paul: you are watching daybreak:

asia. annabelle: we are counting down. shery: the imf cuts global growth outlook as policymakers deal with shock aftershocks. those growth worries may weigh on the market open while dollar strength trends. u.s. confident goal nations will boost oil supply. u.s. futures pointing higher. we had traders paring back expectations, a very aggressive fed tightening. thanks so the best days since january 2021.

citigroup with a strong result. the 10 year yield falling, mixed eco-data. stronger-than-expected retail sales. we are watching oil prices under pressure in the asian session after already two weeks of losses, despite the fact we had president biden meeting with the crown prince and talking about more oil. we did not see a firm commitment. recession fears weighing on the price. we get goldman sachs, bank of america, tesla reporting earnings. annabelle: that's right. those moves could be one of the more positive factors in asia. we have some negatives clouding the outlook, the ongoing outbreak in china, headlines of cutting the global growth outlook. equities in new zealand are

online. trading to the upside. we're eying with happening with the japanese yen. slump the most last week in more than eight months. we heard from the japanese finance minister, saying he is watching fx markets closely. let's talk about what the dollar strength means for emerging markets. we have seen significant outflows, double than what we saw in 2021. looking at markets most vulnerable, taiwan, india and south korea. haidi: these concerns about global growth rising to the four. the imf saying it will cut forecast substantially. it comes as traders prepare for a bigger yield hike.

we are joined by kathleen hays. andrea, tell us about the set up when it comes to asia given we are seeing this doubling down of the risks globally. >> that is right. it looks like asian markets, perhaps today get a tailwind from what happened in the u.s. on friday, but overall, the picture remains uncertain. you have concerns and china building up, but at the same time, you have u.s. futures inching up. on the positive side, we have seen risks coming down a bit.

not a lot of crosswinds for investors to digest. japan is closed today. u.s. futures are pointing higher in australia and perhaps hong kong, still a lot of uncertainty ahead. shery: what does the strength of the dollar tell us about where asian markets could go from here? >> the strong u.s. dollar is one of the major headaches for asian markets, especially those emerging markets. we have outflows jumping ahead, the strong green back does bode poorly for stocks.

it's negative for growth in the emerging market economy, a lot of importers of commodities. on the positive side, we have seen commodity prices -- overall, a strong dollar is going to pose a concern for the asian emerging markets. haidi: pretty grim outlook from the imf. there is this broad sense that the runway for achieving a soft landing is getting narrower. kathleen: and the risk of recession is growing. it's a clear message. this blog talked about how the outlook has darkened, they will cut it. they had already cut it

substantially. at the beginning of the year they were looking for 4.4% gdp growth. things are picking up. then, they cut it to 3.6%. now they are going to cut it again. when the director for strategy and review spoke yesterday, she said she is seeing shock aftershocks hitting global growth, surging food and energy prices, particularly after the war in ukraine. slowing capital flows to emerging markets is that strong dollar. the pandemic is not over yet. the slowdown in china. all of these things are why they are cutting global growth forecasts. she sees a bigger risk of recession this year and an even bigger risk in 2023.

they are bracing, they are having to get ready for this. they still want central banks to hike rates. shery: given the recession risks, is it not surprising the boj and ecb are moving more slowly? kathleen: absolutely, but they are the outliers. we look at dollar-yen, some of the lowest levels since 1998, and we know the governor has made it clear he believes the economy needs this stimulative policy. the short end, yield curve control. no matter how aggressive other countries are getting even in asia and the philippines, they are going to keep policy as it is even as the yen remains weak.

for the ecb, they are going to stay gradual. that policy bond is getting worse, because the inflation rate is expected to move to 8.6%. the risk of recession is growing. you can't have a war on your doorstep, gas supplies cut off and not worry about your economy. again, they are expected a 25 basis point hike, we hope to get more specifics on the policy tools from currency outflows and financial instability as investors react even to a 25 point. it's not the aggressive rate hike. haidi: our asset asia editor and kathleen hays.

let's k2 vonnie quinn. >> the u.s. energy envoy says he is confident the gulf will produce more. the senior advisor told cbs he is confident we will see more steps in the coming weeks. earlier, saudi ministers said policy decisions will be taken according to market logic. the comments came as president biden wrapped up his trip to the kingdom. biden said the saudi's shared an urgency to increase supply. however, the saudi minister played down the idea of any agreement. >> is not about an agreement. it is about the kingdoms policy of working to ensure there is adequate supply of crude oil on the market. we follow the supply and demand

situation very carefully, and we determined that if there is a potential shortage, we would increase production with our opec partners. >> the south korean finance minister downplayed risks of a recession saying he expects inflation to peak in october. the bank of korea raised benchmark rates by 50 basis points. they were speaking to bloomberg at the meeting in bali. >> unless global oil prices soar higher, i expect inflation to stay elevated before it starts to gradually settle down. exports are recovery in korea at the moment. at least for this year, i am not expecting a recession. >> public cases in china continue to climb. authorities say the situation

remains severe. it is the highest since may. macau is extending a citywide shutdown until july 22. almost all businesses have been shut since july 11. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. shery: still ahead, one of the world's leading giants is pushing to go green. we will hear more from l'oreal japan. haidi: next, the risks and opportunities from the soaring u.s. dollar. this is bloomberg. ♪

haidi: there are several key rate decisions do this week, taking a look at some highlights. markets will find out if central banks can resist the global push for aggressive monetary tightening. most economists see the ecb limiting the hike to a mere quarter-point. that decision comes hours after the bank of japan and indonesia are predicted to keep policies unchanged. in china, banks are expected to halt lending rates. shery: we continue to watch the relentless rally in the u.s. dollar. our next guest says that strength reflects u.s. attractiveness.

for more, let's bring in ryan. great to have you with us. let me ask you about consumer sentiment and spending. this chart showing how the university of michigan sentiment improved slightly but still around record lows. does this give you pause? guest: it has to give you pause. the interesting thing is you have got consumer spending still on the rise. you have a very attractive consumer balance sheet. finances are in great shape. that's one reason why we still like domestic companies. shery: where would you invest? guest: in this type of environment, you have to stay large-cap as an overweight. we love dividend paying stocks. you don't want to abandon large tech technology.

some of these companies are possible -- profitable in trading at discounts. haidi: you are saying investors need to be coming to terms with the fact we are probably in for a prolonged period of volatility. ryan: i think so. there are no tailwinds. you have the consumer balance sheet, corporate balance sheets are great. the fed is crystal clear, they want to stamp out inflation and they will be very aggressive. i would not be surprised to see 100 basis points at the next meeting. i think they have to get closer to 4% before the year-end, which is higher than the forecast now. they have to put this is the biggest priority. getting rid of inflation. whatever happens to the stock market is secondary. haidi: what kind of exposure do you have two international opportunities?

you hold some exposure to european and japanese companies. what are you looking for, even for stock tickers the stories are perhaps companies are becoming less idiosyncratic. ryan: the international companies are interesting. they are trading at near recession multiples. the u.s. is not. 16 times, more expensive. for value investors, a lot of them are pointing towards international companies that have nice businesses, long histories of making profitable products. for the majority, we are sticking to the developed european economies. we were dabbling in the emerging markets as well. we are not abandoning international markets because it has been 14 years and i will tell you, typically it's a four-year period between the

u.s.. we are overdue. shery: when you are looking at international markets, how much do you factor in the policy divergence in terms of some of these economies going the other way, ecb, boj, not tightening as fast or even loosening policy like the pboc? ryan: the ecb made it clear that they will make a gradual move. the bank of japan does not have to do much of anything. they are not being nearly as aggressive as the united states policymakers are. that's probably going to lead them to be behind. at this point, that is the path they have chosen and the u.s. fed has decided they would like to be more aggressive with the rate hikes. shery: despite the fact you expect emerging markets to bounceback after the un performance, are you worried about capital outflows?

we know the strength of the u.s. dollar has led to the ms ci to fall 20% this year already. ryan: you have to be concerned. the strong dollar is fantastic. one, it makes the price of imports go down, that's going to help inflation. the strong dollar hurts the domestic company products. if you have a product overseas and 90 have a weaker currency, you will buy that product instead. that leads itself to a weakening u.s. economy which is where we all think we are headed. i don't think that has to be so bad. if you look at past recessions, they have been painful, the most recent was the great recession of 2008. a recession as part of the business cycle. as normal to happen, i don't think it means the world is going to come to an end. it's part of the cycle. haidi: what is the question

you're getting asked the most from your clientele? are you seeing more risk aversion? ryan: certainly. as soon as the markets are selling off, people do not want to be buying stocks, they want to be selling. we are urging our clients to stay the course, know what you own, trust the asset allocation, and if you have the stomach, you have to be buying into this type of market. if you are buying stocks last year, you have to be buying stocks now even if the outlook in the short-term is not good. for long-term investors, you're getting a chance for discounts. shery: good to have you with us. you can get a round up of all of the stories you need to know in today's edition of daybreak. terminal subscribers can go on

mobile, you can customize settings so you only get the news you care about. this is bloomberg. ♪

shery: despite all of the risks of a potential recession being triggered by the fed, banks are seeing the huge benefit of rate hikes. we're talking about net interest income gaining, we have seen a mixed picture when it comes to overall earnings, we are getting results from goldman sachs, bank of america. clear we have seen improvements in lending income, margins, three years of historically low borrowing costs and now finally,

higher low balances are helping these big wall street banks. haidi: we have seen executives getting more confident when it comes to expectations for net interest income. the forecast from jp morgan to morgan stanley all going higher. jp morgan looking at $58 by year end, despite all of these economic headwinds. we heard jamie dimon sounding pretty optimistic last week about the ability of the u.s. economy and business to withstand a downturn. it's a fine balance, because as we see the lending businesses getting that benefit from higher interest rates, you have to wonder at what point that starts impacting on overall loan demands. more earnings kicking off on monday.

let's get you a quick check of the headlines. elon musk says twitter is unfairly pushing for a fast trial and demanding the case be heard next year. the legal teams says the case cannot be wrapped up in four days and needs forensic review of data. this is the first response in court to the claim he is using the bought issue as an excuse to walk away from the deal. singapore says it's been informed shareholders received an unsolicited approach for a holding in a company, but in the stock exchange filing, the casino operator said it's neither aware or party to discussions. shares jumped on friday after bloomberg reported it was attracting takeover interest. meta and amazon are cutting back on planned office expansions. the facebook parent company is halting expansion while amazon is cutting back the amount of

space it intending to lease at hudson yards. many tech firms had been moving towards flexible and remote working options since the pandemic. the marble film thor love and thunder topped the u.s. box office. the movie made $46 million in u.s. and canadian theaters. the film industry came roaring back this summer after two years of closures and delays caused by the pandemic. shery: will you watch it? [laughter] i love all of the marvel movies. thor, i have never fallen in love with the character. anyhow, take a look at futures. pointing higher after the rally we saw on friday. we continue to watch some risks coming from tightening across the board, central banks, we have seen the rally in bank

stocks. the highest since january of 2021. take a look at the currency space. the bloomberg dollar index fell on friday after three consecutive weeks of gains. bullish positioning on the u.s. dollar, surging. the other side of that trade has been under pressure. covid cases continue to rise in china with the situation severe in shanghai. however risks of lockdowns are dragging on growth. plenty more to come. this is bloomberg. ♪ millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction.

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>> recession is pretty likely.

>> the main factors are not only monetary policy. >> i think the debt crisis is a low probability because we have seen the central bank to be supportive, new tools. >> a lot will depend on gas and energy. >> the severe impact on the employment rate. >> negative supply might mean recession next year. >> make the right investment. >> recovery can only happen if

there is no deep recession. >> whether recession is inevitable. annabelle: you would have to say overwhelmingly we had 800 respondents, 84% predicting a recession in the next six months. a lot of factors at play. the war in ukraine. we are looking at what we could see in terms of a debt crisis. 40% of people see a debt crisis in the next six months. quite a shift from the era of negative yields. changing on what would be the major catalyst if we see one, most respondents see a cut off

in russian supplies, anxiety around the nord stream 2 pipeline, currently suspended for maintenance. this complicates the picture for the ecb. the ecb meeting is this week, we seeing no change for more than a decade. even if we get a consensus, we are in negative yield territory. investors and analysts are saying the window is narrowing fast. we are seeing the slowdown so the ecb is going to struggle to change the dial. haidi: new covid cases in china continue to climb. situation with severe. let's get more from emma o'brien.

what is the sense of the scale of the upright? -- outbreak? it serves as a reminder of covid zero, a return to lockdowns is always a possibility. reporter: that's right. we saw 580 cases on saturday nationwide. we are back at that point where we will see more restrictions, lockdowns. keeping covid at a minimum. it's interesting to see where the cases are popping up. in the north, they had locked down the capital, but also in the south where they are seeing

a big uptick in cases going from the double digits to over 100 very quickly. also in shanghai, we are starting to see quarantine. macau, another interesting case, still considering to see cases despite the weeklong shutdown. shery: what will the impact be on casinos? reporter: they have had a tough time covid began. there was a nice period where gamblers were able to come and go quite easily, the shutdown is bringing in no revenue, they are having to pay staff, the shutdown brought into a second week. when we see earnings coming --

haidi: we are seeing outbreaks elsewhere, japan hitting a record, australia and the middle of the new wave. pandemic support payments as so many people are all four. is this just a seasonality kind of thing we are seeing? reporter: covid does come in waves. it has the natural ebbing and decline. countries are on different wave flows. you are seeing almost globally a real uptick, displayed it being summer. people are out socializing, probably spreading the virus. interesting to see how different places are responding.

australia is bringing those payments back but not mandating masks or vaccinations. it feels as though the government thinks people have moved beyond that in terms of restrictions everywhere, except for china. shery: emma o'brien with the latest on those covid-19 cases across the region. we have seen the property sector in china strained, developers feeling the pain, and we continue to see that crisis reaching a new phase. the property bond market seems to be crumbling, when it started with china evergrande, it has really decimated the country's weaker developers and now bonds

are selling off. this would be the nation's second-largest developer by sales, seeing this unprecedented selloff in the bond market area signaling how the $900 billion bond market, the stress has returned to levels we have not seen since june or so. haidi: it's not just the credit market. it's also the banking stocks. bread-and-butter in terms of income. commodities, copper, equities. once again we are seeing an industry which is a reminder accounts for about one quarter of the world's second-largest economy, the number of different sub industries and sectors and how much household wealth is tied up in this given the limitations for chinese households to be able to invest, property is the big-ticket

investment. it's no wonder we are seeing authorities take notice. over the weekend we had a report saying the chinese banking and insurance regulatory commission will be guiding banks to provide credit to eligible developers so they can get these halted instruction projects back on track, expedite home deliveries and potentially try and soothe concerns and anger, frustration from mortgage holders. we will watch this very critical story very closely. that's k2 vonnie quinn. >> the international monetary fund will cut its outlook substantially. the finance chief is grappling with a shrinking list of options. the managing director told bloomberg governments need to seriously target inflation but not in a way that threatens central banks. >> we need to tackle seriously

inflation, meaning monetary policy is tightening. but, fiscal policy could unintentionally go the other way. >> the imf also says debt restructuring toxin sri lanka will resume when the new government is in place. the fund is awaiting the appointment of new officials including the finance minister. the country is facing a power vacuum. the former pakistani prime minister is leading a key vote. the latest results show his party leading in 16 of 20 seats, setting up a possible election defeat for the government. a victory would give the former leader new momentum.

italy says the alliance backing the prime minister has been broken. the central right parties have ruled out being in the coalition. we are told political groups are preparing for a snap election. he is said to address parliament on wednesday. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. shery. shery: we're counting down to the start of trade insole. south korea's foreign minister is in japan for a three day trip. he meets with his japanese counterpart later today. we are awaiting words from the apple supplier, they are considering slashing spending by 25% in 2023 due to weakening demand. the government is selling a total of two 9 trillion one.

haidi: the south korean finance minister is downplaying fears of recession even as inflation hits a 23 year high. they spoke to bloomberg on the sidelines of the g20 finance peaking in october. >> the inflation problem is getting very serious in korea due to international fact is. unless oil prices soar higher, i expect inflation to stay elevated before it starts to settle down. >> you projected inflation would get to 6% and now 7% in the coming months. do you see that coming through? >> there are some people who forecast that, but i think inflation will stay at the 6% level.

it would probably be due to a temporary slump in crop harvests and very brief. i don't think it will go beyond the 6% level. i think it will start to settle down. >> there is a lot of debate on wall street whether or not a recession will take place. do you see a recession this year? >> exports and domestic consumption are recovering in korea at the moment. at least for this year, i am not expecting a recession. the korean economy is forecast to arrive above the potential growth rate. >> you talk about consumption, but we are seeing rising cases of covid. might consumption be impacted and might you have to review your projections? >> the way it appears currently, the covid resurgence will be subdued. we have gained a lot of experience regarding quarantine

policy. the government will do its best to ensure the situation does not become concerning. there will be no economic slowdown due to covid. >> the last few months have been defined by king dollar. there is no stopping the strength in the u.s. dollar, dampening asian currencies. the won is the second worst-performing currency in asia after the yen. is there a reason to be worried? >> like you said, the king dollar phenomenon. the degree of weakening a similar compared to other major countries. i am not concerned about the weakening and itself. the loan strengthening of the dollar can raise unstable markets globally and this can impact our markets. authorities will take

appropriate steps necessary if unstable this grows. >> what is the risk of further weakness and risk of the currency given expectations of such a grading cruises in the u.s., expectations of 100 basis point moves. >> the fast rate hikes in the u.s. may be an inevitable measure for the u.s. to stabilize prices. there is also concern it can increase volatility and other countries. as korea has foreseen such, the central bank raise rates. still, in order to prevent uncertainty from growing, major currency nations should be tightening policy coordination. >> might korea benefit? for the long-term basis, might korean exports benefit? >> we can definitely say a

weaker won we stay mind for -- if it fluctuates, it can amplify psychological unstable most. it is determined by supply and demand and we will respond by needed. >> dollar liquidity is not yet an issue in asia. with janet yellen's visit to korea next week, is there a sense an arrangement might be useful? >> as korea and the u.s. confirmed in may, they will closely talk. while south korea keeps a close eye on volatility. we will cooperate closely with the u.s. treasury. during secretary yellen's visit, i am sure we will talk with all

possibilities open. i think it will be a good possibility to explore various ways and talk closely about markets. shery: plenty more to come on daybreak: asia. this is bloomberg. ♪

shery: equity markets in japan

closed. we are seeing risk off sentiment providing some support for the yen. we will be watching thursday with the boj and investors focusing on rate differentials. haidi: sticking with japan. l'oreal japan is working through startups to make products more sustainable. we spoke to the vp of research. >> with the green science were -- approach, it is around transforming our entire portfolio into a more sustainable set of products. there are two big approaches we take. the first is to transform existing raw materials. the second is harnessing the power of nature to push these

performances to a higher level. we have many examples. what we have been doing in the last few years is working with an approach which is trying to push the boundaries and generating new products and advantages that we can get for consumers. >> you are building strategic partnerships with universities, how is that working? >> it has been great. we just did a pitch event. this was meant to bring in founders of the ecosystem. we believe in japan. world leading material science, biotechnology, everything that goes on. we believe there is an opportunity for startups to work with us.

if you look at the external world, there is a lot more happening. we decided to have a pitch event to invite startups to work with us. >> it's been about a year since l'oreal launched screen sciences in japan. have you made any major breakthroughs? amit: l'oreal has been working on green science for the past couple of years. we have accelerated our programs. if we think about examples that already exist, i can take one example. we have done the modification, working on synthetics, to move into a more biodegradable formulation. we have reached a botanical range, 99% biodegradability. we have worked with suppliers on oil.

working collaboratively with suppliers to bring that into the formula. we have made some progress. it's not the biggest breakthrough, but we are on a journey. >> science is a big part of innovation. so is tech. what kind of new technology are you using? amit: when we think about the company, it's about empowering researchers. tools and techniques that can help them gain efficiency, and at the same time, things they have never been able to do before. one example is the robotics. they are applying and testing benefits. particularly with use products. depending upon the consumer that employee feels, using robots, we can get away from variations.

that is the way we look at tech in general. >> do you do the reverse? do you leverage work done in japan? amit: absolutely. our internal expertise is we have built many years. japanese consumers are one of the most leading edge they have. rating innovation for japan for the worldwide. very much our mission is to take the best of japan. >> i bless you as a business leader. what is the one change you think japan needs now? amit: i can speak from my perspective.

for us, what i would love to happen is to bring in the best of japan, and we have had this we have quite a few collaborations in japan. i think we can bring more japan to the outside world. shery: you can get more from this interview on tv . tune in to hear from the leading names in japanese business. this is bloomberg. ♪

shery: qantas is anticipating a tight labor market. services were canceled in may. they say measures are in place to lessen further disruptions. the acquisition includes $7.5 billion in commercial loans and $32 billion in home mortgages. we will hear from the ceo later on bloomberg. ♪

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shery: we are counting down to

asia's major market opens. we had to another busy week of central bank actions. laggards are expecting to take central stage. those rate differentials, policy divergence in focus. haidi: obviously, we are seeing growth concerns build, that's not to mention worries about the mortgage crisis in china. all of this is building up to be an interesting start to trading. annabelle: the risks to the property market where we are a few seconds away. japan is shot for a public holiday. we won't get any cash treasuries trading.

yields are looking weaker as we see the uptick in u.s. futures as well for the equity markets, we are pointing towards a fairly positive start to the week. we're going to wait a few more seconds. keep an eye on the won because they are at the 13 year low. traders are saying that the risks to the downside coming online, up more than 1%. let's switch to australia area we have the staggered start. we're are continuing to watch the aussie dollar, it is sitting in a tight range against the dollar, still hovering around a multiyear high. yields looking like this. modestly higher. not quite the same result. shery: the ecb and -- the next

guest says he is short on the euro and yen. good to have you with us. is it policy divergence that is going to punish these currencies of central banks not moving fast enough? guest: mainly we are -- we are shorting the euro and dan, because of the divergence. also, the technical momentum trading. we did some -- there is a recession risk on oil prices. we will treat them as a strong dollar play as well. two different similar catalyst on strong dollar. shery: which assets are at risk

from king dollar? what are you watching? guest: to be honest, we are quite cautious on the asia side because of the strong dollar. seems like the market is not pricing into much. if we look at the high-yield bonds, we don't want high-yield exposures. for example, we have been overweighting in early may and start under waiting because of

the sentiment and negative news about the property market in mainland china. at this moment, there is some rebound in asian sentiment, maybe exposure in mainland china asset could be better charge. haidi: how much conviction is there when it comes to equities? it does not feel like any rebound has a lot of conviction behind it. guest: we are playing it a bit cautious. if we look at the 20th national

congress, we are thinking something similar to this year for hong kong equities. during that time, we were talking about the new government , whether they have new players, and we were thinking that the market does not care who will be in charge, but there is uncertainty. we will play a similar game. we are thinking maybe after q4, after the congress, there may be some positive policies coming up.

haidi: fundamentally, if we don't see policy support being restored to the property market with the mortgage payment story, how much damages that do? guest: to be out us, right now we're in the progress of property deleveraging. consumer sentiment. at this moment, we could expect some collateral damage hopefully

that will not cause any big issue, like any black swan. at this moment, the indicator could be a bottom that is better to not invest. unless you are short-term traders. haidi: great to have you with us. let's get you a look at some of the movers. annabelle: checking in on commodities, he had -- we had copper opening. it dropped below the key $7,000 level. recession fears are what is igniting those moves. it's not so much about >> being

driven on the supply side, it's about these concerns around recession. we are monitoring the covid outbreak in china and what that means for the demand. we are continuing to see a drop this morning following president biden's trip to the middle east, this is all on bet so we could see further supply coming into the market. shery: we will continue to watch. let's get to vonnie quinn. >> a u.s. energy envoy says he is confident producers will increase oil output after president biden's visit to saudi arabia. the advisor told cbs he is confident we will see more steps in the coming weeks. earlier, the saudi minister says policy decisions will be taken according to logic.

the comments came as president biden wrapped up his trip to the kingdom. biden has said the saudi shared his urgency to increase supply and heating expects steps. the saudi minister play down the idea of any agreement. >> it's not about an agreement, it's about the kingdom's policy of working to make sure there is adequate supply. we follow the supply and demand situation very carefully. if there is a shortage, we will work on increasing crude oil production with our opec partners. >> south korea's finance minister downplayed risks of recession. cpi rose to a 23 year high leaving the bank to raise rates by 50 basis points. he spoke to bloomberg in bali.

>> unless global oil prices soar higher, i expect inflation to stay elevated until october. exports and domestic is recovering in korea. at least for this year, i am not expecting a recession or rapid cooling. >> covid cases in china continue to climb. authorities say the situation remain severe. macau is extending a citywide shutdown. the gaming hub is struggling to contain its worst ever covid outbreak. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: still ahead, we will hear from the canadian finance minister for her view on the

state of the global economy. another exclusive one-on-one, the imf director talked about help from pakistan and sri lanka. this is bloomberg. ♪ as a main street bank, pnc has helped over 7 million kids develop their passion for learning through our grow up great initiative. and now, we're providing billions of dollars for affordable home lending programs... as part of 88 billion to support underserved communities... including loans for small businesses in low and moderate income areas. so everyone has a chance to move forward financially. pnc bank: see how we can make a difference for you.

>> we need to tackle inflation,

meaning monetary policy tightening. fiscal policy could unintentionally go the other way. shery: the imf managing director speaking exclusively to bloomberg at the g20 meeting in bali. the imf is said to cut its 2022 global growth forecast substantially, for the second time this year, kathleen is here, pretty grim picture. kathleen: it certainly is. we are getting this from around the world. central banks are worried, the imf is worried. the fact they are ready to tell us the outlook has darkened, but we know now if they flash --/the forecast, at the beginning of the year it was 4.4%.

3.6%. almost a full percentage point. in april, now, they are going to cut it even further. we don't know how much. we know >> on their list of the challenges facing the global economy. in fact, the director talked about shock aftershock as she spoke on a panel. surging food and energy prices. the pandemic continues to hobble economies around the world. the slowdown in china, what that means for supply chains. slowing capital flows. that is a big worry. we have heard that for months. she talked about a risk of recession this year and then

even bigger risk in 2023. central banks need to tighten policy because inflation is bedeviling the global economy. haidi: the china central bank pledging more support, we know about the various woes of lockdown. the issue when it comes to the property market. what are we expecting? kathleen: it's another example of a country with tough things on its plate. goldman sachs, they just cut their forecast to 3.3%. the growth target is 5.5%. the economy grew 0.4%.

it's far. what can the pboc do? that's the question. what does he mean by more support? the focus has been on spending, spending on infrastructure. in terms of rate cuts, the loan prime rate is set on wednesday, even there the pboc is not expected to do anything. that is what economists are saying. shery: kathleen hays. we have been talking about the imf. we keep seeing these economies struggling, and they want to make sure they are on track when it comes to potential sovereign defaults. restructuring talks with sri

lanka should move quite quickly once a new government is in place. >> we have a good technical engagement with the counterparts in sri lanka. we hope there is wisdom to move the country out of this terrible crisis. the minister of finance and i am confident we will move the discussions. a lot of the technical work has already been done. >> what amount of debt restructuring is needed for the imf to see that sri lanka is on a sustainable path? >> we have already seen the seriousness to what it will take to have that resolution.

we have been reaching out to the biggest creditors. it would be better for the creditors to step forward, because then they have a better chance for the country to recover and recoup more. >> as it stands now, how much is pakistan at risk and how are you assessing the likes of egypt, tunisia heading that way? >> we just created -- completed step level agreements with pakistan which allows us to reinforce reserves. on that basis, you expect some additional support. this is not to say the country is out of danger. work ahead to continue there is

stabilization that allows pakistan to return to where they were one year ago. we have a similar engagement with egypt and tunisia. those countries have different problems, but one thing is common they are working quickly to stabilize economies hit by shocks. i am very keen to get our membership to recognize that ultimately structural reforms, macroeconomic fundamentals, this is what they need for a world of more frequent shocks. >> the first african nation to defaults, go bankrupt during the pandemic has been waiting for debt restructuring until now.

china has not been on board. what is the status of that? >> i'm cautiously optimistic for zambia, progress is being made. even the committee for ethiopia's meeting for a month. that has been my message for the g20. it's paramount for the framework to deliver on its promise. >> before we let you go, a final question on dollar strength. no signs on it abating. how concerned are you? i we underestimating we can see and unraveling of emerging-market currencies? >> for now, what we see is the depreciation of many currencies. let's remember the majority of

emerging markets have learned a lesson from prior crises. they are in a better position overall. this being said, we have to be seriously focused on how we can get from the situation we are in now. the number one priority as we have to get to price stability again because if we don't, investment suffers, and the foundation for growth is not where it has to be. >> it's a higher rate environment. surely, that poses a risk. >> this is correct, we have seen this year $50 billion in outflows from emerging markets. this is about as much as inflows

were for the whole of last year, last year was a very good year for growth. it is correct to be concerned, and for this reason, what we are hoping to see is the u.s. continuing to carefully communicate what their intentions are, but also to get on top of the inflation problem as quickly as possible. haidi: the imf directing manager spooking exclusively to bloomberg at the g20. let's take a look at how it is shaping up when it comes to the trading session this week in europe, it is ecb week. european stocks rebounding into friday, traders debating how much the fed will hike rates. we saw the italy president rejecting the offer from the prime minister to resign. 50 futures flat, the ms up a

percent, -- 1.8%, dax futures, the euro is sitting a little bit higher. the ecb decision will be the dominant events. investors will be watching for details of the crisis aimed at containing the fallout from italy as well as data including consumer numbers as well, also watching for the shut off in russian gas. that could come this thursday. lots more to come. this is bloomberg. ♪

shery: take a look at how asian stocks are looking excluding japan. we are seeing tech and materials leading gains. we have some outperformance

recently given yields have come down a little bit. the 10 year is tread -- heading towards the 2.9%. we are seeing a rebound across asia, especially with new zealand inflation accelerated at the fastest and 32 years. haidi: let's get a check of the headlines. and that is buying banking operations, seeking to raise $2.4 billion of equity to fund the takeover. it adds a profitable retail and lending network. bloomberg intelligence says profitability should get a boost. qantas is anticipating challenges in the coming weeks. passengers have lashed out at the airlines. more than 7% of domestic services were canceled in may.

i chinese battery maker is considering locations in mexico for a manufacturing plant. bloomberg learned locations are near the texas water and the company is planning an investment of $5 billion. shery: coming up next, the u.s. says it's confident gulf nations will pump more oil despite president biden's failure to get a firm deal. we have more ahead as oil prices continue under pressure with wti and brent headed down in the asian session. this is bloomberg. ♪

shery: we are getting the

latest numbers out of singapore and for the month of june year-on-year is growth of 9%, much higher than expected. we had seen the previous month also the acceleration in those numbers, coming in much stronger-than-expected. that was revised slightly down to 12%. month-to-month basis is a growth of 3.7% for the month of june, really beating expectations. the previous month of may was downgraded to 2.8% growth month on month. still pretty strong given strong demand overseas and it comes to singaporean exports. electronic exports year-on-year, a growth of 4.1%, a slight easing from the 12.9% we saw in the groovy is month. suffice it to say these are very strong numbers, and following the monetary authority of singapore last week unexpectedly tightening monetary policy as we continue to see inflation pressures with strong growth as

well. haidi: yeah, of course a big part of those inflation pressures is energy costs. u.s. president biden wrapping up a politically risky trip to saudi arabia without a firm commitment for a production hike that would ease gas prices at home. saudi arabia says a decision is for the broader opec-plus alliance to make. >> it is not about an agreement, it is about the kingdom's long-standing policy of working to ensure that there is adequate supply of crude oil on the markets. and we fall the supply and demand situation carefully and we determined if there is a potential shortage that we work on increasing crude oil production with our opec and opec-plus partners. haidi: let's get more from elizabeth low. what is a possibility we will

see opec-plus pumped more oil given we heard from the senior advisor for energy security saying he is confident that after this visit we will see more output? elizabeth: we're seeing a very confident u.s. team. president biden said he is inspecting further oil production increases. although there were no pledges from saudi for a production hike. the upcoming opec-plus meeting is august 13 where we will see if this materializes. any increases are expected to be pretty modest amid supply disruption to the region at the moment. we are also seeing output has fallen to low levels of just over 2 million barrels. under the existing terms of the opec agreement, saudi production is expected to reach 11 million barrels a month. so it's quite unlikely they'll

be able to ramp up production. another thing is also this is coming at a time demand concerns are rising globally and oil has been on decline for a few weeks. shery: i was going to ask, how much of the price of oil is because of the supply issues versus demand concerns as well? elizabeth: i think both of them are definitely factoring in at the moment. if you are looking at oil right now, the supply and demand fundamentals are still pretty tight. but right now demand is one of the issues on the horizon. i think the market is reassessing this. there are signs demand disruption is in play right now. so -- the market is still pivoting on that. we will see more volatility this week. shery: elizabeth low with what is affecting oil right now. let's now get to vonnie quinn. vonnie: international monetary

fund will cut its global economic growth outlook substantially in its next update, as finance chiefs grapple with a shrieking list of options to address worsening risks. the managing director told bloomberg governments need to seriously target inflation, but not in a way that threatens the work of central banks. >> we do need to tackle seriously inflation, meaning monetary policy is tightening. but fiscal policy could unintentionally go the other way. vonnie: the imf also says debt restructuring talks with sri lanka will proceed quickly once a new government is in place. the fund is awaiting the appointment of new officials including the finance minister. the country is facing a power vacuum in government following the president's resignation after months of protests. the former pakistani prime

minister imran khan is leading a key vote in their most populous -- it's setting up a possible defeat for the government. a victory for him will give the former leader renewed meant him to pressure the government to hold early elections. italy's league says their alliance has been broken. the two center-right parties ruled out the possibility of remaining in the governing coalition. italy's political groups are preparing for a possible snap election. draghi is set to address italy's parliament saturday. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. haidi: new covid cases in china continue to climb. authorities in shanghai say the situation remains severe. let's get more from emma

o'brien. what is the scale of the outbreak at the moment and why are we seeing cases continue to return to china? emma: we are seeing in shanghai cases coming down but not the vigilance. we just learned that in two very big central districts of shanghai they are going to do two rounds of mass testing this week, even as those case levels come down. it shows the underlying vigilance that city is on despite emerging from that brutal to month lockdown some weeks ago. more broadly in china, the situation is looking more concerning. you are seeing more than 500 new cases over the weekend. particularly in the tourist province in the south, you have more than 2000 tourists reportedly trapped on the coast

there, because that was put into lockdown over the weekend with cases going from double digits to more than 450 quite quickly. so, a bit of a hotbed in china, as well as in the north, a province being locked down for a week. shery: what about macau? we are hearing that the shutdown is being extended. emma: that is right. they extended that one week shut down by another week, which means the casinos will remain closed. there will be two weeks by the time we get to july 22 when they will review this again. so, a pretty big hit to businesses that have had a moribund two weeks, a few periods where chinese tourists

could come and go again. it will be interesting to see earnings come out over the next couple weeks starting with las vegas sands later this week, and see how this shows up there. haidi: and at the same time we are seeing outbreaks swell elsewhere. here in australia in the middle of a wave. on japan on saturday, a record 110,600 new cases being recorded. emma: that's right. you are seeing record huge numbers, hundreds of thousands of new cases in many places. japan as you mentioned, australia, parts of europe, the new omicron subvariant is tearing now through the world and cresting in terms of these virus waves. but nowhere are you seeing the pushback where you are in china, which continues to pursue that covid zero policy of trying to crack down and eradicate the

virus with stringent curves like lockdowns and mandates around testing. shery: emma o'brien there. japan is away on holidays of course we are setting up for the china open. what are you watching? annabelle: we have chinese markets opening in one hour. picking up on what emma was saying about the risks of the hard-line stance we are seeing towards covid zero in china, that is playing into the stock market as well. we have seen a run-up into chinese stocks. the shanghai comp seeing its biggest two day drop in two months on friday, sitting right now at the 50 day moving average. the issue is these covid zero risks, the lack of a strategy that we have for an exit. goldman sachs economists pointing out a lot of momentum or anticipation had been building into this huge meeting for communist party officials

around october or november. we could see relaxation after that, but the elderly vaccination rate is still not picking up. let's look at some other markets because we have japan is shut today for public holiday. we are seeing momentum here still building to the upside following what we saw in wall street in the previous session. a lot of expectations we might not need to see that 100 basis point move from the fed. we are seeing inflation expectations pulling back in that latest university of michigan survey. positive for markets here in the session. haidi: still ahead, candidate as finance minister says inflation has peaked in the country. that is entirely reasonable to hope for a soft landing. this is bloomberg. ♪

haidi: candidate has joined the four point breaking -- hiking club. to find out more we spoke exclusively with the canadian finance minister and deputy prime minister at the g20 meeting in bali. >> look, i think that it is important for everyone to appreciate. there are a lot of truly

external not economic factors out there that are shaping the global economy. putin's illegal invasion of ukraine continues to be a huge drag, and covid is still out there, and we saw how devastating covid has been to date. a lot of external factors. what i will say when it comes to canada he is we have a lot of fundamental strengths right now. inflation is certainly elevated and i would say is our biggest concern right now. but the bank of canada has been acting forcefully. and i think it is entirely reasonable to hope for a soft landing. >> has inflation peaked in canada? the estimate is about 8.4%. >> very well informed, haslinda. when i stopped being a journalist i turned in my crystal ball.

and i know better than to make predictions. but what i will say is inflation is absolutely elevated in canada. it is far too high. it needs to come down. canadians and all of your international audience and investors should have a lot of confidence that the bank of canada has the mandate, the tools, and the will to bring inflation down. and that the underlying fundamentals of the canadian economy are very strong going into this challenging time. haslinda: do you think the canadian government should bear some responsibility for escalating inflation given your fiscal swing, which has been one of the largest ever? chrystia: actually, this year we have the lowest deficit in the g7, and we have the fastest rate of fiscal consolidation. if the court question is, is it important for fiscal policy to work together with monetary policy to bring down inflation, i agree with that.

we spent a lot of money to get canadians through it and to prevent economic scarring. and i feel very confidently did the right thing and that it worked. haslinda: you talk about wanting to support canadians. continue continue to support them with -- can't you continue to support them without raising inflation more? chrystia: this is why we tabled a very fiscally responsible budget with the lowest deficit in the g7. so i absolutely believe that now is a time to have a real eye on fiscal responsibility and that is what we are doing. haslinda: you talk about the bank of canada doing 100 basis points. that is a huge move and the first one perhaps we are seeing. do you agree with the pace at which the boc is moving? chrystia: i am the finance minister. i am not governor of the bank of canada. and it is not my job -- haslinda: you could see a

recession. chrystia: so, the government really respects the independence of the bank of canada and the important role as an independent institution it plays in our financial system. the bank of canada has a job to do and it is doing its job. in terms of the canadian economy, at a time when elevated inflation is our biggest challenge, and the thing that i worry about the most, jobs, we have an incredibly strong labor market, incredibly strong labor force dissipation. so it is a -- labor force participation. so it is a challenging time. don't forget that now was a time when being a producer of natural resources, when being a producer of agricultural commodities, and those are two strengths of the canadian economy, is a real strength in the global economy today. haslinda: i want to talk about the digital tax. given that the global tax deal is now in limbo.

chrystia: the oecd tax deal is historic. it really moves the international tax system into the 21st century, into a world where we have an economy of cliques, not just bricks and mortal. -- clicks, not just bricks and mortar. the whole idea of multilateralism is facing a lot of challenges. the fact that this group of countries, overwhelming majority of the world economies were able to reach an agreement is huge and transformative. is it going to be hard to put the deal in place? for sure. is there more work to do? for sure. but i really believe in positive intent. i think we have to really work hard to make this happen and canada is very committed to that. shery: chrystia freeland

speaking to bloomberg. next, the risk of a national period of financial deglobalization is hunting china, and xi jinping's own policies may be to blame. this is bloomberg. ♪

shery: here is a quick check of the headlines. elon musk's lawyers say twitter is unfairly pushing for fast trial and are demanding the case be heard next year instead. the legal terms as the case cannot be wrapped up in four days, as twitter claims, and instead needs forensic review of large amounts of data. this is musk's first response since walking away from the deal. singapore says it has been informed that the controlling singapore received an unsolicited approach for his holding in the company. but in a filing sunday, the casino operator said it is neither aware of it, nor party to any discussions. shares jumped friday after bloomberg reported it was attracting takeover interest. meta and amazon are cutting back

on planned office expansions in new amazon is cutting back the amount of space it intended to lease from j.p. morgan and hudson yards. many tech firms have been moving towards more flexible and remote learning options since the pandemic. haidi: money managers now say reasons to avoid the country outweigh incentives to buy. let's ring in charlotte yang. a lot of this risk aversion coming from the property market, the refusal of mortgage holders to make payments. there are hearing the chinese banking regulator is telling banks to provide credit and extending credit to eligible developers so they can complete the projects and develop -- deliver on the project for the buyers. we know homebuyers stop paying mortgage on at least 100

projects across 50 chinese cities. what are we watching out for next and what is the latest that we know is happening? charlotte: what is happening is the intensifying crisis, investors are definitely worried, especially the global foreign investors. so they are watching closely as to what officials are going to do. we have seen housing authorities have met up with financial regulators and banks over the past make holding emergency readings on what to do next. investors are definitely watching for close signals from authorities. also going to other cities following the same pattern, if this might be spreading the crisis into the broader financial system. if you include the connected industries it takes up over a quarter of the country's economy, so the property is

definitely a focus for this week. shery: tell us about how interconnected all these sectors are. we saw banks taking a huge hit as well. how are investors reacting to the latest on this property crisis, and how many other sectors could be involved as well? charlotte: we have seen in the past week when the headline comes up the one it takes a hit is the property sector and banking sector because investors are concerned about loan exposure. if you look down the supply chain are sectors where we see commodities as well as the construction sector errors. those companies along the chain could also be affected another thing we are watching is because authorities over the past few months introduced stimulus measures hoping to boost homebuyer confidence in the sector. but if they are saying that, the

-- it's more unlikely for them to keep confidence in the sector going forward. shery: charlotte yang with the latest on the property prices and how it is really affecting everyone in china, including the homebuyers and banks as well. take a look at what we are watching at the opening hong kong and mainland. banks in focus after the banking and insurance regulator urged banks to meet legitimate the man's and help stabilize the real estate market. haidi: we are watching shares of chinese lenders as well. the nation's banking and insurance regulator urging those banks really to potentially provide lines of credit so these eligible developers can deliver on these overdue projects and perhaps try and restore some confidence to the sector. n macau -- in macau, the

government extending the citywide business shutdown. the world biggest's maker of batteries for electric vehicles is considering at least two locations in mexico for a manufacturing plant to supply the likes of tesla and ford. coming up in the next hour, we will discuss the outlook for chinese macro fixed assets. that is it for daybreak asia. markets coverage continues as we look ahead to the start of trading in hong kong, shanghai and shenzhen. stay with us. this is bloomberg. ♪

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