haidi: a very good morning. we are counting down to asia's major market open. shery: welcome to daybreak asia. our top stories, asia could see a calmer start of trading after a rebound for u.s. equities. investors awaiting the latest chinese and u.s. inflation numbers. cleveland fed president loretta mester tells us she backs half-point rate hikes but larger moves could still be needed.

plus, sony flags fresh supply chain challenges that could have slowed production for playstation 5. we are getting the jobless rate out of south korea. this for the month of april coming in at 2.7%, which is below analyst expectations of the rate coming in at 2.8%. it's also at historic lows. this of course coming at a time where we have seen covid restrictions in south korea being lifted and we are now seeing the jobless rate following to that 2.7%. the same level as the previous month, and below analyst expectations, as we are getting those inflation numbers also accelerating in south korea with the jobless rate at historic lows and the inflation print above 4%. we will see what the b.o.k. decision will be later this month. perhaps another rate hike. haidi: let's take a look at

whether any semblance of that relief rally will play into the start of asian trading. not so much when it comes to australian futures. a fourth day lower when it comes to asx 200. futures down about .1%. could see some weakness all of about .5% in the start of cash trading as we see that lackluster recovery for the s&p 500 overnight taking a look at the aussie dollar as well we saw a bit of a bounceback but if you look at technicals, the relief rally looks limited to around 7030, the may 2 blow. in new zealand we are seeing trading coming off session highs. about .1% higher. dollar-yen holding study. australia 10 year yield continues to tick higher as we watch volatility in the sovereign bond space. it does seem like there is quite a lot of weakness and uncertainty when it comes to where this stock route will go from here. on the day of the calendar we are looking ahead of course to

china cpi but also in australia the consumer confidence numbers, which will be key, particularly as we are less than two weeks away from the federal election. shery: stockmarkets not having a lot of clarity on what direction to go. we are seeing that in u.s. futures as well, muted in the early trading session after a lot of volatility in the new york session already. the s&p 500 did managed to rise, but they were big market gyrations throughout. the nasdaq 100 outperform the benchmark indices today, given we already had the biggest three-day stock route in about 20 years or so for those big tech giants. we saw the 10 year yield falling below the 3%. so we're watching treasury futures closely. the dollar pared back against recently, given that we had the stock market, perhaps some support in the new york session. wti continues to be pressured in the asian session.

we've already seen a wipe out 10% in the past two sessions and fond below the $100 a barrel level. we have the eia report coming out wednesday, so we are also watching out for that. haidi: as you mentioned, fed officials backing the idea of had point hikes in upcoming meetings. also not ruling out the 75 basis point increase. for more let's bring in kathleen hays and andreea papuc. kathleen, when it comes to the slew of fed speak we had overnight, this idea of 75 basis points being put back on the table? kathleen: let's say it is being put and kept in the conversation. putting on the table i think means you are thinking of cutting it and taking a bite. so far they are willing to talk about it. the president of the cleveland fed speaking at the second day of the financial markets conference, speaking to bloomberg television 2.5 weeks ago.

she completely pushed back the idea of 75 basis points. here is what you told bloomberg television today. -- she told bloomberg television today. >> we don't rule out 75 forever. the case right now seems about right for me. if we don't have inflation moving down we might have to speed up but if we see inflation moving down and demand moving down more than we might be predicting than we can adjust at that point. kathleen: 50 basis point rate hike makes sense for now. slowing down -- another theme in the markets, the fed cannot bring down inflation unless it works hard enough with rate hikes that are aggressive enough to slow down the economy. that means recession. let's listen to what several said on that front today, starting with the federal reserve board governor.

he said this is a red-hot labor market. it can afford to be cooled off and we don't necessarily have to have a recession. jong williams from the new york fed saying the fed can achieve a softest landing. he said there is so much labor demand. if you eliminate some you will put the economy back and balance. richmond fed, we don't need a volker-like recession. we don't need that kind of extreme slowdown. we just need to slow things down enough to get -- what we need to do is get to neutral and then we will wait to see what we need. this reasonable middle road approach from him. although again, watch inflation because that will probably tell us where the fed goes this year. shery: talking about inflation, what are we expecting on wednesday? kathleen: some relief particularly on the monthly numbers nothing near what the fed needs to see to say we can

start thinking about slowing down. i love this chart because it shows how the numbers might get better and the monthly numbers might not get better but year or in -- year-over-year numbers are so strong. 0.1% on the monthly number. year-over-year, cpi will still be at 8.1%. the core cpi will rise a little because services prices are rising. particularly the prices you pay deliver every live. this is the kind of thing the fed is still facing. mester said she did not see the inflation rate coming down to the 2% target by the end of this year or even by the end of next. haidi: we might start to see the nearing of the peak but that is not necessarily going to change what the fed does. so what are the implications for investors going into the cpi

print? andreea: look, that's right. as you said, the markets are really lacking any sort of clarity and that rebound we saw in the u.s. last night was very lackluster. and we are seeing those features under pressure. the reasons what investors were doing, they were squaring their positions ahead of that number. they don't want to be cut short in turn -- in case there is a squeeze higher. but we are seeing analysts now rushing to cut those predictions for s&p 500 companies. cutting share price targets for those companies at the fastest pace in two years. they are projecting price levels for the s&p 500, but it has fallen 11 weeks in a rope, the longest stretch in a decade. that shows that investors are still very, vee cautiousry -- very cautious, even after this five month long route in the market.

sentiment is still obviously really under pressure. not only because of inflation because of the chinese covid zero policy, which is putting pressure on the economy there. so still a lot of headwinds for the markets. shery: so what are the next market catalyst, especially with china and the rest of asia seeing that stock route? andreea: look, asian markets, probably still under pressure going forward. we have had $2 trillion value wiped out. almost 20% from their january high. the key here is beijing doubling down on its covid zero strategy. it is keeping the csi 300 in a bear market. it is also turning investors off. we had blackrock out-earning neutral on chinese stocks. and what is going on with chinese stocks is having ramifications.

there is that contagion effect for other markets in the region. of course you have that very high and rising u.s. dollar, and that strong dollar is sending regional bonds and currencies lower. so that is a double whammy for asian stocks and china stocks. as you are seeing that contagion effect. higher u.s. rates are going higher, and they will make borrowing and refinancing for companies a lot more expensive. shery: andreea papuc and kathleen hays there. we have breaking news. we are now hearing that lisa cook has been confirmed as the first black woman on the federal reserve board. now, this would be as we had 50 senate democrats voting for lisa cook, and then vice president kamala harris breaking the tie. economist lisa cook would not be the first black woman on the federal reserve board. she teaches at michigan state

university. her research focusing on macroeconomics, economic history, international finance. the vote has been delayed for quite some time. covid cases among democrats in this very much partisan and evenly divided chamber, have delayed the vote and a nominations over the past few weeks. but finally we have that vote. and the full senate voting on lisa cook to become -- to be appointed to be federal reserve's board of governors, to become the first woman on the board. let's now get to vonnie quinn with the first word headlines. vonnie: sri lankan security forces have been given shoot on sight orders to quell protests. unrest continued tuesday despite a curfew. violence had erupted after the president's brother resigned as prime minister. the protests have been fueled by the government's financial mismanagement and asia's fastest inflation. house democrats plan to vote soon on a nearly $40 billion

emergency ukraine spending bill. most of the package will be 40 fence spending including new weapons. it also includes $8 billion in economic support and around $4 billion for he military and aid. it is significantly larger than the one president biden requested last month, and appears to have bipartisan support. the world health organization is urging china to rethink its covid zero strategy, saying the approach is unsustainable. you w.h.o. director general says it no longer makes sense given the behavior of the virus. it is a rare instance of the w.h.o. chief challenging a member state's domestic policies. he was criticized in the early stages of the pandemic for being too deferential for beijing. bloomberg learned j.p. morgan's uninvestable call on china was never meant to see the light of day. the firm's editorial staff asked to remove the word from dozens of reports before they were published in march. but the label still made it into

four, including one on jd.com. that helped erase about $200 billion from u.s. and asian markets. 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: still ahead, seb tells us why depreciation pressures hinge on china's short-term response to covid outbreaks in major cities. first, inflation remaining in focus. fresh numbers out later. we get wells fargo institute's outlook next. this is bloomberg. ♪ is bloomberg. ♪

>> we have seen quite a big correction. >> has been traumatic. >> de-risking. >> sentiment in the markets is incredibly bearish. >> we have seen a huge absorption of a lot of worrying things for investors. >> we are starting to see some forms of capitulation. >> we have not seen that capitulation. >> the question is where do we

go from here. >> today has been one of those. >> there is still a great deal of uncertainty about the near term trajectory. >> we are waiting to see. >> people are starting to get closer perhaps to the bottom. >> maybe what we should be doing is looking at our shopping list and buying some things. >> equities are starting to look attractive for medium to longer term buys. >> there may be opportunities coming in on the horizon. haidi: some of our guests. let's bring in our next guest who says a decreased portfolio risk and downgraded e.m. equities to unfavorable. paul christopher, head of strategy at wells fargo. great to have you with us. there is a great deal of uncertainty, conflicting data points, as well as a macro environment we have not found ourselves having to deal with at

this point. so what are you advising in this depending on time frames? paul: the first thing to keep in mind is to be very pragmatic. we think the s&p has lost 17% so far. we could see further losses enter could be volatile quarters. we don't know about the fed 50 basis points, 75 basis points, still some uncertainties about the war in ukraine, about escalation. and china's covid zero policy which we have treated quite extensively. a lot of uncertainty still. if you are an intermediate term long-term investor, five, 10, 15 years, this is a time to be patient. and as you said in the collage, bring out the shopping list. and we have been doing this all year long. moving away from cyclicals. recognizing the cycle is getting very advanced in age. so we have downgraded industrials, downgraded

financials. we have been out of small caps now this year. we have moved out of emerging markets as well. any think we think has some beta or correlation to the economic cycle. and we have been moving towards higher capitalization, towards the u.s. over international, and away from small caps here in the u.s. and within the sectors we want to move into quality, into where there is good cash flow, good cash to debt ratio. and really good secular trends for earnings and revenues going forward. and if you can be patient, this isn't opportunity to dollar cost average in. make a disciplined plan to make money on an incremental basis. could be time increments or incremental declines in the overall market indices. either way this is a time to be patient and to buy stocks on sale. the people we think are going to get in trouble are the ones who try and time the market and sell

out at 25% down and then figure out when am i going to get back in. those folks have to be right twice. whereas we only have to be right about the market eventually rising. haidi: how do you get emerging markets right? yes, we're seeing an almost two-year low when it comes to emerging-market equities. are you risking throwing the baby out with the bathwater if you say no to everything e.m., even as we see the value rotation fade for emerging markets? paul: it is a good point. we are not eliminating emerging markets from the portfolio by any means. selectivity is part of what we are talking about here in terms of buying this but not buying that. if you want to start buying emerging markets, the ones that have been the most buoyant are those that export commodities. it is likely that those commodities will continue to rise in price in the months and years ahead. that could be a good place to start in emerging markets. and don't give up on china.

haidi: interesting. i'll elaborate on why we are not giving up on china. paul: we have heard president xi say we are going to do zero covid policy for as long as we have to, then we are going to quickly transition to that really big bazooka of government stimulus where they start by getting into infrastructure spending. they have avoided that for a number of years because of the debt increases in the economy but they will be shifting gears very quickly here. the break is on for covid. when that break comes off the gas pedal is going to the floor and that is the point. where you want. to start thinking seriously about chinese stocks again. shery: getting signals from beijing that are perhaps not dominic comes to tech crackdowns. how do you play that? paul: last year was kind of a

special year. over the last 10 years there have been times where the chinese economy has been growing steadily, right at target or a little above target. when beijing all of a sudden will inject some policy, some regulatory policy. that is what happened last year. are they going to be doing more of that? they are not going to remove it, but they are going to be doing more of that in this environment? i don't think so. their emphasis will be on reef leading the economy. will the continue to focus -- but that is not going to be the focus tactically speaking for the next year or two. shery: paul christopher, good to have your insights. and of course this, as we continue to get more and more fed speak. atlantis fed president raphael bostic saying he sees a 2.6% gdp growth for the year, there is strength in the economy, demand is strong. financial market responses have

been incredibly fast to what the fed is doing. he is focused on narrowing the gap between supply and demand. this of course the latest lines coming out as we already heard from a lineup of fed speakers including cleveland fed president loretta mester said they will not rule out 75 forever. perhaps we are getting more messaging coming out from different fed speakers at the moment. you can listen to more of raphael bostic's comments. bloomberg subscriber's continue watching at live go. you can also find a big diary entries coming up today and later this week. all of the events that you may have missed. so do tune in. this is bloomberg. ♪ s bloomberg. ♪

shery: we are counting down to the start of trade in tokyo and seoul. here are some stories we are

watching. in korea, the latest unemployment numbers for april have come in at 2.7% for april, slightly below estimates while matching the same number and historical lows as the previous month. lg household and korea gas announcing fourth-quarter earnings later. we also have a consumer app setting its ipo price. sony's operating profit fell short of estimates. they are facing fresh supply chain challenges that could slow production of its flagship playstation 5. plenty of earnings coming out today including toyota, and we might see some impact on the carmaker around the shanghai lockdowns. plus we are watching bond market liquidity which have tightened to levels last seen in 2017. this, as the boj steps up its purchases. haidi: let's get a quick check of the latest business flash headlines. nintendo will split stock into 10 from october as it struggles

to revitalize the switch console and overcome a global chip shortage. they predicted full year operating income below analyst estimates after reporting a 0.6% rise in profit for the march quarter. it is expecting to sell 21 million switch devices this year, shy of the 21.7 million anticipated. lee auto disappointed with revenue forecast after posting a net loss of $1.6 million. it says it expects sales of about $920 million in the current quarter, well below average analyst estimates. li auto blaming supply chain snarls and surging material costs for squeezing margins. shery: breaking news. the imf commenting on what is happening in sri lanka, saying they are committed to assisting sri lanka in line with imf policies and they are concerned by rising tensions and violence. this of course as the brother of the president resigned, but protests continued over soaring

inflation. now the imf out and saying they are committed to assisting sri lanka. these comments from the imf mission chief for the country. this is bloomberg. ♪ this is bloomberg. ♪

>> when we talk about zero covid strategy, we do not think it is sustainable. transitioning into another strategy will be very important. shery: the world health organization director general on the covid zero policy. beijing's strict lockdowns continue to weigh on asian equities, the selloff has taken

valuations to near pandemic lows ahead of some key earnings in the next two weeks. this worsening selloff is taking the key benchmarks deeper into bear territory, this is a drawdown. investor enthusiasm for chinese equities is waning amid concerns over the impact of lockdowns and a slew of recent data painting a bleak picture for the economy. let's bring in our next guest who says there could be more downside. always good to see you. is this just mostly because of the lockdowns across china, and what happens if we do have relaxation on restrictions? guest: indeed. over the next two weeks, we will be seeing more chinese data for the month of april, and i would be preparing for a further

deterioration in the data, particularly the momentum. that is not going to be the end of it. persistent lockdowns are still in place, and that would mean the activity in may is quite soft. nevertheless, my expectation is the trough in data will be in april, but that's not going to be helping sentiment. shery: we are seeing authorities try and frontload fiscal stimulus, this chart showing how we could be seeing those historical amounts of bombs by the end of june being issued, i can't recall when the last time was we saw that much frontloading on bond issuance. how much will this help? eugenia: that is taking care of the financing of the infrastructure, but for growth to pick up, you need to have projects breaking ground, and

that's not going to be happening if lockdowns are in place. the biggest impact or policy support china can give will be an adjustment of the covid policy. i do not really see that happening up until the autumn, because that will be when the communist party will be having the most important session of the year. haidi: do you still look at the relative technicals when it comes to when we could see a bounceback for chinese equities? if you take a look at some of these gauges, correlating the trend with chinese bombs, equities, that yields gap between stocks in china is pretty much near a record. does that tell you a turnaround could be close or does the all of this hinge on what happens with the opening up of lockdowns? eugenia: yes, indeed.

as much as the technicals would provide us some signals, the real issue here is the downturn in activity was due to the covid policy. the real improvement in the activity would also come from the pullback in lockdowns, specifically in shanghai. if you look at other cities in china, the trend in the mobility there has been improving, and we do see some activity in other provinces. it is just that the logistics are having a big problem considering shanghai is the biggest port in the world. haidi: where to then? it seems fair given the continuation of dollar strength we will see further pressure on the currency. eugenia: in my view, there is

further upside to dollar yuan. i would not rule out the possibility of breaching seven in q2, because that would mean domestic activity led by the restrictions and shanghai would be muted. however, that upside would definitely be capped as soon shanghai shows signs of easing restrictions. that could come in by the end of this month, considering they have already adopted a frequent testing strategy, similar to what beijing piloted earlier in the month. shery: talking about dollar strength, we continue to talk about the other side of the equation which is emerging-market currencies under pressure, especially with the yuan weakness. in a historical context, how does it compare with past financial crisis where we had these huge pressures on currencies across asia?

eugenia: if you look at the high yields, they have definitely weakened in the last few months, however, if you look at losses and compare it to losses even during the start of the pandemic, these movements are very muted, and that is also due to the fact that foreign positioning has never really recovered to pre-pandemic levels. there is not a lot of position to unwind, even if you have a pullback in foreign capital. haidi: always great to have you with us. the cleveland fed president has open to the debate again for a bigger rate hike. she told bloomberg she supports half a percentage hike for now, but would also back a 75 basis point hike later if inflation does not ease by the second half

of this year. >> we do not want 75 forever. we are going to have to assess whether inflation is moving down, and then we will be able to get more information after we do a couple of those. supply and demand will be moving over time. the aim is, we need to use our tools to do what we can to get demand in better alignment with that supply. i do not want to rule anything out when we get to that point in the second half of the year, if we do not have inflation moving down, we might have to speed up. we can adjust about point. -- at that point. we need to be committed to doing what we can with our tools to get inflation down, and that is both the balance sheet in june.

>> your colleague said he expects unemployment to rise, because that is what you do when you raise interest rates. are you on board with that? >> we have excess demand in product and labor markets. we can raise interest rates or policy rates and slow that the man, but this is not going to be smooth. the unemployment rate may have to rise, we may get another quarter or two of negative growth, but that has to happen in order to get inflation down. we are tightening financial conditions, and we are going to continue doing that until we see inflation moving back down to 2%. >> two quarters of negative growth, that is the word people don't like to use. >> i guess that's a rule of thumb, but it is how much demand is low in?

if you look at the first quarter, there was a negative read on gdp, but if you look at the consumer spending side and on the business side of that report, those were quite strong. there is demand momentum in that report. government spending went down, trade was a big negative in the first quarter, and that inventory, there was still a high level of inventory investment. it's always good to look under the hood of those reports, and we may see some of that happening over time. our goal is to bring inflation under control, have it move down towards 2% and sustain healthy labor markets. i don't see this as a trade-off. in order to make sure labor markets are sustainably healthy and we can sustain getting to maximum employment, we need to get inflation under control. >> to get inflation down, down

to where is acceptable? have we changed dynamics? loretta: we are aiming for 2%. will it take some time to get down? yes. we know inflation can be persistent, and we have supply constraints that are not easing and there is upward risk to inflation. it will take some time. i do not expect we will get inflation down 2% this year or next year, but we need to see those monthly numbers moving down in a convincing way. i would have to see compelling evidence that is happening before i would want to say we can ease up on what we are doing with policy. shery: loretta mester speaking with bloomberg. let's get to vonnie quinn. vonnie: that economist will be

the first black woman on the federal reserve board of governors after winning senate confirmation. the vote required a tie-breaking appearance by kamala harris. republicans opposed her nomination, saying the professor has no experience of monetary policy. janet yellen says the u.s. economy would suffer if the supreme court limits women's access to abortion. she told lawmakers during a hearing that eliminating the right to access services would set women back by decades. >> i believe eliminating the right of women to make decisions about when and whether to have children would have very damaging effects on the economy and would set women back decades. vonnie: lawmakers are pressing jp morgan -- elizabeth warren and katie porter sent letters to the ceos of both banks demanding

lists of clients betting on russian debt. they want to know if the bank could benefit doubt amir put in. -- vladimir putin. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: coming up, the yen's historic fall expected to boost profits for toyota. we will take at -- take a look at earnings, next. this is bloomberg. ♪

>> this is difficult to predict. we think it will take about three months for the shanghai lockdown, about three months to normalize. haidi: we are tracking the fallout of the global supply chain crunch and these are our top stories. sony says it's facing fresh challenges in its videogame division as component shortages and supply chain disruptions hamper production. tesla's china factory experiences disruptions and warns of potential curbs this week. supply chain constraints as well as surging costs have dampened it second quarter revenue forecast. shery: take a look at those

companies experiencing supply chain disruptions. sony, tesla, li auto. bloomberg terminal users can read more about those stories. toyota is due to report earnings later, investors will be watching whether the world's biggest carmaker can sustain growth. let's bring in our japan transport reporter. what results are we expecting? reporter: for the recently ended year that wrapped up in march, we are expecting toyota to comfortably beat its previous profit guidance. we see two factors. the first is consistently strong sales. unit sales for the recently ended years was toyota's

second-highest ever turn out for that period. it is seeing strong demand for cars, and in recent months, it's benefited from the pretty historic decline in the yen so with that currency hitting 20 year lows, those two factors combine to put toyota and a strong place for the recently ended fiscal year. haidi: if you look further out, what about the headwinds? are they set to carry forward? river: the story does get a lot more challenging going forward because on the positive end, there is the tailwinds of the yen and strong demand, but toyota is facing a long roster of challenges, especially when it comes to production over the upcoming year.

at the moment we are seeing surging material prices and the semi conductor shortage that has lasted longer than toyota predicted. of course, most pressing is the covid-related lockdowns we are seeing in china. toyota just had a factory in china halted for more than a month due to virus outbreaks there, and of course with shanghai, although toyota's production is not being impacted directly, it is seeing logistics disruptions and parts shortages from the shanghai lockdowns that is causing it to cut production in japan in may. in the past, toyota has tended to guide on the conservative side, but today we will get a better sense for how toyota sees these colliding over the next 11 months. haidi: our japan transport

reporter with a preview. opec's top producers have issued a warning at a conference that the world needs to wake up to the issue of declining capacity. the comments come as prices hit a record. su keenan joins us now. su: what we have at this conference is the saudi oil minister along with the minister for the uae both warning the world needs to wake up, spare capacity is dwindling across sectors, and they are saying this is coming as producers slashed investment. everything from oil, diesel, gasoline, natural gas, is trading at record levels. the saudi minister pointed out he is a dinosaur. he has been attending meetings going back to the 1980's and says he has never seen anything like this where there has been a rapid surge in these products. he says the world needs to wake

up to a reality we are running out of energy capacity at all levels. saudi arabia and uae are two of the few producers who are investing to increase capacity, spare capacity is the question producers have so whenhere are production delays, they have enough to meet targets. we have been reporting month after month that opec-plus, the alliance of 23 countries has struggled to meet their targets. shery: the demand picture is important as we are getting these latest headlines on bloomberg shanghai, 1487 new, local covid cases for may 10, this as restrictions and lockdowns across china continue. oil futures are trading in both new york and london dropping 10%

in the past two days. how much is the demand picture playing into this as we also get the latest covid deaths numbers out of shanghai. su: demand underscores why producers are reluctant to invest in greater spare capacity, but also look at the lagging indicator because of the run-up in prices at the retail level, we have record prices, the average price is $4.37 a gallon, that does not count premium gas or the higher prices in chicago, if you look closely, one of these car owners is putting 17 gallons in their car at a price of $94. in california, we hearing reports of prices more than seve or higher. if you drop into the bloomberg, refined products traded at a 50%

premium to oil. this problem is baked in the cake as we take off the summer driving season. as shery said, we are coming below $100 for west texas intermediate, but it's been a difficult handoff to consumers as a result. back to you. shery: we have plenty more to come on daybreak asia. this is bloomberg. ♪

shery: here is a quick check of the latest headlines. coinbase tumbles. the largest crypto currency exchange warned trading volumes will be lower than the first quarter, however it kept its outlook largely unchanged. shares have fallen to record lows, down more than 70% since they went public more than a year ago. peloton slumped to a record low after the fitness company posted a worse lost unexpected. peloton says demands for bikes is softening. shipping costs are also squeezing margins. the stock has fallen 85% in 12

months. apple's ipod has been discontinued. the last model will remain on sale until supplies run out. the device was introduced into thousand one and helps turn apple around from your bankruptcy. -- near bankruptcy. intel is rolling out a new processor as it tries to compete in the lucrative market. it will include updated ai chips and fresh versions of processors, plus chips for telecommunications networks. it will challenge nvidia on its own turf. take a look at some of those stocks we will be watching when asian markets open. toyota lowering its may production plant, they are being impacted by lockdowns in shanghai.

for the same reason, sony is struggling to make enough play stations prompting you to warn of a grim outlook. things are not looking up for nintendo, either. investors can expect a 10 for one stock split in october. better news for amore pacific which says it has resumed operations in shanghai after getting approval from the chinese government, that follows a month-long suspension due to the lockdown. we have those restrictions lifted in south korea that has helped the company in recent weeks. coming up, we will speak to an asset manager as inflation central bike tightening continues. plus, we are joined by city private bank to discuss the impact of the lockdowns in china ahead of the release of latest

cpi and ppi numbers. the market opens our next. this is bloomberg. ♪

shery: welcome to daybreak asia. haidi: asia's major markets are now open for trade. a peck markets could see a calmer start after a rebound for u.s. equities, investors are weighing the latest inflation numbers. the world health organization tells china covid zero is unsustainable as plans emerge of a leadership split on the

policy. the imf says it's concerned by rising violence in sri lanka with the army order to shoot people, damaging property. japanese equities coming online, under pressure, down 6/10 of 1%. we are talking about two-month lows as a japanese yen is seeing -- we talking about 20 year lows against the greenback. we are watching very carefully what is happening with the 10 year yield which hangs around the upper limit of tolerance of the boj. take a look at the kospi, we have already seen the longest losing streak since november of 2021, and korean equities are under pressure with the kospi down 6/10 of 1%. the jobless rate in south korea coming in at 2.7% which would lower -- was lower than analysts expected. historic lows for the jobless rates, but the korean won

continues to be under pressure, talking lows. the trade situation in south korea is not happening -- helping, we are seeing a boost trade in the deficit for the first 10 days of this month, we got export numbers and import numbers, exports rising 28% year on year, and imports surging, 34.7% year on year for the first 10 days of the month. haidi: we are seeing a fragile set up when it comes to the start of trading in sydney, the asx looks like another session of losses. we have seen lower finishes for seven out of the past eight sessions, 1/10 of 1% lower there as we see the weakness in sentiment. take a look at what happens in the bond market, some fragile

gains, aussie bombs advancing but sentiment remains weak and those comments of about 75 basis points can't be ruled out by the fed. traders are focused on cpi data out of china and the u.s. in particular. the aussie dollar is little changed after closing lower for a fourth day, a lot of analysts see the relief rally limited to around the 70 30 point. watching that yield curve flattening, the three year note falling,. taking a look across treasuries, as we saw that volatile session in u.s. bond markets, so much fed speak for investors to be

focused on, particularly whether we see the peak when it comes to cpi inflation and where the fed goes from there, of course they would need to see more when it comes to inflation levels. futures for equities in the u.s. are looking mildly to the downside. shery: that's bring in our next guest who says we are experiencing peak bearishness on many assets. with us now is james. it seems the technicals are not looking great with a huge stock rod globally. are we set for a bounceback, how would you position to take advantage of this? james: the markets have been haunted by various macro uncertainty. the ukraine situation, the fed,

things like that. these factors have been haunting the markets for months. it all boils down to the most important number that will be released tonight is cpi. we need thoughts to form online. together with last month's high prince, let's see what this print looks like and we can have ec whether inflation is trending in the near term, and that would probably make investors recalibrate for the next equilibrium, and then think about what next? a lot of the sentiment indicators, positioning, again, reports of programs, bearishness in the chinese covid situation, everything is so bearish. technical or not.

shery: finisher thought. -- finish your thought. james: the u.s. market have enclosed down 8%, that's actually a decent opportunity to buy the dip. shery: i was going to ask. other than buying the dip in these potential technical down stocks, what are some of those fundamental trades you could play in the long-term? james: we see a lot of volatility in the market. we are looking at a fundamental catalyst, one being the reopening trade.

the covid situation being contained. therefore we are building reopening positions including airlines, booking platforms, travel and leisure, both in the states and europe. people will start normalizing activity which is supported by strong mobility numbers around the world, the workplace, or retail activities. haidi: what do you do about emerging markets with respect to china, and other em's? you are seeing the value trade hold up in developed markets, not so much across em's. james: brazil has had a great

run because of commodities, on that count, we believe the commodity complex should hold firm. because, the supply situation will resolve itself. the whole complex -- the situation in china is uncertain. the expectation is it is unlikely to achieve its target gdp this year unless we see significant policy stimulus, which we are still waiting forever. we are stricking exposure in the china em complex given its difficult to predict policy

stance. haidi: you talk about one of the risks of the noise being too big to ignore for the wave of selling, and we see a lot of that right now. if you take it tighter liquidity conditions, geopolitical risk, does that mean companies are going to need to overcompensate when it comes to how much better future earnings are going to have to be to impress this market? james: you are right. at the moment, still decent earnings reports over the last quarter. demand is still strong. they are able to pass on rising costs to consumers because demand is very strong, but it's not going to last forever, and we all know the fed is on a hiking path.

it is trying to slow down demand. maybe in 2, 3, four quarters out companies are on their own feet. haidi: let's take a look at some of the movers we are watching. toyota with the revision down, getting a little more guidance ahead of expected profits, and the weaker yen is said to be a major boost. watching for some drags when it comes to supply chain materials and production delays. nintendo in focus, a little bit

of downside, the market welcoming the stock split after what was a pretty lackluster set of results. they reported slowing demand for the aging switch console and that overshadowed impressive sales for the new pokemon game. also watching sony as we continue to get the earnings parade out of japan, they also announced the buyback to a little more of a positive reception. let's get you to vonnie quinn. vonnie: sri lankan security forces have been given shoot on sight orders. the unrest continued on tuesday despite a curfew but some protesters torching buildings. violence erupted after the president -- the protests have been fueled by financial mismanagement and inflation.

house democrats plan to vote soon on a $40 billion ukraine spending bill. most will be for defense spending. it also includes $8 billion in economic support and humanitarian aid. the package is larger than the one president bynum requested last month and appears to have bipartisan support. the first black woman on the federal reserve board of governors -- it required a tie-breaking appearance by kamala harris. republicans opposed her nomination, saying the professor has no proven experience in monetary policy. bloomberg has learned j.p. morgan's poll was never meant to see the light of day. the label made it to jd.com.

global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. shery: still ahead, china's prolonged omicron wave and static management is expected -- the world health organization chief is calling the zero covid policy unsustainable. details on the situation, next. this is bloomberg. ♪

>> our economy has gone from being on the mend to on the move. for every worker i met who gained breathing room to see get a better paying job, the entrepreneur gained the confidence to pursue the small business dreams, i know families are hurting because of inflation. shery: joe biden attributing high inflation to the war in ukraine and acknowledging rising prices are hurting american families. it's taken for granted that the federal reserve is unanimously

backing 50 basis point rate hikes. investors do take note when one of them opens the door to a 75 basis point move. let's bring in kathleen hays. kathleen: april 22, loretta mester was in an interview where she said she preferred a deliberate, methodical rate hikes. well, they have opened the door if needed and as inflation figures prove persistent, she has altered that a bit. let's listen. loretta: we do not rule out 75 forever. i think the case we are going now seems about right to me. if we don't have inflation moving down, we might have to speed up.

kathleen: again, i think it's important if inflation is not easing, that's when they would make the shift. notice this sense is look, we can have tighter policy and not have a recession. chris waller from the board of governors said it's a hot labor market, john williams saying we can achieve a soft landing and it's ok if unemployment rises a bit. another said we do not need a recession, we do not need to be so aggressive. he is open to 75 basis points if needed. what we need to do is get to neutral, then wait and see what

needs to be done. he is also mildly keeping the door open. no one is ready to walk through it yet. they will do the 50 point hikes, go from there. haidi: kathleen hays. the head of the world health organization has delivered a rebuke of china's covid zero strategy, saying their efforts homework. stephen engle is in hong kong. what are we hearing from the who chief? stephen: that's interesting, these comments contrast with this study from a university in shanghai which says if they drop strict restrictions like lockdowns, there could be an absolute explosion in the number of cases and deaths. i will get to those projections in a minute. first off, it's essentially a

rare rebuke to china's covid zero policy. let's hear what he had to say and we will talk more about it. >> when we talk about zero covid, we do not think that is sustainable, considering what we anticipate in the future, transiting it into another strategy will be very important. stephen: he is recommending china adapt its policies to be less restrictive to adapt to been every day situation. essentially, he was facing criticism early on for being too deferential to china. this comes in contrast with the report saying there could be, if china relaxes, they are using new modeling projections, they could be facing 112 million

symptomatic cases, 2.7 million icu cases as well as 1.6 million fatalities between now and next month. that is very similar to another projection we got earlier from peking university, perhaps is what the chinese government is going off of. shery: how united's leadership when it comes to zero covid? stephen: that's interesting. the head of the party is perhaps taking a more mild tone. let me take you to some statements that show the contrast and dilemma local officials will have on where to

put priorities. on the one hand, the government calling for boosting the economy and employment, but you must control the virus. how do you control the virus when the economy is shut down? lee did not mention the covid zero policy. days earlier in the standing committee meeting which is chaired by xi jinping, had warned citizens not to question covid control policies. they did not mention the damage being done to the economy. these mixed messages must be confusing. we are always reading the tea leaves. does it matter? he will likely be confirmed for

a third consecutive term. shery: our chief market asian correspondent who will keep us updated. take a look at european futures, trading slightly higher. this after we saw european stocks rebounding in the regular session, we are seeing stocks getting notably cheaper, the stoxx 600 trading 12 tons forward earnings -- times forward earnings. perhaps that is giving more momentum to these stocks, something similar we saw in the u.s. after a lot of fluctuation. u.s. futures are higher. we have a roundup of those stories you need to know in today's edition of daybreak. you can see what happening in europe, asia, the u.s.. this is bloomberg. ♪

haidi: producers are warning energy capacity is dwindling, as u.s. prices hit a record. su: the saudi and uae oil ministers warning spare capacity is dwindling all across energy products, and it's causing everything from natural gas to crude oil to diesel to soar at record highs. when we talk about spare capacity, we are talking about the cushion most producers have, so if there are output issues, they have extra oil, they are producing ahead. the ministers are saying because producers have come back

and/investment, this question is dwindling and that is a major concern. they are saying the world needs to wake up. meanwhile, at the retail level, gasoline prices have hit an all-time record. $94 for about 17 gallons in chicago, so all of this weighing on inflation. shery: su keenan with the latest on oil. the energy sector is weighing the equity space. on the nikkei, the sector is down 2.5%. the asx is down. the kospi is unchanged at the moment as kiwi stocks gain 3/10 of 1%, perhaps recouping some

losses over the past two weeks. next, china's prolonged covid outbreak has had an impact on consumer spending. we will have the details. this is bloomberg. this is bloomberg. what's it like having xfinity internet? it's beyond gig-speed fast. so gaming with your niece, has never felt more intense. hey what does this button do? no, don't! we're talking supersonic wi-fi. three times the bandwidth and the power to connect hundreds of devices at once. that's powerful. couldn't said it better myself. you just did. unbeatable internet from xfinity. made to do anything so you can do anything. whoa. as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: 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. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities.™

haidi: quite a drop from the previous month. consumer confidence index adjusted, a contraction of 5.6. the key federal election in about 10 days time, consumer

confidence showing a strength of demand in the economy as we see soaring price pressures. there are indications the aussie could be oversold. quite a poster child for stagflation for the markets slumping. taking a look across risk assets, downside, bit of again when it comes to australian bonds at the moment.

coming off the back of a volatile session for treasuries. mixed messages from chinese leaders over whether there is a split over the best way out of the pandemic. the crosscurrents are muddying the outlook when it comes to chinese inflation. joining us now is the head of aipac economic analysis at citibank. in unclear outlook for the broader economy. how much of it remains tied to how they get out of the covid zero strategy, and if they see an opening up? guest: i think china's growth is hinged on the covid zero policy. it's very likely gdp growth

could be in a recession. keep in mind the 5.5% growth target has not been changed. it means in order to achieve around 5% growth, china will have to deploy a much bigger fiscal and monetary policy stimulus than expected. from what we are observing, it appears shanghai's lockdown could be at the end phase, it means perhaps china's growth starting from june could pick up again. haidi: we heard about the grave and complicated circumstances that face the labor market. we know the gdp market is tied to being able to maintain

stability and employment. is that still feasible? what type of fiscal measures might we see? guest: i think the government has done quite a lot on the supply side. they have a 2.5 trillion tax cut, we think perhaps around 8% to 10% year on year growth could be achieved, and the central issue now is whether more local governments in china may want to use the consumption coupon to

boost local consumption. this is something we need to watch closely. shery: authorities have asked local governments to frontload new special bonds by the end of june. i can't remember the last time authorities asked for the issuance by june. how much will this help in frontloading fiscal stimulus, and realistically speaking, how fast can this trickle through the rest of the chinese economy, and how fast can this be spent? guest: the trickle-down effect should be fast. the second quarter, especially april and may data could look

quite disappointing. china has a lot of infrastructure projects to implement. the impact could be in the second half of the year rather than the first half, especially q2, the number will continue to this point. shery: the debt situation, too much leverage. we seem to have veered away from that, focusing on growth. this is an ongoing issue in china. guest: the leverage of the local government level is pretty high. ppp projects.

however, if you look at china's central government fiscal foundations, it has been quite good. debt to gdp ratio is no more than 20%. this means the central government has room to keep using fiscal stimulus. it's a huge foreign-exchange reserve. they think the reserve has a security issue, perhaps some of those foreign-exchange reserves could be brought back unspent and this could be another source for china to bolster its economy. haidi: how much weakness will the pboc allow for the yuan going forward, particularly any type of pressure with currency and trade links with other

emerging markets? guest: we think a week rmb is not in the pboc interest. china could suffer from capital flight. the stimulus program could not look effective overall. based on that, the renminbis could not be allowed to depreciate too much in the one-way direction. and the pastor could depreciate toward 6.8, then intervention could come by and look at the china growth cycle that is in the second half of the year.

perhaps towards the end of the year, remedy could be around 6.6. shery: that's good to have your insight. despite the potential stabilization later in the year, so far we continue to see turbulence in the property sector. china's fourth-largest developer faces the end of a grace period. let's bring in our editor. anymore insight? reporter: investors are watching this very closely to see whether or not we get a possible default. sumac and other larger

developers were hit by the second wave of stress. investors really thought it was too big to fail, would not be allowed to fail. that is what investors are looking at very closely. if we see a substantial failure, it would be an important marker, even these firms are still under enormous pressure. the other thing to watch out for, today we have this coupon payment of about $30 million. sunac missed the initial deadline. there is this flurry of payments . of course, if we get into a default situation, they will risk defaulting on other bonds and may precipitate a broader restructure. if we do see that type of

restructure, that will draw more questions to other similar names . haidi: evergrande continues to be a concern. what are we seeing? reporter: when we look at defaulted names, bond prices are under significant amount of pressure reflecting that concern, though investors came in quite bullish, prospects have logged, and that has made worse because of lockdowns and china. we are not able to move forward with a lot of restructuring and meetings to see a bonds

proposal. we are continuing to watch whether evergrande is able to proceed, and other developers have not defaulted. we are watching very closely to see whether that will ripple through. the new factors are starting to weigh, and even though we are seeing the government to build the economy, private developers are not playing a key role in that. shery: be sure to stay with us as we look ahead to the release of china cpi and ppi numbers. barclays joins us. that's coming up next. the latest on the situation in sri lanka as the imf says it remains committed to helping amid violence and unrest. this is bloomberg.

♪

vonnie: this is daybreak: asia. the red a mester has opened the gates for the chance of a 75 basis point hike. she told bloomberg she favors half-point increases but would support a bigger move later if inflation does not ease. >> we do not rule out 75

forever. the case we are going now seems about right to me. in the second half, we might have to speed up. we can adjust. vonnie: the who is urging china to rethink its covid zero strategy. the director general says it no longer makes sense. it's a rare instance of the chief challenging and policy. he was criticized in the early stages of the pandemic for being too deferential to beijing. >> when you talk about the zero covid strategy, we do not think it is sustainable. transiting into another strategy will be very important. vonnie: elon musk says he would

reverse donald trump's permanent ban from twitter when he takes control. he told the conference twitter was foolish for kicking trump off and it undermines trust. he also said he is lining up funding. >> he has stated he will not be coming back to twitter and will only be on truth social. the point i'm trying to make is banning trump from twitter will amplify and that is why it is morally wrong. vonnie: u.s. lawmakers are pressing j.p. morgan and goldman sachs. elizabeth warren and katie porter sent letters to ceos demanding lists of clients betting on russian government

debt. they want to know if the bank's dealings could benefit vladimir putin. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: the imf it remains committed to assisting sri lanka but the fund is concerned about rising tensions and violence. that is unrest continues despite a curfew. our managing editor joins us now with the latest. what are we seeing across the country given the huge amount of upheaval? reporter: the curfew has been extended until thursday morning, quiet on the streets.

they have been given instructions to shoot. classes turned violent monday night. we have seen protests go on for weeks, you'll and food shortages, government supporters ended up attacking people camping out which set off a round of violence that coincided with the prime minister stepping down. right now, there is no government in sri lanka, we are waiting to see what the president does there, he has been trying to get the opposition on board, but so far there has been no substantive discussion for how the opposition would play ball. shery: we are hearing that the imf is committed to assisting, but we have heard the likes of citi saying those talks are at

risk, there is no government to negotiate. where do they go from here? reporter: to get the imf program off the ground, it was already going to take weeks and possibly months. all of this does is push the process that has broad-based support among the country's leaders. right now it's in total chaos. the imf is saying as much as they can say, we remain committed but are concerned. they have to be sure that whatever whatever package they negotiate can be implemented by whoever is in power. that is very precarious. shery: of course, those protests

and we see commodities prices is going right now, we are seeing we at a record high, u.s. storms delaying the plantation season, we're seeing corn gaining ground as we see a little bit of pressure for oil prices down below that $100 level, this of course after we have seen oil prices surging with u.s. natural gas near that record high. we are talking about fuel prices heading into driving season. haidi: we are taking a look at the impact of big tech stocks, falling for the fifth straight day. we will preview what to expect that the open. this is bloomberg. ♪

>> we have seen a huge absorption. shery: peter oppenheimer on

opportunities. this route making this route -- are we going to see a turnaround given the history? let's get a preview of how the market will open with sophia. what are we expecting? reporter: a morgan stanley notice landed saying investors need patience. this is let's happening in china. stocks are under pressure, but we did see the market rising yesterday despite a significant drop in hong kong. that suggests volatility is suppressed when you compare to >> happening in other markets. looking ahead, we have cpi data and credit data do any time. that will show you how poor

credit demand is in china because of what saponin with covid zero. those are the key data points. that will show you how much the pboc can do to stimulate growth, that is the policy transmission problem. shery: the jp morgan note did not help when it came to sentiment. reporter: it was published in error according to our reporting . policymakers identified internet platform companies as a very important industry to drive economic growth. jobs are a key concern for policymakers. we had the premier.

we need to see policy, words are not enough. we need to see whether policymakers will signal that the tech sector is an important part of economic growth this year. haidi: bloomberg's chief china markets correspondent. time now for the market opens on the mainland in hong kong. keeping an eye on big tech check names. the hang seng tech index on a five-day losing streak. investors want to wait for government stimulus entities lockdownase. coming up,are speaking with barclays, counting down to cpi and ppi.

geopolitical concerns over the russian war in ukraine. we will discuss global investment strategies in chinese markets. that is just ahead. this is it for daybreak asia. this is bloomberg. ♪

david: good morning from hong kong. 9:00 a.m.. welcome to the china open. markets, inflation datam