haidi: good morning.

>> i am annabelle in hong kong. we are counting down to the major market open. shery: the top stories this hour, u.s. stocks fall and the inversion deepens. this is as recession risks rise. a mixed start ahead of rate decisions in south korea and new zealand. haidi: the outlook for oil deepens. >> twitter sous elon musk to force the richest person to follow through on the $44 billion buyout offer. u.s. futures are unchanged at the open, s&p 500 really falling in the afternoon session, fluctuating between gains and losses.

we have the selloff in make a cap tech and technology shares. -- mega cap tech and technology shares. this is as we continue to see the fears about a potential recession. covid cases surging in asia as well. the dollar index is above the 108 level. levels we have not seen since 2000 two. investors are bracing for what has happened to the cpi numbers to come in the u.s. on wednesday. we are releasing the recession fears, perhaps given that the fed could tie in more aggressively. we saw that in the treasury space with tenure rates falling. below the two year rate, this is an inversion level we have not seen since 2007. more signals that the concerns may be well-founded. we have the imf after the market

close coming out and downgrading the u.s. gdp growth forecast for this year to 2.5 percent from 2.9 percent. they are raising the jobless rate prospects. they say imposes a systemic risk not only to the u.s. economy but the global economy as well. >> underscoring the global cost of reining in price pressures. in asia we are looking to a muted session ahead of our key cpi release. you mentioned the dollar strength are saying the dollar index trading higher once again. we have seen a six-day losing streak against the greenback. you have to say that the qe dollar is also looking flat ahead of the decision later today. a basis point move is expected in markets, it could ruffle the than others a little bit -- it

can ruffle the feathers a little bit. let us check on the other economic releases. we have the be ok in korea could also raise rates for the first time to reign in inflation pressures. exports show a slowness in the month of june. haidi: u.s. inflation is expected to see a fresh peek and that is expected to keep the fed on an aggressive freight path. contextualizing widening concern we could see a policy over a step or misstep and create a recession. what we are expecting is the consumer price index probably increasing! put 8% -- increasing 8.8%. we are seeing a climbing, that

could mark the third month and four months we have seen inflation jump at least 1%. sophie: the pain is in the credit space. that aggressive credit drying up. that would lead to a recession. historically speaking. we will get some indications of what is happening on that from from bank earnings later on this week. one thing to look for are signs of the credit tightening. the deeply inverted yield curve is threatening to rein in bad interest margins are the could create a credit crunch. let us bring in garfield reynolds and our global economic and policy editor kathleen hays. let me start with you. what signals the yield curve is sending right now? >> the yield curve is continuing to send the signal, most investors file recession is

coming. that tribute not only to fed hikes, also to the fact that around the globe that there are a lot of worrying signs for major economies. europe has its own extreme struggles because of what is going on in the war in a crane and china with a fresh covid outbreak and other issues. fresh evidence that that economy is not turning around and maybe slowing. europe is slowing, china slowing, u.s. getting high interest rates from the fed. it does not look good. even if the fed does not stop hiking so aggressively, we who may have already been heading for a recession. the inflation print today is likely to cool down a bit, head of the hike, 75 basis points. look to hike to 75 basis points in september. that is what the treasury is

reflecting, the expectation that recession will be hard to avoid from here. haidi: we have a banks on tap and both of the central banks expect to go pretty big and both of them contending with economic slowdown risks. releasing the need to cut inflation as a bigger challenge. >> these are two central planks -- or to have been leading the path throughout the recession. the bank of new zealand, back in 2020, the first one to cut 75 basis points. one of the first to do a post-pandemic u-turn. a 20 basis point hike. three more 20 basis point hikes and a basis points in april. today, 50 basis points was 2.5 percent, investors are thinking it could be near 4%.

let us look at their inflation. 6.9% year-over-year. while above the forecast for 5.9% this year. inflation expectations for one year, 4.88%. that is not very much, getting back into the one--- 1%-3% margin. the bank of korea is also poised to do a rate hike. if they do so it will be the first one that they have done since they adopted interest rates as their key monetary policy, back in 1999. they also have an inflation problem. 23 year high. relatively new governor has said he is open to a 50 basis point hike. getting to the 50 basis points will be a move that will

potentially show the seriousness of inflation and the fed is ready to do a 75 basis point rate hike. bank of korea only doing 25. the 50 basis point hike seems to be baked into the cake for both of the central banks today. shery: we are watching what the ecb is doing. you mentioned europe is slowing. we have been watching the euro-dollar parity for a while. what is holding it back from reaching gold levels? >> there are a few things that are holding you back. one of the major things is that there are a lot of options around the parity level. plenty of traders out there, we see own is small fraction, there are a lot of investors who have a lot of stake if europe goes through parity. you need a major newsbreak to

send it under and if it goes under, it makes quite a bit further. cpi later on tonight, that is the obvious potential trigger point and it is hard to see it going through there unless something else happens before then. another big thing that is hanging over everything is the potential for russia to cut off gas supplies or limit gas supplies. we have the scheduled maintenance coming up to shut down the pipeline. people are nervous about whether it comes back on. the bad news has been priced in. if the euro goes through the dollar, it will go a lot lower. you do not want to go before the news because if the news is not so bad, the levels will not be justified by events. haidi: let us turn to another

big story. twitter sued elon musk for his or an takeover offer. -- for abandoning his takeover offer. let us get the details with ed ludlow. this push does not come as a surprise. >> don't you have deja vu? it is official. we have the delaware court fairly and the basic argument is that elon musk has no right to walk away. they want to hold him to the original deal. they are actually saying that muska breached specific points of the deal which are a few. i will read them to you. he breached his obligation to use reasonable efforts to complete the merger. he breached his obligations to

provide twitter with information about the financing of both equity financing and the debt financing side. they say the heat breached his obligations -- he breached his obligations regarding public comments regarding the deal. they are blaming him of preaching confidentiality. they are holding him to account and the ball is in his court in what he plans to argue. shery: does twitter even want musk as its owner at this point? >> it is a great question. they point out time and again that the actions elon musk has taken have been materially damaging the company. share price harmed investors. this has been the most consistent point of this whole saga. porter was to hold him to the original terms of the deal. elon musk does not approve fx. he must approve that whatever

actions twitter did or did not take regarding the parts on the platform altered the value of the deal. there are ways that twitter has a good chance of defeating musk in a court case. who knows? shery: let us get over to vonnie quinn with the first word headlines. >> the world health organization is urging health-care systems to take steps to curve covid-19 transmissions are made a new wave of infections. the directorate general warned that some variants of the omicron strain are causing higher case numbers and deaths. in england, an estimated 2.1 million people have have been infected. janet yellen is showing no market intervention to support the yen. yellen said the two did not

discuss intervention and g-7 nations should have market determined exchange rates. the last time two intervened was in 1998. the market outlook suggests no relief for consumers with demand growth set to surpass applied by one million barrels a day. opec would need to significantly hike production. members are falling behind due to underinvestment and political instability. president biden is urging the producers to open the taps. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. haidi: why the euro is to fall further against the u.s. dollar as the currency edges closer to parity. here why our next guest says market sentiment has become too negative with a higher chance of positive earnings for most

investors. this is bloomberg. ♪

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bit. one would and up with a recession or not, i think -- whether we end up with a recession are not, i think it will be higher than they have done as yet. shery: peter oppenheim are there. our next guest says markers have become too negative.

good to have you with us. could we see a positive earnings surprise and how meaningful with that before the market? >> i think the likelihood that any surprise will be more likely to be positive is higher. i think earnings estimates have come down, there has been a lot of negative warnings by companies, and a lot of negative guidance after q1 reports. many people are expecting the worst. i actually think that it is more likely than not that companies sort of use the opportunity to warn and get their act together. in order to prepare themselves for q2. i think that there is an overly negative sentiment. the highest level of s&p 100 futures we have seen is over 10% for s&p 500 futures.

we are just overdone with the negative sentiment. shery: we have exploration of the inflation numbers tomorrow, what sort of reaction can we get from the market? >> if it is slightly higher than expected, the markets react negatively. not necessarily with the same negativity that they did last quarter. i also think that if it is in line or even a bit better than expected, that will be something that will actually drag the markets upwards. everybody is. expecting bad inflation numbers. there are signs that inflation is starting to ease in the commodity market. you are starting to see that. good oil prices have come down, some of the big stocks have come down. any big earnings announcements will include guidance that will give us a better outlook to how

future inflation is impacting these companies in real time. the number is in line for less than expected. if it is more than expected, i do not think the market will freak out. haidi: when you take a look at the components of the cpi, is there anything that meaningfully inform investment strategy? >> the only component i am keeping buckeye on have to do with cost of housing. apartments, owners equivalent right. i think the impact of rising rates is impacting the housing market negatively. i would be interested to see what that looks like. that is the only part of the cpi component that i am paying special attention to. haidi: the moves when it comes to fx is relentless, king dollar

as we said. we've parity with the euro-dollar. how does that have impacts on how you are investing at the moment? >> it does not have a huge impact. it does impact i willing i am to take currency risks without a hedge in any sort of international equity location. it is not impact that much what i am doing. these are normal moves in fx. we are in extremes, the only hardware about it if you are investing in that currency -- you only need to worry about it if you are investing in that currency. haidi: today's edition of daybreak, terminal subscribers can get that on dayb . get the news on the industries and assets that matter to you. this is bloomberg. ♪

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investigating the january 6 capitol riot saying that comp was asking for civil war -- trump was asking for civil war. we keep getting these shocking revelations about president trump's role during the insurrection. what are some of the highlights? >> we continue to hear details of how president trump was in touch with members of these groups that went to the capital. we heard more about that today including as you mentioned some of the text messages between his campaign manager and a campaign staffer in which the civil war reference was made. he also heard from president trump legal advisor -- president

trump's legal advisor who talked about a meeting in mid-december where they were trying to make the case. his staffers were trying to make the case that he had lost the election and he should concede. he was furious at this and try to get them to say, come up with ways including perhaps us bringing in ballot boxes, to show reported fraud. i wish no one thought there was election fraud -- of which no one thought there was election fraud. there was more of that detail today. no one really made a case that president trump incited the writers to go to the capital and was -- rioters to go to the capital. he encouraged this but he did not incite this. we also heard about a

contentious meeting at the white house where there were -- was a breakdown in communication. shery: we heard from liz cheney, revealing something about donald trump. it came with a warning? >> what liz cheney said, this was the end of this hearing. the seventh hearing. she said that they had -- the committee was told that a witness, somebody who has not yet testified and someone who she did not identify had been contacted, by president trump. this person did not apparently engage in any kind of conversation or exchange with president trump and told the committee about it. the committee has referred this to the justice department. they would take those kind of communications with any witnesses or potential witnesses very seriously.

i warning she has given before and said they would -- a warning that she has given before and that the justice department could get involved. she was very explicit in that warning. shery: you said this is the seventh hearing. what is next? >> we expect one more hearing. there was one that had been scheduled for thursday at prime time in which could be the last one. that had been postponed. we think it may come as soon as next week. perhaps next thursday. there could be more as the committee gets more witnesses and evidence. they will continue to investigate. we think that there will be one more big hearing. haidi: let us get a quick check on the business flash headlines. abu dhabi is in talks with

fortress from softbank. they dollar investment is discussing a deal that would valley fortress on more than $1 billion. abu dhabi has been a counterpart in 2017, it would be among investors in the firm's debut. peloton will stop building exercise bikes and treadmills and rely on production production -- providers instead. peloton boomed during the pandemic. it has struggled as economies reopened. plenty more to come on daybreak australia. 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!!

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>> clearly the energy crisis. >> and divergence between the ecb and the fed. >> the dollar is the risk parity as set. -- asset. >> there is not a big trigger you can see and turnaround. >> a shift from the fed and the change in the energy dynamic. >> it will add another way to the u.s. earnings season. >> a lot going for the dollar at this point. shery: we continue to see safe haven flows mentioned. the spring in annabelle. -- let us bring in annabelle. >> we get the cpi read later today.

the fastest inflation or the highest inflation with expectations of 8.8% on the year. we are already hearing policymakers express their support for an outsized move. investors weighing in on this as well. the billionaire made famous by his real estate investment says that the issue is that the fed flooded the system with liquidity and that is coming back to bite the economy. reduce liquidity and the only way that can happen is by hiking rates. he is going for a proof as high. as 75 basis points. he told us that the fed can withstand a magnitude. >> interest rates can up a couple hundred basis points and not throw us into a recession. there has been so much capital sloshing around. i think the first major swallows

of reducing the excess flow, i do not think it will have the impact that the stock market is reflecting. >> some people may dismiss inflation as old news because as you can see we have already seen commodity prices dropping over the past couple of weeks with a drop in oil, salt commodities across the board. bloomberg intelligence points out the fed shows what happens if we do get a high inflation, it could entrench price pressures into the american psyche and as jerome powell said, the clock is ticking on inflation expectations becoming tethered into the psyche of americans. haidi: those pressures coming from energy costs. >> how low can it go? td securities has one of the

most bearish calls out there. 85-90 cents. this move that we are seeing in trade that balances around the eurozone. germany, france, other major economies looking at deficits on these higher import costs on energy. that is set to worsen as recession takes hold across the region. these consistent or persistent years around covid lockdown from china. if you change now you see we are basically at parity, it'd bounce off slightly. td securities says expect a bit of defense at this level. finally, the euro is following the trajectory it had in the last hiking cycle. expect more downward pressure ahead. haidi: let us get more on the euro with our next guest. particularly in terms of what happens if we see a more

meaningful level of hitting parity. it is a border that could quickly collapse again. fresh concerns about russian natural gas supplies. the fed could continue to put further downward pressure on the common currency. let us bring in the head of economics at commonwealth banks. we do have you with us. parity by any other name. it hinges on the conviction of this trade. what happens if it meaningfully breaks below? where do we go from here? >> on our forecast we see the euro going down to 98. given the technical support levels once you do get below parity, you could go lower. i would not rule out that out before the end of the year. it would have stocks on the undervalued side if it goes down

to the low levels. it depends on gas prices and that reflects the war in ukraine. things are not going well for the euro at the moment. whether the interest rate hikes in the u.s. or the deficits we are seeing in the euro zone. haidi: it is this kind of cycle we continue to see with the king dollar. does that change with the cpi print that we get? >> i think that the consensus continues to underestimate the stickiness of u.s. inflation. i think too much attention is paid to the core inflation. we prefer the trend cpi. that is something getting close to 10% annualized monthly increases. we look at that partly because

we are in the strategy and the key measure of the strategy. that is because the cpi is the leading indicator of the core cpi. it is screaming that it will go higher, not lower. although the crisis has started to come off, wage growth is really strong in america. so is inflation expectations. they are really high and they are suggesting to us that the u.s. cpi can go higher, not lower on the next few months. shery: inflation expectations are high when it comes to new zealand. how much volatility will not inject into the qe dollar today -- will not inject into the kiwi dollar today? >> i would not be surprised if

it would pull a rabbit out of the hat today and say that you could get kiwi volatility. it is not much on the schedule for a strategy. i think the aussie dollar is very kingly. shery: going in a different direction, the election victory by the ruling party has seen the yen fall to a 24 year low. do you buy into the narrative we may see doubling down on economics and easy money policy? could we be going the other way around? >> the governor will be in charge until early april of next year. more or less no real risk that the bank of japan will tighten monetary policy. inflation in japan is quite soft

, under the 2% target unlike every other central bank. i do not think the bank of japan will take the bait to tighten monetary policy. the yen is on an upward trajectory. the prime minister is becoming more conservative about the weakness of the yen and the rapid moves in the yen. some of the comments you made yesterday is why they are strong overnight and you may want to see more of that today. the cpi is going to push it back up again. shery: i think we are going across every civil currency given the importance of all of these moves. let us get to the chinese yuan. we have seen the resiliency despite the strength of the dollar. where is it headed?

>> i think the dollar will head up. not so much for the trade data, that is having influence. mainly because of the infection in shanghai and other large cities. the market is sensitive to covid infections and i think that the risks are because of the zero covid policy that the central government has that will lead to more concerns about mass testing. even if you do not lockdown, mass testing is disruptive to the economy. it has people worried about going out to shop and the like. it is a real handbrake on the chinese economy. probably going to get close to the high that we saw a few months ago. shery: taking us around the

world of currency. thank you. coming up, an alert for possible u.s. recession next year. we hear more on the and the outlook for china and india, -- that, and the outlook for china and india. this is bloomberg. ♪

>> you are watching daybreak australia. conor parkin is key because options open on helping the fomc should go when it raises interest rates. he said the rate policy is to keep inflation under control. >> we are engaged in a very challenging exercise which is to cool the economy down to normal levels. in an effort to bring inflation under control. or that the intent of trying to cool it -- without the intent of trying to cool it so down. >> china has criticized timeworn syndicates minister to mourn shinzo abe. china's response was more muted than usual. they say it was a personal

visit. hong kong has suspended nonemergency services in public hospitals as they grapple with a certainty covid cases. the latest outbreak has pushed the number of patients in public hospitals to about 1000 health officials warned that infections could climb to as high as 6000 in two weeks. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. shery: abu dhabi is set to ba asset manager -- be an asset manager. the latest. why is abu dhabi interested in this deal? >> let us look at the total history of everything. may have to take a look at what happened last year as well. softbank declined roughly 20%,

it has been a tough market for all investors. you have the ceo of fortress last weekend on bloomberg tv who sat down with sonali and spoke about inflation and this biden administration. it would be rough to predict the next year or two. this comes down to those environments themselves. this is the next shift to follow as well. haidi: the intent that massar had four fortress ended up being quite different in terms of what were they were able to do from a regulatory perspective. >> again, back to the entire environment, it is tough for everyone. you see a lot of these investments come over the course of this year. you continue to see investments both in the public equity markets.

a huge debate is the recession over the next 3-6 months. this is another trip to fault, possibly showing that things are getting tight for investors. --chip to fall, possibly showing that things are getting tight for investors. haidi: gains in domestic stocks offset widespread declines in china. the fund as adopting a cautious outlook and sees more market decline ahead. >> i would say that generally speaking on the regulatory front, the worst is behind us on the internet that forms. what will drive that going forward is earnings which is probably a function of economic growth. what actually looks more clear cut cut -- clear-cut, living themes, that includes companies like ev or battery companies or

china has the largest tv market in the world. -- ev market in the world. it is policy aligned. those areas have become much clearer. other areas like assumption look attractive but will depend on the pace of recovery from now on. >> some are saying that 5.5% growth for the year is just not achievable. closer to 3%. >> it may surprise the markets negatively. it may lead to downgrades. from here, as you go to the second half, you see strong physical initiatives by the government, announcing a $1.5 trillion bond printing in a structure by the local government. still a lot of risk on the horizon, clearly, it has a government situation is focused on promoting growth. it does not matter if they have

5.5, as long as they are improving growth, that would be seen positively by the markets. >> foreign funds have been pulling out in a huge way to eat of market cap. -- huge way, 1% of the market cap. >> in india, in the near term there is headwinds. we do see a turn in the cycle, one of the very attractive ones for us is the digital economy and the ecosystem out there which is very vibrant. >> the strong dollar will impact all asset prices. the pain will continue. >> it is already impacting all markets. it is one of the headwinds, u.s. earnings we expect to see the rest of this year.

you have to admit it is a challenge. once you get to a point, talk about a u.s. recession, the point where you see it done in monetary policy, that is when you see the dollar exchange. it cannot be a one-way thing forever. the headwinds are creating a number of worries. >> the biggest worry for you in the next 12 months as an investor? >> one is inflation. we need to see that come under control. we have been talking about inflation for a while, we need to see where it comes and settles. >> when do you see that settling? >> it is tough to say. i would say he would see a reverse from the peak in the next few months. when it comes to a level that is acceptable depends on a number of factors including russia, ukraine. the second is russia and ukraine.

that is something that does not have a clear end to it. if you have a gas cut off to europe, it will lead to energy price rises all over the world. more importantly, beyond the near term becaus -- in the near term, the polarized world with governments and are able to deal with each other, it mitigates attending two major issues such as climate change -- it mitigates attending to major issues such as climate change. shery: we are hearing from google's ceo saying that the company will slow hiring for 2022. they will limit hiring two technical roles this year and next. we have seen a slowdown when it comes to the red-hot hiring spree. more people worry about

recession. google saying that they will limit hiring two technical roles in 2022. this was in an email. plenty more ahead. this is bloomberg. ♪

shery: tentatively agree on a 4.3% increase in the base salary to south korean automakers, and includes an assist and other cash equivalent benefits salaries are rising about 9%. the company's management refused to extend the retirement age. they will vote on the deal next week. south korean pop band bds will appear in two exclusive shows next to a deal with their label. it includes a concert filmed in los angeles last year and a documentary following the history over nine years. both are set to air on disney plus globally. netflix's squid game companies for best drama in the emmy awards in september. the first time a foreign leg which program has been nominated

for the biggest prize in the u.s. industry. they show is up against hbo's succession and euphoria among others. let us take a look at the asian markets. pretty major central-bank decisions. the bank of korea says it has been at the forefront of the tightening cycle in this part of the world. haidi: we are expecting 50 basis points of further rate hikes. they look to put a cap on prices as a bigger priority and challenge. take a look at australian futures where it is flat at the market -- moment. also pretty tepid session in asia. the aussie dollar seeing risk aversion and dollar strength does continue as a major theme.

kiwi stocks looking subdued as we have traders worried about recession risks when it comes to the increased treasury conversion. 10 year yield dropping 10.4 basis point allow the tenure right. we have not seen that kind of drop since 2007. when it comes to the impact of the recession on what we are seeing, that will be one of the biggest debates. even as the cost of living continues to surge, food costs and rising energy costs, we are seeing bonuses for ceos in australia surging. shery: we are talking about boards rewarding bosses with 77% of their maximum potential payout. this would be an average bonus

hitting the highest since the australian council started collecting data. we will have labor data as well out of australia tomorrow. we will be keeping an eye on that. that is it for daybreak australia. daybreak asia is next. we have u.s. stocks falling decisively in the u.s.. recession fears will be -- recession fears, we will be discussing all of that next. this is bloomberg. ♪