♪ >> good morning and welcome to daybreak australia. >> we are counting down to asia's major market open. >> from bloomberg world headquarters in new york, i am shery ahn. monetary policy looms this week as the fed starts shrinking its $8.9 trillion balance sheet. >> asian stocks set open higher after u.s. equities brought their best week since november, 2020. traders debate whether the end of selloff may be near. >> china unveils -- boost shanghai economy with beijing relaxing restrictions after authorities declare the outbreak

under control. u.s. futures gaining ground at the moment on this memorial day weekend. we are looking at the -- rest of the week despite the markets being closed monday given the rally we saw last week. s&p 500 wiping out all of its losses for the month. gaining more than 3% on friday. the caveat is you have to zoom out and look bigger picture which means the s&p 500 is still down 13% this year. the worst performances 1970. no wonder we are seeing treasuries now rallying again with the 10 year yield headed toward a 270 level. we continue to seek growth concerns affecting markets. and it came to oil prices, we are seeing that rally continue in the asian session above $115 a barrel. we are seeing u.s. fuel supplies pretty tight toward the driving season. these oil prices are higher,

just more pain for consumers. we are watching consumer spending data closely. this chart showing inflation adjusted numbers still rose by the most in three months. we have seen consumers still holding strong despite price pressures we are seeing in the u.s.. we are now seeing also u.s. inflation starting to cool with the fed preferred pce gauge matching estimates. >> we did have the university of michigan survey indicating consumer sentiment is around a decade low. certainly a positive end to the week. as that does continue in the asian session, so far pretty good for the fed and australia. futures above the key resistance level of 7200 we will see what happens at the open. the aussie dollar just fractionally weaker against the greenback.

also keeping an eye on the yen. that is around its average exchange rate we have seen this quarter. -- security and japan saying we could see a slight rebound in the dollar against the greenback toward the end of the month when we see dollar buying with the month end rebalancing. kiwi stocks coming online. not quite the same sort of gains. we did have a report from jb -- jp morgan, they have downgraded the overall economic outlook for the country. we had previously seen growth of 3.3 percent, now 2.3% instead. certainly a lot of it does hinge on where we go with the chinese economy and we did have beijing relaxing its movement over the weekend in a sign the outbreak is under control. also changes in shanghai. haidi: that's right. the financial hub badly battered by lockdowns over the past few months. over the weekend, we did hear

shanghai is unveiling a slew of fresh policy to recover from covid zero lockdowns. they include everything from expanding approval to construction projects, tax cuts, incentives for electric vehicles. telling manufacturers they can resume operations from june opera -- june onwards on a full basis. 50 measures across eight categories aimed at stabilizing and getting the economy back on track. this is going to be key for regional and global investors to see whether we could see a rebound in china's economic activity but we still see covid zero being maintained and these outbreaks being handled across other parts of the country. >> no wonder we see economic measures from china. after 33 measures already last week, worth $20 billion by the national government. they are very much trying to help the labor market. it is a different picture from what we have seen in the u.s..

a very tight labor market. wages continuing to increase by large amounts in the past year, given the tightness of the markets. perhaps we may see some relief, which is great news for the federal reserve in the sense that this would bring down those inflation numbers, the worst in 40 years. recent surveys across the country showing that companies are becoming more cautious with their cash. this week we will be watching for payroll numbers, which are key, likely to show the smallest increase in just over a year. we will see how this affects markets with stocks already rallying. investors wondering if the force of this year's collapses -- the worst of this year's collapse is over. andrea, i put it into context earlier in the show that we are still seeing the s&p 500 down 13%. finally could we see capitulation in the markets? are we near the bottom?

>> that is a really good question. to some extent, this is a question that was bound to come up, after that 30% drop in the start of the year, the biggest since 1970. investors were bound to start wondering whether we are coming to close to the bottom of this selloff. there were a few things last week that played into this. we did have those minutes that sounded somewhat less hawkish, perhaps the fed going to port. you may see perhaps a smaller rate increase in july. corporate earnings relatively upbeat. consumer spending in the u.s. remains resilient. there had been different data, a little patchy but overall, the consumer looks like it is still spending.

also we had these valuations after the decline in u.s. stocks come up especially the tech sector. no doubt investors were going to wonder, is this the bottom? the feeling is you are going to have these bear market bounces. but i think we are still in for -- so to speak. but it is on the table whether we are at the bottom of this route. >> of course, the fed remains key. what are analysts seeing in terms of market reaction? is that also starting to be priced in as well? >> in the bond market, it is interesting, that is where you are sort of oscillating between the growth, the inflation story and bond investors and treasury investors really want to see

clarity about where this is going, which is why those payroll numbers this week are going to be key. we have seen this rally and treasuries after the 10 year hit 3.2%. it has come down to around 2.7%. will the bond market be able to maintain these gains? that is where there is a little bit of clarity and investors are looking what the inflation and the growth picture is. whether we are going to crs session and of course, you do have the liquidity issues in the treasury market with the fed not buying securities. this is something the bond markets are watching very closely. >> we saw china stock markets moving around last week despite

$20 billion in tax relief. will the shanghai measures make a difference? >> they are definitely positive. so far you have seen investors underwhelmed by the measures that have come out of china. we know the economy is still under pressure. they are still adhering to covid zero. the market looks like it will be supported today by what happened in the u.s.. it is definitely not a negative, but will it be enough to give investors confidence that the government is following through with some of these policy measures we have seen including these 33 last week. it is definitely not a negative. is it going to be enough to

really drive gains? that remains to be seen. on a day like today, playing into that mix of positive news out there. >> let's get over to paul allen who has the first world headlines. >> the u.n. top human rights official drawing criticism for her visit to china. the six-day trip ended with a press conference that did little to address concerns about china's alleged human rights abuses. in a statement saturday, the u.s. state department said restrictions imposed on the visit meant she was not able to undertake a complete, independent assessment. hong kong relaxing some covid-19 testing requirements for inbound travel. passengers will still need a pcr tests before their scheduled flight but no longer need to gave -- gave proof of the lab's aggradation.

measures have been eased slightly for airlines. u.n. failed to agree on sanctions over moscow's invasion of ukraine ahead of a summit in brussels. hungry refusing to back a compromise despite proposals that -- aimed at easing oil supplies. a proposal to ban russian real estate purchases was also removed from the draft anti-e.u. officials say a deal is still possible. volodymyr zelenskyy visited troops in the harkey region over the weekend. his first publicly known trip outside of kyiv since russia's invasion. zelenskyy handed out awards to soldiers and was briefed on the operational situation. ukraine official saying more than 30% of residential buildings in kharkiv have been damaged by russian attacks. 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 paul allen. this is bloomberg. >> u.k. prime minister boris johnson says there is no point negotiating with vladimir putin. hear more from our exclusive conversation later. up next, key economic data coming this week including china's pmi. this is bloomberg.

♪ >> let's take a look at major events in the week ahead. eu leaders begin a two day meeting in brussels monday with the war in ukraine driving the agenda. the u.s. not concerned with the closed memorial day. we get another check on the health of the chinese economy, pmi numbers due. also getting sterling, gdp, asia readings as well. thursday, opec-plus meeting.

friday, jobs day. the u.s.. also, soaring food prices. shery: this week marking a turning point in monetary policy. quantitative tightening officially begins as the fed starts shrinking its $8.9 trillion balance sheet starting june 1. that is bigger than all of the economies of the world. except for the u.s. and china. with a reduction in $95 billion per month as the current plan, we will see how this will ripple through markets. larry summers thinks the fed is better positioned now. let rico -- >> the fed's flexibility is in a much better place than all of this emphasis on forward guidance we were having for a long time. humility is the right posture with respect to monetary policy.

i thought the fed's posture was broadly appropriate and now the question is going to involve carrying through. i continue to believe a soft landing is unlikely. shery: let's get more with -- joining us from singapore. good to have you with us. we have more positive news perhaps this week. a slowdown or a peak of wage growth. we are expecting to see inflation numbers reese all last week cooling. i wonder with quantitative tightening starting on policymakers warning of unanticipated effects on the markets, what are you watching? >> that is one of the things we are also watching.

which is really the type of impact it would have on market liquidity. as well as the potential for building up funding pressures as it gets underway. we are looking for a step up and quantitative tightening to come through. according to the plan, it does double to $95 billion per month after. so, also pay in mind -- being deliberate with rate hikes. we will probably see a 50 basis point being a done deal for june. highly likely for july. that i think would coincide with a period of rising prices. the price of money and shrinking supply at the same time. this is going to be the test of liquidity in terms of markets. for ems -- he sees me, we are at about --

>> if the markets do not behave the way the federal reserve in tens, could we see a strategic pause? >> that if the $1 million that is the question. [indiscernible] they are looking more intensely at inflation now. whether they get cold feet from the markets, something we have seen over the past 10 years, that remains the question. everything else we have heard over the last few months, particularly this step up and how hawkish the fed becomes sick chests that until -- suggests that until inflation is en route to being tamed, it is not going to back down. that adds a layer of uncertainty. haidi: in china we have seen a

slew of new policy measures. two, in your words, save it from itself as china tries to rebuild their economy after harsh lock sounds. are you optimistic -- lockdown spirit are you optimistic? could we be seeing a discordance in terms of how covid should be handled? >> i like your word discordance. that remains problematic for us. not just in terms of the tone from the top, but how does it -- trickle down. apart from these measures that are announced obviously to lift the economy, we actually have not seen the kind of liquidity we need coming from property developers. all the uncertainty being lifted convincingly in the regulatory space either. to your question, these measures will certainly start lifting economic momentum from a very soft footing.

arithmetic lay it is difficult to get around the 5.5% target. more troublingly, we do not know whether confidence can be -- to a point where we can get underlying growth momentum to get back to the 5.5% region. infrastructure may have been -- in the past, but the same -- may not work this time around. shery: meantime, we see the dollar trading at the moment. do you think we are past the peak of -- dollar or is this a process of finding more durability for the rally? >> this remains a difficult assessment. for anyone who is looking at the dollar day by day. we have seen over the past week a rather convincing pullback on the dollar. the dollar has not in any sense abdicated yet. for that reason, we

dollar dominance of this market for a couple of reasons. one is as we get into this turning point in june, you are actually going to get the supply of dollars coming off the market. we saw in the last cycle that even though the dollar peaked well before the rate peaked in the 2014-2019 cycle, when quantitative tightening started we saw a -- in the dollar. this time it has only compressed more. we will still wait and see what happens there. it also comes with the policy of major central banks including the ecb who is posturing for more tightening. i think we still won't get rid of the disparity between how hawkish the fed isn't how conditionally hawkish the et be is and how suddenly the dovish be -- suddenly dovish the boj is.

haidi: bloomberg opinion columnist mohamed el-erian says two policy mistakes are prevailing to contain surging u.s. price pressures. he also told us china has a key role to play on global inflation. >> what happens in china impacts growth both global and aggregate supply. we forget china is a major consumer of products made elsewhere. we saw what their retail numbers looked like. they were pretty horrible. we also are reminded on how -- how important china still is for supply chain. the concern we have, and i know you are -- to this, three major areas of the global economy are slowing at the same time. there is no compensating locomotive anywhere in the global economy right now.

we've got to be careful we do not get this self-feeding process. this is important because the marketplace has embraced the possibility of a pause in september. be careful, the only reason the fed will pause is because demand has come down really fast. tom: what is the feasible -- right now for the american central bank? >> at best, what chair powell called a soft issue landing. i think the time has passed for a soft landing. we could have done it but that would have implied the fed moving nine months ago. it should have, it did not. instead of tightening into a growing and dynamic economy, it is tightening to a slowing economy. it is very difficult to get a soft landing.

the best we can hope for right now is -- and what is the probability of that? not as high as we would like. i think the fed is going to have to decide between two policy mistakes. hit the brakes too hard and risk recession, or to have the brakes in a stop and go pattern, and risk having inflation well into 2023. >> mohamed el-erian. you can get a roundup of all of the stories you need to get your day going on this -- today's edition of daybreak. this is bloomberg. this is bloomberg. ♪

♪ >> a quick check of headlines. former disney ceo bob iger has reportedly taken a stake in australia up -- graphic design company. cnbc says he has also agreed to act as an advisor to the firm. neither party would comment. the u.s. corruption and market and new palatial in case against glencore -- two former executive walked away as billionaires. authorities have not brought charges against top managers and the sweeping cases, but documents have identified two alleged perpetrators

>> a look joe biden will be meeting the new zealand prime minister on tuesday. the leaders will discuss strengthening the economic framework. paygo energy could announce a strategic view of the company. the company may not have the shareholder support to proceed. ibm says the cody risk management is moving in the right direction towards building a productive risk culture. turning back to china, shanghai bringing measures to support an economy that has been battered by covid lockdowns. let's get more analysis, emma

o'brien. there are eight categories to undo economic damage. >> it is a different picture to what we saw last week when cases were so persistent in beijing, it was looking like a lockdown was still a risk. you have seen economic measures. all factories basically are allowed to reopen from june, not just those on the waitlist. they are introducing subsidies for manufacturing and industries to get moving again. they are also changing the testing system around the edges. you know only need a negative test 48 hours before going to a public place rather than 72. it doesn't show they are cognizant of the disruption that this has been causing and are trying to do something about it until the next outbreak. shery: what changed from last

week? covid cases falling or is it also the government wanting to relax that covid zero policy? emma: i think it is a combination of the covid caseload. pressure is easing, but also a real understanding that they are causing disruption to the economy and they are causing high level to people's lives in that they need to amend for that. if they are going to continue with covid zero, which is their intention if you take the public rhetoric. you have seen cases coming down in beijing which was looking dicey last week. this time last week, we had come off 100 new cases. saturday this week, we have only seen 12 new cases and they are saying they are not seeing new cases in the community.

that is a positive sign and they are easing things in beijing in some districts. some people can go back to work. there were work from home orders across most of the district. they were opening some public transportation and access to shopping malls, grocery stores in some areas. haidi: what we claim about what we know about how the leadership -- what do we gleam about what we know about how the leadership is handling this? emma: it is hard to tell. at the end of the day, xi jinping's word will prevail and we will see a continuation of covid zero until the party congress in october, but they will stomach the disruption, tinkering around the edges with subsidies and policies. at the end of the day, they have staked a lot rhetorically and ideologically on covid zero and that it does produce a lower death rate than places like the

u.s. and that is something they want to bank on going into that party congress. shery: emma o'brien there with the latest on the pandemic in china. netflix video streamer is moving to prioritize profitability over market share, the company lost about 70% of its market value since its 2018 debut. the ceo and founder of comb you spoke with bloomberg's -- with bloomberg about the change in strategy. >> seeking market growth should not be our strategic priority. this industry has developed into a relatively mature one that is at a slower growth stage. >> i.t. in november of 2000 raise prices and raised prices again last year.

how much to see to raise prices again? >> price hike potential still exists. whether we will raise the price this year, we will see how markets react. we don't have a clear plan yet. >> where do you see advertising revenue going and ready see the economy going the rest of the year? >> for the second quarter, shanghai is under lockdown. those who understand brand advertisement industry, they know half of china's print advertisement marketing is based in shanghai. we will see figure negative impact on and impact in the second quarter. in my opinion, q2 is the bottom. the end of q2, which is current stage, we will see gradual recovery. the third and fourth quarter will see growth. >> you expect the impact from the bilateral environment to

become -- from the regulatory environment to become less noticeable going forward? >> last year, there was regulatory scrutiny. we are not afraid of regulation but the transition is painful. let's say regulation was this way last year and this year it changed. it is that transition which is painful. >> in 2020, there were reports that alibaba and tencent were interested in buying states in iqiyi. is that still possible? >> this is a rumor. there have never been conversations with tencent and alibaba about investing in iqiyi investment banks. some people did ask my opinion. my response is it is not possible. >> at the end of march, the sec placed iqiyi on the list of companies that could be delisted. at the time, iqiyi said it was

working on solutions to protect stakeholders. how is that going and how likely do you think a delisting could be? >> i hope the dialogue between china and the u.s. will make progress to resolve the issue. at the same time, we are looking at other opportunities to reduce risk. we are working on technical issues for hong kong listing. there is no specific timetable. >> giving us a better picture about the economy is looking at, what does consumption look like in china? >> the service iqiyi is providing a special. it is a low spending online entertainment industry. our business is not highly correlated with the economy. >> iqiyi ceo and founder speaking with bloomberg. let's get you the first word news now. paul: president biden has laid out a plan -- president biden

was in uvalde. the can control -- with them control back on the agenda, lawmakers are city a tight table to negotiate new laws. the department says that you will conduct a critical incident review of the police response. pakistan's finance minister says the country must secure an imf a lot quickly as it is unable to raise funds from the bond market and commercial banks. the country is including saudi arabia are willing to help once an agreement is reached. pakistan needs $37 billion in financing for the fiscal year starting june. that leader of sri lanka's opposition party says the country needs a new government to tackle the economic crisis. he says the country needs policy coherence to get it through the crisis and is calling for a fresh mandate to ensure stability. sri lanka is negotiating a

bailout program with the imf and restructuring debt after defaulting for the first time. the british ambassador in paris is packing an investigation into the chaos before saturday's champion league soccer final. the game was delayed by more than half an hour and left thousands of supporters stranded with police charging fans and firing teargas. france's interior minister accuses liverpool fans are forcing their way into the stadium and assaulting staff. 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. this is bloomberg. >> we have breaking news out of columbia, the latest polls from the presidential election. we are hearing the country is headed for a presidential runoff between a leftist, cassava pedro, a former guerrilla and mayor of bogota, he is also headed against rodolfo

hernandez, a 77-year-old construction magnet. this is surprising in the sense that we were expecting there to be a runoff which would be under 19, but rodolfo and hernandez got a late surge and he is now headed towards a runoff with gestapo pedro who was short of the 50% needed to win in the first round. columbia is now headed towards a presidential runoff under 19, investors will be watching as columbia has never had a leftist government. bond markets very uneasy given the prospect of petro becoming president. two into bloomberg radio to hear more from newsmakers and get under alice's from the daybreak team, not broadcasting live from our studio in hong kong, listen video the app -- listen via the app. stay with us. ♪

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>> you are watching "daybreak: australia." lots of debate over whether we are seeing the end of the market selloff. >> that is right, particularly with this rally. a lot of investors wondering whether we have seen the worst of 20 and it has been an awful

standard. we have the global benchmark about 50%. amp capital weighing in on this and they are saying there is more volatility ahead. this is when you look at the vix and put call ratios. they are saying, we are not seeing signs of a bottoming out yet. some factors weighing into this, we are seeing central banks tighten. we have a slowdown in china and the war in ukraine. for amp capital saying, we are likely to see more volatility in the near-term, looking in the swiss the 12 month rising, the picture could -- the sixth -- the six to 12 month horizon, the picture could stabilize. >> oldman has an interesting production -- goldman has an interesting prediction. annabelle: goldman sachs saying the prices of three key metals, cobalt, lithium, and nickel,

they could decline over the next two years and there's an interesting reason. they are not saying these metals will not play a crucial role in the ev sector moving forward because these are key ingredients in tv batteries, but what they are saying is there has been such exuberance around the sector that there has been too much supply into the investor side. they are seeing -- they are saying that oversupply could lead to a weakness in metal prices as they are predicting lithium prices, which have averaged around 64,000 dollars, they could drop to $16,000, also likely to see declines in cobalt and nickel, although that could improve in 2024 when we see the demand side pickup. shery: and they will look at the broader commodity space. we saw copper gaining ground in the previous session. we continue to see skepticism in

the metals market given concerns about growth, especially from china. we saw a little boost later in the week. we are watching crude prices which are extending gains after five weeks of gains. we have seen those tight supplies. we have talked about food price, inflation, concerns were developing nations. india, for example, not curbing exports of wheat, we see the rally holy study. a little bit of gains for friday given that we had cooler u.s. inflation numbers. this is about monetary policy and inflation. gold holding at around $18.50. that was an interesting story, those lithium prices, cobalt, nickel. that goldman sachs is calling for the end of that will market,

which is different -- that bull market. the argentinian mining secretary is bullish about this place is because on the ground, they see ramping up of production numbers , it is hard, especially if you are transitioning to green energy and you have more hurdles, it is difficult to ramp up production. interesting to get these calls, especially when we hear from gary shilling saying that everything, every asset class has come down, commodities has to come down as well. haidi: talking about a lot of economic forces including the covid-19 lockdowns in china, how that is feeding into the demand destruction, the important destruction, also pointing out that when we get to that growth cycle, consumers favor services over goods. that is 20 have an impact in

addition to the impact from the war in ukraine on the demand and supply side. gary is pointing out that we have issues like not economic forces like bad weather, cartel behavior, but it does feel like a disconnect. when you heard in panama is being reflected in what we here in australia when we are seeing that boost for the asx because of that commodities heavyweight element. most miners we talk to say we are in the middle of another super cycle. it will be interesting to see which side will be prevailing. boris johnson in the meantime speaking of ukraine, urging more military support. in an interview, johnson called for the west to send more weapons to kyiv while pushing back against the idea that ukraine should negotiate a peace deal with russia. >> i think it is important that

we do not get into -- because of the hero wisdom of the ukrainians -- heroism of the ukrainians, because of their valor, we should not believe that this problem has gone away. on the contrary, putin at great cost to himself and russia, is continuing to chew through ground in donbass, he is continuing to make gradual slow but palpable progress. it is vital that we continue to support the ukrainians militarily. what they need now is the type of rocketry, a rocket system, that will enable them to defend themselves against this brutal russian artillery.

that is where the world needs to go. >> final question about president zelenskyy. you stood shoulder to shoulder with him. >> i would say to any proponent of a deal with putin, how can you deal with a crocodile when it is in the middle of eating your leg? that is what putin is doing. he will try to freeze the conflict, he will try to call for a cease-fire while he remains in possession of substantial parts of ukraine. >> having said that you emmanuel macron? >> i make that point to all of my colleagues in the g7 and nato. by the way, everybody gets that. once you go through the logic, you can see that it is very difficult.

we desperately need it to end, the world needs at two and. -- it to end. the one way it can end his reported to accept they do notification of ukraine has taken place and he is able to withdraw with dignity and honor. that is what needs to happen. i'm not saying there were any nazis in ukraine, but one of the interesting things about the situation is the strong support that putin commands in russia for anything he says or does. i think he has the political margin of maneuver to make an end to this. shery: boris johnson speaking to bloomberg. if you missed any part of that conversation, coutu tv , our interactive -- go to tv ,

our interactive tv function. send us instant messages during our show for terminal subscribers only. this is bloomberg. ♪

>> here's a check of the latest headlines.

money grab getting set to partner with a crypto firm to allow customers to convert stablecoins to hard currency. the service firm up over she asked ceo says a partnership with stellar blockchain bridges the two worlds. the collapse of stablecoin has raised scrutiny on the crypto space. india has oil and natural gas profit rose 32% in the fourth quarter but missed estimates. an increase in government levies aiding gains from restoring oil prices after russia's invasion of ukraine, that income increased to $1.1 billion in the three months ending march from 860 $7 billion a year earlier. top gun maverick topped the memorial day weekend box office taking in $124 million on friday through sunday ticket sales in the u.s. and canada. the movie gay feeders one of the

biggest box office debuts since the start of the pandemic, a rare move for a non-superhero film. the movie is unlikely to be released in china, diminishing its global returns. haidi: let's look at asian markets and whether we are going to see that momentum as we saw in the u.s. u.s. stocks closed for that memorial day holiday. we are looking like asian stocks set to open higher with that upswing off u.s. equities in their best week since november. ozzie futures looking firm. we saw an earlier gain of 1.2%. we are seeing higher trading when it comes to that open in japan. we are getting jobless numbers as well as industrial production this week, expecting to see a mixed picture by tightening labor market in japan. we have the dollar trading range bound but the aussie dollar pretty resilient, easing a bit.

the yen also little changed after that three week slide. shery: u.s. features extending gains after the rebound last week, the best week since november 2020. we are seeing the upside for nasdaq 100 futures. haidi: we are getting breaking news from ado, the energy giant saying the board has planned to review the strategic direction. they agree the merger would not get sufficient support, they have withdrawn that proposal. this is the strategic review when it comes to the plan to split of their coal plants into a new company. there have been concerns there would not be enough shareholders support to proceed, that is the determination. the chairman will resign and we look at more details on this as it comes to us. this is bloomberg. ♪