haidi: good morning.

>> we are counting down to the major market open. david: the top stories this hour. officials see the possibility of more restrictive rates if inflation persists. haidi: boris johnson sees an unprecedented revolt within his party as more officials resign. shery: china accuses u.s. of terrorism as it limits chip sales to its rivals. this is after the s&p 500 gained for a third consecutive session in the new york trading session. there was a lot of investors trying to digest the latest fed

minutes, brushing off some of the hawkish news that we saw. we have some data showing some of the growth concerns and inflation concerns easing a little bit. we have utilities and technology leading the gains in the session and energy stocks are the biggest losers. oil continuing to drop below the $100 a barrel level. we see the pressure in the asian trading session as recession fears come to the forefront. the dollar at a two year high. we continue to see the inversion. we had a lot of volatility and the wild treasury market, a two year yield which is sensitive to policy. jumping as we got the fed minutes. the 10 year yield is above 290 again.

is this a signal of an economic recession to come? they cap has had to be a bit larger when it comes to the inversion for the recession in the past. we continue to watch these metrics as the yield curve is a signal and a warning sign perhaps for the economy. >> what is interesting is not a single mention of recession but mentioned inflation. the trade-off that the fed is making between economic growth and reining in price pressures. in asia that debate as to whether the fed got it right on the fundamentals, setting us up for some modest gains. japan is also modestly in the green. we see a slight relief rally as both of the markets close in negative territory.

new zealand is looking a little bit flat, having a public holiday in a previous session. the aussie dollar falling below, we are keeping an eye on it because we see a drop in commodity link currencies. the commodity index, bring up the terminal, bloomberg commodities dropping more than 20% from the june peak. we are seeing that feed into stock markets across the region because as asian-pacific energy index has spent the last man standing here. seeing positive gains for the year in negative territory as well. haidi: you are talking about they jump in the front end yields and that was on the reaction of a fed juno meeting minutes underscoring the inflation slide. they are willing to take in their heels to bring the inflation down to 2% which is key for the jobs market. shery: we may see some clues to

the slowdown we see in the u.s. economy. mortgage rates double since the start of the year. we are saying the labor market also as being overheated. they numbers of starting to stabilize as well -- the numbers are starting to stabilize as well. haidi: kathleen hays joins us. garfield reynolds is with us as well. the real concern over deeply entrenched inflation. >> if nothing else, this shows the fed's result if do what it has to to bring down inflation. they acknowledge that their policy could slow down growth, they are worried about inflation expectations rising and importantly, one thing that jumps out is these minutes are very carefully put together. open to more restrictive rights.

many participants judge there is a significant risk of facing the committee that is elevated inflation could become entrenched of the public begins to question the result of the committee. are you willing to get inflation down? they recognize the were possibility to have even more restrictive strands -- stance could be appropriate if factors persist. ready not just to raise rates, but go above neutral, as far about neutral as they have to go. what you are seeing is the white line is the long-term expected funds rate. 42020 two, the consensus sees the rate going up to 3.4%. there was a dot plot saw the rate up to 4% this year. that is what they were looking at when they put their forecasts together. they talk about positive growth,

a tight labor market. they were looking for more aggressive moves, 50 or 75 basis point rate hikes in the july meeting at the end of this month. economics is arguing that we mogul for the 50 even if we have 85 on the table. the procession chatter is under the fed's skin. -- recession chatter is under the fed's skin. maybe not quite as bad as the fed expects. at the ecb, at the big monetary policy gathering where jay powell the worst mistake that the fed could make is not to cause a recession, it is a do not raise rates enough to bring down inflation. shery: where are you saying the biggest market reaction when it comes to the fet inflation and recession concerns? >> it is in the two year yield.

not only did it jump quite a large amount, also that it rose significantly above the 10 year yield. that is often the yield curve that gets the most attention, even as it is up and a more of a problem. it is deeply inverted for some time. it is close to the april low on the basis and it closed inverted for the first time since then. that is signaling both that treasuries have taken on board that the fed is going to do willing to risk a recession and they see very strong chances it will help to create a recession. it is also part of the reason why even amid a very aggressive fed we have got a lot of the curve under 3% which seems right

concerning what happened with last month where inflation fears to cold. inflation fears are staying around in the short term and i will push the fed to do whatever it takes and whatever it takes is likely to be a recession. shery: what a the odds at 38% or so. thank you so much for all of those insights. let us turn to the u.k., boris johnson refusing to resign despite an internal revolt. john, how much longer can the prime minister hold on when you have senior ministers from his own party asking him to let go? >> had another cabinet minister resigned before i came onto the set. motto that he has fired in the

last 24 hours or so. i would have told you that he could not last two nights tonight british type and i have been proven wrong about that. even though he does not have enough people willing to be a ministers to fill all of the dogs in the british government, it is obvious he is planning to move ahead. it looks as though it could come to a head before next week because he is talking about launching a new plant on monday, and that is when the organization of mp's will meet to set a new executive and they can decide whether to change the rules to allow mp's to take a vote on whether he should go. they story is that the cabinet tried to force him to leave -- the story is that the cabinet try to force them to leave and

he has called their bluff. >> what are the options for a change in government? it would not necessarily trigger an election, he could call an election, he would think that would be unlikely. what does the opposition look like? is that viable? >> at this moment, the labour party is looking more electable than it has done in quite a long time. the conservatives do not have the same sense that they would win fairly easily thanks to the weakness of their opposition. to get back to what you were saying, one of the points that boris johnson has been making this evening is that if he were to go, there would be an election swiftly thereafter and the conservatives would lose power. that is completely untrue, there are ample precedents for parties changing prime minister in the

middle of the term and then subsequently a year or so later winning reelection. broadly speaking, if the conservatives want to hold onto power, i would say their best chance to do so is to jettison boris johnson fairly soon. he is very unpopular in the country and trying to find somebody who agree to succeed him. haidi: why is he trying to hold onto power? he does not have enough people to fill in as ministers. but what the repercussions before the economy? >> i have to be careful about what i say. boris johnson is incapable of feeling shame or embarrassment, that is something i have always had -- i have always had the impression that he has neither of those things. life would be easier if you

never felt embarrassed about anything. i think he is just prepared, he has the skin of a rhinoceros and prepared to press on and as far as he is concerned he won this meant it not that long ago -- mandate and does not know why he cannot see it out. what we have seemed to have trailed tonight is with his new chancelor, he will launch a plan and go for broke which would be cutting taxes and increasing spending. he is hoping that kind of aggressive argument populist policy is going to raise conservative fortunes. i do not think that will go down terribly well with the markets. i do see the idea. let us go for populist broker

now. haidi: a great analysis, we continue to monitor these headlines. let us get you the rest of the stories you need to know this hour. beijing residents must show proof of vaccination to enter some businesses. this is the first time that china has mandated vaccines. they're hoping to boost the vaccination rate for those over 60. shanghai lags behind at 70%. the latest virus outbreak is worsening, the number of covid patients in hong kong's hospitals has doubled with new cases topping 2008 8. hospital authorities say the rise could put force hospitals to suspend nonessential care. hong kong's new leader assist the city cannot lie flat in the battle against covid.

capping the price of russian oil . attempting to minimize the impact on their own economies, more specific threshold depend on market conditions when the cabinet agrees. the u.s. is when enforcement tools including secondary sanctions as a measure of last resort. china has slammed the u.s. for urging supplies to stop selling it to make a technology they have accused washington of technological terrorism. sources say the u.s. is lobbing the netherlands and japan to stop shipping technology to keep chinese ship bankers -- chipmakers. shery: chances of procession, -- recession, investments and are likely through the worst of the bear market. the selling may not be over just

yet. and the joins us next. this is bloomberg.

>> the bigger mistake with the who fail to us for price stability. >> we are signaling through our

money through a drawing and outsourcing more liquidity. >> moving gradually, if there is uncertainty about the outlook. the option to act decisively. >> downward pressure, a monetary policy would be inappropriate. >> inflation has increased beyond the tolerant level. >> i do not think we are going to go back. >> we should be moving through inflation. higher than the midpoint. >> it is unconditional. >> we have ways to go forward. >> central bankers speaking about the global inflation flight -- fight. a generation up on opportunity for some segments of the market. with us is nancy, good to have

you with us. how much risk risk are you adding back into your portfolio right now? >> i think there is a lot of places that you can take it upon yourself to look at and say is the tailwind behind this segment of technology? one of those is in the cloud part of technology, companies came in and recorded 40% growth in the quarter rate guidance, a brief rally and then sold off dramatically. those are the kinds of names we are looking at. cybersecurity, clout, even some selected semiconductor names that have gotten pretty beaten. shery: are we getting closer to the bottom, now? >> i do think so. i have been critical of the fed for waiting so long and

remaining accommodative for too long. i think they have done a one thing well and that is the rhetoric to really jawbone the bond and stock market to do the heavy lifting. haydn financial conditions. the market has discounted a significant slowdown in growth. when you look at the pmi's of the came in today and last week in manufacturing, it is expansionary. we expected that. the numbers came in better than expected and durable goods were revised for may and it came in better than expected in june. this economy is very strong. that is a much better place to be starting from than the 2000 or 1970's. haidi: how concerning our liquidity conditions -- are liquidity conditions? >> if you look at the u.s.

euro-dollar future yield curve, you see it is pulled in the timing of the peak fed hike to december from june of 2023 and if you look at the 10 year inflation rates, those are now at levels below where they were in late february. the market is saying it has come in pretty dramatically, the market is saying that this has been over discounted, the fed cannot tighten as much as expected. given this is a midterm election year, you will see them moderate their town going into september. -- tone going into september. shery: what does this say about energy opportunities? >> that is the point. if you look at where consumers are with the u.s., where natural

gas futures are up 150%. the climate focused crowd would like to see increases of over 300% and we know what is going on at the gas pump. until those numbers begin to come in and as long as the dollar is strong, we do not expect to see a lot more investment around the world and focus on really expanding capacity. we believe that the energy trade if you are investor is in the next six months, you can make money in these thoughts. we thought this is short-lived. this pullback in commodities. that is not good for consumer sentiment nor is it a good four inflation expectations. haidi: great to have you with

us. you can get around up of the stories you need to know in today's addition of daybreak. bloomberg subscribers can get it at dayb . get the news on the industries and assets that you care about. this is bloomberg. ♪

haidi: here is a quick check of the latest headlines. the latest in a growing list of casualties from crypto's rout. the collapse of a hedge fund as caused voyager to secure a credit line from crypto mogul alameda research. gamestop jumped after announcing a 4-4-one stock split.

it is the latest jump on the practice after past splits from amazon, apple, and tesla. it helped drive retail investor interest and a stock has a lower-priced tag. one point $7 billion under pricing in the hong kong second listing on top of the range. the firm is listed, it sold 164 million shares. it is the largest share sales this year and end a month-long route -- drought. apple has introduced a security tool to prevent cyberattacks on high-profile users like activists, journalists, and government officials. it is called a lockdown mode and offers protection against spyware attacks and offers other methods of hacking -- other

methods of hacking. it is coming in the next update. new data points into slower u.s. growth while at the u.k. is deep in a leadership crisis. more with andy from dartmouth college straight ahead. 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? yes!! and once in a lifetime moments.

two tickets to nascar! yes! find rewards like these and so many more in the xfinity app. 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. that's a whole lot of happy campers out there. and it's never too late to join them. get unlimited data with 5g included for just $30 a line per month when you get 4 lines. switch to xfinity mobile today. shery: u.k. prime minister boris

johnson is staring down an

unprecedented revolt within his party and government. his cabinet is set to fill empty positions after 30 resignations. he says he will make a major economic speech. they say he could face a fresh confidence vote from his own m p's. >> they job of a prime minister during difficult times is to keep going. shery: the malaysian central bank has raised rates in a bid to tame inflation. the future moves will be gradual to continue supporting economic growth. as a policy rate was raised by 25 basis points to 2.2 fibrous and, it is now 75 basis points a way to restoring the pre-pandemic level of 3%. u.s. central bank is speaking to

foreign explained -- exchange of flows as the rupee hits new limits. temporarily lifting any interest rate ceiling for banks who attacked deposits from nonresidents. as our b.i. is meeting rules for foreigners to involve in corporate debt. the philippines maker at a slower pace with a new raft of challenges. -- of a philippines growing at a slower pace with a new bunch of challenges. the economy is contending with quickening inflation at a record debt and these are of the president's 6th year term. haidi: i just keep talking about the chances of a u.s. recession next year -- let us keep talking about the chances of a u.s.

recession next year. u.s. consumer confidence is predictive of a recession. danny, great to have you with us. we appreciate your time. a lot to get through. let us get to our chart which shows we are seeing the growth outlook starting to hit inflation expectations in the u.s.. the 30 year inflation expectation is racing down to 2022 lows. it is interesting to see that loop, inflation concerns are deeply entrenched. that is leading through two recession concerns and the collapse in consumer sentiment that you are worried about. >> the collapsing consumer sentiment came pretty early. with -- cleared by august of last year, predicting recession in the u.s. it is the only variable that has pretty good six of the last six processions.

-- he has predicted six of the last six processions. the consumer confidence collapsed in europe, in u.k., declined sharply in japan. it is not just what the fed did, it was not the fed raising rates, it was the. pot.net it -- it was the dot plot that did it. every prospect, the u.k. looks to be, sweden, france, germany, already in recession. the markets are behind as they

were behind in 2008. by the failure of the lehman brothers, every year and every country around the world from australia was in recession and they have not spotted it. that is where we are now. inflation is falling, oil prices are falling, timber prices, fertilizer prices are all tumbling. i think we will see a recession coming and i think inflation will tumble and markets rise to adapt to their inflation expectations. haidi: you mentioned the future in the u.k. and there is so much discouraging news on the growth outlook on the vle. the intent to move quicker to take more action on top of this, you have this chaos politically. give us your views on these rapid developments. changing as we speak. >> i think you said on your introduction which you probably

recorded an hour ago that there were 30 resignations. i think that there are 50 now. the background of brexit which is complicated, it has raised the price of goods. we have titanate by the bank of england, and it is quite clear that comes too quickly, they worried about inflation. consumer confidence is tumbling and all of the measures of output, looking at march and april already, they offered the national statistics and said we are negative. the political chaos is a really important factor. we see how the markets respond. we have a chancellor who may be like an internship, gone by tuesday. we are having a government collapsing around it. market seems to be sanguine about it at this moment. we will see. i think that the bank of england

should not have raised rates as fast as it did. should have not made the moves it had and it is clear that it has a major responsibility for punching the u.k. into a recession. financial policy reported yesterday, containing four of the nine members of the mpc, warned about the catastrophe that they created in their other committee by raising rates too soon. they predicted they will be creating recession in a type of political turmoil and adjusting to brexit, issues in ireland and so on. this is pretty catastrophic for the prime minister trying to hang onto power. the blessing is he will be gone by monday. the question is if he is gone by tomorrow morning. great! [laughter] haidi: this is a crystal ball

gazing, the fact that boris hanging onto power. what do you make of this? what happens because there are options. an election a street after an exit. this does not trigger any kind of change in the government. what happens from here? >> the british people do not vote for a prime minister. this is somebody elected by the members of parliament. also note that i went resign, they are still -- when ministers resign, they make it hard for the -- johnson to run a government. even if he is pushed out, the control conservatives have a majority of 80 seats. there will be some continuum. replacing him with presumably someone who has been less

chaotic and less trouble. that is the issue. for the markets, we are probably not going to see a change of regime. to some extent the economy needs that chaos to be sorted out. haidi: as a prime minister is working on tax cuts, deregulation, what and that but more -- what it that put more to inflation? could banks be overreacting over inflation? >> actions and take a wild to have an effect. inflation is coming down because of the underlying levels of activity. look at things like the directors, look at the pmi's. they are terrible.

all of the expectations, i like to get people to think about consumer expectations. if the consumer thinks that a recession is coming, if there is a signature -- financial situation, what do they do? they start to stop spending. that is the data that we have seen. i think the bank of england and the fed overcooked it and listening to the comments displayed by the european central bank and the bank of japan. it is facing the same situation and they have been more cautious. sensibly so. waiting to see what is happening. it is hard to predict. it looks like the bank of england and the fed jumped too soon and responded to the hawk about inflation when it is about unemployment. people keep saying inflation is a terrible thing. a one percentage point rise in

unemployment is about 10 times worse in paying them and written by a famous economist in new zealand, and hate that about the time more painful to people that has one percentage point rise in inflation. slowing economies really hurts. the problem in the conversation is people say that we have to soul inflation. what are you solving it with? has a probability is that is much worse -- the probability is that is much worse. haidi: take a action out of the equation. is it a prized wage spiral? >> i have been writing columns about that. thinking about. that the answer i think is no.

i am worried about jobs. what was interesting in the 70's, that was the period it was writes in the 60's and union membership grew all around the world. workers were able to bargain for wage increases that were substantial. we have seen declines in unionization, globalization, the good economy -- gig economy. note wage spiral but -- no wage spiral, but workers have gone on strike. and percent inflation and you are offering us a 2% pay cut, enough is enough. we are seeing strikes of train drivers and postal workers and even qc's saying you are not paying us. i do not think there is a wage price spiral.

there may be discontent. shery: what a great time to have you on with everything that is happening in the u.k.! >> wait until tomorrow and see what happens! shery: let us see what happens! we are talking about the fears of the recession growing. they are adding the pressure on commodities. let us bring in annabelle. what are you hearing about the outlook for those metals? >> it had been one of the most resilient corners of the market but we are seeing the broad-based losses from metals into the soft end. it is in the bear market territory. the concern is that the slowing economy will hit the demand picture. that could change in the second half and the reason for that is that markets are more focused on the demand side. the supply side is what we should be looking at instead.

the inventories are looking pretty low across the board for a range of metals. as a production cuts as well in europe because we do have they brought out in a metals prices coming up against rising energy costs. also looking at china to continue driving demand into the second half as well. in the short-term, prices may stay under pressure but we can expect them to recover a little bit going into the second half. shery: what are analysts saying when it comes to oil? >> what they are saying is we cannot expect further downward rescissions -- we can expect further downward revisions. oil hitting $65 by end of the year and down to $45 by the end of 2023. if we see a steep recession. we spoke to the head of

commodity research about why he is hearing this. take a listen. >> everybody has reduced their expectations for demand in the year. we are at the 2.4-2.5 million dollar a day level. that is similar and i expect we will be seeing further damage revision date demand. the met is not going on an empirical basis to the tree that people had expected. >> we are off where he sees heading -- sees prices heading in the stock market. look at the one in december around more than $10 drop from where we are today. haidi: coming up, a warning that china is exerting influence beyond washington's breach. this is bloomberg. ♪

shery: source intelligence says china's government is looking to exploit cultural relations to further its geopolitical and military objectives. jodi, even when u.s. relations are at an all-time lows we were

thinking that people to people exchange, cultural exchange was still there. u.s. intelligence is warning against that. >> everyone said it was good to trade ties with each other and a way to maintain relations even when the federal government was souring. this is a bulletin from the national counterintelligence and security center part of the intelligence apparatus in the u.s. is warning that chinese companies and chinese government may be using these ties as ways to exploit state and local governments and hook them financially with incentives as a way for china to expand its geopolitical and military efforts. this is something that came out as a warning, the u.s. government and a news bulletin

said this is a way for china as the relations have soured on the federal level two around washington and the u.s. government. they are advocating vigilance on the part of state and local leaders. shery: we have a response from beijing when it comes to these updates in the u.s., extending influence to analyze and telling them not to sell key chipmaking products to china. they are calling this classic technological terrorism. >> we heard from the spokesman for the chinese foreign ministry. basically saying that this is -- this technological terrorism that the u.s. effort to try to get the allies to not sell some chipmaking equipment, it is something that u.s. government

is trying to work on with the netherlands and tokyo with the japanese government to really extend a moratorium on the sale of some chipmaking equipment which could be significant and be a significant detriment to china's efforts in chipmaking. this would affect asml and nikon. we hope that you did hear from the spokesman who blasted the u.s. government for this. they did not announce any retaliatory measures but it was significant criticism coming from china on this move. the u.s. is working with the netherlands and perhaps with the japanese government to get it to extent the moratorium and expand the moratorium. this is souring relations further. haidi: samsung is expected to

report the slowest quarterly earnings growth in more than two years. let us bring in annabelle. we are seeing another set of the inflation hate it when it comes to company profits -- side of the inflation hitting when it comes to company profits. >> the impact of inflation and the lockdowns in china. operating income is coming in at $11.2 billion. that is growth of 16% on the year. more than 50% expansion of the previous two quarters. the impact of inflation has been two fold because not only does it stop consumers from reaching into their wallets to buy a and other gadgets come on the flipside you have high import costs. high costs of production and raw materials and we have seen it playing out across other samsung appears like micron with a

negative outlook. haidi: how much of the negative news flow is already priced in? >> we have seen some sort analysts lowering their profit forecasts -- some samsung analysts lowering their profit forecasts. we have seen the stock price dropping around 30% from the year to date peak. that is the worst year in 22 years. if there is anything that could rebound or be a positive factor for the stock in a short and strategists are saying really. haidi: we will bring you the latest samsung numbers as they break. 282 bloomberg radio to get in-depth analysis -- tune in to bloomberg radio to get in-depth analysis. 20 more ahead, stay with us. -- plenty more ahead, stay with

us. this is bloomberg. ♪

haidi: our reporter is on the ground, what is the main focus to people who have been speaking to today. >> autofocus on the micro and recession and market volatility -- a lot of focus on the

recession and market volatility. spotify ceo's is getting grilled about the company's handling of the joe rogan situation where he was giving an opinion on his podcast about covid-19. he was talking about the tension with apple and the app store with spotify which was interesting. there is a lot of big picture thinking here. is there dealmaking going on behind the scenes? shery: my question is where is elon musk? >> he is not here yet and sources tell me that he will be here on thursday. we have seen twitter's nfo. elon musk has offered to buy twitter. if i see him, i will ask him what the latest is. haidi: that is about it for

daybreak australia. daybreak asia is next. stick with us as we count down to the third day of the trading session. when threat and fear of a recession -- eight when threat. sydney futures looking positive. we see bonds dropping, equities set for a steady start in asia. this is bloomberg. ♪ this... is the planning effect. this is how it feels to have a dedicated fidelity advisor looking at your full financial picture. this is what it's like to have a comprehensive wealth plan with tax-smart investing strategies designed to help you keep more of what you earn.

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