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major market open. our top this hour, treasury holders expecting a worsening, growth. haidi: central bank expected to raise interest rates this week. >> chinese developer misses a one million-dollar note payment adding to a record year of offshore bond delinquency. >> another quiet week to start. we have a july 4 holiday. equity across the board is higher. recession fears are overtaking inflation.

new zealand is coming online, up fractionally high this morning. the dollar around a two week high. the yen weakened against the greenback. we do have other elections in japan this week, this could set the course of trading. political pressure to change the course of action. we have 20 of other central bank decisions on top this week. we take a look at the decisions in asia. pakistan, australia, malaysia, you can see this is the consensus of what economists are expecting here. the first back-to-back rate hike ever if we do get it tomorrow. it would take the key rate to the highest since may of 2019. >> an aussie dollar weakens.

s&p 500 futures, let us have a look at where we are. eight massive move up to be specific in the treasury market. features are coming online come up by two points. about a 21% forecast. we really get geared up for a second half here. inflation is everywhere. breakevens have been breaking down and you look at everything from the two year, the 5, 10, and third year breakevens. it goes to show how bond traders not buying in as much when it comes to this inflation story. it is upsetting that at this point. haidi: we have been talking about the new 50 and there is one and the 26 economists that

are expecting 25 basis points. that is the outlier. we are expecting 50 basis points. twice in a row, that was a shock for the market. there is concern in terms of the fertility of the australian consumer. we expect property prices to continue coming down. we are seeing past weekly credit card spending data calmed down a little bit as well. the major developer failed to pay a one million-dollar bond. -- eight $1 billion bond. we would rather forget about the first half. it would be challenging. >> the first half is the only good part about going into the

second half. everything will be much cheaper than it was. that is encouraging investors to look for value in assets. again long enough outlook, they are unlikely to come back. the problem is how soon they start to bounce back and if outline the u.s. and elsewhere -- and as you outline the u.s. and elsewhere, unclear about what is going on with inflation. there is no sign that inflation is going to cool down, it it will stop spiking up so far. -- maybe it. spiking up so far. inflation but in --

helping to get inflation under control and it took a while. all assets suffered including treasuries. david: if that is the case, why did that move up in treasury markets? >> there is always the potential when yields are rising as far as they did that investors look at the yields. they want to buy and hold bonds and hold yields. they are looking for a good entry point. you do not want to buy when yields are rising. it has stabilized, the recession narrative spread. there are a lot of reasons to pile in. some of them will do quite well. by the time the two or three

years comes around you have earned your yields and may bonds will stabilize. it does not say much about what is going to come in the next few weeks and treasuries are extremely exposed if we get another upside surprise in a couple of weeks. david: hold that thought. we will talk about what that means if china recovers. we talk about the big news, a billion dollars, they were unable to pay this debt. the missed payments? >> there are others as well. it also missed other payments on outstanding offshore debts. the 14th of august developer in china and they are involved in luxury business as well -- the

14th largest developer in china and they are involved in the luxury business as well. they have been talking with investors to reach an amicable relationship. the crackdown that we had from beijing on leverage in the sector and the high refinancing costs. what is interesting here is that shimao was considered immune to this. and they had been one of the higher rated developers in the country. it is facing the right financing costs and how they apply to get around this? the company is looking to sell 20 companies bash properties. -- the company is looking to sell 20 properties. haidi: what is a broader outlook for china? david: china has a more mixed

outlook. it is in a different stage. it has a central bank that is looking to ease policy, even through the crackdown on different parts. what goes on with covid, that is no longer a factor for the rest of the world. with china's covid zero, we have reports of accelerations in infections again, and the potential for more shutdowns or social restrictions, weighing on the outlook which there has been a lot of optimism about china turning the corner when it comes to the impact of covid on the economy and the crackdowns every time it looks like they are starting to get escape velocity it turns out that they do not have the thrust to get into clear air.

haidi: let us get some of the first word headlines. amazon's creator as criticized jeff biden -- joe biden for insisting that gas prices go down. in response, the white house is elevated gas prices are not based on market dynamics but a market that is feeling american consumers. china carries out mass testing, 300 infections were detected. nationwide, 385 local cases where reported. two covid related deaths. thousands of people are being forced from their homes around sydney as torrential rain continues. nadine rescues were carried out overnight as three major rooms flooded. they have been or to avoid

unnecessary travel. the system that caused the day lose has weakened, -- the system that caused the rain has weakened. where guns can be carried and requiring a background check to get ammunition. it would make it a felony to carry firearms in public places. it is supposed to take place in september but it is sure to draw a lawsuit challenging it. david: just ahead, a massive move, across the board on concerns over a looming or potential recession here. what that brings later this hour. we are hearing from our next guest with shares do bottom around september and october. this is bloomberg. good morning. ♪

>> i think the risk of a recession is significantly higher than i would have judged six or nine weeks ago. haidi: larry summers getting marcuse from a banks as the battle to contain inflation continues. celebrating the fourth of july holiday, investors are waiting for more insight from the fed, if they go for the jumbo hike. here in australia, said to hike on tuesday. thursday, pivoting the focus to

foreign policy in bali. friday, the ecp climate stress test. -- ecb climate stress test. david: we are looking at the philippines, energy prices in focus there. the trade deficit has been blowing out as of late. japan is on the radar with the prime minister facing an upper house election that could determine the course if he governs four years or becomes another revolving door leader. a weakening yen and inflationary aureus continue. that is your week ahead. haidi: our next guest says until there is clear evidence that inflation is falling, banks will

be tightening. we have chief economist shane oliver. great to have you with us. what is your biggest risk when it comes to policy missteps or the way that the inflation mindset may have been entrenched go into the second half -- going into the second half? >> it can end the risk of recession. to me is it is how much banks have to hike to get inflation under control. on the inflation front we are saying demand slowdown and supply bottlenecks start to improve to some degree and should provide some relief allowing this to e-cig -- ease up. central banks go over the line

that dips their economies into recession. to know which way it goes for several months. we will not know until september or october at the earliest. haidi: you have the inflation mindset, it is getting stronger. concerns about the supersized hikes for the rba went into how the consumer responds. does that mean or hedging against consumer stocks in your investment strategy? >> you have to be somewhat cautious. if you take a 12 month year over at the 10 year, do not worry about it so much. you have a downside in the short term on the inflation. in some ways that is good news. you can argue that the central

banks finally have started to take the problem seriously. that over to some degree the recent inflation expectation. we have a rerun. inflation is 10-15 years. it does bring in the short term risk of recession. you could argue that given what has happened, you should be cheering a central banks on because they could get inflation under control. higher levels would relate to a even -- an even worse outcome than a recession. david: we had a big rally in the bond markets last week. if recession is a concern, look at equity markets, earnings projections have yet to really start trending lower globally. i am wondering how does this inform your equity markets?

have they bought into the equity markets? >> top to bottom, around 21% in local currency. you could argue that they are on the cusp of factoring in a little of bad news in terms of recession already. historically, you get processions, it probably has another issue down in the market. you could argue that the market so far has been on valuations. he has been valuations adjustments. we see a recession and that means we get more earnings downgrades. able start to turn down and historically, share markets fall through the first part of that. the plea 3-4 months, markets

finally make a bottom -- for the next 3-4 months, markets finally make a bottom. david: do you think that that inflationary, there is not a lot of -- essentially provide for a chinese recovery? or is it not inflationary because of the supply chain getting smoothed out? >> that is a difficult one to work out and that is why we need to get to the bottom of the particular issue. i think it is more of a positive than a negative. we are a commodity exporter. i would rather say that the chinese economy recovers. that would have more of a positive supply chain disruption that commodity prices. -- than take commodity prices to

a new high. haidi: what is the balance of risk for the rba? the fragility of the australian consumer and the property market. how much space will they have if we actually see energy prices and the supply side start to come down in the second half? >> they have to tread carefully here. they are right to go hard and go fast up front. there are inflation expectations. underlying their commitment to their inflation target. they end up with a foul. they have to be prepared to slow up. we are seeing clear evidence that they rose 25%-30%. that declining looks to be gathering steam.

we have consumer confidence in australia and i think it is only a matter of time before that gets into the lowest spending in australia. that is a response in housing and consumer which is a lot earlier. that means that the reserve bank will not have to continue aggressively raising rates. 3% plus, and probably will be able to pop out the cash at 2.5%. in the third half of next year. david: on that optimistic note, have a great week ahead. you can get more on the markets and events you need to know to get your day started. today's addition of debris, it is dayb on your terminal. you only get the news on the industry and asset that you love

and care about. this is bloomberg, good morning. ♪

>> the one risk i am worried about is the liquidity risk. we see markets lock out a funding. keeping a close eye on issuance in june, it was really low. companies were unwilling or unable to refinance themselves. david: that was a bloomberg contributor on the liquidity being the biggest market risk out there. let us wait for the warm up across the board. a bit soft as we wake up to the new trading session. the story for things like

inflation expectations and earnings and strategist projections. this is on the s&p 500. s&p strategists say 4600, roughly speaking is where we will be in the 12 month. take this with a grain of salt, i guess. let us have a check on the latest headlines. global delivery dips in at the latest quarter due to covid shanghai factories. the automaker's shifted cars worldwide in the quarter. tesla delivered a record 310,000 cars in this period before that. tiktok has confirmed the employee is all that of the u.s. can access information from american users raising concern about the data sharing practices.

it came in a letter to nine u.s. senators who accused tiktok of monitoring u.s. citizens. tiktok says none of the information is shared with the chinese government. google says it will automatically delete records of users in sensitive locations including abortion clinics because of concerns about the data may be used to prosecute individuals using reproductive care. the policy is seen as a response to the overturning of legal protections for abortion. haidi: taking a look at the day ahead for australia and new zealand. approvals are said to be released in three hours, a full this year and also inflation index for june, the prime minister is to lead a trade mission.

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♪ haidi: you are watching day big australia. let's get the first word headlines for you this hour. shimao is adding to a record wave of developers missing payments. they have other offshore debts on our in talks with creditors to come up with solutions. if that fails, the creditors can take enforcement actions. ukraine says its border city is under russia control. russia claimed it sees to the city advancing the goal of taking over the entire donbass region. ukraine's armed forces said the order was made to prevent heavy casualties. prime minister of australia met with ukrainian president zelenskyy during a visit to kyiv where he pledged an additional

$100 million in support including equipment for border guards. zelenskyy says they discussed the food crisis as well and sanctions on moscow, and economic support for ukraine. argentina is yet to name new economy minister. they announced their decision as infighting within the liberal coalition worsened. his exit is raising doubts that argentina can meet the targets of their programs. he had come under pressure with inflation topping 60%. u.s. airports restructure the dashed were stretched to the limbic with the busiest day -- stretched to the limit. on friday and saturday, they had 3% more than in 2019. 16,000 flights were delayed since friday, however, bad weather kept cancellations in check. it your first word headlines. david: ok, perhaps related to

that and the recovery we are seeing in parts of the commodity market there, very small minority though. we are coming off really what was supposed to be a decent first half in the commodity markets and as you can see, june happened. down nearly 13%, so that takes us to a slight gain. the first in july. here's will be are in the monday session. west texas, one 08.38 last i checked. copper is back above the psychologically important, if that is important to you at all, 8000 level. so commodity markets, the new thing we have to figure out is what china means for this market. the pmi last week certainly showed that recovery is gaining pace in china. in june, you have output, new orders, things like inventories, delivery times improving from levels back in may. so let's see what that means for

the commodity market. we've got monitoring -- mining and energies executive. if china is recovering it is not obvious looking at the pricing in commodities markets. why do you think that is? vivek: that's a great question because you are competing two different forces here. one is the financial market is really looking at the rising u.s. dollar and two, the risk off global economy, so particularly the u.s.. now, with financial markets looking in that direction, we have certainly seen base metals reacted to that but when you look at china after the recovery, there is still a portion in terms of how this recovery will take place. keep in mind that the pmi we talked about, particularly in commodities, it was export orders that really grew. and that is something that is

probably going to be unsustainable. so i think there is credible doubt in terms of how china's commodity demand imports can grow from here, but the markets have certainly in june focused on the risks to the global economy and that is been a big factor when you talk about commodities. david: suffice to say what you are saying and correct me if i am wrong is that declines we had in june, that likely continues? vivek: look, our view is that that is correct. that we are going to see through this year pressure build. i would say, you know, it is going to be different for different commodities, but energy, we definitely see destruction playing out by later this year. on base metals, we think the market is probably overreacting to the downside. particularly given the fact that china is still going to be potentially in solid demand support by the end of the year

if the destruction comes through as promised. keep in mind, when it comes to base metals, china accounts for about 40 to 62% of the metals. we talk about stimulus in china and what china does, it has an enormous impact on the metal market. haidi: we saw the warning for stratospheric $318 a barrel or the dust will from j.p. morgan this year, there could be retaliation for the price cap and other sanctions against russia. is that risk something that is on your radar? vivek: look, i think when you break down what is happening with oil, i think that there is a difference between saying oil that we talk about in terms of the impact on the economy and what is happening. keep in mind that diesel and petrol is what hits the real economy and that is something that in our view, is something that is being missed. that aspect of it, which is structurally struggling to

produce enough to really meet global demand. there's a number of factors to that. global refining capacity, it rolled backwards for the first time in 30 years. russia, then on top of that, china's restrictions on exports. these are exports that were at the lowest level in seven years in may. now, that has meant that diesel in particular has been very, very tight. and that is something that when we look at it, that is what it's hurting the developing and emerging market economies right now and that is where the pressure point will be. i'm not saying that we are seeing economic destruction at this point, but as we go through 2022, we expect that to be a factor and that is something that we're watching very, very closely. oil will be more reactive early on, because it will respond to the financial market conditions and the chance of recession

means oil will fall more steeply. but when you look at oil, certainly in the big picture, it is the weaker refined product demand that will translate to oil prices and that is why it will be $100 a barrel by fourth quarter this year. haidi: there does seem to be demand destruction when it comes to oil exports in australia despite optimism over china and infrastructure investment roll out there as well. do you see that being sustained and does that continue? vivek: when it comes to iron ore, it is very much a china-centric question. and when you look at the current steel market in china, it really is signaling. look at still stockpiles from china, and the 17 weeks since stockpiles peaked this year, we have seen still stockpiles fall about 14%. now, typically, when you talk about this time after the

stockpiles peaked in china, you're talking about 30 to 50% more and still stockpiles by now. so still stockpiles, they are highlighting that we are in a supply chain between china. and now when you look at that and we look at the fact that as we have this covid zero policy pushing through, and destruction still remaining subdued -- property construction remaining subdued in china, it is difficult to look at the future that is coming to save the day when the current situation is one of concern. and that is why iron ore has fallen, particularly over the last few weeks. something that we think is complete we justified due to the current market conditions. david: do you put that down -- you know, the drawdown only being at 13%, because of the covid containment strategy or is there something else? in other words what i'm try to get to, the risk seems binary when it comes to the housing market, for example.

so what are the big risks you are looking at here that might actually lead to a massive drawdown in stockpiles there? vivek: sure, so it the first and foremost would be relaxation of china's covid zero policy. that could see infrastructure investment really be better. and that is not to say that we did not see it in june. there was a significant uptick in the construction sector and manufacturing pmi, that is indicative that in the structure has picked up and from the low 50's 256 .6, when you look at that, it's like we definitely saw china's demand pick up, but can we see that sustained until the end of the year? that would be contingent on not seeing another flare up, another widespread locked in right now, there is no confidence that we can really say that in china, just given how high it's been. so if we do see some meaning for reduction in that stance, that is really going to be key if we

are going to see a massively down word still demand. haidi: given that we are seeing lockdowns across parts of the country in china at the moment, always good to have you with us. cva mining and energy commodities analyst. some of the analysts are saying oil prices are tripling. we were just talking about the j.p. morgan morning. >> that's exactly right. just saying that we are more worried about diesel and gasoline. talking broadly about jp morgan, broadly what they are focusing on is a call for g-7 countries to impose caps on russian oil and gas prices. now the twin goals are to push down prices globally and also to hurt russia financially, but jp morgan here saying that perhaps that will be the outcome, because russia's economy is in a good fiscal position here they say. they can/about $5 million a

barrel a day without substantially affecting their economy. so as for where we go from here, let's change up to the terminal and when you look at oil prices of course, one of the few assets to be performing in the first half and we could actually see prices moving even further from here. so jp morgan is saying if we do see an event where receipt russian output slashed by about three million barrels a day, that could send prices to around $190 a barrel and in a worst-case, 5 million barrels a day cut, that magnitude, we're looking at prices of 380. certainly not what we're hearing from cva there with a call for 100. david: a bit wide on those forecasts, aren't they? annabel, it is easy to access, perhaps, focus in on the recession and inflation fears, but there is another risk. annabelle: yeah, that's right. so capital essentially getting a lot more difficult here to acquire and we did see that last

week in the it spreads in the u.s. that hit the 1000 basis points. but also in insurance causes as well because we got traders that are moving away from the riskier corporate debt and also paying a lot more to ensure themselves in the event that we do see a default. so we did speak to mohammed about this, this is how he sees that playing out. mohammed: the one risk i am really worried about is liquidity risk. and we are starting to see markets locked out of funding. and keeping very close eyes -- issuance engine was very low, companies either where unwilling or unable to refinance themselves. annabelle: so this is really recession fears of course playing out in the credit space, but mohammed says the imperative here is to assure that the issuance does not dry up. he says he is quite surprised that people are not talking about this risk enough in the markets, but that could be what we see in the second half, the

sequential move from inflation and rate risks into more credit and liquidity risks moving forward. david? david: that's where we are now. coming up next, ftx agrees to the jack m crypto letter deal that could shape up the crypto space. you hear from sam bankman-fried. this is bloomberg. ♪

haidi: we are seeing australian bonds rally across the curb. -- the curve. this is bcd continuation of recession fears bolstering global saw friends. -- this as we see continuation of recession fears. yields in particular taking a plunge in the short end and leading the way. we are seeing the australian session this morning, as we head into the decision almost certain to raise rates to slow accelerating inflation concerns, putting the pressure on australian consumers, among the most indebted in the world.

economists are expecting 25 out of 26 expecting the rba to raise it a habit percentage point. david: shifting to crypto, also yields were down and austria. we're looking at bitcoin, down about nothing really, relatively speaking of course, given the volatility here. we are down about 19.3 right now on bitcoin. takes us into the next conversation with ftx u.s., that is the crypto exchange founded by billionaire sam bankman-fried here who has agreed to inject capital into a deal that includes this option to purchase the crypto lender for as much as 240 of its million u.s. dollars. and we spoke to him in this occlusive interview, following that deals announcement. have a look. sam: there are synergies between businesses. you know, if you look at what blockify has built out, i think they have a loyal customer base.

they have a business ball, a program that people love. it has strong leadership. and i think that we have been focusing on a pot of the back end infrastructure, right? -- a lot of the backend of the structure. and those not up somewhat nicely. and so, i think that there are a lot of ways that our products can work together and mesh together in a way that is sort of better than either would be independently. and i would also say that they have been working really productively with regulators on building out regulated yield products and licensed yield products, which, you know, we are excited about and excited that they have been doing it in a regulated way. i think that is the healthy way to do it. and i think that will serve them well long-term. and it is something that we are excited to work with as well. >> you had told politico that

ftx is looking for opportunities to bail outcome of places where customers would otherwise be underwater. are you worried about moral hazard at all? that bailing out a company may not actually be what is best for the industry at large? sam: that is a good question and i am guessing what you are getting out there is does that bailout accompany -- does that bailout a company that really should have failed and teach the wrong lessons to that company? and i think what i would say there is two things. first of all, i am way more excited to bailout customers and shareholders. so the focus is not how do we deliver as much as shareholder value to troubled assets as possible, it is how do we protect customers. i think those imply pretty different things. so that is one thing that i will say and i think that one of them is way more important for the ecosystem and the other is the one that has to be a moral hazard. the other thing is that we are

trying to find who where the responsible players who were building out a good business, had a sustainable model. and what used short-term liquidity -- and would use short-term a liquidity. and who built a valuable business that i think had something real to offer to customers, rather than which companies honestly should never have existed probably. and you know, as of today, you know, maybe we should let them sort of die a quiet death. i do think that is something that we have been thinking about. haidi: ftx cofounder and ceo sam bankman-fried there. coming up next, torrential rains

are lashing sydney forcing thousands of people to evacuate australia's largest city. we have the details ahead, this is bloomberg. ♪

haidi: a look there at the rain right now across sydney harbour. sydney residents have been warned of another day of devastating flooding as we get into monday.

seeing large parts of the state particularly when it comes to the south wales coast last with torrential rainfall, a number of rescues across greater sydney. thousands of people under evacuation orders there as well as we've seen the wet weather lashing australia's largest city causing widespread flooding. our sydney bureau chief joins us now. what is the situation on the ground this morning? >> the rain around sydney is looking bleak. but it looks like it is going to ease this afternoon which will be a huge relief for those people who are being evacuated around the river systems outside sydney or just on the outskirts of the city. it has been a very rainy weekend, luckily, most of us are safe. but there is a small portion of people who are now waiting to see where those rivers peak and whether their houses will be there in a few days. david: do we have a rough number of how many people the weather is affecting? >> yet, it is in the tens of

thousands. the last count i saw was 32,000 homes have been evacuated and they are largely around the big river systems that are on the outskirts of sydney, the george s, and the spring which are rising rapidly this morning as we see more rain. haidi: it is been a terrible year for flooding, not just in new south wales, but we are seeing a lot of weather and treating to the inflation picture as well cured what are we expecting for the second half? >> we hope that there would not be so much rain given the la niña system has finished. the bureau of meteorology told us in recent weeks, however there is a 50-50 chance of it coming back later in the year, which could spell another wet summer, which is the last thing that we want to hear in australia after two really devastating years of flooding summers and just huge rainfall. again, we are seeing even have a year worth of rain coming in over the weekend in some parts of new south wales, so you can imagine how devastating that is. david: stay dry, stay safe.

not just about the view, but everyone over in sydney. our sydney bureau chief there. and let's get you an update on your latest business flash headlines, so let's have a look at the world's biggest oil trader. the company saying that level surge in the fuel cost is starting to weigh on demand. speaking on a podcast, head of asia says the high energy costs are causing economic stress and so-called demand destruction. the comments come after gasoline and diesel prices hit a record in the u.s.. japan's kddi says it has restored mobile phone networks after an issue i destruction over the weekend. up to 40 million connections could have been affected according to local media. the deception affected other platforms that use of networks like atm's. the president said that the situation was deeply regrettable. fortress investment group has reportedly emerged as the per

ford at four -- as the preferred offer. it was ahead of bids by lone star global acquisitions and gic. no decision has been made so far. haidi: david, coming up in the next hours, we will be talking to kazou momma and an outlook amid growing fears of wrist session. that is it for daybreak australia in a very wet sydney here continuing with warnings of another big day of rain across sydney and south wales. daybreak asia is next. this is bloomberg. ♪