>> a very good morning.

welcome to "daybreak australia." shery: i am shery ahn. the 12 day slide is broken, but gains may be short-lived. u.s. treasury secretary janet yellen the biggest since 2022 as the economy slows down. bloomberg sources say the biden administration is rejecting claims about the taiwan straits is not an international waterway. a long weekend here in the u.s. with the juneteenth holiday on monday, but we are seeing that rebound in u.s. futures after the s&p 500 saw the worst week since march of 2020. we are talking about those

recession fears being felt across the markets. the s&p 500 in fact very close to oversold territory on the 14-day, resting around the 32 level, and this, of course, as we have the market losing about $2 trillion of market value just last week. a drag in china index, a gain from five consecutive weeks, the regulatory backdrop is improving. we are seeing crude prices rebounding, the worst gate -- day in about three months. take a look at this chart on the bluebird, which actually shows you that we had the worst week since march of 2020. the s&p 500 energy index actually losing about 17% last week, the worst week in years, so we continue to see the downside pressure on recession fears and perhaps there will be demand disruption given the rise in prices. annabelle: yeah, recession fears

also setting the stage for trading in asia as well, shery, futures now pointing low. we did see a slump 6.6% last week. that is the same since march 2020. also falling marginally in the red. yen weakness could be a factor in that. we are also heading in the fx market, we did have the yen this morning back at the 135 level. not much to stem or stop the slide to 140. we did hear the leader say that it could be. trade is really interpreting as simple -- simple or a risk rather to the issue.

haidi, checking in on bitcoin, can it be sustained? haidi: after what a tumultuous time it has been, of course, if you did not know, this is a market that is known for its volatility, but even though it is 12 days that we saw from bitcoin, had a lot of old school crypto devote tease questioning when there would be some sort of grounding for the asset class, crawling back no above that $200,000 level and leading the market when it comes to some others, including the record-breaking declines. we could see losses of saturday could we saw on-site or a the session get as low as $17,599. the question is, we do we go from here, and where does that leave the fundamentals of crypto

and bitcoin? emma: especially when you see the long-term portfolios and exit the positions. we are seeing this measure track and realize, sinking to the lowest level in about a year, perhaps because some of the long-term holders are exiting below cost. we are watching that, but it is not this is a really mean that all holders are sounding, but it is another part of concern. monetary tightening continuing, crisis within the crypto space giving rise to concerns about the long-term stability of this market overall. let's get more from bloomberg cross asset reporter katie greifeld. where do you feel bitcoin is going from here? katie: well, i keep hearing it depends on where the risk assets in general are going to go. bitcoin is kind of a leverage

that, on stock, a bit -- a bounce back a little bit, but still very little conviction beyond that. we are starting to see among that cohort, especially concerning, because those are mostly selling at a loss. usually the mantra is to keep holding. you have not lost any money until you sell. but to see the panic selling is a worrying side, especially when you think about broader macro when it comes to inflation, when it comes to the fed, you mentioned. annabelle: katie, volatility, of course, has not been contained to some of the asset classes. in terms of how they have now priced in what a wild week for central banks, they are still

issues on the inflationary pressure the could be maintained here. katie: exactly. we did hear from treasury secretary janet yellen saying that, again, inflation is unacceptably high, echoing what we have been hearing from federal reserve officials. in terms of what is priced in for the fed, we have a very aggressive reserve priced in, but it is hard to know where you go. in early may, jerome powell effectively moves out effective basis points hikes. he delivered one last week. he said it would not be the norm, to not expect that magnitude of hikes, but he still left the door open. that is what stocks in particular are grappling with right now, how aggressive of a federal reserve to price in when you read the tea leaves of the other members of the fomc coming out, everyone is hawkish.

every point of data matters. haidi: some people pointing to the resilience of chinese equities, chinese equities actually jumped. chinese abr's actually gaining ground for five consecutive weeks. now that we are heading to the asian session, with u.s. market growth, what are you watching? katie: it is interesting, like you said, to watch the english stocks, to watch the dance between the federal reserve and the pboc, and the diversions it is causing, but i am going to be honest, i am watching bitcoin. everyone is airy well aware bitcoin has no actual fundamentals. it is a pure measure of risk appetite. maybe it portends well for u.s. stocks, when they open in new york tuesday morning, should they continue to rally a little bit here.

haidi: bloomberg cross-asset reporter katie greifeld there. the taiwan strait is not international waters,. . but spring -- let's bring in stephen engle in hong kong. give us a sense of how this would be. stephen: regular meetings behind the scenes between chinese and u.s. officials, that, of course, the chinese would regularly protest any u.s. military move through the taiwan strait, but rarely in those discussions with they then bring up any potential legal challenge to the legality, if you will, of the united states using its freedom of navigation rights through the taiwan strait. but sources are telling us now, almost at every level and every occasion, beijing is protesting and essentially saying that the taiwan strait is, as they have

long asserted, not international waters. that poses significant problems, also for the united states, that is, because it potentially raises the spectrum of increased challenges by beijing, and that could, given the rare but fragile geopolitical security environment right now after the invasion, the rest of the invasion of ukraine, it could lead to escalation of challenges or interceptions, and that could, obviously, destabilize this region as you alluded to the top, the biden administration is looking at potentially rejecting this claim beijing if it is indeed a claim, and, you know, a bolder assertion. again, we always knew the taiwan strait was a potentially spark in this region, but given the framework, there more challenges right now. haidi: our stephen engle there.

let's get to vonnie quinn with the headlines. vonnie: staying on as his post under incoming executive donley. he has held his positions in 2017, overseeing the recession triggered by antigovernment protest spewed other pix include chan, -- pick include chan and paul lam, head of the fiduciary. an early lead in colombia's runoff election. he is the former mayor, and his opponent is hernandez hernandez has campaigned against corruption. the boat is set to upend u.s.-colombia relations. emmanuel macron -- after an

unexpected surge in far right support in sunday's election. five of the alliance up to 260 seeds for an absolute majority. macau has reported its first covid-19 outbreak in eight months. 40 one preliminary positive cases as of sunday evening. this comes after a gaming hub eased requirements. schools in non-essential businesses will not be allowed until further notice. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi? haidi: still ahead, a straw you is facing its biggest power crash in decades. for the public to conserve gas and electricity supplies. more a little bit later. but first, a chief economist says a perfect storm is making a

big pull for policymakers to calibrate plans. we will look at that next. this is bloomberg. ♪

>> the committee decided that a larger increase at the target range was wanted at today's meeting. >> we always felt it was necessary to increase, looking at our inflation forecast, it clearly shows that inflation is now higher. >> if we do see greater evidence that higher inflation is becoming embedded, then, you know, that will be the trigger. >> the calibration of this rate increase will depend on the updated medium-term inflation

outlook. >> if we raise the yield ceiling, we would expect to see larger yield drive above 2.5%, and that when weaken the effect of monetary easing, so we are not planning to do anything like that. >> by the end of the year, i would expect inflation to get to 7%. . that is a very high number. >> either a 50 basis point or 75 basis point increase seems most likely at our next meeting. >> if the medium-term inflation outlook persist sort of periods, a larger increment will be appropriate at our september meeting. annabelle: central bankers during what has been an intense two days of policy action. let's take a look at your week ahead. chair jerome powell on wednesday and thursday after reaping up his playbook. we get more on the boj's refusal

to budge, and a stream of high-profile meetings as the war in ukraine continues, and president biden will attend the g7 meeting over the weekend. emma: hai-- shery: and haidi, it will completely change course if the data warrants it. last week, after chair powell ruled it out a few weeks earlier, so for investors, the play load also meeting there is less space in forward guidance and no relief from all of the volatility, as you can see how yields have moved all of that pure we keep that in mind even more from the quiet period we have already heard from governor christopher waller, backing another 75 basis points, the highest in july, saying the central bank is all in on tackling inflation.

and that is your week ahead. haidi: testimony will be key. there's a real question we hope from -- heard from treasury secretary janet yellen. there is a real concern that the instrument of monetary policy, even when it is 75 basis points, is not going to be able to address these global disruptions that is actually causing low-pressure. >> i don't agree with that. global disruptions absolutely are an issue. your sequence of videos introducing this section has the swiss national bank and the bank of england. this is a very common advanced economy problem. it is through the pandemic, and it is about access demand -- excess demand, actually. the supply is a piece of the story, but supply has not taken inflation 7% or 8%.

most of that is in excess demand problem. the central banks are moving now. shery: when you talk about being behind the curve, is that really cemented inflation expectations? richard: well, there is obviously a bit there. if you look at the bond market, it is still 2.5%. it has been as close as 3%. if you are the fed, that would make you uncomfortable. i think over the next couple of months, if the fed really delivers on these hikes, i think market inflation will come back down could i think we will see expectations are still reasonably anchored. shery: have we focused enough on inflation? we have seen that rise in asia that is particularly vulnerable. richard: developing economy, no question, but advanced economies are as well, they have benefited from much more stimulus through the pandemic.

i think for developing economies, food-priced inflation is a huge issue, as is energy price inflation. now you have a very hawkish fed on top of that. it is not a great cocktail, and i think it will continue to add to this trend of diversions between the advanced economies and developing economies. and, in fact, when we think about the fed, potentially, when it might end its tightening cycle, it seems more likely we will get more problems in developing countries in the u.s. consumer. shery: where is china headed after we had that week as well? richard: a very different playbook, of course, because china has still got some issues dealing with the pandemic, and that is holding the economy back and holding trade back a bit out of the world's second largest economy. so in china, it is still for monetary policy to be easing

rather than the tightening trend we are seeing in other places. haidi: do we see that being a whole 20 five basis point from the pboc? richard: i think it will continue to be quite targeted, haidi. they like to support the economy where they can, recognizing that if they are running a dynamic zero covert strategy, there will be limitations on how much economic activity can actually occur, regardless of how much they are doing. i think they just want to get bang for their buck. haidi: still having a whatever it takes moment. what does that mean going forward in terms that they have also moved a little bit slower than perhaps they should have? richard: i think there will be tightening for every meeting for the rest of this year, and that is a reasonable expectation.

the 50 point hike recently, whether they discussed anything larger than that, i would be surprised if they did, so i think the market will settle on this idea that there are a couple of 50's coming from the reserve bank. haidi: you see the cementing of reflation aerate expectations -- reflationary expectations. richard: property prices are quite below, which is expected as rates come down below somewhat. but i don't have any concerns of it becoming uncomfortably weak. they are in very strong shape in australia. i think we see a price response but not something more worrying. haidi: it is great to have you back in the studio with us, richard yetsenga. shery? shery: we are getting the latest on colombia's presidential election. gustavo petro has claimed victory. 99% of those being counted in

colombia, and gustavo p etro has 50% of the votes, as opposed to rebel for hernandez, who has 47%. petro is less favored. he wants to halt exploration -- oil exploration, which is the biggest export in the country. hernandez was closing in very closely on this presidential election, but we are now seeing 99% of votes counted in columbia -- in colombia, and petro getting over 50%, and he has now claimed victory p at we have plenty more to come on "bloomberg daybreak: australia." this is bloomberg. ♪

haidi: here is a quick check of the latest business flash headlines. apple workers have voted to form a union in a landmark case that could change the face of the tech giant's retail operation. the bargaining unit includes about 100 workers and could spark a wider movement across apple stores. the head of the airline industry says carriers will be able to sustain a post-pandemic rebound despite a post-pandemic slowdown. a recovery and demand along with the remover of travel curbs should continue, regardless of initial pressures on consumers. >> security, pent-up demand, all of the research we are doing,

you know, backsliding again. but actually the outcome is very, very positive. shery: a large order of narrowbody jets, as the carrier is looking at purchasing as many as airbus a320 or boeing 727 max planes. that will likely take years or decades to fulfill in order that size. boeing declined to comment. annabelle: the australian financial review shows that they have overridden the governor's wishes to review the central bank. guidance during covid-19, interest rates not expected to rise until at least 2024.

the investment aimed at kickstarting the aviation industry, and reports from brazil says the market halted production. coming up next, british leaders need to be more proactive with post-brexit trade deals. that exclusive interview is next. this is bloomberg. ♪

(police radio call) (sirens)

(news report) (sirens) (news report) >> some data crossing the bloomberg.

this is the expansion of the services industry in new zealand, the fastest pace in 11 months. this is coming off a revised 55.2 in april and the third straight month we have seen the gauge be above the 50 mark. we see some broad improvement there which will come as a positive element given that we had last week the new zealand economy reporting gdp for the first quarter unexpectedly contracting as we saw omicron running rampant through the population for the first time. rates rising aggressively in response to inflation as well. mcewan told us different economies are handling

inflationary pressures to from the and australia is well-placed. >> every country has a difficulty with inflation, either short-term or long-term. on the others of that, each country is different in how it needs to handle it. the australian economy is very strong. it appears that u.k. economy is weaker. how do you deal with interest rate rises? an interest rate rise in the australian marketplace might be easy to absorb than the u.k. where if you push it too hard, you shot the economy. >> do you worry about your mortgage? the economy may be strong enough to sustain but maybe some customers are not. >> the customers in the general sense are in good shape. there will be some that will have some difficulty. we need to work with them to get them through. but we have a buffer on what we think they can pay when we do their assessment. because the economy has been so

good for so long and interest rates have been dropping, many of our customers, we have not reduced their interest payments. they have quite a buffer. we think they are in good shape. but there will be some who have difficulties. >> you have a unit in france. what does that mean for the u.k.? is the financial sector moving more to mind and -- more to mainland europe? >> because of the u.k. coming out, we have to service those customers and our operation in france will do that. of our top 100 customers, 53 have businesses in europe. there is a strong connectivity between australia and europe as there is between australia and the u.k. we have a good team and made a lot of customers. >> the unit in france, because

of brexit, you need two bases? >> we have two basis. there are some things we can do out of the london office that we have been allowed to do from a regulatory perspective but the core of our european business need to be in the european market. >> how do you see london changing? >> i think it needs to find itself getting out into the marketplace again. the u.k. needs to get its confidence back to get back into international markets. you made the decision to come out of europe, so get back into the markets as for the as you can and rebuild the confidence, the trade, and then the banking sector will be fine. >> easier said than done. is that through incentives? ross: entry might help as opposed to squabbling over the issues here, let's get the u.k. back. >> ross mcewan speaking with

rensselaer. we have breaking, colombia has elected gustavo petro as president, this as hernandez conceded to the presidential election being won by cassava petro. even the president has congratulated petro as the new president after 99% of the votes are counted in columbia. we will be watching closely how the columbia peso and bond markets reacted to the election of petro because he has a candidate who has talked about wanting to raise taxes on the rich, halt oil exploration, protect agriculture with more tariffs. he has been distrusted by many money managers because of those plants, especially phasing out oil and coal, which would deprive columbia of half of their export revenue.

we are seeing gustavo petro claiming victory in columbia's presidential election. this will be the first leftist government, leftists president elected by columbia. we really watching the market reactions closely as they open this week. haidi: we are watching the french election as well with emmanuel macron expected to suffer a setback to his second term agenda. he is projected to lose his majority in parliament. it does not look like and a group or coalition of parties will get that outright majority. what does that mean for his ability to govern? >> it is going to be difficult for him. french presidents have been used to having a majority in parliament and that allows them to push through whatever legislation they want to. now, emmanuel macron is going to have to learn to compromise,

find common ground with other groups. that is hard for them to do. there is no single group that is going to have a majority. he will have the biggest block but to pass things, he is going to have to find allies either from the center-right for his retirement reform efforts or from the left, possibly for his environmental or green agenda. shery: we are seeing the euro in early trading under pressure. what was the most surprising aspect of this outcome? alan: in the run-up to the selection, people thought the far left was going to do well. a pretty fiery politician. but the biggest surprise is how well the far right did. emmanuel macron pete a far right candidate -- beat a far right candidate in april and it looked like the far right was knocked down a bit, but they have come back strongly. they are going to have more than 90 seats in the national

assembly and that is a great score for them, 10 times than the number they have currently. it still puts them in third place among the party groupings, but it is a strong score for them. it is probably the biggest surprise. shery: alan katz there with the latest from the elections in france. let's get to the first word news. vonnie: the central bank lag in raising rates is partly to blame for rising recession risks. it will take several years to return to the fed's 2% inflation goal. janet yellen told abc that unacceptable high prices are likely to stick with consumers through the year. >> we have had high inflation in the first half of this year and that loss and high inflation for the entire year. but i expect that the pace of

inflation is likely to come down , although there are so many uncertainties related to global develop its. vonnie: the u.s. is said to have rejected china's assertion or international waters. president biden has been briefed on the matters and his team is beijing -- is examining beijing's claims. the state department said that taiwan straits is an international waterway. a u.s. presented has said former vice president mike pence kibbe asked to testify -- could be asked to testify. adam schiff said nobody is being excluded at this point. the panel heard from mike pence's top lawyer last week. the u.k. is on track for the worst availed instructions as 1989 after failing to avert a worker strike. it will start tuesday as 40,000

staff halt work. monday nights will be hurt by a walk out of the underground network arriving from a separate labor dispute. the strikes come as inflation pushes to -- threatens to push the u.k. interest session. -- the u.k. into recession. 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. haidi: australia's energy crisis fronting an unprecedented decision. we will have that next. this is bloomberg. ♪

>> one important thing about energy is getting secure supplies. that means you need more than one choice. and you need more than you need available at all times in case something happens. we have a situation where energy security is on the agenda. we have to diversify sources in europe, especially germany.

we reduced the number of choices germany had. >> let's get you a check of commodities at the moment as we continue to see this rebound in oil. high demand being seen against a potential economic slowdown being triggered by aggressive u.s. tightening -- u.s. monetary tightening. we saw wti plunging almost 7% on friday. but then regaining some of his momentum. brent up by almost 0.8%. we are seeing a pullback when it comes to gas with the downside of 4% in the futures contract. we have heard germany will be firing up coal plants again in an effort to save natural gas

supplies and taking other efforts to bolster supplies. in australia, blackout warnings for the east coast have been lifted after enough power came back online to meet demand. the failure of a power market highlights a challenge facing the energy transition. our next guest says the government needs to undertake major reforms. great to have you with us. it seems astonishing that a fossil fuel powerhouse like australia could find itself in this situation. i suppose it does speak to the uncertainty and level of preparedness when it comes to an energy transition that should be underway. alison: it does. there was a number of problems we had building up over the first six months of this year. those ranged from call being out of action due to repairs or maintenance, we had high coal prices and high gas prices because of the war in russia and

ukraine and demand elsewhere. all of those things, we should have been able to deal with within the current market. but when they all came together and came during a period when the weather was particularly cold, it made it difficult for the market to cope with that. so prices shot up. when prices go up a lot, the operator imposes a price cap to protect consumers. when the price cap was in place, a lot of generators were not able to service the market and still make a profit so they withdrew from the market and we found ourselves with a gap between supply and demand. last week, they cap got so large, the operator could not efficiently guarantee the lifespan so they stepped into suspend the market altogether. that means that at the moment, instead of having effectively a

semi-free market, we are in a world where we have a single operator directing generators to come on or come off. haidi: when you are facing a consumer sensitive shortage or situation, the temptation is to have quick fixes. what is needed given that we know the energy transition is going to be fraught with not just opportunity, but risk? alison: you need a lot of things. there is no silver bullet. it is in all of the above question. what we need in the short-term is to get the call generators operating again. that is because we do need those generators, it is still called, we need that -- cold, we need that generation. we also have to make sure we have enough gas.

a lot of the generators burned through the gas that they have contracted for the winter so they are having to go to the stock market and pay a higher price for it. in the medium to long-term, we need to look at the settings between the market and make sure they are right for a market that has more renewable energy, that has coal-fired generators that are more fragile. we have a certain amount of coal capacity, but a lot of call generators are getting old, they need more maintenance. they come out of service more. we need to get the settings right so we know -- we need to have a choice of stuff. shery: what we need to do to ensure domestic availability? it is one thing that you have these resources, but then you export them. do you need -- people were saying about a windfall tax if people don't want to keep their

supplies domestically, is there anything that can be done on the policy side of things? alison: a lot of the exports were coal and gas are sold under contract. if you want to divert more of that into the domestic market, you would be requiring someone to break the contract. our view is that what would be better is to put a windfall profits tax on call and gas companies because the ones who are selling under contracts making an enormous profit off the back of the international high prices so by putting a windfall profits tax on them if they are exporting, that would encourage them to send more into the domestic market. you still have the problem of getting the gasoline from where it is to where you needed, getting it down to victoria. having more supply coming into the market will help. shery: alison reeve, thank you

for joining us. we have breaking news, we are getting the latest on the french elections. the macron group has lost its absolute majority, keeping the largest block. we do know that at least 289 seats were needed for that absolute majority. macron's group was sent to -- set to win, now they have 245 seats, losing their absolute majority. the french interior minister giving the results with 100% counted. the far right national rally has won 89 seats. they were set to be the biggest winner of the night, given that

this would give them a formal legislative status for the second time since the 1980's. but they did not get as many as some analysts projected of more than 100. the far-right groups winning 89 seats in the french election. although the macron group lost the absolute majority, the far right has not necessarily won all of the seats expected. we have plenty more ahead. this is bloomberg. ♪

shery: you are watching "daybreak: australia." annabel in hong kong is following the morning calls. this is the first gain in 13 sessions or so -- or so but strategists feel cautious about where this goes. annabelle: some saying this rally we are seeing or this move higher could be brief and the reason for that is there is plenty of headwinds, central-bank tightening, signs of distress. but some still staying positive. michael seiler is one of them. he is a bitcoin billionaire and the ceo of microstrategy. the reason he is saying that is bitcoin is what he calls the

most exciting investment opportunity right now. take a listen. >> the bitcoin strategy is 10 times better than any other alternative, so i do not regret it, we have 2.8 billion dollars with a bitcoin on our balance sheet, we feel like their positions well tell when the market's turnaround and our only other choice would be to give the capital back to the shareholders in which case we would have nothing and we would be struggling to get by without any assets. annabelle: around the 20,000 level now for bitcoin and michael saylor says that means it is on sale. the reason he says that is he looked at a simple moving average over a four year time horizon, that puts bitcoin around $21,700. michael saylor saying he plans to acquire more bitcoin in the long term. haidi: does that mean we are

seeing more recommendations in terms of defensive positions across fx? annabelle: that is what we are hearing from j.p. morgan. even with buying opportunities that could be emerging with carrion value space, still saying -- recommending to stay defensive in fx because of this tightening cycle, lingering macro risks that are producing some anxieties and reducing the quiddity as well. you can look at what the strategists are recommending. they are saying boost along swiss franc exposure. they are recommending westport yen -- cross support yen -- cross port yen. they are recommending to keep a long singapore dollar position. haidi: let's get you a check of the business flash headlines as sources tell us providers have

made an offer to buy a platform. they are said to have support from the group with new investors with a company's board expected to meet on monday. early this year, it was investigated over investigations of financial irregularities leading to the dismissal of its ceo and cofounder. airbus will make an investment aimed at kickstarting australia's aviation industry. the airline and playmaker plan to invest 200 million dollars to accelerate the adoption of sustainable fuel and the country. the ceo says number is necessary -- says the move is necessary. shery:qanta --on monday, the q anta ceo bill join us. another conversation to look out for, bloomberg will be speaking with elon musk as the economic

forum. we will talk about his plans for twitter, tesla, and beyond. let's look at u.s. futures. we are seeing a rebound. nasdaq futures up after stocks fell to the lowest level since december of 2020, we saw the worst week since march 2020 was all about those recession fears leading the markets to erase $2 trillion in market value. the markets in the u.s. closed on holiday on monday but we will be setting a for the asian open. daybreak: asia is next. this is bloomberg. ♪