuations. shery: let's talk about what goes into these products. what can we expect in terms of cost for these banks? >> i mean, the banks have spent literally hundreds of billions of dollars to lower their operating costs, investing in robotics, investing in the look and feel of the product, investing in the distribution system. now unfortunately, because the cloud technology is moving so rapidly, it appears they need to make another major investment because a lot of the legacy technology which is in place has to be improved. the cost of running the bank is not going to come down the way it has in the last few years because that reinvestment was secure. secondarily, the banks have

increased the price that they are willing to pay for labor. bank of america for example is paying $20 an hour. it's promising to get up to 25 per hour in the next couple years. technology costs will remain high. i don't think there are tremendous cost opportunities in the banking industry at the current time. so great to have you with us -- haidi: so great to have you with us. this. -- this is bloomberg. ♪

haidi: let's get you a check of kiwi bonds. the biggest interest rate hike in 22 years, moving the cash level up by 50 basis points, much more than expectations priced in my analysts and economists. this is what we are seeing when it comes to that two-year kiwi bond as well as the 10 year, trading at just under 3.5%. we did see a slide when it came to the five-year in particular. the 10 year following allow -- about nine basis points. traders are cutting baits --

bets on future rate increases. we are also seeing a little bit of a sympathetic move when it comes to us trillion bonds as well. the aussie dollar has been trading at the highest level since 2020 against the kiwi. the australian curve is steepening. shery: let's get a check of the morning calls ahead of the asia trading day. spikes in the vix spear gauge. the central bank pushing down returns to combat inflation. this environment skews their outlook for stocks negatively. low volatility stocks are the best in asia, according to bernstein. investors will want to find some cover in the second quarter as concerns grow over high inflation. taiwan tech.

real estate in australia and singapore. haidi: the u.s. is extending a mask mandate for travelers along with formal covid-19 health declarations as it grapples with rising cases. emma joins us more. as expected with the reopening, we are seeing a new rise in cases and having to return to some of those restrictions. emma: yeah. i think we are in a position where people want to leave the hard-core time of the pandemic behind and we do want to learn from places. china is finding a happy medium where we are still putting public health concerns front and center. that's the place where this extension has come from. this recognition that cases are

continuing to spike. we are seeing subvariant's. none of them are particularly concerning in terms of scientists at this stage. the possibility is always there, given that the virus is constantly mutating. shery: what are we seeing in terms of virus restrictions across china? any easing at this point? emma: no. as a whole, they are very much sticking rhetorically to a very strong focus on covid zero. that is supplying very strict measures like lockdowns, mass testing, compulsory isolation for close contact and positive cases. all that is still happening. we are seeing signs of potential tinkering and experimentation around the edges. china has acknowledge that they will exit from this at some point. we haven't had a full throated plan from them.

we did see that there's a pilot program that's going to go get underway in some cities where they will look to reduce the quarantine time for incoming travelers, from 14 days to 10. but that is seen more as them trying to free up quarantine and isolation spots. haidi: emma o'brien there. coming up next, the international energy agency is lowering forecast for global oil demand this year. china's lockdowns are one of the key drivers. we dig deeper into that forecast. this is bloomberg. ♪

shery: the international energy agency has cut its forecast for global oil demand this year on china's reimposed covid lockdowns ahead of the agencies oil market division. the market is now looking more balanced. >> this month, we lowered our forecast for world oil demand by 260,000 barrels a day. this follows mostly the lockdowns and china. over the last month's report, we made a much bigger revision to our oil demand outlook stemming from higher prices, lower economic growth and we are

seeing the economic forecasters continue to downgrade their outlook for the world economy. obviously, this will have an impact on oil demand. oil demand is still recovering from covid. we are expecting growth of nearly 2 million barrels a day this year. it is lower than what we saw last year. the navigation sector is recovering. we are expecting growth. obviously, downside risk is -- as the economic outlook deteriorates further. >> feeding into this, you have the input -- the reality of war. among this, it plans to stop trading russian origin crude one should's contact -- contract raise out. do you expect russia to cut its own input -- output? if so, how much? >> thank you.

our forecast, there's a lot of uncertainty about the russian production outlook. we are seeing major oil companies in europe stepping away from russian oil, stopping by altogether. many of the companies and traders, our expectation is that oil supply could fall by 3 million barrels per day. we are seeing apple falling -- falling from the march average. domestic demand in russia is also falling. the economic outlook has been downgraded. refineries in russia are lowering runs. they have difficulties facing some of the products. we are seeing russian output also falling. how far it will fall? it depends on the international community reaction. sanctions, it embargoes

expanding. there were elections of buyers internationally to take the russian crude. our forecast is that we could lose up to 3 million barrels per day. haidi: take a look at the commodity space. we have seen oil react to those comments. we are seeing it under pressure in the asian session. we've seen zinc leading the base metals higher, the highest since 2006. plunging inventories and focus on the war in russia. futures extending gains. prices up 30% this year. poor crops in south america shrinking output in florida. coffee falling for a second straight drop. prices are superhigh. 70% gains in the last year. [inaudible] [laughter] shery: we have a lot to talk about. haidi: the fed struggling to get

the rate levels strong. fears of recession. we will be joined by cap trust. they are expected to post a record quarterly profit. this is bloomberg. ♪

at xfinity, we live and work in the same neighborhood as you. we're always working to keep you connected to what you love. and now, we're working to bring you the next generation of wifi. it's ultra-fast. faster than a gig. supersonic wifi. only from xfinity. it can power hundreds of devices with three times the bandwidth. so your growing wifi needs will be met. supersonic wifi only from us... xfinity.

haidi: very good morning. we are counting down to asia's major market opens. shery: welcome to daybreak asia. asian stocks set for a steady start as investors rethink aggressive fade -- fed hike bets and turn their focus to china. the pboc could cut its key policy interest rate on friday and lower the rrr within days.