>> good morning and welcome. >> we are counting down to asia's major market opens. taylor: good evening. top stories this hour. jerome powell faces a tough task , more pressure on the central bank. paul: more aggressive action from the fed. shery: china issues one of its strongest warnings. u.s. futures under pressure, we're talking about the nasdaq futures moving already 1% which

is quite a big move. this is ahead of the fed decision this week, raising uncertainty, we have the s&p 500 moving almost 3%. we have really those short-term yields spiking, above that level since 2008. a signal that an economic hard landing may be unavoidable. oil prices have remained high at the $120 level. that price pressure was about

inflation. take a look at this chart. another fresh 40 year high. we are talking about broad-based gains across categories, it's rising given fears that the fed may have to move faster to regain control of prices. annabelle: a lot of focus on the treasury market and bond space, the q. week 10 year at a level we have not seen since 2014. new zealand coming online just like this, australia a public holiday. japan futures are pointing lower. ports need to contend with covid lockdowns, we had china resuming mass testing in shanghai. flipping the board for >> happening in the currency space.

the aussie dollar snaps a three-week gain. the yen in focus this morning, the whisper of a 24 year low against the greenback, a japanese official saying now is not the time for intervention. paul: as you have been talking about, it's about inflation. 8.6% has us reaching for the history books. 1981 was the last time we saw inflation this high. his history a god -- a guide? a deep recession. that's how it came under control in the 1980's. this would have implications for the upcoming midterm elections. the bond market is sending a clear signal. shery: the selloff continuing.

we even have the likes of barclays at a 75 basis points. let's get more analysis with our guests. mark, let's start with you. what was asia's biggest take away from the market mayhem that we saw in the u.s. on the friday session following the cpi numbers? > they are going to be shocked and the jump into year treasury yields. i don't think anyone was ready for that at all. i think people that the cpi data would increase treasury yields, maybe at the longer end to some extent, but the 25 basis points jump, which has taken the yield above three -- 3%.

the two to 10 year is heading towards parity as well. but a huge effect especially for asia, when you have a two-year treasury yielding that much. some of the equity markets have been supported because of reasonably guiltily companies. it is a big competitor to what people might think of the market. it also affects central bank thinking because 75 basis points us to be a consideration for the federal reserve, and that is a big impact for asia as well. paul: kathleen, you will be watching the fed pretty closely this week. as the bond market going to force their hand here? kathleen: the bond market, i don't think we have to worry about them forcing their hand.

i think it is the inflation numbers forcing the fence hands. the fight got much tougher because all the things the fed thought might be easier now, food, energy prices, gas, shelter, even car prices, they have bounced back again. shery: will the rate hikes be enough to bring this under control? >> back in march, the median dot was up. we'll more of the dots move up? that will be important. an economist telling bloomberg this week that he doesn't think there will be 75 basis points now but they could start talking about it. it may look more and more like it is necessary, and people are

saying, yes, a recession may be necessary. o'er the fallout you don't want to see but you have to expect it to bring down inflation. sentiment fell to a record low in may. high prices are taking a toll on consumers feeling about current conditions, future conditions, business optimism. people say sometimes higher prices are the cure for higher prices. one hope is ben bernanke saying he is somewhat optimistic. economists are very bad at predicting recessions, but i think the fed has a reasonable chance of what jay powell calls a softened landing. there are reasons to keep hope of a soft landing in the background. economists and fed watchers

think not to expect a 75 basis point rate hike at this meeting, but i would expect a lot of questions at the press conference afterwards about just that. shery: given the market dynamics and but the fed is doing and what treasuries are doing, we are very much watching that 20 year weakness of the japanese yen against the dollar. we have the doj policy decisions -- the boj policy decisions. is there anything we can expect from them given the yen's trajectory? mark: the comments we heard on friday and over the weekend suggest that for now the japanese authorities don't see it as an urgent situation to support the yen, but i suspect we will soon be entering the window where they will have to change their tone.

the rest of the g10 will be looking there as well and saying, look what is happening to your currency. we would like to see some slowdown in the weakness. we are definitely getting closer. this week's bank of japan meeting might be too early for that to be addressed. it is a question for the ministry of finance. we could see some hints from the bank of japan that they are ready to change yield curve control, which already would be a support for the yen. we might get some language that suggests the bank of japan is getting closer to the point where they can change the yield curve. paul: mliv strategist mark cranfield and policy editor kathleen hays. taiwan took center stage in weekend talks between global defense chiefs at the shangri-la dialogue in singapore. beijing says it will fight until the end of taiwan made a move toward independence, while the u.s. accused beijing up trying to unilaterally change the status quo over taiwan. let's bring in stephen engle in

hong kong. what is the key take away here? stephen: it is a good sign they are talking. we had over the weekend as well the deputy prime minister of australia speaking with the national defense minister of china, the first ministerial level talks between those countries in about three years, so that was good. again, the center of a lot of these discussions that began on friday with the u.s. defense secretary also meeting at the beginning of the shanghai dialogues -- the shangri-la dialogues, excuse me, in singapore, where the two traded barbs over taiwan but also agreed to continue discussions. military to military between the u.s. and china have been fraught over the years, where diplomatic channels have been challenging as well.

what was striking from the key take away his sources are telling bloomberg news that bloomberg news is increasingly morning the u.s. military to stay way of the taiwan strait. how over the years, the naval vessels have sailed through the taiwan strait, as they have the south china sea, challenging china's claims to those waters in the south china sea over freedom of navigation. but sources say increasingly beijing is making it a key talking points, warning the united states not to sail through the taiwan strait as it is seen as provocative. china views the taiwan strait as part of their exclusive economic zone. again, as you mentioned, the minister said that beijing would fight to the end if taiwan backed by the united states made

any move towards independence. shery: stephen engle there with all those geopolitical tensions in the region. let's get over to vonnie quinn for the first word headlines. vonnie: staying at the shame log dialogues, where australia's defense minister says his country needs to prioritize relations with certain island nations' woes. this counterpart is in singapore, ending a two-year diplomatic phrase. canberra continues to support the one china policy. >> we have made clear that our respect of taiwan and china has not changed. we have a one china policy. we do not support taiwanese independence. we don't support any unilateral action on either side of the taiwan strait which would change the status quo. vonnie: canada's defense minister has told bloomberg that china's behavior is highly concerning.

they highlighted beijing's actions and military provocations. that follows weekly reports of jets buzzing canadian plains, helping to enforce sanctions on north korea. there remains concerns about taiwan. >> we remain committed to the one china policy. at the same time, we are concerned with the level of chinese military activity in the region. therefore, we continue to build the relationship with taiwan. continuing to ensure peace and stability of this region with like-minded partners is also important. vonnie: beijing global government says a covid-19 outbreak linked to a popular bar is more difficult to control that previous clusters. the weekend saw mass testing and rising infections in beijing and shanghai. authorities have delayed the reopening of schools in the capital. the africa merged just days after the cities eased months of restrictions. 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. paul? paul: still to come, our guest joins us as we assess the fallout between the tussle between china and the u.s.. investors brace for more pain after the shock u.s. inflation number. this is bloomberg. ♪

>> we see inflation continuing to rake havoc. >> certainly the drivers of inflation. >> broadening and deepening out. >> everyone knows inflation is

going sticky. >> inflation will be stickier at a much higher level. >> more clarity from the fed is what is needed for the equity markets. >> there is more work to do. >> more work to do in the coming weeks and months. >> rates will go significantly higher. >> above 3.5%. >> between 50 and 75 basis points. >> can the fed pause in september? we know the answer is no. >> i don't think anybody thinks we are going to get out of this without interest rates being significantly higher than they are right now. paul: some of our guests reacting to the blowout u.s. inflation. the fed and some of the most influential central banks will have to confront those prices in the next few days. let's take a look at the major events in your week ahead. jerome powell facing renewed pressure to dial up his hawkish and us after the main cpi data shows a peak in inflation. the bank of england follows on thursday with age when he five

basis point hike expected there. a different story in japan, where the boj's dovish policy is under scrutiny as they yen topples to historic -- as the yen topples to historic lows. china expected to pick up marginally after a tough april. shery: ahead of all of those risks, one thing is for certain. volatility is here to stay. stocks coming up their worst week since 2020 and yields searched to the highest in 14 years after that u.s. inflation report. traders see a 50-50 chance of a 75 basis point rate hike, while barclays says it could come as early as wednesday. that has the bond markets firmly pricing in a hard landing with the yield curve re-inverting. we will be watching jay powell's press conference on wednesday, with the characterization of inflation and the dot plots.

that is your week ahead. let's bring in our next guest. a soft landing, he says, is slim to none. andy, always good to have you with us. what does it mean in terms of your portfolio and how you are rebalancing with high inflation, not to mention this treasury selloff we continue to see? guest: this is a very challenging environment for investors of all stripes, stocks and bonds alike. what you are experiencing is an unprecedented degree of volatility at the start of the year on record. there is a very difficult degree of volatility. in bonds, this is a contrarian suggestion. consider adding to duration. a lot of investors were under duration. at this point, you're starting to see a shift in investor sentiment for mooring about

inflation, which still is a worry, to worrying about the next recession, which is looking more and more certain and the chances are sometime in 2023 we will experience a decline in economic activity. shery: what does that mean for the stock markets as well? we have seen huge favoritism for value against growth, and now we have rising rates. this chart on the bloomberg shows the gap we have seen so far in the performance. are we sure of more strength for value ahead? guest: i think investors will be eager for profit and value. don't get too eager. rising interest rates holding back primary competitor growth. rising inflation supporting businesses that own a lot of real assets or have a lot of

leverage. rising interest rates support earnings on a handful of companies, particularly in value sectors like financials, banks, and insurance. they have a lot of runway. even though we have had such a great year for value stocks, value stocks remain discounted. so this is a good place to be. paul: we have also seen a u.s. listed chinese stock having their moment in the sun. is this a scenario you are looking at? guest: chinese stocks have been under pressure as a result of having two regulatory bodies after them. the s&p looking for more accounting scrutiny. china's regulator looking for more control over how they use data, especially data that exists on that platform. some of the challenges are starting to evade. we are seeing progress, seeing

some progress in the restrictions on social media companies. they are deeply discounted in the price, but they are volatile. what that says to me as if you are going to go into this market, you should nibble at it rather than take big bites. paul: how about if you are looking for safety at the moment? what sort of havens look best place? 144 does not fit the bill anymore. guest: the yen is the only major central bank not aggressively tightening monetary policy. i don't think that yen will be a safe haven for the next three months. what is your safe haven? traditional u.s. treasuries. after the rebound they have had in yields so far, i realize it has been a painful one for investors, but they are starting to look much more attractive in terms of their potential to produce income. highly competitive with the gold

standard. shery: the only time we see a huge selloff, we see that dip and investors rush back in. it doesn't appear we are seeing that any longer. what time horizon do you need to have for this mentality to work for you? guest: for this mentality to work for you, your timeline needs to be longer than a few weeks or a few months. looking at buying equities today, global equities for the u.s., they have effectively undone the valuation of the post virus era. that is great. that means we are buying stocks at a bargain today. but we see all this risk tied to a recession that is likely to happen in 2023. that means any investor who is buying this step needs to come into it with the idea they are going to see a profit on this in three years, not in three months, certainly not in three weeks. paul: andy kapyrin, thanks as

always for joining us. you can get around up of our stories tonight in today's edition of daybreak. terminal subscribers can go to db . this is bloomberg. ♪

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paul: let's get a quick check of the business flash headlines. a selloff of hsbc's asian unit could unlock 26.5 billion dollars or 1/5 of the current market value. the sunday times says research by external consultants was commissioned by hsbc's biggest shareholder. they have begun their own analysis to push back against the argument.

sources say broadcast rights to the indian premier league cricket hit $6 million on the first day of auction. amazon pulled out at the last minute. living disney and sony as the competitors. they are vying for a contract for one of the world's most popular sporting events that resumes on monday. shery: we are seeing u.s. futures under pressure in the early asian session. we have the s&p 500 seeing the second worst week already already. had data. we are seeing oil prices under pressure in the asian session after we saw seven weeks of gains. this risk off sentiment spreading across the board. we will be watching the asian open soon. this is bloomberg. ♪

>> if anyone dares to secede from china, who not hesitate to fight. -- we will not hesitate to fight. this is the only choice for china. >> we remain committed to a one china policy. we understand the level of chinese military activity in the region. building a relationship with taiwan is important. ensuring the stability of the region is also important. >> i have been feeling a strong sense of urgency that ukraine today could be back tomorrow. japan has shifted policy towards russia. paul: the defense ministers

speaking on the growing political tension over taiwan. australian defense a minister and his chinese counterpart made up thier dialogue. there is more about the china policy. >> let me be clear that of a policy in respect to taiwan and china have not changed. we have a one china policy. we do not support taiwanese independence. we do not support any unilateral action on either side of the taiwanese straight that would change the status quo. the type of taiwan is a matter that should happen by consensus, by agreement. that is the way in which we think. >> you labeled china as australia's biggest anxiety. how would you counter china's ambitions? >> we want to be engaged in the

way that australia should be. you see the emphasis of that in the new government. she was visiting the countries of the specific -- pacific, as quickly as we can be. in my experience, the pacific, if we engage with energy, if we seek to place the interest of the pacific people first, there are challenges that they face in terms of development. australia is in a unique position to assist. will be the partner of choice. it is not something that we get by. when he to learn it. >> australia has funded a submarine act. does this reset relations with france? >> i have met with the minister who was a warm individual, there

was gratitude expressed for the fact we have moved quickly to draw a line underneath what was an episode that did get in the way of our relationship with france. france matters to australia and we do not think about it enough but france is our nearest neighbor. the closest overseas neighbor is in france. our longest border with france is with australia. france is a pacific country route we share interests in this part of the world. >> there are concerns that this will fuel an arms race. >> i think it is important that people understand this is not a security alliance. it is about the sharing of technology between australia,

united kingdom, and the united states. delivering the successor submarine to submarines and a summary that has nuclear propulsion. we remain committed to building security of asia. >> japan says that the rate of today could be the east asia of tomorrow. how worried are you about potential war? >> the point that he makes is that the rules-based order is important everywhere. what we are seeing in ukraine is a challenge. the behavior by russia in a completely unprovoked way, seeking to invade ukraine and other sovereign state totally contests the rules based order and undermines it.

it is totally unacceptable in 2022. it is important that we stand with ukraine. paul: that is richard speaking with bloomberg. we are speaking with the director of research at an institute. let us start with the remarks from china's defense minister about china vowing to fight to the very end if i want to secede. should we expect any other message? >> they made a similar point in 2019, the last time that the shangri-la dialogue was held. they are reiterating a long-standing position. it does not mean that the tensions have not risen. we have seen the liberation army intimidate taiwan with india on the himalayan borders, and the sovereignty claims in the seas,

this is a confident military power we are seeing in asia. its lines remain the same but the cap abilities are enhancing year on year -- but the abilities are enhancing year on year. paul: is this a more worrying development? >> it depends on claims that has been made before. it is being made at a high level forum which is significant. i think again, you have to judge china by actions by -- rather than by its rhetoric. china may be thinking twice about the assumptions it is making about how easy launching an amphibious attack on taiwan would be after there is the taiwan strait, it is a mountainous country. it looked as if russia had all of these advantages in ukraine, and russia has had quite a bit

of a preponderance there as well. it entirely supplants. i think china is thinking twice despite the high were -- despite the rhetoric. shery: military has been increasing and you have the specter of what is happening in ukraine, how is that being taken by asian nations right now? >> that is what is so interesting at the shangri-la dialogue. unlike europe where i think you could talk about a new call to war emerging -- cold war emerging, in asia there is a lot more complexity and a lot more countries who are hedging from somewhere in the middle. we saw in indonesia, a robustly set nonalignment, it is about the choice of a middle power not to take sides. they will defend those

traditions in their foreign policies. malaysia was saying that we need to be looking at food security and economic security. this is a ripple effect from the ukraine crisis. the black sea is effectively closed. food is not going to asian markets. ukraine was. a huge exporter to asia. this is a problem. there are other opinions here, singapore was adamant on saying that you should not characterize this as a battle between democracy and authoritarian states. it is much more appropriate to justify a response in ukraine as simply a response to an act of aggression and as a of you and charter and respect for territorial integrity -- of the eu charter and respect for territorial integrity. shery: do you think there will be a softer touch, and are pushing for a coalition against china? will they extract more allies?

>> i think that the u.s. is recalibrating its message somewhat. i think it is more cognizant of the fact that it has staunch allies such as the prime minister or australia. there is a lot of other countries here, in southeast asia that are not going to be in the u.s. exclusively. the u.s. will need to engage not only in terms of defense of solitude but also in terms of economics. that is where the economic framework comes in. paul: when he to talk about the australia and china relationship between his chinese counterparts , the first contact between the two countries, close to three years. very encouraging to see but it is not seeing any change? >> this is a change in tone, but

not in the substance of australia's national interests. i feel that is correct. this government has been very staunch, advance's interests and justify why it is concerned with military escalation in south china or as a militarization of the pacific. it has opened dialogue because the relationship it is trying to instill is a complex. it is measured progress. there is not much to lose. there is something to gain by talking. paul: considering china is in deep? ? pockets >> if anyone can do it, it is this new team. they prime minister is very well-versed in the pacific -- the prime minister is very

well-versed in the pacific. if it requires trust, the australia do more than provide aid or provide security. do more in terms of labor mobility and leverage australia's approximate to the pacific and market access. that is the advantage of australia. that is what it will take to compete with china in the pacific. paul: that is the director of research. let us get the first word news. >> australia has compensation for a canceled promise to recent communications with france. they have not accepted an invitation to visit paris. this is after the a stashed deal last year. emmanuel macron's majority is in

danger. i left wing alliance is set to get the second most see. it could force him to compromise on his reform agenda. as a second and final round of voting happens at june 19. a new gun safety legislation package. and it involves giving -- it involves removing guns from dangerous owners and more funding for mental health services and school safety. negotiators must agree on the details, it is a significant breakthrough after years of little progress. goldman sachs is facing an sec investigation into its mutual funds. wall street journal says the inquiry may focus on whether disclosure violates discretion

practices. hong kong recorded more than 800 new covid infections for the second straight day. authorities warned that numbers could rise as they are easing the social restrictions. 230 infections have been found this month. new cases are reported on sunday, 16 were found to be the ba two subvariant. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. shery: coming up next, we are looking into how the crypto market has reacted to the united state's inflation surge and why crypto got crazy. this is bloomberg. ♪

>> we are seeing a little bit of indication that some firms are no longer reporting the kind of labor shortages that they were

before. we are seeing some indications of inventory buildup. i think overall, the picture still is a very stretched economy. shery: that is on the fed's tightening path and the impact. on the u.s. economy. record gas prices having a major impact on inflation numbers. let us get to annabelle for the morning calls. even the surge at the pump is not enough for consumers to back off? >> that is what goldman sachs is saying. energy prices would have to rise before we see any sort of change in consumption patterns. they are paying five dollars a gallon. six -- $6.50 in california.

consumers are absorbing these sorts of costs. i think it is worth pointing out that we have seen a change in consumption or consumer sentiment dropping in the u.s.. you can see here that the client is taking us to a record low and a level four we have not seen. -- level fall we have not seen since the recession. >> the greenback is getting hard to hold onto. >> this is from bloomberg intelligence. there is nothing left to fuel japan's currency. we have some sort of sustained intervention from the g7 groups. this could be an overcorrection or overreaction when we see a change of tone from japan's government and the doj.

the only chance for the dollar-yen bid is that we are nearing a cycle peak in the greenback. if you do subscribe, you can consider the yen by other channels. shery: the latest on the currency space. we watched the u.s. inflation number. major movements in the cryptocurrency market as well. let us go to sue, what are you seeing? >> we are saying that coin around the 27,000 level. the inflation blew a heavy blow to crypto. both have pared their losses in the past few hours but it was swing up again friday, down as much as 6.4%.

a level not seen since march 2021. bitcoin drop as low as the 26 800 level. it took a pretty big hit in the past eight hours with the likes of dogecoin down 8%. it was midday sunday, new york time, we saw the compact begin. one veteran, he says if one looks at previous bear markets, bitcoin has declined around 80 plus percent normally with altcoins dropping further around a 90 plus percent retreat before building those highs again. we could see a much lower bitcoin prices over the next month or two. if it got below the high 20,000 level, if the put cap lower and we are talking about the height

19,000 level which you may remember was the high in 2017. paul: we are seeing a lot of scrutiny about a fascinating apartment where crypto is gaining when the market is closed. what is the story there? >> went wall street goes to sleep, they party all night long. there is a hypothetical strategy that is fascinating of the investment group, at their brand and model the five feet coin at the close and then sell it the next day. they found it yields the strategy, yields gains up to 260%. buying at the u.s. open and selling at the close shows only 3.6 percent. the coin transpired during the weekends and when the stock market is closed.

no one knows for sure why this is happening although it is clear to see that this is going on this weekend. we have a lot over on the screen. paul: you can watch us live and see our past interviews on our interactive tv function. you can also dive into any of the securities and become part of the conversations. this is for terminal subscribers only, you can check it out at tv . this is bloomberg. ♪

shery: here is a quick check of the latest business flash headlines. -- ev will account for 20% of south korea's automobile market by 2026. up to 40% by 2030. renewables will maintain a reliance and make a since of the prophet but also strengthen ties with china. a report has revealed that tencent bought a .72% stake in walmart last year from is cofounder. the stake is worth $254 million.

flip card's -- flipkart's valuation has caused the authorities to be notified at the start of this financial year. dozens of new titles for windows's subscription service xbox game pass, it has been big on game pass would is has 25 million subscribers who pay at least $10 a month. trading on the over-the-counter markets, monday in the u.s. and two weeks ago shareholders voted to delist the company for raising about $4 million last year. the listing had angered beijing and shares had fallen 80% since their debut.

more than $50 billion in market values. paul: let us take a look at what is going on in currency markets at the moment. dollar strength continuing to be in the top spot. of about 2.5% -- .2%. one of the worst performing currencies, against the greenback. one point 3467, closing on the low of 1.30 5 -- 135.15 read a preview of the string of central bank activities this week with rob. japan reopening the borders, but not quickly enough for business groups. we learn from the general manager. that is it for day blake australia -- a break australia. next is daybreak asia.

this is bloomberg. ♪

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