>> you are watching "daybreak: asia." >> counting down to asia's major market open, here are the top stories. the fed hikes by 75 basis points, the biggest increase since 1994 as chair powell signals another big move next month. >> i do not expect moves of this size to be common. from today, either a 50 or 75 basis point increase seems most likely at our next meeting. >> wall street reacts positively to those comments with u.s. stocks and treasuries rising, signaling the gains will continue in asia. shanghai to test the entire city every weekend for covid as hong

kong tightens quarantine rules with daily cases topping 1000. we are seeing the u.s. many rally continue in the asian session. we are having the s&p 500 valeant during jay powell's press conference. given a brutal selloff we saw earlier this week, we continue to see futures gaining ground and chair powell talking about the fact that that 75 basis point move will not be common sent the dollar plunging by the most since 2020 and the two year yield plunging by 24 basis points. the 10-year yield holding below that 3.5% peak we saw earlier this week. oil turning positive in the asian session. in the new york session, we have seen it under pressure.

we are now seeing the upside now. >> jay powell saying 75 basis point hikes will not be the norm , setting the tone for bond trading in asia. yields dropping 20 basis points. the tender yield around that 4% level. it is putting that yield differential in japan in focus and some speculation growing as to whether the boj will be forced to tweak its program of yield curve control. deutsche bank among those saying the program could end in a mess. flipping the board for how we are sitting in equity markets, we are fallen to broad-based gains in new zealand. back to the boj and what it means for the yen, we are seeing that pullback a little bit from that 135 level. a lot of pressure on the currency. the zoo hossain the boj could be

the root cause of the problem. haidi: we know policy-setting moves in step with the fed. the hong kong monetary policy raising their base rate. we will see whether the sum hong kong bates -- whether some hong kong banks will keep their lending rate study -- steady. it has been a busy time. their currency fell to the weekend of that trading trend. we subtlety five points -- we s aw 25 points. let's get more insight, we will bring in kathleen hays.

is this a more aggressive fed, a more realistic fed? the market almost interprets it as a more dovish fed. kathleen: if it is dovish because they said we could do 50 at the next meeting and he said, don't expect to 75 to become common, if i were one of them, i might question that. i guess they could have been more hawkish. the median dot is up to 3.4% for this year, 3.8% in 2023. at the beginning of the year, the dots were forecasting 1.9%, even though the markets got more aggressive. in terms of what this means and what the fed is hoping it will do is slow down inflation and

not cause a recession. maybe people are believing that jay powell wants to make sure he can achieve a soft landing, he will, although jay powell said inflation was transitory and some investors said that it not directly there. interesting what he expects for figuring out the size of the hike, what they are hoping to do. let's listen to more of what he said after the meeting. >> 75 basis points today. the next meeting could be about a decision between 50 and 75. that would put us at the end of the july meeting in that range, that more normal range. that is a desirable place to be because you have more optionality about the speed with which you would proceed going forward. kathleen: one thing that is important, coming out of this, jay powell is sing a soft landing is possible. can you have a soft landing if unemployment is 2.1% in 2023?

projections seem not hawkish enough. you can get inflation, the acknowledge it will be 5.2%, that is more realistic, but by 2024, 2 .2% and unemployment only going to 4.1%, that is higher than where it is now, nevertheless a lot of economists are saying that still looks like hopes, it is less of the magical thinking that jay powell and the fomc showed in march but in june, people so figure at the terminal rate might have to be 5'5" or 6% -- might have to be 5% or 6%. >> given the macro environment, does the rally we are seeing in risk assets make sense? mark: people have big positions going into the fed decisions, especially in the bond market.

people were aggressive and short. possibly some of that in equities as well. in terms of where we go from here, traders are skeptical of any forecast the fed makes. they were pushed from 15 to 75. -- 50 to 75. let's see where the fed is going to go, we will see the data where it comes. you were told that inflation was speaking, yet the cpi numbers still get higher. i suspect traders will take it on a week by week basis. they are not going to look too far ahead. the fed has gotten a bit more aggressive and they may stay aggressive for a while. when you see first quarter gdp data went into contraction, it shows you the difference between economic growth and economic contraction pretty short and that is a warning across the g10 space.

>> the fat is out and away -- fed is out and away. what is the macro focus for asia? mark: asia is looking to china now. we have seen a rebound. people are getting more comfortable with the idea that the chinese economy is starting to recover. chinese authorities seem to be taking a lighter touch towards financial markets which is a good thing. money starting to come back in. the mainland back to normal levels, that is a good sign. people are coming into the market with fresh money. it looks as though we have the chance to build a rally on going in the chinese market. that would be a huge relief to asia.

from here, what happens in china is more important to the rest of asia than what happens with the fed. shery: mark winfield and kathleen hays there. let's get to vonnie. vonnie: the central bank has raised its -- numbers all central bank has raised its interest rates. it may have to keep rising hate -- rising rates. lawmakers are debating proposals to cut fuel taxes that may help reduce inflation. the ecb is working on new policy to also ease fears of a debt crisis. the decision was announced after the central bank surprised the market with an emergency meeting. bond yields in italy and spain shot up to eight year highs after the ecb announced it will

plan to announce policy. president biden has told president zelenskyy that u.s. will provide another $1 billion in security assistance. that includes artillery and ammunition and advanced rocket systems. joe biden says he will send $225 million in humanitarian assistance. shanghai will roll out over testing throughout the entire city every weekend for the end of july. workers at supermarkets, restaurants, and other public businesses will be tested every day. china is sending up tens of thousands of testing places across major cities. 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. >> still ahead, why global advisors think central banks need to pay more attention to

the risks facilitated with the global tightening tsunami. . first, vincent reinhart tells us why the u.s. central bank guidance is less reliable after hiking 75 basis points instead of 50. he joins us next. this is bloomberg. ♪

>> we are committed to returning inflation to our 2% active. inflation has surprised to the upside. some indicators have risen and projections for inflation have been rising notably. in response to these developments, the committee decided a larger increase in the target range was warranted. today's 75 basis point increase is an unusually large one and i do not expect moves of the size to be common. either a 50 or 75 basis point increase seems likely at our next meeting. >> jerome powell speaking after the fomc decision. let's begin our global economics

and policy editor with our next guest. kathleen: 20 us now is vincent reinhart -- joining us now is vincent reinhart. it is great to have you with us. in the many jobs you had, you worked a lot on fed communication and working out what the message and decision would be. what is the message here? jay powell says they can achieve a soft landing. they speed up the pace of rate hikes. they still see unemployment rising, but not to a level that a lot of economists think might be warranted when needed if the fed is going to bring inflation down. vincent: it is about three things. it is about the rate projection, it is the underlying macro story surrounding that to justify

policy actions, and it is out -- it is how you handle your committee. the good news is chair powell is showing that the federal reserve appreciates that they have a serious problem. 75 basis point is a good chunk of change to throw what the problem. the bad news is they don't quite have a macro forecast that consistently justifies the action in the sense that there is a good bit of wishful thinking still. they acknowledged that inflation will be high in 2022, but it comes down virtuously in 2023 even as the on employment rate ticks higher. that on implement rate is 5/10 of a percentage point higher relative to march. that is enough for a recession. that is a word jay powell would not go near.

they basically said, we understand we have to move policy significantly, we are uncomfortable with spelling out all the implications for the macroeconomy. kathleen: in terms of how high the funds rate is going to have to get, for this year, 3.4%, 3.8% next year, then it starts coming down again. what you think that is going to have to reach to be at a level where it is going to contain demand, contain inflation, and get it coming down? vincent: you could say, look at the dot plot. they say the federal funds rate in nominal terms will have to overshoot their view of the neutral rate. the real federal funds rate is negative five now and it will be negative for a while. if you don't get the

disinflation that they hope for, you pretty much markup the nominal funds rate. if you don't get inflation in the neighborhood of 2.5% next year, and i don't think many people think that is possible, that should be tacked onto the nominal funds rate. they have a ways to go. appreciate that they are doing something hard and it is hard to communicate, so they are taking smaller steps. haidi: we spoke earlier with the former richmond fed president. take a listen to his thoughts. prof. lacker: i think they have backed away from that a little in this meeting. they dropped a critical sentence indicating they are not certain they can do this soft landing. that is an indication that they think they are running the risk

of recession. >> is there a sense, given that they moved late to tighten, the moves they are now making our perhaps feeding into that inflationary psyche? vincent: i think there's a certain amount of panic to it, why if you had a plan at 50 basis points, a couple in succession would be sufficient within a day or two before the meeting, you switch to 75. there is a certain amount of panic associated with that. concerns about the recession. they indicated they are going to put in a big increase in the funds rate and in the postwar period, that sort of increase has been associated with recession. there no getting around that. is it inevitable? no, it just tells us there's a

higher risk of recession given what the fed is doing. shery: do you think it was that appearance of panic, what as her george wanted to avoid and that is why she dissented, she did not want to contradict the fed guidance? vincent: i think the third aspect of the rate proposal that you see, that is the collegiality among the group. they worked hard to rethink 50 basis points as the appropriate policy action, a succession of a 50 basis point move will get us where we want to. they said it, they repeated at in every statement -- it in every statement. then the monday before the meeting, it would seem like chair powell changed the

direction of the boat. if you are just getting off a plane to go to your meeting in washington, d.c. and have your carefully scripted remarks no longer fit because the fed changes the story, i think you probably want to show your displeasure. kathleen: so your displeasure in what way? vincent: by dissenting. kathleen: in terms of what this means, in terms of forward guidance, the fed sign under bring a key yellen, they put so much effort -- so much on forward guidance. should the fed be rethinking that, get a more old-fashioned, don't try to forward guide so much and just try to be more definite and aggressive on rate hikes? would that be a vulgar moment? vincent: what we are seeing is

the intersection of two styles. the fed embraced gradualism at the last meeting, they said, we will raise rates at the next meeting. they were signaling near policy intentions. it also has to mesh with the other communication tool, the dot plot, which was not seamless. in some sense, they are probably over communicating but they have to do is establish a record by just doing it. one of the problems of guiding so much to 50 and then doing 75 is not really obvious why market participants should put a lot of weight on what you say for the next time. >> do you believe the tools that the fed has in our using will ultimately be effective when it comes to food and energy inflation which is being driven by so many specific global and geopolitical forces?

vincent: i think what the last couple years highlights is micro sometimes trumps macro. the and i make was an enormous stop, it hit services and there is nothing the central bank can do to provide more services. they can amp up the level of demand, but they cannot get supply where it isn't, same with commodities. in that circumstance, there a limit to what the central bank can do. they can borrow from the future by changing rates or they can borrow from their neighbors by putting pressure on exchange rates. they cannot make more stuff. in this case, the fed is moving stuff. in this case, the pie is contracted relative to the cost

of going up. >> to be clear, it is not want to do a recession, jay powell says that, but to acknowledge it might have to happen. how much are the politics of the moment? there is internal action coming. the fed trying to avoid getting involved. inflation has become like a third rail of discussions when it comes to what is going on in the two parties as they had to november. vincent: chair powell has to trudge up to capitol hill and explain the setting of monetary policy in the current configuration of the u.s. economy. it is not fun to get criticized and inflation is the number one polling problem, economic recession we look at people's attention if the unemployment rate starts rising.

why do you make a central-bank independence? you get to criticize it if you are in congress and that is what we are going to see. >> a was to have you with us -- always great to have you with us. plenty more to come. this is bloomberg. ♪

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>> ab change from the fed. >> the fed caught up with the pricing rate hikes. >> i think the fed really needs to send a message that it is going to crush inflation and do it as fast as possible. >> it would move expeditiously. >> i don't think it's the headline cpi, i think it's the fact that they were seeing signs of inflation expectation looking a little more suspect. >> the question is can they deliver the path they laid out for the next couple of years. >> i think the fed is remarkably optimistic. >> the unemployment rates fantasyland, the rate at which inflation is going to come down is fantasyland. >> the question is how much is the fed going to power unemployment. >> we have never had a timer and inflation has come down by more

than 2% without having a recession. >> the forecast is basically saying they will pull out something that has never been accomplished in u.s. economics. >> bloomberg tv reacting to the feds 75 basis point hike. let's bring in our next guest who says the current inflation regime investors are not getting the full benefit -- full benefit of diversification. joining us's chief macro strategist at state street global advisors. really good to have you with us with bonds and equities positively correlated. how do you hedge when there's a global tightening tsunami coming? >> i think on the fed decision there is the global tsunami of tightening coming and there was a piece and where we had global liquidity, fiscal easing, monetary easing on an

international basis. not in the situation of the offices. in the consumption we are talking about investment teams as if that comes true, what with attitude to demand instruction or will it go beyond the demand we are seeing today, and will the fed be balanced after this next height, will it move too aggressively and will demand slowdown much faster. in that environment you continue to see heavy correlations between bonds. in our portfolios what we have been doing is restricting the direction. making the calls and equities versus the bonds is about two things. how to have diversification by doing more relative value traits across each of those markets, and then boasting up hedges, whether it's real assets, commodities and using something. so the allegations of those hedging or supplier power has

been increasing portfolios from january until now, and the actual direction on equity and bonds. and equities you have the rates coming down, and even in bonds they are reducing the duration. >> are valuation multiples good enough to be able to do that? >> yes, you know, we think about two things. one of the things we think is the actual estimates, being that s&p is an example, the estimate has been holding up pretty well. in fact, the estimates in june, in the midst of all this inflation actually moved up. so, if you look outside valuation on a private basis, almost every acid is super cheap. you look at between 40% to 68% percentile and it is called as being super cheap.

however, if you see that big gap between the expectation and actual markets, we generally don't see is significant dropping. the s&p could begin at 5% and cutting and earnings, but not dramatic dropping earnings. there is some resilience you can expect from equity markets through this time because of the fact that investors are. more targeted with less uncertainty today. >> how attractive our income opportunities for bonds. the global market is on the cusp of a bear market. use of recovery following the fed, but undoubtedly there would be more volatility. >> there will be more volatility, hopefully lesser volatility depending on this. i think it's between what i

would consider cyclical factors and structural factors. and if you start looking at valuations and looking out the longer events, it would be long-term plans on investments in technology, demographics. on those metrics, productivity and the long term basis, we are actually looking at fair value territory. maybe here. if he gets up to two, which means it's a 10 year in the u.s. gets to 504, i think that makes a fairly cheap. cyclical e there could be challenges, but show actually, maybe not that extensive. haidi: your inflation hedges are cash commodities. what are you holding in terms of dry powder at the moment for cash, and for commodities, what your preferred exposure?

>> about 10% over the year we have been holding for 2020, 2021 it would've been something like 2%. a significant pickup from that point in time. we'll go, we like commodities, so those in when you think about cash versus others, cash is about 4%, so maybe a little bit higher than what we traditionally held, so holding a decent amount. >> great to have you with us, state street global advisors chief macro strategist. guggenheim cios says the fed is running out -- is running out of time when it comes to five-year inflation. he told bloomberg surveillance it's possible the u.s. is already in recession and cracks are appearing in the credit world. >> we haven't seen anything like

this where we have an inflation problem that we are fighting and , the big difference i think between greece been -- greenspan and us today, greenspan was in the era of opportunistic disinflation. we are not in that position anymore, which is, every time the economy overheated, he ratcheted it rates up, and as soon as you saw weakness you would start to come back down. we don't have those kinds of choices here. >> you and i each have those moments or a crisis moment that we didn't see coming. i'm looking at a bond market that is a bear bond market price down that i have never seen. the fed can't act nor -- the ecb can't ignore the collapse of bond prices, right? >> know, and it's interesting because i'm not sure what the cure is at this stage. >> isn't time the cure? isn't that the solution?

>> time is secure, but in some ways, i think they are running out of time. when you have btp's in italy go up 300 basis points, 3% since the beginning of the year from one to four, and makes our bear market looks like nothing, comparatively. and the other side is that we saw those retail sales numbers today come out, those were very weak numbers. and there's a chance that we are already in a recession. so if we are in a recession or closer recession and the fed pushes on us more, and there we find that we have a decline in asset prices like stocks did in 1987, if the fed reverses course, they will look like they will look like their week on inflation. this is a very, very tough situation we are maneuvering. >> given everything you are worried about, hasn't the fed

committed to that? isn't that a commitment to the outcome? they won't say a book based on what they are doing, are they committed to the outcome? >> i think they are, but every time we get another bad piece of news on inflation, which is higher than expectations, then we are forcing the fed to ratchet up their pace of the degree of tightening that they are doing. coming into this meeting, honestly, i listened to the show earlier, i really thought we would have a trade-off between 70 five basis points in 100 basis points because i think the fed really needs to send a message that it is going to crash inflation into it as fast as possible. quick like scott minerd speaking with bloomberg's tom keene the end jonathan ferro. let's now turn for a check of the market. how are we setting up for the asian open post fed? >> he would have to say there's

a bit of relief rally and focus here, but certainly investor nerves are frayed. we are looking at key assets. the yen has strengthened a little bit closer, saying we could see more volatility in trading because it is growing in the boj will be forced to tweak its policies. we had the showdown between bond traders on the boj. futures force to hold trading. we could see a relief rally is well with those moves we are seeing in treasury markets, cash markets opening up the top of the hour. but mitsubishi expects more volatility ahead of japan's central bank meeting. indonesian debt is amongst the most sentiment to any changes we see in u.s. interest rates. speaking of em as well, em assets are setting up for a bit of a relief rally as well. particularly in the tech heavy stock market for indonesia, south korea and taiwan. we are seeing the move in the dollar in the rally we saw in

chinese assets. that is a net positive because we have seen foreigners really leaving these markets over you today. valuations at a very attractive entry point, if you are looking at this chart, hstech shares are down around 30% year to date, that is a significant decline around 20% if you are invested in hong kong. haidi: let's get you to vonnie quinn in new york we has our first word headlines. vonnie: the hong kong monetary if order -- authority raise rates for the third time this year in line with the feds 75 basis point hike. the policy and hong kong gives the local currency dollar peg. the rate hikes threaten to disrupt the recovery in the financial hub as the economy gradually rebounds from covid restrictions. the health organization will hold an emergency meeting to assess the spread of monkeypox. the committee will decide if recent outbreaks to acquire the

agency's highest alert levels. more than 1600 people in 39 countries have been affected. the virus has been in debt to some developing nations for decades, but has spread across europe and the u.s. recently. natural gas futures serves 25% after they have it for buyers. further curbing supplies for the nordstream 2 pipeline to germany by 60%, adding to a 16% cut inflows. germany's economy minister accuses russia of trying to pop up prices, but still say supplies are secure. the market operator has soft trading. it means the operator can now compel generators to provide electricity. sometimes the supplies are brimming -- blaming profitability issues. the energy crunch worsens with coal-fired plants to reduce renewable capacity and the cold snap. global news 24 hours a -- global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries.

>> shanghai announces citywide covid tests until the end of july. we will get the details next. this is bloomberg. ♪

haidi: tracking the fallout of

the global supply chain crunch. the iea says the global oil supply will struggle to read -- meet rising demands and 20 tony three. a resurgence in the chinese economy will bolster consumptions at the oil output. seeing european officials see a new chance of russia easing global food pressures by striking a deal for ukraine with crucial grain exports. they view the crisis as leverage against kyiv and its allies. china's strategy continues to weigh on supply chains. shanghai now having mass testing to detect cases and residential compounds every weekend until the end of july. antigen test will be done on a daily basis. on bloomberg terminal users can read more about the supply chains on and i trade in l. >> let's get more on shanghai plans for covid tests every weekend until the end of july for the entire population of 25

million. our chief north asia correspondent stephen engle joins us more -- joins us with more. what are we seeing in terms of infections and shanghai and beijing with these measures? stephen: shanghai has two new cases yesterday outside of quarantine and local community transmission. doesn't sound like a lot, but they are going for covid zero and they are trying to stamp out new transmission by residential compound by residential compound so there's not a broader spread throughout the community, therefore seeing the economic impact we have seen from the tomb of lockdowns. really, no rest for the people of shanghai, even though they are free to go out and about, they will have to spend their weekends, 25 million plus will have to get tests every weekend, and it will even be more stringent for those at the front line, if you will, of retail and restaurants. employees at supermarkets, barbershops, shopping malls and

restaurants, they will have to have daily nucleic acid tests. those who work at banks, gas companies and industrial activities will to have to have daily tests by the rapid antigen variety. just more pressure obviously on the people living in shanghai, they are setting up, the city is setting up tens of thousands of testing boots across many of the largest cities, including shanghai to conduct tests. just more pressure on the people. >> what are we seeing in terms of changes to hong kong's response to covid? stephen: we, of course in the week that we heard that carrie lam would not necessarily be changing, loosening or tightening restrictions ahead of the hand over power to john lee, we've gotten a couple of moods -- moves from the health secretary. they changed the home quarantine requirements before those who tested positive locally, not those coming in, could apply if

their homes were suitable for home quarantine. now they have tightened the home quarantine requirement and essentially saying, if you do not have access to an exclusive use of toilet in your home, meaning most people who have probably only one toilet in their home and their small apartment in hong kong, then day, if they test positive, will have to go to a government isolation facility. there is tightening on the home quarantine rules. this just after the famed health secretary announced that if you want to go to a bar or nightclub, you need to show a negative rapid antigen test within the previous 24 hours. >> our chief north asian correspondent stephen engle with the latest on covid-19 in china. his the check of the latest business flash headlines. cathay's -- cathay pacific is recruiting 4000 staff between now and the end of 2023 a secures up for an anticipated recovery and air travel. the ceo tells bloomberg the

airline plans to bring in 700 pilots in about 2000 cabin crew with the remaining positions open for frontline airport staff. they also say it will be flying to more than 60 destinations by the end of this year. hsbc is said to have fired a trader in london after scrutinizing the mobile phone. sources tell us the bank found some communications problematic after reviewing the phone. regulators have been pushing lenders to make sure staff properly use personal phones for conversations with clients. bloomberg sources say the world's biggest maker of electric carb diaries have its

contemporary technology was seeking $6.7 billion from the private placement. it represents a 12% discount further companies wednesday closing price and shenzhen. hey rally -- haidi: a rally is expected to provide relief for the boj after the key policy decision. we will take a look at the open in just a few moments time, this is bloomberg. ♪

shery: breaking news out of japan as the trade number

exports grow from 15.8% for the month of may. this is a slower again than what's expected at more than 16%. but still much higher than the previous month. imports jumping exponentially 40.9% in the month of may. of course not surprising given higher commodity prices and that weaker yen also inflating the import bill. that has led to a much bigger than expected trade deficit widening to 1.9 trillion yen. inflation for the month of may. that would be the biggest trade deficit since march of 2014. so we haven't seen such a big deficit in japan for a while. now the trade deficit is coming in at ¥2.3 trillion and adjusted it would be ¥1.9 trillion. this has to do with the weakness of the japanese yen as well.

the dollar averaging at around 129 for the month of may. we continue to see that weakness play out right now without 134 level against the dollar. and of course, this already after touching that 24 year low. of course we are watching out 13519 level. the monday low, the weakest since october 1998. in haidi, that's really being played out across the trade space as well. haidi: let's get some more analysis. david joins us now. so, the fact that we still see some high volatility for the yen despite the rest of the markets at 75 basis points in the fed, what does that tell us about how much future moves will hinge on what the boj does? >> normally the boj is uneventful and that's the volatility that is quite low. that's definitely not the case of this one.

where near that 17, and that's labor terms, and what that means for one week is a $.75 challenge that dollar-yen will trade in at 13060 to 13750 a range. so basically, a seven point range. we are out 13415, just have a three-point on either side of the one point range. a lot of tension going to this boj meeting of what we do. even though the fed is out of the way, the market is still on high alert for the boj's policy. >> especially given that jgb slumped even with the boj coming to their defense, what sort of tweaks could we expect if we see any at this meeting or the next one? >> certainly, if there was a tweet this meeting would be a mild one, they signal down the road for the july meeting. in reality, it's nothing, seeing of the policy is more work -- is working for japanese spot

futures, and there's a leeway. 2.2 trillion bonds next week and 1.27 yesterday. they can keep purchasing more bonds if they want to. they have the reason to do it, and they don't want to suddenly change course all of a sudden. if anything, it will be an indication for july, but at the moment they need to say we are spending in that for the yen wouldn't be a positive. haidi: we look ahead to the boj. the fed is out of the way. we are looking to china for recovery svc shanghai reporting to new covid cases outside of quarantine. 16 local covid-19 cases, beijing reporting a team for june 15. it comes a shanghai is set to conduct mass testing and residential compounds every weekend through to the end of july. this is bloomberg. ♪ ♪

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shery: this is daybreak asia. we are counting down to the major market open in the reaction to the fed 75 basis point rate hike. as of course we have the boj starting its policy decision today. and of course a japanese yen continues to be around the 24 year low around the dollar -- against the dollar. haidi: the high volatility suggests that it's at 75 basis points in the books, we are looking ahead to the recovery in china and looking ahead to the bank of china. the boe as well. >> certainly a lot of speculation growing in the boj could be forced to switch. if we do have the open in japan, south korea and -- upon us.

we will be focused on the open we had an treasury markets, particularly the two-year lows. we are seeing it move towards a direction with yields rising. we did see that big drop after powell dropped away from 75 basis point hikes in saying 50 basis points perhaps looking a little more likely around trade. that sets us up for the rest of the trading session in japan. we are seeing japan bond features another feature here. we saw that show down between bond traders in the boj and that selloff continuing because of the boj offering to buy unlimited bonds and sellers continuing to be active in the market there. the yen also, we saw that strength building into the currency. after that drop we saw in the dollar post fed decision. markets are trading much higher today around 1.4% after those drops over the last sessions.

checking now at the open in korea, we are keeping an eye on the tech sector. the cause stack just outpacing the gains we see for the broader index. we did hear from samsung security saying that any selling in the market would be stopped around the 24th hundred -- 2400 level and we are seeing that reflected this morning. changing out to the open we have for are still your, the asx 200 also coming online to the upside here. again, the relief rally taking what we saw from the wall street session and we continue to watch the yield space tracking those moves that we see an treasury. haidi: the fed delivering its biggest interest rate hike since 1994, promised to bring down inflation even if economist questioned if it could be done without causing a recession. our global economics and policy editor kathleen hays is here. the question is, is the fed being aggressive enough? kathleen: is true as to question

how much the fed will do at the next meeting. jay powell said we are going to watch the data, purposely avoiding being to clear are predicting exactly what the next hike is going to be, but he did make it clear the decision between 50 and 75, and it will put them in a position to better gauge just how fast they have to go. here's what jay powell said at the press conference after the policy decision. >> to -- 75 basis points today, i said the next meeting could be about a decision between 50 and 75. that would put us at the end of the july meeting in that range. and that more normal range, and that's a desirable place to be because he begins to have more optionality about the speed with which you would proceed going forward. kathleen: every three months the summary of economic projections and updates what it thinks it's rate hike path will have to be. the dow did change dramatically. just before this meeting, 1.9 was the median view of how high

it would get, now it's up to 3.4, up to 3.8% next year. some people are saying including what was said earlier on the show, as long as inflation stays pretty high, that's going to have to be a number like 5.5% to 6%. another thing people look at closely as the summary of economic projections. gdp, unemployment, inflation, because those forecasts change. i could show you the differences they are looking at. they got five point 2%. in march they only saw 4.3%. but they also have a pretty big drop to 2.2% by the end of 2024. what people question is, in march you thought you have have unemployment up by 1/10 of a percent. that's not really tightening up. with unemployment at 4.1% at the end of 2023, you would have a tighter impact on the economy, maybe so it down more, but people are still questioning and jay powell's assumption, and

stock landing as possible, some people say, maybe not, you will have to push harder to get unemployment higher and that could mean a full-blown recession. at this point it remains to be seen how much the markets, as a continue to digest the information, we will hear jay powell next week testified at congress, maybe they will reassess a more dovish fed, the doors wide open about how hawkish they have to get. shery: kathleen hays our next guest says macro headwinds have intensified and that led to the forecast and tied targets. forecasts chief asia strategist tim joins us now. always good to have you with us. how hawkish was the fed this time around, and where do you expect to see the biggest pain across asia giving -- given the findings? in terms of the fed, it actually delivered pretty much what we in the market expected, a super rapid repricing of fed

expectations. a useful construct is to go back to the beginning of the year and note that the market was looking for three fed hikes, now it's priced between 14 and 15 cumulative price hikes to the february 1, 2023 meeting. pretty dramatic and expectations. the concept we have been using for regional equity markets is what we call the troubling triad of macro headwinds. of course those are number one rising rates led by the fed. number two was about growth in u.s. recession fears and so on. never three is a stronger dollar, which just broke to 20 year highs on the index. the combination of those three factors, rising rates into a slowing growth outlook is challenging for equity markets. what has happened is that it is all ratcheted up in the last month, particularly the last couple of weeks, and that led us to appear moderately for earnings numbers. we were looking for 9% growth for the broader asia-pacific region.

that's just down slightly from 9, 10 previously. we have taken a fair value down from 12.7 at 12.4. that rolls into a 2% to 3% of our 12 month forecasts from 630 to 610. the narrative remains consistent, which is that we think the next few months may be bumpy and we will discuss it in a moment. on the 12 month we think the region can deliver a type of upside, and we think it still looks compelling for investors who can navigate what's obviously going to be a challenging and bumpy path for markets. >> is talk about china, the pboc is going in a different direction, such as the boj as well, does this policy divergence, how big is this a factor in what you like at the moment? >> it's huge or very significant because if you look at all the different markets in the region, the economies in the region, we have rate hike some policy hikes

for pretty much every single one with it -- with the exception of china. china is in a different stage of the economic cycle. they really need to ease policy across a variety of different modalities in order to protect economic growth. so the case for china is that is good, in other words, the fundamental environment is necessitating an easing of policy, which we think the market responds to. it could be reduced to 14 arguments. number one, sequential activities are recovering from a low level in april. we saw data come in that shows a moderate increase. number two, policies easing across five dimensions of monetary fiscal, property, regulation in covid. number three, evaluations are still low following this very significant decline in prices we have seen, and number four, investor position is very light. we think the near-term potential

for china to recover looks to be good, and thus the feedback we get from the interaction with investors. >> reglet tory risks is an outside one for china. we are used to talking about it is a binary risk, do you see a more nuanced now? >> things are looking more nuanced. we have a proprietary tool that we develop that it served us very well. it's a text search tool that can look over one million different websites in both mandarin and english for combinations that signal regulatory tightening or easing across nine different sectors or partners and enterprises are prominently featured. the punchline is that last week that turned into easing mode. it went below zero on our scale. after having made a positive to tightening for over 18 months. from a direction of travel perspective, we see some signs of accommodation. i want to be clear, we don't think that china will go into super easy mode or back off when the regulatory changes were announced -- or introduce last

year. we think this is moderating, and that qualitatively, the nature of regulations will be more about codification of rules that were announced last year as opposed to new tightening being introduced in different industries. and given where the market is and when its price, we are thinking it will respond and continue to respond favorably to that. >> what's your view on the u.s. dollar and asia, particularly where grows. when you mentioned this, you see that historical inverse correlation with strong outperformance in the greenback and poor performance in asian equities. is that saying something you are concerned about as a risk? >> absolutely. the key story is that the empirical evidence is that is a very strong negative correlation between the dollar and equities. strong dollar, week equities. if you look at what the

direction of causality is, it's very clear that in the near term, a one or two month view, that the dollar contributes to the directionality of asian markets. i think the narrative that explains that is a strong correlation between the dollar and portfolio flows. the stronger dollar tends to result in portfolio flows out of asian markets probably because of concerns over currency moves. that something that can obviously weigh on equity market performance. what's interesting is that over longer term, six to 12 months, there's not that much between the dollar. that would be that is more about earnings valuations and the core fundamentals. so if you do it together, the strong dollars clearly a headwind in the near term. but on the longer run, we think that the current valuation and the underlying growth in earnings will be supporting asian markets and that's where we are a little bit more concerned in the very near term. >> always great to have you, as

always. chief asia-pacific equity strategist there. let's get to a look at some of the movers. we are watching tech stocks after that fed decision. shery: we are seeing a relief -- annabelle: we are seeing a relief rally, unsurprising because of the less hawkish term from the fed. also another factor weighing in on this cheap valuation, because we have seen stocks in asia losing around 30% over the past few months. wells fargo investment institute talking about this and there are spots within equities that are looking quite attractive. checking in on another sector we are watching this morning so we are keeping an eye on matrix suppliers to automate and japan. we had a local media reporter out saying that some of the companies are being forced to put off workers because of logistic issues and today, not really reacting to the local

media report. >> let's get you to new york where vonnie quinn has our headlines. >> thank you. speeding up work on a new policy to ease fears of the euro zone's gas prices. the central bank surprised the market with an emergency meeting. a shout out to eight highs that was announced last week that tightens policies. brazil central bank has raised its benchmark lending rates by 60 basis points to 13.25%. it also warned that it would keep tightening rates until it sees signs of prices easing. the year on year inflation is above 10% for september. meanwhile, lawmakers are debating proposals to cut fuel taxes that may help reduce inflation. hong kong monetary authority rate is in line with the fed 75

basis point hike. the monetary policy and hong kong is the lockstep of the fed given the local pad. they are trying to disrupt the financial hubs and see economy is gradually rebounding restrict covid restrictions. shanghai will conduct mask over testing throughout the entire city every weekend through the end of july. the temporary lockdown will be imposed on any residential complex for covid cases detected. workers at supermarkets and other businesses will be tested every day. china is setting up tens of thousands of lent testings across the largest cities. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. shery: still ahead, as hong kong tightens with cases hitting four figures, they are urging the incoming chief executive to rethink strategies. more on that later at this hour.

but first, a look at what's next from the global central bank with decisions ahead from the boe and boj in the new prices in the works to curb market threats in the euro zone. we wrap all that up next, this is bloomberg. ♪

>> i think what's clear is central bankers need to catch up to their economies. they've been behind the curves, they've acknowledged this, and

they need to start to get interest rates above inflation effectively or at least perspective inflation, inflation expectation. haidi: that was the former bank of england governor on taming inflation. this is eyeing from the boe with policymakers expected to lift interest rates. our chief asia economic correspondent enda curran joins us now, how much pressure is in the boe in terms of what they need to do, given that the labor market is still running pretty hot? enda: i think it's all about the labor market, wage growth was around 7%, that's obviously eye watering, any central bank has to respond to that. you mentioned it by 25 basis points, it's maybe a 30% chance for a big move. certainly not likely what it's doing to the fed and the other side of it is that government is

actually putting money into the economy. the government is spending money to offset the energy crisis. so obviously that gives the central bank push, they can go along and raise mortgage rates and borrowing costs knowing that on the others of the ledger the fiscal authorities is putting money into it. that would help nudge it along. in terms of the trajectory from here, you would have to see would signaling this. there is indication the labor market might soften in the second half of the year, particularly around participation rates. so they are trying to move josh move early and they will pull back on the reins later in the year. but with the dollar central banks, we continue to be surprised. shery: what are we going to see in taiwan? as we see another rate hike back to back, that would be the first in one more than a decade. enda: that's kind of a straightforward story. inflation goes in the wrong direction for the central bank. they need to get on top of that.

the problem is the growth is slowing in particular exposure in taiwan has meet exporters that are exposed to what's going on in china as to the lockdowns. there is concern that if you have higher borrowing costs in companies are already exposed to big problems stemming from china's lockdown, you will have a very impactful economy. that's the needle that taiwan is trying to thread in the deal is to get ahead of inflation, but how to do that without hurting the company. that's a global story, we are seeing warnings of stagflation rise around. the central banks need to slow down the economy and create economic pain, how did they do that without tipping it over? the same challenge for taiwan as well as anywhere else. >> the ecb feels a little bit like deja vu. are we not seeing the surgeon risks for the debt crisis? enda: as you mention, executive

go the crisis for western europe was keeping a lid on borrowing costs for italy, spain, and i what's happening is they need to respond to inflation and most driven by energy prices. of course i want to keep a lid on the borrowing costs for italy. that's why we had this emergency meeting of the ecb yesterday out of cycle, and they said they will work on a tool to try to allow them to both raise interest rates and intervene in the market to a certain extent that the borrowing costs will be cap low. that's going to be a very hard task, there is no indication to when they will come out with this and when they are going to launch it. interestingly, the former ecb president mario draghi came out last week and criticized it and said there was no need to raise interest rates with plenty of slack in the economy. inflation in europe has been driven by gas prices, not by the man the way that it is in the u.s.. fairly complicated task for the ecb and very difficult for them

to be raising rates. >> our chief asia economic curse spun enda curran there. that's take a look at european stock features are opening up at the moment. this as he just went through some of the risk going into the boe decision, a fifth consecutive hike. of course the sovereign debt crisis issues risks rising for the ecb as well. we see european stock futures. let's just take a quick look as to how they are trading at the moment. the euro is holding pretty steady. we had in the previous session that they rose before the fed. we heard the ecb is working on this new crisis tool after the longest fund since march 2020, the ecb tried to stave off the sovereign debt crisis with this new tool to current market rates. there you have a, u.s. top 50 features up by a firm 1% in

almost 2/10 of a percent. msci europe looking pretty robust and dax futures up by over 1%. following as we see this kind of relief rally play out globally. shery: we see it across asian assets. we continue to see the nikkei now gaining ground. this would be sustained by two weeks. the first gain in about five sessions, but we are seeing the japanese yen also considered to trend down towards the 24 year low. the korean kospi is now gaining ground for the fourth time in eight sessions. the korean won continues to gain a little bit of ground. this after two-year low. so that risk on sentiment is really spreading, even across the fx space. coming up next, a big tweet by cl's capital founder is spooking investors in the crypto space. we will discuss that. this is bloomberg. ♪

shery: looking at crypto markets with crypto rebounding. we are seeing the risk on sentiment now's bread after falling out one point to just above the $20,000 level. bitcoin is now pairing its losses and turning green. bloomberg su keenan joins us. we are seeing the risk on risk rally at the moment, but how long will it last is a question. su: we are seeing stabilization after nine straight gains of declines. if we look at the big picture, look at the chart that goes back five to six years to the last time we had a crypto peak which was 2017. and while there's been a lot of focus on the 20,000 level, it's the 19,511 level that was the previous full cycle hi that many

long-term bitcoin holders are focused on. bloomberg research supports that there has never been a bitcoin retreat that takes out the previous cycle hi, and bitcoin retreats over the year have been severe, down 80%, down 90%, never taken out the previous cycle. there is a bit of optimism displaying the green on the screen. there is also the boost from the fed decision that now has a lot of crypto positives that perhaps the worst is over. we get up view from why we follow hedge fund funder, he sees a lot of liquidations going on and you are looking at your today losses that are pretty severe. he believes we could have fallen and he would not be at all surprised that coin fell to 10,000. >> he correctly predicted that crypto would fall to 20,000. so a lot of people tend to pay

attention to what he saying. >> a lot of troubles at a hedge fund. su: one of the cofounders put out a tweet that many found somewhat ominous. the tweet saying that he is a major player in known to be liquidating in that it's communicating with relative parties and fully committed to working this out. the question was, working what out? it's a big fund that holds 10 billion in assets, so any fines stressed would tend to ripple through the crypto market. lotta focus on this going forward. haidi: bloomberg su keenan with the latest and crypto. we look at pressure points for asian traders hoping for the relief rally after the 75 basis point rate hike from the fed. we take a look at the winners and losers. this is bloomberg. ♪ psst. girl. you can do better. ok. wow. i'm right here. and you can do better, too.

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>> a big change from the fed. >> the fed caught up with the pricing rate hikes. >> i think the fed needs to send a message that it is going to crush inflation and do it as fast as possible. >> i don't think it was so much at cpi, i think it was the fact that they were seeing inflation expectations become a little bit more suspect. >> the question is if they will deliver on the path they laid out over the next couple of years. >> i think the fed is optimistic. >> all these numbers a throughout our fantasyland. the unemployment fantasyland, the rate at which inflation will come down is fantasyland. >> the question is how much will the fed tolerate on higher on inflation. >> we've never had a time where inflation has come down by more than 2% without having a

recession. >> the fed forecast says they will pull out something that has never been accomplished. shery: bloomberg tv we are reacting to the fed 75 basis point rate hike. they see the fed fund rate rising to 3.8% by the end of next year, both former richmond fed president says that will be enough to break inflation. >> i think it's going to have to go to five -- 5.5% to 6%. that's my own two cents and that's just based on the historical record that indicates the real interest rates. the adjustment and short-term policy rates have to get above zero in order to have any chance at inflation. the fed's policy rate is deeply negative on inflation. in order to get it into positive territory, it has to get above

the current level of expected inflation, which indicators suggest it's around 555% to 6.5%. so they will have to raise it pretty smartly and continue raising it until next year. shery: how can the fed do that without crashing the economy? >> i set a couple months ago, i think they missed the opportunity to do this without a recession, without a significant increase in the unemployment rate. i may be wrong, i would love someone to prove me wrong, but i just don't see how that can happen, how can they restrain demand enough to pull back inflation without causing a significant downturn in the labor market in the u.s. haidi: bloomberg fed president former richmond -- former richmond fed president jeff lacker speaking with us. we see what is shaping up to be

a continuation of that sigh of relief. annabelle: he would have to say you could hear it from investors. japan is leading the gains. nomura securities saying that move that we had from the fed will come to reevaluation with japanese securities and more buying opportunities. in korea we see the kospi snap a seven-day losing streak in the cause stack has heavy index after facing the gains we are seeing in the border. the korean won, also gaining against the greenback there. is the biggest move we are seeing in nearly two weeks for the currency. we heard earlier from the boj and the finance minister ian korea pledging to do more for the bond and fx market if it is needed. switching the board, let's focus in on bon mots as well around the region this morning. we are seeing the two-year yield just move a little bit higher. we did see it drop post fomc, and that is setting the tone for the rest of trading. particularly that aussie rate of three year yield.

>> let's bring a mark cranfield. now we have the fed out of the way, but there's plenty of investors for the boj's and the aussie job numbers today. so what's happening in china? what do you think is asia focused now? >> very much the chinese equity market is beginning to get a little bit of traction in terms of support for the market for a good couple of weeks. there's more optimism about the chinese economy doing better in the second half. the authorities seem to be taking a lighter touch towards the market. they haven't introduced anything else. people are more optimistically and there are much bigger trading volumes in the mainland indices, which is a positive sign that money is coming back into the market. so certainly, if we see a federal positioning in terms of china, it goes across the asian markets as well.

people are getting used to the fed trajectory at higher than 4%. it's something that's pretty much factored and now. of china on top of that can help economic growth in a steady policy, then we certainly could see a chance for asian equities outperform probably what's happening in europe in the united states. also, the yuan is relatively stable and that seems to be under control. but for now china really has a good chance to attract more money, and that's going to be supported from the region. >> we are also seeing jd these maker come back in terms of being a much more relevant force in the global one market. >> this is a huge relief to bond traders. the jgb market has been for too long. he used to be one of the great trading markets in the world alongside treasuries and german bonds, they are right up there as being a major influence of

what happens in the g10 space. but it doesn't break quietly because of the japan policy to keep it low and to make the cash yields buckle. and during the past couple of weeks we've seen fantastic volatility in the futures, it seems as though foreign investors are fairly convinced that the bank of japan can't hang onto this yield curve policy for much longer. whether they face changes in meetings, we are certainly coming to the end and the boj may give a hint that they can't hold them to the policy, which looks out of place compared to the rest of the g10 universe. they really are the last names changing in terms of trying to keep rates extra low. there is a challenge for change. but we can expect more volatility in the japanese bond space in the next couple of weeks. >> march -- our strategist mark cranfield. this get you to vonnie quinn.

>> president biden told ukrainian president volodymyr zelenskyy the u.s. will provide $1 billion in security assistance. that includes traditional artillery and ammunition, defense weapons and rocket systems. >> by and is announcing 220 $5 million in humanitarian assistance sale people inside ukraine. the australian energy market operator has stock trading chinese supply issues. the unusual intervention means the operator can compel to provide electricity. sometimes withholding supplies and blaming profitability issues. facing an energy crunch worsened by coal-fired power plants to reduce renewable plants and a cold snap. the world health organization will hold an emergency meeting next week with the threat of monkeypox. they will require the agency's highest -- when more than 1600 people in 39 countries infected this year. the virus has been an endemic to

some developing nations for decades but has spread across europe and the u.s. in recent weeks. the chief white house medical officer anthony fauci tested positive for covid. he said he's experiencing mild symptoms and has not been in close contact with president biden or senior officials. he will self-isolate and continue to work from home. the 81-year-old is fully vaccinated. global news, 24 hours a day on air and on bloomberg quicktake power by mother 2700 journalists and analysts and more than 120 countries. >> coming up next, hong kong's lobby group is urging the incoming chief executive to take away quarantine rules for travelers.

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shery: shanghai will conduct

covid tests every weekend for the entire population of 25 million stephen engle joins us now. with the latest on the infections not only in shanghai but beijing. stephen: beijing having those clusters. but with shanghai they have gone from too much lockdown to now weekend testing. some people in the retail will have to be tested on daily basis. those in restaurants, supermarkets, barbershops, shopping malls, they have to get nucleic acid to test every day. every resident would have to line up to get tests every weekend until the end of july. also, those who work at banks, gas companies and industrial entities will have to do antigen test's every single day as well. this is a wary of new infection

chain spreading to a wider outbreak and then causing the economic impact that we obviously had with that two month lockdown in shanghai. if they find even a single case in a single residential compound, authorities will lockdown that residential compound until the weekend testing has been completed. shanghai is feeling the heat. beijing, they found another virus cluster tied to the bar district. they've had about 287 cases and there will be mass testing there as well. >> we have seen hong kong cases at to month high. other changes to the covid response? stephen: even though earlier this week when i spoke to carrie lam, she reiterated that there won't be many changes, either tighter restrictions or easing of restrictions until at least july 1 when johnny takes over for carrie lam. however, her health secretary

did announce that they will be changing the home quarantine requirement for those who are found to have covid, at least locally, anybody who has been deemed to not have exclusive access to a single one to themselves and their home if they tested positive, they would have to go to a government isolation facility. before you could get clearance for your home and qualify for home quarantine if you tested positive. now will be tighter. this comes after the health secretary and announce that you are going to have to have a rapid antigen test within 24 hours of entering any bar or nightclub herein hong kong. >> our chief north asian correspondent stephen engle in hong kong. the lobby group and fund managers once john lead to scrap quarantine rules for travelers. joining us as the ceo of the hong kong investment funds association. they represent firms with more than 62 trillion assets under

management. sally, we appreciate your time. great savvy with us today. what would you like to see from the incoming chief executive? >> first of all, thank you for having me on the program. we have gotten a lot on the wish list. on the covid travel policy, it's hardly on the risk. in the past, we have seen those from hong kong including from the financial industry. and we think that this is an area that the government should have. as to what we think the new government should be doing, is a more immediate term. we hope that the government can allow public quarantine. and then also, in the time going from seven to three days and

working that out. and also for example on the sites specific extension. even though they relaxed the requirement, we are seeing that that is still not sufficient. because this mechanism will just disrupt any people who want trouble. so we want to scrap it altogether. because the passengers are only on the receiving end. there's really nothing you can do. so why penalize the passengers. the focus should be on the top then. the airline and people who fly in so the onus should be on them rather than other passengers. these are more than short-term fundamentally. i think this should be a revisit of the whole covid policy. understand the government is china strike a delicate balance between two different objectives. on the one hand there is a very

large one in the community that wants to be for members that have a lot of importance is something that is very dear to our heart. don't forget hong kong is an international city. it would be true to the label, we need to ensure that it up soon motion and full function. shery: have you spoken to john leah, has your team reached out? >> we have not caught in the at the opportunity, in the past few months we have been in close dialogue with the security and banking regulations. and we are very grateful that our regulators are not only professional, but they

understand the challenges faced. and it continues the data will be regulated as well as senior leaders in hong kong. haidi: is the market opportunity presented by the area and enough to outweigh the closing of international borders with quarantine, and if there was a choice, is a more important to drop quarantine for china or to drop internationally? >> we have always been in this discussion that we have to be mutually exclusive. we would like to approach it from a more pragmatic angle. what can we do? what could be within our ability to control and do something. as the leaders have said, the discussion would probably take time. in the meantime, should we start to do something more on the international front. on this we could take reference

from other countries examples of how to manage risk. our focus is looking up the metrics like the number of caseloads, but are there other metrics that are more relevant? what are the key risks that we try to address? this is the reason we want to open the international border. it's very unique to hong kong scheduled by the central government. you want to go out and explain to the world the opportunity. >> your point, just quickly. tell us about the talent. is that going to be a problem if

that reopening happens? >> opportunities are there. we want talent not just from hong kong, which has always been set. we want diversity in terms of gender, nationality and so on. we see permanent location, a temporary one. temporary three months, six months, and we don't want them temporary. in the longer we stay in this restrictor, the more likely people will turn into permanent. we see the urgency for the government to give a very clear message that now we are moving

ahead to open up. for example, the press releases easing in june with confirmed cases pushed into the authorities. that's not really happening. so we want clarity. >> we are out of time, but it was really good to have you. thank you, hong kong investment fund association ceo. coming up next, we will be back with more and how markets and the hong kong could react to the markets just ahead. this is bloomberg. ♪

haidi: it is a risk on day after the fed decision putting chinese equities to extend their outperformance. the growth record policies continue for investors. let's bring in our chief china market correspondent. we are still getting the investors that there is an inflation hedge. >> a chinese media is chancing this. when global markets are in turmoil. this is very much the case in march 20 20 when we saw the s&p 500 enter a bear market.

chinese equities are doing better than everywhere else and that was something that authorities really championed. it was a good thing for china to look like as not only the virus under control, but markets. if that's the case the money will follow. if chinese equities looked to be more stable than everywhere else, the money will come true. yesterday we had a big rally in csi 300 and it was the birthday present, but the funds are following the stability. whether it's an inflation had, at least it's better than crypto. >> to fret -- the fed is tightening. is china worried about outflows? >> it should be, we have the data saying foreign investors sold chinese government bonds for a fourth month. that's the record streak of

outflows. that's something the look out for. the outflows are decelerating. we are no longer seeing the scale that we saw in march just after russia's invasion of ukraine. this is how much you get paid for earning chinese government debt. it's now the biggest discount since 2009. if you're an investor thinking of buying chinese sovereign debt, why would you when you get a significant yield versus treasuries. that carry thing is gone and that could also impacted. haidi: what's happening in terms of hong kong markets for the fed. it was the highest since 2008 yesterday. >> i'm watching that extremely closely. the twelve-month month underpinnings corporate loans, so it's not the more important

one, watch the one-month. it just raises interest rate and that has to be because of the currency. as the one-month high that underpins. it's still relatively low historically speaking. if we do sue that creep up, that will impact the property market, which is the one thing that people in hong kong care about, and that could impact the economy, that could impact everything else this underpinning the recovery that's very structural and it's a key part of that. >> our chief china correspondent with the preview of an exciting open to come. our markets coverts continues as we look ahead to the start of trade in hong kong, shanghai and shenzhen. standby for bloomberg markets china open. this is bloomberg. ♪