♪ haidi: er watching "bloomberg markets: asia" come into you live from sydney, new york and hong kong. annabelle: we are counting down to asia's major market opens. shery: global central bankers are warning of long-lasting inflation shocks, telling bloomberg how price pressures are forcing them to tear up their playbooks. asian stocks set to struggle for direction. traders are betting that recession will stop the fed's aggressive tightening campaign. and china's president is set to leave the mainland, after 893 days at home. we look at the message he is sending with his visit hong kong. haidi: we are just getting the industrial production numbers out of south korea at the moment and this is what we are seeing, industrial production output is rising more than economists expected. 73% year on year, much bigger

than the expectations of 4 percent in may and 3.3% in april. the estimates going from 0.2% to 8.3%. industrial output on a month-on-month basis, up 0.1%, slightly less than expected, but still bouncing back from the contraction of 3.3% in april. look at what we're seeing with it comes to reaction in the korean won, following the most since june 13, the most in about two weeks. we had consumer data that was pessimistic. look at what we're seeing when it comes to the debate over the minimum wage in south korea. the minimum wage in south korea will increase by 5% next year, according to the labor ministry. they have set it to 9621. there was concern that the increase in minimum wage would continue to if you owe some of these inflation pressures.

labor unions wanted a 19% increase. they are getting our 5% increase next year. annabelle: and of course we had the data out from the bank of korea, saying consumers are turning the most pessimistic in more than a year. certainly feeling the weight on the kospi in the previous session. it could be helping to move the needle today. we also have industrial production out of japan later this hourm and aussie jobs data. otherwisem not a lot of direction here at the start of trade. futures coming online are flat on the asx 200. the slide in brent crude in the previous session dragged down the energy sector. also the electronics sector is the biggest weight on the nikkei. brent crude is relatively flat at the start of trade. recession fears continue to be the overarching theme. we heard from jerome powell, that we could see inflation

being something that will weigh on the fed. on the board now, what we have seen in stocks for the past quarter, because we are near the end of the month and near the end of the second quarter as well, and we can see that the weakness in the yen has helped the topix a little bit. but particularly the kospi is down, saying that foreign cells are a factor. shery:. shery: perhaps it is the quarterly rebalancing of portfolios that is adding to the choppiness. even the u.s. futures not doing much in the u.s. session, finishing almost unchanged. really a lot to digest as well as central bank speak. we saw the 10-year yield falling towards the 3% level. we also had weaker than expected data with consumer u.s. spending coming in and slowed down at the worst case since the recovery.

gdp numbers were also revised down. the risk-on sentiment was also felt in the oil space, we continue to see the drag lower. we had two different forces in the new york session, a bullish inventory report, offset by the seasonal slowdown in gasoline demand. remember, it is the summer driving season, but not even that is supporting prices. i mentioned that central bank speak, jay powell and his european counterparts, christine lagarde and andrew bailey discussing price pressures. take a listen. >> i think we understand better now, how little we understand about inflation. honestly, this was unpredicted. >> there are forces that have been unleashed as a result of the pandemic, this massive geopolitical shock we are facing now. >> if we see greater persistence of inflation, there will act more forcefully.

>> the path back to 2% inflation while still retaining and sustaining a strong labor market, we believe we can do that. >> as the uncertainty will clear, on various accounts, we will have to certainly be less gradual. >> it is quite clear that as we respond to this shock, we want to have options on the table. >> i think the bigger mistake to me, let's put it that way, would be to fail to restore price stability. sheri: let's get more on the fed and with the markets are pricing in with our global economics and policy editor kathleen hays, and chief rates correspondent for asia and mliv contributor, garfield reynolds. let's start with jay powell and the message he was trying to get across. kathleen: the message is that the fed is more worried about not doing enough to bring inflation down than they are about tilting the economy into

recession. jay powell still thinks the soft landing is possible, but he makes clear that the risk they are willing to take to win this inflation battle -- let's listen to what he said on the panel -- >> we are strongly committed to using our tools to get information to, come down and the way to do that is to slow down growth, ideally keep it positive, and as i mentioned, supply and demand, get it back into balance. certainly, there is a risk, but i would not agree that it is the biggest risk to the economy. the bigger mistake, to me, let's put it that way, would be to fail to fixed price stability. kathleen: he said we cannot expect inflation expectations to become entrenched. he says the fight against inflation will likely cause some pain. again, he is willing to do whatever it takes. that is a message.

the cleveland fed president also spoke today, she said the fed must act forcefully. she cited research that says it is far worse to worry too much about rising inflation expectations and move policy accordingly, than it is to worry too little and not do enough. the fed is just the beginning of raising rates. she says she will see the find rate at 3.5% this year, and about 4% in 2023, not at all what the markets were expecting. bottom line, central bankers have a theory, you minimize the maximum of the worst mistake you can make. . that is what they are playing at now. it would be worst to let inflation become more entrenched than it is to do too little and tip the economy into a period of contraction. haidi: that whatever it takes seems to have the bond market believing there will be a recession they are pricing in a half-point cut at some point in

2023. garfield: it has been clear for a while that both the level of inflation, and the willingness of the fed to react to that, 75-basis point hike this month and the potential for another one in the next month, that has got the bond market on watch for an economic slowdown. he also expect the potential for economic slowdown when inflation is this high. that is a tax on consumers. we are seeing the hints that demand destruction is coming through. we mentioned the gdp figures overnight which were extremely concerning, they showed the economy shrank more than previously reported and inflation was higher. so, stagflation and potential recession are knocking on the door right now. bonds are reacting to that. arguably, so are equities, with the drop they have had recently. haidi: given what we are seeing with the fears of the

slowdown, we also saw the dollar claiming. shery: but the other side of that is asian currencies now are headed for the worst quarter since 1997. is this inevitable, given how we are seeing the monetary policy divergence as well? garfield: it is very much what a lot of people were concerned about. as the year began, and as it was clear that the fed would be hiking aggressively and other central banks would be doing so too, and that was before anybody factored in what would happen with russia and ukraine and the impact that has had on commodities. particularly with asia, it causes a lot of difficulties, partly because you get some commodity producers will get plenty of income coming in, but at the same time, they are facing high inflation. and they need to combat that,

and the need also to counter what is going on with currencies that are a lot weaker than their fundamentals might otherwise indicate. as i said,, the commodity importers and exporters should be helping to combat the weakness in the currencies that you are seeing. but the fed, and what is going on with the dollar, is overwriting that. the dollar also gets a fear premium with that. so they face starker conundrums than the fed. they need to act to avoid the weak currency move, compounding the inflation concern. but if they do that, they kill off growth. a lot of them need the growth after a rough couple of years thanks to the pandemic. haidi: bloomberg's kathleen hays and garfield reynolds there. let's get you to vonnie quinn

with the first word headlines. vonnie: thank you. u.s. president joe biden has met leaders of south korea and japan on the sidelines of the nato summit in madrid. the three-way discussion with japan's fumio kishida and south korea's toon focused on dealing with north korea. joe biden is trying to help improve frosty ties between the two major u.s. allies, after the pair had a rare conversation on tuesday, hosted by the king of spain. president xi jinping says covid zero remains the most, quote, "economic and effective policy for china." during a visit to wuhan, the city where the virus first emerged, he said strategies like herd immunity would risk many lives and lead to unimaginable consequences. xi also said the lockdown-dependent policy, which has isolated china from the rest of the world, is connected to the "communist party's nature and purposes," his words. south korea jumped to the bloomberg's ranking of the best

places to be during the pandemic. the ranking scored countries and territories, based on how they have lived with the virus and resumed economic activity without a system and -- without a substantial spike in death. and a new survey shows negative views of china remain at highs. they cite its human rights record. perceptions of china are the worst in the u.s., japan, south korea, australia, and sweden. beijing has faced mounting criticism for its treatment of minority groups, especially in its western xinjiang region. 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. rb star r. i am vonnie quinn. this is bloomberg. haidi: chinese president xi jinping arrives in hong kong on thursday, his first visit in five years in the first time he has left the mainland in nearly

900 days, amid the strict covid zero policy. chief north asia correspondent stephen engle is covering the visit. so what will stand out, halfway through china's commitment to one country, two systems? stephen: i will be wondering what his tone will be. we heard vonnie talk about his comments in wuhan, where he essentially said the economy could be the victim of a prolonged covid zero strategy, and will that apply to hong kong? will hong kong continue to be shackled to the covid zero policies of china, or will hong kong be allowed to chart its own course as an international financial center, as places like singapore, dubai, new york, london, chief competitors of the international stage for financial services which are completely opened up. in hong kong there has been clamoring for the relaxation of

quarantines. china cut their quarantine for inbound arrivals by half yesterday. however, will hong kong cut that further? many businesses are essentially saying that it needs to be scrapped altogether. . what will xi jinping's tone be? will there be an olive branch, after a tumultuous five year term of carrie lam? or will he stand side-by-side with the successor to carrie lam, john lee, a lifetime law-enforcement officer? will there be more of a clampdown on political freedoms here in hong kong? or will john lee be able to chart a different course than carrie lam, after she steps down later today and tomorrow morning? shery: stephen engle, over chief north asia correspondent with the latest on hong kong. still ahead, the opec+ alliance fell short of its monthly production targets. what that means for the oil

markets. but first, macquarie wealth management says the u.s. economy is proving to be more resilient so far in 2022. however, growth is slowing. we will discuss that next with our guest. this is bloomberg. ♪

>> the u.s. economy is actually in pretty strong shape. back the year, it grew more than 5.5%. >> we also have this recovery that is very much underwayc that is certainly driven by services

because of the swing from goods. >> when i look at the u.k. economy, it is very clear that the economy is now starting to slow. we are in something of a turning point. >> the labor market is still strong, very high job growth per month. >> we have very low unemployment numbers, high employment participation. >> so overall, the u.s. economy is well-positioned to withstand tighter monetary policy. is there a risk that we would go too far? certainly, but i wouldn't agree that it is the biggest risk to the economy. haidi: some key voices at the european central bank forum. our next guest says 2022 is proving to be an even more volatile year of transition. martin lakos is the division director at macquarie wealth management. great to have you here in person. let me start with our mliv poll question. what is the biggest risk for the

markets? inflation, or recession? martin: those go hand-in-hand. the key risk for markets at this stage, the market is already accounting for what we have seen with the expectation of central banks accelerating their policy stands, which i think we all agree, the central banks have been behind the curve, and are playing a balancing act between not wanting to stifle recovery, and wanting to keep inflation in check. unfortunately, it has not worked so they are having to accelerate. so the markets, from a sentiment and a volatility perspective, we see that the next risk is recession. what are the possibilities of recession. it is looking more likely to ask that the u.s. could go into recession by the second half of next year. that does not necessarily guarantee a global recession. but europe and the u.k. are struggling. australia may avoid an actual recession in technical terms. we are certainly going to see a

growth slowdown. we have the rhode tracking around 3.5% growth -- when you have the world tracking around 3.5% growth now, that will translate to 1.5% growth next year, a pretty sharp slowdown in the next 12 months driven by those policy settings. what has been interesting in this year of transition where economies have been doing quite well and now interest rates are having to catch up, is that the u.s. has been quite resilient. that is somewhat confusing. you would expect to see their data are deteriorating a lot more than we are currently seeing. haidi: what is one place you are looking to hide or look for alternative opportunities? usually you see them thrive in a period of higher volatility? martin: we have amped our asset allocation towards alternative assets. you are absolutely right, alternative assets in nature are not liquid. it is a 3, 5, 7-year timeframe,

so it has to be appropriate for clients with that timeframe. we have almost doubled our location because these assets, such as private equity, infrastructure, they have low or no correlation to the global markets. in the short-term they get engaged with the motility we are seeing. that makes sense for clients. it also fits into that the medics we are running with for the next decade, which is obviously this big focus, particularly with infrastructure -- it fits in with the thematics we are seeing. infrastructure assets such as data centers, distribution and logistics, we like those. that is where we are tightening the alternative asset class allocation. shery: so how much of that is inside china? martin: not a lot. to be quite honest with you, at the moment, if you look

certainly, infrastructure assets that have china exposure are generally u.s., europe, and others. we don't know how long the impacts of the covid lockdown is going to take. we have no doubt that the chinese authorities will be pumped-driven gear economy. we have a politburo meeting in july in which we expect more announcements on policy around how they will support the economy. then going forward, we expect to see more announcements as well. we see china growing 6.5% coming out of covid. now at 4.5%, we would see them try to target growth towards the 5.5% state growth objective. shery: especially with the potential stimulus coming from

beijing. how much confidence will that give markets at a time when, as you said, the u.s. could potentially fall into recession, and the european economies are not doing that great as well? >> it is a great question, because at the end of the day, china is the world's second-largest economy. when we start to see it recovering, that should have benefits in terms of consumer or investor confidence. so it may be that we will see some economies like the u.s. and europe go into a shallow recession, certainly not a deep recession, but the rest of the world does not. that could well be because of the stimulus chinese authorities put in place, along with, obviously, an improvement in sentiment that the chinese economy is starting to recover. that would be an interesting dynamic over the next 6-12 months, for sure. shery: please come back on and we will talk about that dynamic. martin narcos from macquarie wealth management. taking a look at the global growth picture. plenty more to come on "daybreak: asia." this is bloomberg. ♪

shery: er watching "bloomberg markets: asia." we are tracking the fallout of the market crunch. the port of los angeles chief says he does not foresee strikes at 30 west coast maritime herbs, even of the labor contract for 22,000 dog walkers is set to lapse on friday. the deal with the union and 70 employers started in may and will likely go past that july 1 expiration date. one of the worlds busiest ports is backing ambitious modernization plans. singapore is forging ahead with a $14 billion project to the world's biggest automated port. in one of the biggest carmaker says the industry is doomed unless electric vehicle making

becomes less expensive. stellantis says the cost needs to come down 40% by 2030. haidi: delivery times are changing, significant delays since the start of the pandemic. president xi jinping has reaffirmed his support for the covid zero strategy which has seen major cities locking down for mass testing. bloomberg users can read more about these stories in our newsletter, "supply lines." next, despite easing rules for inbound travelers, china's very curbs are still the world's toughest. xi jinping has vowed to stick to that covid zero policy. details ahead. this is bloomberg. ♪ millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction.

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>> we are counting down to the

opens to the opens and wrapping up what it's been a measurable start for markets. there has never been a worse time, in the past three decades for the portfolio benchmark index. tracking that, 60% invested in stocks, 40% in bonds. we're down nearly 16% and there is no world relief in sight because investors are continuing to forecast losses for bonds and stocks, a little more modest. few change on the terminal chart, watching other asset classes because we are seeing losses across the board, as you

take a look at the essen the 500. some think we could see the index return 3000. they're moving treasuries here in blue. cold finishing the first half. if you change now, we will see one market where we see in our performance in chinese stocks. it has been the biggest in nearly eight years. there are a couple of factors. we are expecting more fiscal stimulus from china as we start to see covid measures easing as well. haidi: president xi jinping set to mark a visit to hong kong.

as the creek continues to tighten, what lies ahead for the city. >> they came to hong kong the same year. 25 years on, they are leaving. >> we were holding on as hard as we could. >> we love hong kong but we have to say goodbye. >> is been a to mulch was 25 years punctuated by harsh covid curbs and quarantine but antigovernment protests against china's rising influence.

>> we have been seeing -- >> carrie lam admits the quarantine policy has weakened the international city, if you look around, why the orla -- other governments have opened up they realize they could no longer tolerate isolation. >> we must expand international conductivity, establish a more favorable business environment. >> with other global cities opening up, the damage already done. >> hong kong remains our

regional headquarters. i have been through this in 1997, i've been through this in the asian financial crisis and i can tell you things will go back to normal. everyone is here. >> it's tragic. i want hong kong to be the great, wonderful open city it was >>. >>it is simply too tough to plan a future here. >> it's taken a battering over the last three years, but it is such a resilient place. >> much like on that stormy day 25 years ago, there is still an air of uncertainty hanging over hong kong.

shery: go to bloomberg.com. emma o'brien joins us for more. we are getting mixed signals from china >> one day china is

saying they are not going to pursue the herd immunity still targeting the elimination policy. they are starting to live with covid, it's been a painful pivot. china doesn't want to do it. china says they have too many elderly people. that is what we seeing at the moment. haidi: what were the biggest takeaways?

>> we started this in november, 2020, pre-vaccines. very effectively to keep covid out. they shifted the way the countries have approached, that is a justice ranking as well. top of the ranking for a long time. this started to pivot. access to vaccines quicker, helps to put a lid on fatality rates. then we saw other places in europe and other parts of the world come before the united arab emirates, norway, south

korea, places there were able to balance keeping a lead on cases with preopening. one of the biggest takeaways we have seen is we have societal cohesion. you are more likely to bring the population along with you. haidi: emma o'brien with some of the takeaways. let's get you to vonnie quinn. vonnie: the cleveland fed president says central bankers should act forcibly to curb rising prices. in remarks, she says central banks should not be complacent. she told cnbc the fed is just at the beginning of the process. democrats are said to be working

on cutting tax increases. sources say it's part of the bid to make a deal with joe manchin and get the package passed. the changes under consideration would trim some tax measures and could mean corporations and wealthy households end up with more tax hikes. r. kelly has been sentenced to 30 years in prison. he was convicted last year the judge impose the sentence who told r. kelly's abuse affected their lives. the latest cost-of-living survey has revealed hong kong is the world's most expensive place for employees to work. switzerland was hot on the heels ranking second.

global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. shery: u.s. seeks to improve ties between asia allies. first of all, is an asian nato in the works? >> the u.s. has tried to reassure there are no plans to expand an asian nato, that has not alleviated concerns of asia which has protested vigorously that they are saying they don't

want to see sinister eyes cast towards asia. the u.s. says it is not coming. haidi: there is no doubt this theme of increased militarization is becoming more prominent. how has that impacted security concerns? >> from that period onwards, countries in the region trying to push back against this idea in showing their support for nato.

the russian invasion has strengthened. haidi: still ahead on daybreak asia, we discussed how inflation fears are penetrating the oil markets. this is bloomberg. ♪

haidi: opec-plus ministers are setting together. just under $110 a barrel. it's overshadowing rapidly tightening energy markets.

it is peak summer driving season . we are continuing to watch the price by when it comes to this market. our next guest has the unreliability of the directions we are seeing. shery: always good to have you with us. the markets are trying to figure out if we are heading into a recession. have a price this and already? where we at? guest: the short answer is, the oil markets have not priced in a recession.

have deep and how long it's going to be and how far out it's going to be. oil markets are myopic. we're looking at the very short term which is dominating. there is a huge fear and shortage of supply, within the context of a scarcity, that have been the dominant narrative. we are seeing demand concerns starting to appear, partly the demand momentum has been quite good, pent-up demand for travel, tourism, that narrative might be starting to shift. shery: especially given we saw the unseasonal slowdown in gasoline demand. let me ask you about the supply

side. this is full of contradictions, trying to bring the price down but at the same time you have to put the cat. >> green lighting it, oil markets will tell you that it's unprecedented. this has got commercial implications with heavy political overtones. as you have seen from the start

of the ukraine war, china and india have taken steps so getting those countries on board will be difficult. officials have been acknowledgment that it's going to be extremely complex and complicated to put this together and work it out and implement it. haidi: we are seeing the dip in the gasoline market. do you see consumer sentiment starting to break? guest: within this broader picture of the momentum of pent-up demand, the market has been looking closely at what is happening to u.s. consumption. oil consumption as well.

what we saw overnight, gasoline demand is about 2% below year-over-year levels, gas and oil demand is down 7% year on year. none of this comes as a surprise. this is not new. since april, gasoline has been trending below. you have to view this in conjunction with macroeconomic data, that had a dampening effect on sentiment. consumer demand, growth number also revised down.

haidi: what is the implication for the opec-plus consideration? guest: that is an interesting development and one that will remain in flux. these are huge changes we are talking about. they are further complicated with countries like india, they don't have to worry about the freight and sanctions. india and china are consuming much more of russian crude i

think the decision later today with what to do with production is probably going to be the last easy decision because one of the things they have to contemplate is how to keep this coalition together, if there is no production. if it's longer-term, i think it will be a big one. shery: we have breaking news out of japan. getting industrial production numbers. disappointing with a contraction of 7.2%. expectations are to stay

slightly flattened but nothing as big as a contraction. we have seen supply chain contract instead of growth expected for the month of may. the trade ministry says the june output will rise given we have seen a reopening of trade in july. this is bloomberg. ♪

shery: here's a quick check of the business flash headlines. analysts say the negative report may have valid reason for discrepancies on battery sales. nio shares plunged wednesday

following the report. a japan bank is buying european bonds. the lender will be the anchor investor. they had stepped back from investing in 2019. haidi: coming up, the msci index fell for the first time in five days over renewed worries of economic growth. we will get more on that. and, we take a look ahead at pmi data speaking to img about prospects for more stimulus. this is bloomberg. ♪

shery: this is daybreak asia. plenty for investors to digest including commentary from global central banks. we still have pmi numbers out of china. haidi: some precariousness in the chinese economy as we watched chinese president leaving the mainline, his hong kong visit ahead. this as he pledges commitment to covid zero. >> setting us up for some subdued trading in asia.

it's been pretty miserable. we are seeing the yen following that direction in treasury yields. 140 is looking less likely done before. the weakness we have seen is boosting japanese stocks, so we have seen a decline of 1% but that's nothing. let's change to the open in korea because we have seen the kospi dragged down. the biggest laggard. big focus was chipmakers and auto companies. we could see that today. we had a warning from bank of america that we could be seeing a slowdown. turning to the open in australia, the asx with a staggered start, tracking the

losses we are seeing in brent crude. we will be watching those moves throughout the day. energy prices have been one of the biggest contributors to what we are seeing in the energy complex. as i said, we are seeing slight losses at the start of trade. haidi: central bankers are speaking on a panel in portugal. >> we now understand better how little we understand. this was unpredictable. >> is the uncertainty will clear

on various accounts we will have to be less gradual. >> we want those options on the table. >> the bigger mistake would be to not restore price stability. shery: let's get market analysis and bring in a regional cio. good to have you with us. inflation, the recession raging on. when it comes to asian equities, given inflation has been muted? guest: inflation has been muted

because some of the economies are subsidizing fuel and food prices. we think inflation -- at the same time, demand on the some of the world is not as strong as it was compared to g7. nonetheless, it will come towards the second half of this year. shery: especially if you do have a stronger u.s. dollar. we are heading for the worst quarter since the asian financial crisis. how big of a threat is that? guest: the bigger threat comes from the fact u.s. treasury yields have started to rise

quite sharply. that is likely to put some pressure on the needs of asian countries, especially with deficit. that means there could be more pressure on currencies. currencies have held up well. because of dollar strength, haidi: where do you see the opportunities within the economy ? guest: the chinese equities market will remain volatile,

msci china is close to 30%. there has been a slight relaxation of the measures. the government will open more slightly. haidi: i want to throw up a chart on the corporate bond market, where we are seeing liquidity pressure. when it comes to spreads, bonds are widening over 1000 basis points for the highest since august 2020. is this the recession story

playing out? where are you looking for selective opportunities? guest: the high-yield market is going to be tough. we are basically pricing and a higher risk of recession than what the federal reserve or most central banks are. [indiscernible] that is what the high-yield market is telling us. equity markets are at the forefront of pricing in a recession has priced in by the equity markets.

even though we are starting to see, we advocate, even then you probably want to go in more when the 10 year yield is reaching 3.5%. shery: is that fear of recession why you are seeing the dichotomy when it comes to commodities? a month ago we were thinking everything is abide. -- a buy. you said you prefer actively managing commodities strategies. what does this mean? guest: the commodities complex is difficult right now, given the fact you have china easing and recovering. china is a big buyer of commodities. you have the rest of the world slowing down.

can you imagine if china did not go into a zero covid policy? commodities prices will be higher. at the same time, china's recovery is easing. the g7 will likely be neutralized by china. at the same time we think commodities prices will be range bound. haidi: always great to have you with us. the regional cio at ubs global wealth management as we see oil toys for a monthly decline. how are you seeing the price action when it comes to energy stocks in asia? >> that focus we have gasoline demand.

we have losses across the screen, some major energy-related stocks. a chicken i what we are seeing with the tech space because we did have bank of america out with a work and we saw a downturn in the chip sector, we are checking in on some of the major chip production companies and makers. another we are watching, this is jumping in tokyo. to be clear, two of them include my melody, hello kitty is being licensed to alibaba.

haidi: [laughter] let's get you to vonnie quinn. vonnie: thank you. the red investor says the fed should act forcefully to her price pressures. she said central banks should not be complacent. she told cnbc the fed is at the beginning of the rate raising process. joe biden has met leaders of south korea and japan. the discussion focused on dealing with north korea. joe biden -- president xi jinping says covid

zero is the most effective policy for china. he said the lockdown defendant policy is connected to the communist party's purchases. south korea has jumped to the best place to be in the pandemic. the latest rankings scored countries and territories based on how they live with the virus. mainland china, taiwan and russia are at the bottom of the list. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. shery: china's official pmi data is out in the next hour and economist fear a return to expansion.

we will get the outlook. haidi: china's president is set to leave the mainland for the first time since the pandemic began. we take a look. this is bloomberg. ♪

shery: take a look at asian currencies. we saw the greenback climb on safe haven demand. central bankers speaking and that is driving the markets. we are seeing the japanese yen holding at the 136 level after touching a low, we're seeing the korean won extending declines after seeing the worst day in two weeks. can't believe we are past the 1300 level. the aussie dollar being driven lower by some of those.

haidi: the chinese president is set to visit hong kong. stephen engle takes a look at what has changed and what lies ahead. >> they came to hong kong the same year as the hand over in 1997. 25 years on they are leaving as strict covid policy left this nothing but -- melting pot isolated. >> we were holding on as hard as we could. >> we love hong kong but we had to say goodbye.

there have been 30,000 that departures from hong kong this year. >> in the past year or so we have been seeing restrictions and uncertainty. stephen: carrie lam admits hong kong policies have weakened hong kong but neither she or her successful has -- successor has given an exit plan. >> if you look around, none of the other governments are opening up. >> we must expand.

>> with other global cities opening up his the damage already done. >> i was through this in 1997. i can tell you people left and a year or two later things go back to normal. >> it's tragic so many good, decent honest people left hong kong. i want hong kong to be the great city it was, not just for the very rich but for everyone. stephen: it simply became too tough to plan a future here. >> it's taken a battering. such a resilient place. it's a little bit different. stephen: much like on that day 25 years ago at the handover,

there is still uncertainty hanging over hong kong as we crossed the halfway point in the 50 year experiment known as one country to systems. stephen engle, bloomberg news, hong kong. haidi: our chief north asian correspondent joins us now. this is the first time he has left the mainland and almost 900 days. is there an indication on the significance of the reason he is traveling? what are you looking at? stephen: the political changes here in the city, the national security law followed by a look tour of reform. i expect president xi jinping to

touch on the covid policy. we have heard him talk quite a lot about it including in wuhan on tuesday, saying the covid zero policy is the only way forward. will he be allowed to lower hotel quarantines? will he be allowed to make hong kong more competitive? carrie lam admitted her own policies undermined hong kong's role as an international city. as he leaves the mainland after 893 days, talk about a lockdown. he will be coming here starting today, we'll go back to shenzhen and come back tomorrow for the

swearing-in. shery: stephen engle with the latest. he was telling us, hong kong feeling the pressure. it is still touted as one of the world's freest markets but that has not helped bring in a new class of the megarich. why aging billionaires are a sign the hub is getting behind. >> what strikes you is how little has changed in the makeup. they broke -- it's a sign of how well the sector plays in the economy. 17% of affluent families own a

property business. housing prices are continuing to outstrip, for decades officials will rely on the bulk of revenue , the process allows a small group of tycoons to dominate and limit competition like retail and infrastructure. if hong kong can turn into a true innovation hub, it could necessitate a shakeup for a key growth. haidi: you can get that on bloomberg.com, our special coverage looks at the last quarter-century and what could be lying ahead. lots more to come.

this is bloomberg. ♪

shery: oil is heading for a monthly decline as opec us discusses supply. our editor joins us now. this is the summer driving season. what are we seeing? reporter: you're seeing a tight supply situation. down to 21 million barrels. traders say the minimum levels should be around 22 million barrels. we're starting to see some demand destruction, dropping to the lowest since 2014.

people avoiding the driving holidays. it will complete the process of the production taken off-line. the real interest happens with what comes next. can the 70's -- saudi's pump a lot more? an opinion writer has a great take on this, how saturday's can produce over a long. of time. haidi: let's take a look at the

state of play when it comes to the early part of the thursday session. we have seen treasuries climbing as well, a lot of these concerns over how the central bank is tackling system price pressures is feeding into the negative feedback loop. a lot of this uncertainty is weighing on energy stocks, kiwi stocks are looking flat. lots more to come on daybreak asia. this is bloomberg. ♪ this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going?

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>> 30 minutes into the session,

we have seen the dollar strengthening with haven demand coming back into markets. the risk for tightening. we have the yen sitting around a two decade low, keeping an eye on what we are expecting from china. it moves the needle from markets.

big changes to the travel rules. haidi: big concerns over u.s. recession risks. jay powell says the economy is in strong shape. he began by outlining risks to global growth. >> if what we see is a redivision of the world into competing geopolitical and economic camps and a reversal of globalization, that sounds like lower productivity and lower growth. you see aging demographics is, a shrinking workforce. economies that are growing more slowly. that is a possible outcome. to some extent a likely outcome.

we are raising interest rates. if you look at the strength of the economy, households are in strong financial shape. forced savings from not being able to travel and physical transfers. households overall, the same thing is true of businesses. low rates of default, things like that, lots of cash on the balance sheet. the labor market is strong.

overall, the u.s. economy is well-positioned to withstand monetary policy, we think. >> is there automatically a trade-off? how far are you willing to go? >> our aim is to have growth moderate, it is a necessary adjustment that needs to happen so supply can catch up. it could be time for supply chains to improve. if we can -- supply and demand are out of balance in many parts of the economy. we need to get them better in balance so inflation can come down. that's the aim of what we're doing. obviously, monetary policy is a blunt tool. that is our aim, our intention. there is a path back to 2% inflation while retaining a strong labor market.

we believe we can do that. it is going to be quite challenging and i would say the events of the last few months have made it significantly more challenging, thinking of the war in ukraine which has added tremendously to inflationary pressures around food, energy commodities, industrial chemicals. the pathways have gotten narrower. that is our aim, we believe there are pathways to achieve that. shery: jay powell. you heard him talking about the challenges for a soft landing, implications for the debt markets as well. >> absolutely. an aggressive fed. recession risks are playing out. dumping the riskiest corporate bonds, new issuances slowing

considerably. shery: let's get to vonnie quinn. vonnie: senate democrats have considering -- consider changes that could mean corporations and

wealthy households end up with smaller tax hikes. a cost-of-living survey revealed hong kong is the most expensive place. switzerland was hot on their heels. three more asian cities, singapore, tokyo and beijing and new survey shows a negative views of china remains at all-time highs. human rights records and perceptions are the worst in the u.s., japan, south korea, sweden. beijing has faced mounting criticism. r. kelly has been sentenced to 30 years in prison. the 55-year-old has been

sentenced for sex trafficking. the judge heard from survivors. kelly did not address the court and plans to appeal. 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: choosing things relying on herd immunity with lead to imaginable consequences. how china stacks up against other countries in the bloomberg final covid resilience ranking. that is next. this is bloomberg. ♪

haidi: when it comes to u.s. futures, a directionless session as investors way inflation fears, bond markets pricing in a half white rate cut. the start of trading in china looking pretty muted. this as the president is going to hong kong, leaving the mainland.

watching dollar china, just above the 6.7 handle. shery: he is saying the covid zero policy was the most economic and effective and the country is capable of achieving final victory. emma o'brien joins us with the latest. is beijing loosening its view on covid restrictions or not? this comes after reducing travel quarantine times. reporter: there is a lot of confusion. we saw stocks rally on the reduction in quarantine the day before yesterday, then pulled back again when we had this definitive, symbolic's reach in wuhan where he repudiated herd immunity.

shery: we have seen the reduction of the travel quarantine period. what does this mean for the tourism industry customer? reporter: china has 90's this policy. at one point, you are facing 21 days in hotel quarantine. to reduce it is significant, but

it isn't going to bring china apart with many parts of the world, we are seeing things like testing on any pandemic words. china has one of the toughest regime's end are discouraging people to travel outside of the country. not likely to see hoards of chinese tour is back on the beaches or alleyways anytime soon. haidi: the covid resilience ranking is coming to an end after two years of tracking the fortunes. what were the biggest takeaways? reporter: it's been an interesting ride. we started this in november when the most successful countries were those that had shut down

and shut the virus out with order curbs. they were able to keep covid out until we got a viable vaccine. when we saw parts of europe to buy the vaccine supplies. net the end of the day, what we have seen in terms of broad takeaway, the places there were able to bring populations along where the most successful, social cohesion. haidi: emma o'brien there. china's pmi figures are due out in less than an hour. economists are expecting a slight rebound, showing expansionary activity. our next guest does not expect much recovery and says fiscal policy will be key.

always great to have you with us. you are saying fiscal may be the only support we can see. guest: i think manufacturing pmi could be better than services pmi. manufacturing has not been to affected by isolation, quarantine policy in june because there is more adulation. for nonmanufacturing pmi, unexpected drop. that is my estimate. even my concern -- my concern is businesses are affected by the

quarantine and they can't recover, because some businesses have been shut down due to covid. property services are not really getting to the normal level. i don't think there will be very good numbers for nonmanufacturing emi. haidi: when it comes to fiscal stimulus, this is the old playbook. how much systemic risk is being built up? guest: good question. it's very damaging for china. it takes time to recover. for the service dr., -- service

sector, the reopening of restaurants, this is something we can move on quickly. the gdp target will be difficult to be achieved with quarantine duration. shery: especially if you are not doing more on the monetary policy side of things. we had the lpr cuts. how much more needs to be done here? guest: the interest rate was damaging margins. lowering policy -- it means loan

prime rates can't be lowered. haidi: how much is china doing on the out of lemon side of things? very important it's very important for social stability. guest: it's a concern. there is redundancy in the technology sector. it stabilized [indiscernible]

-- shery: good to have you back. the greater china columnist at ing. counting down to the market opens in china, the benchmark stock index has outperformed by the most in seven years. more on that next, this is bloomberg. ♪

shery: here's a quick check of the latest business flash headlines. the u.s. will purchase covid vaccines from pfizer and biontech. the partners are set to receive billions of dollars. government contracts made up about 25% of pfizer's revenue in the quarter that ended in december last year. red berm expects amazon's cloud unit to hit 3 trillion dollars. the market intelligence firm says the web services business is so powerful the firm may spin it all from the retail out -- operation. a gaming company has canceled

projects. the firm has struggled to find another hit following its game pokemon go. the company specializes in augmented reality games that blend digital interfaces with real images. it is betting on a collaboration with the nba for a new game. haidi: just about half an hour away from the open in mainland china and hong kong. cap performing its peers by the most in seven years as the pboc pledges more stimulus. let's bring in our asian stock editor. we expect to see the divergence continue? reporter: i think the stimulus is playing a big role in terms of investor sentiment. that is being counterbalanced by the gloomy picture of employment.

as we look at history, we did some data crunching, upside will be limited. csi 300, every time the index hits the bottom, the reality -- rally is 13%. from the april low, we have seen 17% gains. history is not really on the side of the rally. shery: given those challenges, what are the cautious voices saying? so far we are seeing more banks and funds turning bullish. reporter: it's getting harder and harder to find cautious

voices. we didn't interview and they are not in a rush to broaden exposure to china. the reason is adherence to covid zero. as you discussed previously, she has affirmed covid zero and says this is the only way forward to fight covid in china and that could have implications on the recovery of sumer spending. they are saying it's unlikely consumer spending will bounce back quickly, and while things are looking rosy now, china could easily go through that cycle. we have to be cautious. shery: what are people saying about hong kong? reporter: that has been facing a headwind.

in the short run? with xi jinping coming to hong kong, to celebrate the 25th year anniversary, we could see a short-term boost. he might announce stimulus measures for hong kong as well. shery: the preview of what to expect. we are watching those travel related stocks, we talked about the rally we have seen already. anything related to tourism, hotels, easing of travel. haidi: let's take a look at the broad picture, we are seeing downward sectors at play at the moment. a lot of this is concerns over

whether we are facing a recession, bond prices pricing in a rate hike cut. we are seeing these pockets of distress, pressure of liquidity when it comes to certain parts of the bond market as well. shery: plenty for investors to digest, especially we got those global central bankers. a reminder about our bloomberg special with the hong kong leader, 25 years since the return to chinese rule. the china market opens our next. -- are next. this is bloomberg. ♪

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