>> good morning. we are counting down to asia's major market open. >> the top stories this hour. stocks bounce off lows as fed officials have concerns over more aggressive rate hikes. there is a report that alibaba is facing an inquiry in china. >> recession fears are brushed aside by j.p. morgan a big outlook. shery: u.s. futures rising slightly at the open of the asian session. the fed officials make comments today making traders pair back expectations that we might see aggressive rate hikes including

100 basis points. we had tech giants like apple, intel gaining ground. we did see banks disappointing. perhaps the worst in a month or so. j.p. morgan and morgan stanley disappointing on earnings. the two year yield climbed back a little bit given the expectations of 100 basis point rate hikes were paired back. crude prices are seeing an upside. it is still below $100 per barrel. this is very important when it comes to the ppi numbers we got today. 11.3% gain year on year. we are seeing producers seeing a little bit of relief given that commodity prices have come down in the last few weeks. right now, we are seeing consumer inflation accelerating faster than ppi. households taking the brunt of these price pressures. haidi: let's take a look at the

asian markets. we're looking muted given the uncertainty and headwinds. sydney futures looking at a drop. u.s. stocks closing will off session lows after a lot of fed speak. the aussie dollar is unchanged. we did see a boost for the aussie after the jobs data that was positive in australia. taking look at new zealand where we are saying modest gains early in the session. the dollar yen holding just over 1.39 handle. breaking news, wall street banks are and focus given that we have had the start of earnings season.

regulators are getting what it to extract about a billion dollars in fines from the biggest banks for failure to monitor their employees using unauthorized messaging apps. this texting habit is looking like they will penalize with a $1 billion deal. big banks have already had advanced talks with regulators. morgan stanley disclosed it expects to pay a 200 million dollar fine which is the same as jp morgan. these discussions are still taking place and we know that the penalties could still change. a big escalation for regulators that are looking into this issue.

given that a lot of the fines have been a lot lower compared to what we are seeing now. wall street big banks and focus. we saw a mixed picture when it comes to these numbers. the big bank stocks taking a hit overnight. so far, dominant against the idea of a recession. the ceos are not seeking shelter for their firms. according to jamie dimon, the consumer is in good shape. that even if we go into a recession in the u.s., entering the recession with less leverage in much better shape than in 2008 and 2009. >> reason we are focusing on recession fears is we heard today from the fed governor christopher waller talking about backing up i -- hike of 75 basis

points. the markets have gotten a little bit ahead of themselves pricing and a 100 basis point move. waller said the 100 basis point hike is still on the table but he still has to look at the data. let's bring in our guests to discuss this more. is 100 basis points on the table are not? >> it's important when you hear from hawks, the bank presidents, the governors going toward a charge for more aggressive rate hikes. chris waller speaking in idaho today including speaking on bloomberg through a panel said

that he was keen on a 75 basis move. maybe 100, but it's all about watching the data. let's listen to what he said in his remarks. >> i fully support another 75 basis point increase. however, my base case for july depends on incoming data. we have important data releases on retail sales, housing, inflation expectations coming in before the next meeting. if that data is materially stronger than expected, it would make me lean toward a larger hike in the july meeting. >> you heard echoes of our conversation 24 hours ago when the cleveland fed governor said he does. another says he sees virtue and 75 basis point hike. that it's already a big. today's producer price index is

second in line to consumer prices nevertheless 11% year-over-year. when energy is taken out because it was such a big driver of the headline, it was up about 8.2% year-over-year. one of the signs that maybe too early to say some of the inflation pressures could be softening. that's the kind of thing they will be watching ahead of the july 27 meeting. >> what are we seeing across the markets at the moment? the reactions to the fed speak? the setting up of expectations for a larger hike? >> it really is about expectations for the rate hike. when we start of the s&p 500 had fallen more than 2% in after we got the fed speak, we saw stocks farming higher for the rest of the day. 75 basis point rate hike the july meeting sounds hawkish, but the stock rally had to do with the fact that it was less hawkish than the 100 basis point

hike that the options market is pricing in the day before will be had the hot inflation print. 75 basis point, 100 basis point, none of this is exactly good for risk assets, but it was less hawkish than what the market had the earlier. >> when it comes to banks, they did not meet expectations. we were watching them closely to get any close -- clues on what happens to the economy, what did they say? >> today was a big day, we set off the earnings season for the second quarter. we will see the other big u.s. banks report their earnings. this is critical because there is a real desire to find out what these companies are seeing. these banks have a pulse on u.s. consumers. they interact with the worst populations of the united states as well as major corporations. what do they have to say? the bottom one fell off the

highs of last year and that's what you saw from jp morgan and morgan stanley. with so many issues clouding the horizon, how does the forward path look? both of those ceos did offer an upbeat outlook. not that they're not expecting a recession, but even if it were to arrive, it would not be deep and dramatic. jamie dimon says the consumers is in a much better place this time around than 2008 and 2009. >> you have been reporting when it comes to the wall street fines. how significant is this given that the previous fines for breaches of record-keeping were minuscule compared to this amount? >> that is the rub here. we have gotten used to big banks paying large fines over the last 10 years ever since the financial crisis it feels like an annual tax regulators want to impose for various follies.

when it comes to record-keeping, we have never seen fines of the size. we think about what is happening over the use of mobile messaging apps like whatsapp or using personal devices and email to create -- to conduct is this, regulators want to crack down on that and they are sending a message by imposing such big penalties or that's what it looks like it's all shaping up towards. >> it's been a tricky market to trade today especially given we had a record strength for the dollar paring back a little bit given the fed comments. where are we at now? >> you can add the record high in the dollar to the lift of factors -- the list of factors that strategists are going to be looking for as we head into the earnings season. a stronger dollar is typically seen as good for american consumers, but it's not always good for american companies because they manufacture and

sell a lot of their products abroad. we have seen some companies like microsoft, cosco, hp putting out warnings that the stronger dollar is going to eat away at their profits. wells fargo also noted earlier this week that they're going to be watching foreign exchange volatility as a big headwind in this earnings season. another thing added on top of inflation recession risk high in the dollar. >> speaking of economic stresses, what are we expecting from the gdp numbers in the chinese economy and more -- the latest pressures of the government and what they might do about it? >> shanghai lockdown. that's where we start. the second-quarter gdp is supposed to be 1.2%. that's shrinkage from 4.8% in the first quarter.

a lot of uncertainty. bloomberg economics sees a drop of 2% in the second-quarter number. the government's growth target is 5.5% and the first two quarters if this number 1.2 comes in, it will be 2.9% year-to-date which is a big miss. the rate of hope is china's june data dump starting with retail sales. they're supposed to be up 0.3%, but they were down export 7% in may. china's production is expected to rise 4% which is a lot better than 0.4% in may. china's investment 6%. in the june numbers, maybe some hope that the economy could stabilize and better moving ahead particularly as the

lockdowns come in. >> those were our top stories on top of everything we are following right now. we are watching chinese stocks listed in the u.s. after the report that alibaba faces an inquiry in china connected to a data theft case. alibaba's cloud division has been summoned for talks by authorities in shanghai in connection with the theft of a vast police database. we saw the nasdaq golden dragon china index falling more than 2%. that would leave it down almost 8% on the week. we continue to watch for regulatory pressures affecting these stocks. let's get over to su keenan with first word headlines.

>> we start with chinese authorities said to have held emergency meetings with banks this week alarmed about a growing number of homebuyers refusing to pay their mortgages on stalled projects. sources tell bloomberg that government officials are concerned that more buyers may follow suit. regulators have asked watchdogs and banks to report their financial impact. italy's president has rejected mario draghi's offer to resign as prime minister. it is to avert a political crisis that would unsettle financial markets. the chaos was triggered after the main coalition partner the five-star movement criticized the government's economic policy and boycotted a confidence vote. the prime minister of sri lanka has handed in his resignation.

he told the officials after arriving in singapore on thursday having fled months of antigovernment protest. this has left a power vacuum in sri lanka. the japanese prime minister asked for as many as nine nuclear reactors to be online this winter to deal with a power crunch. reactors were shut following the fukushima nuclear disaster in 2011. 10 of 33 have been restarted although some are online for maintenance. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. >> still ahead, more

announcements of the u.s. bank earnings situation. our guest says second-quarter results are not going to be indicative of the future. first, comments from fed officials. this is bloomberg. ♪ ♪♪ ♪♪

♪♪ real luxury, real thrill. feel the rush of performance at the lexus golden opportunity sales event.

>> our next guest says the fed needs to curb expectations about what they can do.

does that mean that the fed may not want to do that shock and all strategy even if they did something like this with that even work? >> a lot of people think that the fed is incredibly powerful which they are but they don't necessarily have a lot of control. when you have power but not control, that can be a toxic mix. if you look at the hiking and tightening cycles back to the 1950's, inflation continue to rise even through the tightening cycle. it was only with affects after they were done that you saw inflation began to roll over. if we are looking for a monetary fixed to inflation, we are barking up the wrong tree. it needs to come from more of the supply-side as opposed to the monetary side of things for immediate relief. >> we're trying to gauge the ark's strength through bank

earnings. second-quarter earnings are disappointing. what do we need to see in the numbers to come? >> it's early. here at all spring when i've been talking to fundamental managers, equity managers, they have good expectations for the company said they are investing in because they have been looking for more of this higher-quality companies where more stable cash flows. you look at the market as a whole, site the s&p 500 coming in, people were expecting about 4% year on year earnings growth. if you strip out energy, it was down about 3% with expectations. even though from the big headline perspective it looks like analysts and strategists expectations have been lofty, it looks like that might be mostly concentrated in only the energy sector so perhaps we have already seen throwing in the towel as to what this earnings season can look like coming into it across the other sectors. >> are you still looking for

stock specific stories at this point or is that strategy starting to get difficult because the overwhelming the medics are affecting companies at this point? >> that's a great question and it seems like whatever the macro news is, the theme of the moment, that can drive the prices. we take the longer term view, it really is about trying to identify companies that have the management in place. and market share that can grow the market share in these troubling times. one of our portfolio managers famously said that when everybody is playing defense, it's good to find a company that comply offense. when the cantata capitalize on some of these opportunities. -- one that can capitalize on some of these opportunities. i can't talk about individual companies, but my asset team we are finding that consumer

staples and technology. a barbell approach where defensive with consumer staples but offense of with technology because how much things have sold off since the highs of january 3. >> are you still dovish with bonds? >> about a month ago, it was 170 basis points ago. yields were half of what they were. yields have risen and we were shorting bonds during that time expecting it we would see yields rise. now that we have gotten up to 3%, with think we could get to 3.5% on the 10 year treasury as yields rise. so the inflation compensation has begun to come in a little bit. we feel like bonds you can find income there. if anything, they can diversify the equity holdings if we do get a market selloff. if there is a market selloff

now, with ink it's going to be about growth concerns as opposed to inflation fears. in that environment, bonds would diversify stocks once again. >> always great to chat with you. it's you can get around up of the stories you need to know to get your stories going on the bloomberg. don't miss the exclusive interview with the philippine central bank governor. you can catch that at 11 a.m. sydney, 9 a.m. hong kong. ♪ this is bloomberg. ♪ ♪

>> a look at the day ahead for australia and new zealand.

the pmi is set to be released in just a few minutes. also watch out when it comes to rio tinto's production figures. chinese officials are calling to an and to a two-year ban on australian coal. worries are growing about supply stability. >> a casino firm is -- sources say its u.s. rival recently approached the firm's controlling shareholder on a possible deal. the discussion did not lead to an agreement, but other suitors have been studying the firm. this move reflects uncertainty about electronics demand in the

face of a potential global recession. unit flow owner fast retailing expects profit to hit a record as the weaker yen and strong sales outweigh a china slump. the retailer has raised its forecast from an earlier estimate. that is according to a company statement. if achieved, profits would beat the previous record set in 2019. coming up next, u.s. bank earnings take a beating but our next guest says that's not reflective of the possibility of a broader recession. this is bloomberg. ♪ psst. girl. you can do better. ok. wow. i'm right here. and you can do better, too. at least with your big name wireless carrier. with xfinity mobile, you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill, over t-mobile, at&t and verizon.

wow. i can do better. yes, you can. i can do better, too. break free from the big three and switch to xfinity mobile.

>> we are setting up for the

start of trading in asia. muted trading in new zealand. the manufacturing pmi slipping below the threshold denoting contraction. it's falling significantly. also getting the performance services index that is going to be incoming. it has been at the forefront of tightening measures from the rbnz. we are starting to see some of the crux to the economic performance. >> a bit of a mixed sure right now.

kiwi stocks now gaining three tens of 1% after the rbnz rate hike. that's why we are seeing the pressure on the kiwi dollar right now. we have had such a series of rate hikes recently that it seems 50 basis points is it cutting it anymore. the unemployment rate fell again to the lowest level in 50 years. the huge jump in new positions. when it comes to nikkei futures gaining a little bit, we have weakness of the japanese yen. if you don't go along with all of this huge tightening we are seeing around the world then you're going to get punished. that's what we're are saying with the japanese yen. we continue to see support for

equity markets in japan. not a lot of change when it comes to u.s. futures at the moment. perhaps some upside given that we did fall in the new york session. we pared back some of those losses that at one point exceeded 2% because we got fed officials commenting that 100 basis points may not be the favorite hike at the moment. >> wall street outspoken ceos said the u.s. is more than prepared to withstand the economic downturn. saying they are not -- >> there is a range of outcomes driven by how much rates go up. it's not going to change how we run the company. we have managed a recession before and we will do it again. >> let's bring in our next

guest. what do you make of these comments? that the results are not going to give -- be indicative of future performance. >> i think jamie dimon has backed off dramatically from the statements he was making some time ago. he talked about hurricane being out there about to hit. what you are seeing from both james gorman and jamie dimon is recognition of something that neither one was willing to recognize three or six months ago. that is the probability of a recession is very high end with are going to say is that we can handle it it doesn't matter what it is. the key difference is that the

are now believing that there is a good chance that a recession will occur. >> he didn't stop with the whether analogies. he said his forecast for the economic hurricane has not changed but the health of the american consumer offers a possible break in the clouds. what points of weakness would you be looking for when it comes to future earnings? >> for the banking industry as a whole, definitely for jp morgan, you can see that i'm going to call it three buckets that you have to look at. the first one i would call conventional banking. traditional banking. that is making loans, trying to get the highest margin possible by increasing interest rates and prices and keeping losses low. that bucket is doing extraordinarily well. regional banks will focus in

that aria doing well and jp morgan itself did extremely well in that area. the second bucket is the capital markets business. capital markets would be their investment banking activities, mergers and acquisitions, mortgage banking, trading to some extent. that bucket is in trouble. it does not appear that investment banking or mortgage banking or mergers and acquisitions, they certainly did not do well in the second quarter. i don't think they will do well for the remainder of the year. the third bucket is the accounting issues that banks have to deal with. most important is where you going to put your loan loss provisions? if you think we are into a recession, you want to increase your provision and we saw jp morgan do that in this quarter. if you think we're going to good times, you are going to reduce your loan loss provision. >> that was interesting he kept

talking up the economy and the strength of the u.s. but they had to prepare for the downturn. what did you see in terms of expenses? >> jp morgan has said often for years that we don't look at the current cycle. we look at is what our plans are. the opportunities to grow the company and therefore, what we're going to do is continue to go forward with technology expenditures. we aren't going to fire anybody. we will continue to penetrate into new markets and we are not want to pay attention to the short-term cycle will may have a long-term goal that we want to achieve. translated, expenses are going to stay high, revenues are not going to go up at the same level of expenses and therefore earnings are going to be stressed for the next couple of quarters. >> what are the regulatory

hurdles? that there may be a billion-dollar bill when it comes to banks failure to monitor employees using text messages. >> i'm want to change a little bit. it was a challenge with jp morgan throughout the united states government in that meeting this morning. basically, the u.s. government has increased the capital requirements for jp morgan to a level which jp morgan believes is unrealistic, excessive, arbitrary what have you. what is jp morgan saying to the u.s. government? they said this morning where going to make fewer loans. if you want to reach these capital standards, or going to reduce the size of our balance sheet. were going to make fewer loans. for five times, he said clearly we are not going to make as many mortgages as we were making.

he is saying you put this challenge to us, we are taking it and what you're going to get back is lower growth in your economy. shery: there's a trade-off. good to have you with us. coming up next, live to the g20 session of finance ministers and central bank governors. russia's invasion of ukraine is hanging over prospects for an agreement. this is bloomberg. ♪

>> you are watching daybreak australia. we start with christopher waller who has given his support for a 75 basis point hike after the latest inflation report. he says he could go bigger if data warrants it. >> based on the labor market, i don't see -- it's inconceivable to have a recession with an unemployment rate of 3.6%. >> the fed inspector general has said that trading by jay powell and the former vice chair did

not break any laws or rules. the watchdog was examining trades made by a financial advisor to pal family trust but found no wrongdoing. they say they failed to report trades in 2019 and 2020. investigations to other fed banks are ongoing. joe biden said tehran new what the u.s. was willing to accept and also that america would never allow around to acquire a nuclear weapon. donald trump is returning to washington 18 months after leaving office to attend an america first agenda summit. it may be a move toward a

possible 2024 presidential run. it comes as the house is convening a meeting to investigate his role in the january 6 insurrection. russia's government has made a plan to create a natural oil benchmark next year. a document shows key russian ministers domestic oil producers and the central bank plan to launch oil trading on a national platform in october. russia will work to attract foreign partners to buy oil through pricing benchmark with sufficient volumes between march and july of next year. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. haidi: an impasse over the economic follow russia's invasion of ukraine is affecting

the summit in bali. what do we expect to see? >> it's hard to say. you talk about how russia is front and center and it's the reason why there has been a lot of disagreement on the wording of the munich a. there is no agreement on the challenges the world is facing right now like surging inflation, energy crisis, food crisis. the wording is important and the disagreement and that and from what we gather that it has omitted word like russia, oil, supply chain and therein lies the problem. if you recall at the last foreign ministers meeting at the g20 here, they didn't come up with a message precisely for that reason. a challenging environment and add to that the macro landscape.

we have darkening clouds over the global economy. the last meeting back in april in washington, the imf cut its growth projection to 3.6%. since then, things have gotten worse. inflation has surged and we talk about the energy and food crisis. will there be a recession? how deep will it be? we have an exclusive interview with someone part of the roundtable. >> our house call is finally balanced. personal bias is more negative. i think the degree to which inflation is entrenched is going to require severe central-bank action. there determined to bring inflation down under control. it's hard for me to see how we escape any inflation -- any recession.

we are starting with a strong economy with strong balance sheets and a strong financial system. it banks are in good shape. if or when we do have a recession, i think it's going to be relatively shallow and short. >> we have the likes of jamie dimon warning about hurricane in the horizon. don't you see that? >> he talked about storm clouds. there are definitely storm clouds. inflation is a big storm cloud. the russian invasion of ukraine and the consequences of that are creating storm clouds. but we are starting and a good place with strong underlying finances. that is the thing to keep that storm cloud from turning into a hurricane. >> are you reassessing your

plans? >> we are full speed ahead with our investment plan. there will be an economic downturn. this is one that one invests through, not one that one runs away from. we are opening up new banks in saudi arabia and egypt and elsewhere. we are investing in core capabilities like sustainable finance which is the theme of the g20 meeting. we are hiring. >> what are you anticipating? >> what we said to our shareholders in february was without that we could grow our income at 8% to 11% over the next three years. that is with a little bit of help of rising interest rates.

while rising rates are bad for the economy, that's why they go up is to slow down the economy, they are good for banks. we get a tailwind there. our underlying business is growing strongly. trade is growing. financing and investment is growing. not in a straight line. with the headlines in china with covid related lockdowns, with our management business and the pressures that come with uncertainty in equity markets. these are transitory things. the underlying drivers of growth in our region are the opening up of china's capital markets which is moving at pace. it is the steady reconfiguration of supply chains, but accompanied by a increases in trade. >> he sounded a bit optimistic

but policymakers have a lot on their plate. one of the big issues, surging debt among the poorer nations. if unresolved, it will test the resilience of the financial system of the world. >> president biden is on the next leg of his middle east trip. he is set to meet with the palestinian authority before adjourning to saudi arabia to discuss boosting oil supplies. >> as president biden wraps up the first stop of his middle east tour, he will be meeting with the head of the palestinian authority's. there, who be the first president to take air force one directly from israel to saudi arabia. the president's optimistic on a deal on overflight potentially something that can come out of his trip to the kingdom. all eyes will be on when he

meets with the king and crown prince after the president on the campaign trail vowed to make the country a pariah. now he needs their help to put more oil on the market to bring down prices. >> be sure to turn into bloomberg radio. we are broadcasting live from our studio in hong kong. lots more to come, this. -- this is bloomberg. ♪

the pacific islands forum -- the emissions target out laid a more ambitious target. how does australia plan to meet expectations of the neighbors? >> that's going to be the tricky part. a straw you has been working to build -- rebuild its relationship with pacific partners. australia just showing up to this meeting and taking climate concerns seriously is a big step. in 2018, a did not attend and at the last in person meeting, there were reports of shouting

and tears about australia's inaction on climate change. signing the document is an important step calls for cuts of 50% by 2030. currently the government is planning cuts of 43%. they have domestic criticism of the green party. great intention is in place, but the size of the cuts the plan for legislating it to get there, that's all in the air. >> another key driver of this trip, what about the risk of a chinese military base being built in the islands? what assurances did australia receive? >> the prime minister had a very warm meeting with the solomon islands prime minister. that meeting beginning with a very friendly hug. saying that he is now very confident that there isn't going to be a chinese military base in solomon islands. the security agreement between the solomons and china sparked a

great deal of alarm when it was signed in april. it is 1200 miles from the coast of australia. we still don't know the details of what is in that agreement. assuring australia that there is no military base or other military facility in that agreement and the solomons still consider australia its partner of choice when it comes to security. >> now a quick check of the latest business flash headlines. u.s. listed china stocks tumble on report that alibaba faces an inquiry over a data theft case. authorities in shanghai summoned executives from the cloud division. cybersecurity researchers concluded the database was hosted on alibaba's cloud platform. online spending in the u.s. rose 8.5% during amazon's prime day sale. the event helped used traffic on

competing sites that held their own sales such as walmart and target. amazon sold more than 300 million items over today's. more than any previous prime day. the u.s. justice department is likely to reject concessions offered by alphabet that would clear the way for an antitrust lawsuit over the dominance of their online advertising market. google has made at least one offer to the justice department to address the concerns. one of the world's most valuable startups has told staffers that an internal valuation has dropped. the public traded shares continue to face plummeting valuations. the recent common stock price has been valued at $29. that's down more than 27%. >> australian futures are

looking tepid. indicators are down close to 1% will make it to the start of trading. the aussie dollar is not seeing much change. even after the initial boost from positive employment and labor market data for australia. new zealand erasing most of those gains. business indicators suggesting a contraction and the dollar yen, 139. potentially the big 140 level is