call right now. (upbeat music) heidi: we are counting down to

the major market open. shery: walmart is cutting the future forecast. china is angry about the nancy pelosi taiwan visit between -- after they call between president xi jinping and president biden. a warning for the eu ahead of colder weather. heidi: we are seeing fed quarter gdp expanding .7% against the estimate of .4%. two point 9% headline number for

the second-quarter gdp. we are also seeing that as a bit of an acceleration from the previous quarter. a quarterly basis and the gdp year-over-year almost matching the previous quarter's 2% pace. we continue to see the won seeing some weakness as questions remain over the resilience. some signs of strain going through two major economies in asia including south korea at it comes to decreasing demand for goods. the chinese economy, we are watching the won in terms of the reaction when it comes forward. shery: we have so much weakness around the korean won. annabelle: really it does

point to the pressure on the bok. the global growth fears we have seen in the economy, the. we are having in asia because we did get the profit outlook cut from walmart in the past couple of hours. we are seeing chicago nikkei futures lower, australia is flat. we did have a gdp number from korea but also japan. we get producer price numbers as well as what you can see on the chart. this is looking pretty subdued across the region. traders are in wait and see mode. more volumes are at the lowest levels of the year. the trading range is at july or june lows. heidi: we have seen yields

rebounding in the u.s. session. around 2.8%, posing a plunge of 80 basis points. stocks were mixed in the new york session. we are seeing them under pressure. show -- show u.s. futures. walmart was out. u.s. stocks were down today. heidi: it is the energy as we go into the fed, make a tech earnings as well, apple is one to watch with the recent price discount scheme in china. a looming recession risk, let us try to make sense of all of these. our editor of economic and

policy editor and our commodities strategist are with us. how are we seeing market pricing as we get into the fed decision? >> i think one point that needs to be made is about liquidity very low at this time of the year. we know that with the summary in the lower atmosphere -- hemisphere. you also have a divergence of views on whether the market has found a bottom. you have morgan stanley saying that bulls are delusional, the decline is to come. you have some saying we have an earnings season in the u.s., it is not as bad as expected. you do have the fed tomorrow, we know that they are going to hike. there is uncertainty on how they are going to hike, but rates go higher.

elevation -- inflation at elevated levels. you do have investors generally at the moment really sitting on the sidelines plus the technology earnings being closely watched. shery: we are watching treasury yields all over the place with a rebound today. >> we did. we do have a lot of points coming up, sales are coming to the market this week. that is a reason why you saw the yields rise. you also have investors saying that perhaps they are not concerned the fed can bring down inflation. the markets and traders have gone a little bit ahead of themselves, expecting a rate cut next year.

all of those came together and offered the plunge in the treasury yields. we saw them head back higher overnight. heidi: we have some pretty divergent views from wall street when it comes to the view from the fed. >> it has become the foundation for some bullish bets. let us dive right into this. being quoted in a bloomberg story saying that he thinks sticky inflation will keep the fed hawkish, hiking rates, we expect as a 75 basis brightpoint height, they hiking into a recession. policy will come too late and there is not any bullish signal here. the head of wealth management says this is a bear market rally, wishful thinking. when you go to j.p. morgan chase, he thinks inflation is speaking already. the fed will balance -- give to

a balance policy. it has not happened yet. inflation is one part of it. it is not enough for inflation to peak, it has to start coming down repeatedly on the headline and the court. on recession, it may happen. look at the national bureau of economic research, the recession trackers, this does not tell us where we are going, their indicators suggest we are not there yet. we were talking about investor'' bets. a lot of this is writing on -- a lot of investor's bets are riding on this. shery: let me turn to europe. we see more recession concerns

in europe as well. the ecb keeping the door open to another 50 basis point rate hike. >> the council board member said the frontloading that happened, he does not think it is over yet. a significant september rate hike is possibly in the works. another said that they will move in a gradual way, a step-by-step way. they are not moving slowly, but they will do it that way. what is the latest on the economic front? the recession risk is rising in europe's biggest economy and that would be germany. the recession probability is up to nearly 50%. that is the same for the u.s.. finally, the business sentiment survey came in today. it came in the weakest since the

pandemic. that is why people say that the recession is coming for europe, too. heidi: nord stream resumed, we see capacity being cut because of turbine maintenance. what is the worst case scenario here? you are seeing some expectations are warnings we could see europe running out of gas by february if this perfect storm scenario continues? >> i think we are close to the worst case scenario. a war in europe, russia cutting off supply. they need money and leverage. if they cut off completely, they do not have leverage. european gas supplies are on par and they are 20% above where they were last year. the spikes are a bit higher than the prices now. u.s. gas is catching up. i think what we are seeing been described as a virtual guarantee

of the global recession. hiking rates in europe because the u.s. is catching up. the copper is starting to collapse, corn is going down, lumber is collapsing. we see the beginning of the end of a big geek and a correction in commodities. shery: how much of that being the china story being factored in? >> china is not so much china locking down, it is one person, being much more autocratic. the negative sentiment out of china. china is in decline, incremental decline, you see copper and metals and you never have good commodity rallies without china expanding and a weaker dollar. we are getting the opposite and

central banks being aggressive. i think what we are seeing is the beginning of that plunge. if the stock market keeps going up, the fed keeps tightening more. shery: great to have you buy for our top stories today. do not miss our special coverage of the fomc decision. it is 1:30 a.m. in hong kong. but us get to vonnie quinn -- let us get to vonnie quinn. >> china is getting prepared for nancy pelosi's possible visit to taiwan. they have not ruled out plans to visit taiwan, no final decision has been made. it could come days after an expected call between president biden and xi jinping. china is forcing the biggest companies to operate within a closed loop for seven days as the southern manufacturing hub bottles a covid outbreak.

operations are limited to employees living within a closed loop or bubble, allowing no contact with other people. tougher stances on china in a battle to become the next uk prime minister. one says china is the largest threat to britain, proposing measures to maintain -- lesson china's influence. >> we should be cracking down on those types of companies. we should be limiting the amount of technology exports we do to authoritarian regimes. >> global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. heidi: still ahead, the anticipated rate hike from the fed is deepening anxiety over a u.s. recession. look at how that could impact

currencies. shery: the ceo tells us what is needed to bring u.s. inflation to an acceptable level. this is bloomberg. ♪

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>> the trigger will be a recession and a recession is not immediate but it is severe and protracted. >> bring prices down in a way that does not give up all of the economic gains we have made. >> the third and fourth quarter will be quite bad, it may be the company may stagnate or fall into a recession. >> the signals are note, can i be a top landing? >> a recession for prolonged pain. making the acne longer and longer. stretching out over years. shery: laying out the risk of recession and how bad it could be. our next guest says jay powell is facing a similar challenge to his predecessor. let us bring in george.

good to have you back. we continue to see recession probability by economies rising. we are looking at this graphic for our viewers showing how recession probability for all of these countries are surveyed by bloomberg of economists, is it pain in the short term? >> the pain in the short term is worth it for a reason. it is sociological and i think political. inflation is the reverse robin hood. it robs four people much more than the wealthy -- poor people much more than the wealthy. the fed is aware of that. i worked at prudential insurance company, paul was on the board. to kill inflation, kill the snake.

you have to cut the head off the snake and show it to people so that they understand that the snake is dead. i think we are going to live through the same sort of instrumentation by the fed where they bring inflation down and they will show everybody it is down and it is not going to be endless. shery: the market reaction will be big. you are saying that you are looking for downside but not calamity. you have a more optimistic view of how the markets will eventually settle? >> i think the markets are going to end lower. a former colleague was very bright, he said you should not bet against it. i will in this case. earnings forecasts come down and come down quite a bit over the

next quarter or two. there is not the amount of leverage in the world's economy that we have in 2008 and 2009. you do not have the double edged sword of excessive leverage eviscerating companies, people, and jobs. it will be more of a tropical storm that a total hurricane -- than a total hurricane. heidi: when you talk about the jerome powell moment, do you suggest he has to choose which one of the dual mandates is the bigger batch of greater importance? what does that mean? how can they cut off the snake and show it when markets are betting on the fed? >> the fed will talk about balance and that is smart.

what the fed will do first and foremost is to bring inflation into the united states to 3% by the fourth quarter. they will do that by expected and highly likely 75 basis point increases. 50-75 points at the next two. also by ending quantitative easing, getting into quantitative tightening by selling off or by letting all of the excessive portfolios so often to the market. the fat is serious, it will stay above inflation. it is also the right thing to do. even though it will be so much pain economically. heidi: when it comes to crypto,

a lot of investors are being gripped by an existential crisis when it comes to two fundamental value. -- true fundamental value. where do you see the opportunity to buy in and what role does crypto have going? what role does it play in a balanced portfolio? >> so i was something of a -- i think crypto does have a built in investment and a speculative role in a portfolio. you can make money on it. the other is you are going to see the debasement of currencies. people who are fundamental investors like me are probably going to want to own bitcoin and the other crypto's as a part of their portfolio.

i would advise buying going or ether on the way up, not trying to pick out the pace. instead of it improving, they could easily fall on itself. by the crypto's as they are going up in price. you will have a better probability of a favorable short-term outcome in my estimation. heidi: great to have you with us. you can get around up of the stories you need to know to get your day going in today's addition of daybreak. terminal subscribers can to dayb . customized settings so that you can see news on the assets that you care about. this is bloomberg. ♪

heidi: we are counting down to

the start of trading. temperatures soar in japan to unprecedented levels, some insurers have begun offering keystroke coverage. hajime takata signaled his support for monetary stimulus. we are also on the lookout for the june ppi numbers. the boj minutes are due later this hour. in south korea, it is the second day of parliamentary hearings. economy related ministers will take questions from lawmakers. these are the earnings who are watching from the corporate side. heidi: a big day ahead. let us get a quick check of the latest business flash headlines.

bankers backing the buyout of citrix, a new debt plan to soften losses. that includes a putting a in a billion-dollar go-between themselves, private credit funds, and other investors. other big changes may also be necessary as credit conditions remain challenging. while mark tumbled in late. apricot is profit outlook for the second time this year, citing the need for lower prices to cycle out inventory. adjusted inventory is 15% in the fiscal year. consumers are shifted to spending on necessities. apple has listed discounts in china before the lord of the new generation devices. it will take up to $89 off of the topline device for are days. this comes as china's economy struggles.

herding domestic sales of smartphone brands. tesla has boosted spending plans. the ceo has called tesla's new plant a new money center. it will spend a 6-8,000,000,000 dollars through every year through 2024. shery: take a look at the markets, we watch the dollar strength or weakness in the last three sessions or so. the bloomberg dollar index, the aussie unchanged at the moment. we watch offshore yuan with weakness on data and the yen holding at the 1.36 level. 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

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shery: the possibility of

nancy's below key -- nancy pelosi visiting taiwan is stoking tension. let's get more from stephen engle. what do we know about this possible trip? stephen: this would add more to the tension between china and the united states, and we are not sure, officials have not confirmed whether nancy pelosi's visit will include a stop in taiwan. nancy pelosi said it is necessary to show support for taiwan. that does not mean she will make a stop there. it is rumored she would do so, in the ministry of foreign affairs in beijing was asked about that possibility and the hawkish spokesperson said china

is getting prepared for that possibility. he did not say what would happen, what retaliation from beijing would happen, but he did say the united states must assume full responsibility for any severe consequences. he was also asked about his positioning or beijing's positioning on the possible visit, his wording is stronger than in the past. he said it would be right to assume so. there is speculation that she will show up at some point in early august, but it is a guessing game right now. it would be the highest level visit led by a house speaker in 25 years, at the time where tensions are fraught.

haidi: despite it being -- how does it fit into the fact we have been hearing about a potential conversation? stephen: joe biden is expecting to hold a video conference call with president xi jinping by as early as this week. taiwan will likely come up, but i think the focus of these conversations will be on potential relaxation of tariffs. that would help alleviate inflation. the backdrop is going to be the geopolitical concern both countries have, taiwan, north korea, definitely the geopolitical situation and war

in your rain. haidi: stephen engle there with the latest. let's get you to annabelle. annabelle: we are about less than a half-hour away from the open of japan and korea. we saw the benchmark dropping to the lowest level in four months, the 10 year going as low as .18%. this is over fears of a global recession. spi security says this battle around yield curves, the boj, traders who have been filling securities are forced to buy them back even at inflated prices. they were somewhat alleviated, we had gdp numbers coming out from korea. we saw the number for the year coming in at 2.9%, higher than what economists had been expecting.

household and government spending whiskey, that helped to absorb the hits we have seen from the war in ukraine as well as rising price pressures. keeping and i am what we continue to see happening in the chinese economy, we are starting to see south korea and germany posting rare trade deficits with the world's second-biggest economy, what is key is the slowdown in imports we are seeing in china in terms of high-tech products, mechanical, electrical goods. let's get to vonnie quinn. >> the european central bank a not be done with interest rates. a councilmember told bloomberg the rate increases needs to be quite significant. the ecb is trying to reduce inflation four times its target. russia is reducing the flow of gas to germany. gazprom says it will cut

shipments to 20% of capacity, blaming maintenance issues. it's one of six made -- the reduction is a troubling prospect for the eu. president biden's doctor says his covid-19 symptoms have almost completely resolved. kevin o'connor said the president is experiencing some nasal congestion. biden tested positive last week. he is being treated with paxlovid. federal prosecutors have charged nine people with insider trading including a former member of congress. they were accused of passing information. a former republican congressman is accused of trading on complement so information. -- confidential information. 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.

haidi: let's like the -- take a look at the dollar climb. when you take a look at the relentless strength we have seen in the greenback, are some of those drivers starting to fade? guest: yes. i think the dollar has had a fantastic run on the back of the market pricing in the fed rate hike. that driver is gradually winding down and we are getting new growth drivers, that is pretty much the global growth slowdown story. if you look at u.s. dollar performance, the u.s. dollar is quite mixed. it has been -- this is as fears

as a global growth slowdown. haidi: where do you see the biggest pressure points as we get the 75 basis point move this week? alvin: as the fed hikes further, it's not just this week, it's beyond that. anticipate the korean won will bear the brunt of dollar weakness, the korean won has been a major performer among asian currencies. it is acting as -- technology

stocks to new to weaken. shery: i cannot imagine the wall him surpassing that level. what about the japanese yen? alvin: dollar-yen, we do expect it to have higher. bond yields are glowing -- moving lower. it will take some of the pressure off dollar-yen. on the flipside, as global bond yields come under pressure, as growth fears mounds, that will take off some of the pressure from dollar-yen.

nonetheless, we anticipate dollar yen trading well two 140 by the end of the year. shery: are you expecting similar market reactions like we saw last time? alvin: this week, the market is expecting 75. based on fed speak, it looks like what they're aiming for. that is a surprise in terms of expectations, it's going to be beyond the rate hike, so we are talking about the rate hikes priced into the year-end. the market is pricing in 3.5%. if that does get ramped up further, if inflation does not come off as quickly, then i think definitely there is a lot

more upside. the global growth slowdown will bring exchange rates higher. haidi: is the renminbi still in anchor when it comes to asia em? if you take a look at exports and imports, i wonder if there is further downside. alvin: as you say, the exports picture looks cloudy now. china's economy itself is heavily clouded going forward. consumption is weak, it remains

fragile. the one shining spot for the chinese economy currently is the export sector. one can anticipate policy tools to help support growth, and that means further exchange rate depreciation. shery: we thought commodities curiosities -- currencies would be immune to any pressure, aussie-dollar, malaysia. now with commodities under pressure, where does that leave us? alvin: it's a mixed picture for commodities. the price for commodities have come off.

however, if you look at the commodities market itself, it remains quite high. oil, the price curve means there is a demand and supply problem. the aussie picture is not one where the prices under pressure. i think the commodity picture can hold up better. the southeast asian currency more exposed to commodities, for example, indonesia. shery: we continue to lose your sound. of course, we continue to watch

the euro as well. trading in a narrow range after touching dollar parity. a member of the ecb counsel saying the central bank will adopt a step-by-step approach as it tries to tame inflation. the italian central bank governors told us a recent 50 basis point hike was not a difficult decision. >> we decided to make the meeting. what we have decided most to from load, increase interest rates that is basically an normalization. depending on data, this does not mean we are not going to precede in a gradual way.

there is no particular reaction. >> governor, how difficult was it to agree on that 50 basis point among the members last week? >> not difficult. there was a long discussion. we said in june that we intended

to raise 25 basis points in july, then actually in laois and -- inflation was maintained at the higher level than was expected. not only by us, by markets, futures. it seems to be linked to the protraction of these incredible wars, this implies the energy prices have been mounting much higher than expected. haidi: the ecb governor. coming up next, fruit is getting whipsawed. we will get some analysis. this is bloomberg. ♪

haidi: crude prices are in a tug-of-war. bloomberg says volatility will remain through next year. there are a lot of different

factors in the market at the moment. guest: a report issued a signal for oil prices. the recovery in stockpile levels seems to be showing demand weakening, particularly for gasoline. in china, we are seeing oil demand recovery. we are -- that remains a key upside to oil prices.

russian gas flows to europe remain, [indiscernible] shery: tell us about the oil refinery margins. what we are seeing so far, if they make the shortages even worse. guest: we expect the oil refinery run rates to remain better due to the high of we have seen, given plenty of opportunities. that is because there are a lot of difficult shortages in the market, in 2023, we expect

another year of supply tightness. assuming there are no more restrictive measures in china. stronger demand will depend on supply stability as well as u.s. production growth. however, based on our outlook,

russian gas flows to europe can go back to the pre-pandemic level. in that event it remains depressed, or even comes to a halt, it can trigger a rally in oil prices. shery: the latest on the oil markets. we are getting the latest minutes from the boj meeting in june, we are hearing members will not hesitate to add easing if needed. the boj defied market expectations in june and stuck to the ultra-easy monetary policy, they have intervened and conducted more limited operations to defend the yield cap, yield curve control. we're hearing from members with the boj minute. not that surprising. haidi: unrelenting. the latest boj versus market vigilantes as we get into fed decision week. cpi services coming out, you're on your for japan, expectations

are 2%. it picks up the pace a little bit from the 1.8% in the month of may. lots more to come here on daybreak asia. this is bloomberg. ♪

shery: we are tracking the

fallout of the global supply chain crunch. some of the biggest companies operating in china including foxconn are operating at limited levels. only those living in a closed loop or bubble are in offices. apple is offering a rare discount in china. the company is taking $89 off the iphone 13 between july 29 and august 1. it comes as china recovers from major lockdowns in the business of. the port of oakland has resumed operations after truckers protesting a gig lull will

move to another site. cargo is moving smoothly, though it can take weeks to get through the backlog. protesters have shifted. bloomberg terminal users can read more. haidi: these are some of the stocks we are watching. a lot of names and retail after the walmart news. we saw the u.s. retail giant cut its profit outlook for the second time this year. watching japan with corporate note deals. also watching osaka gas. this is bloomberg. ♪

shery: we're counting down to the major market opens as we continue to watch restrictions and shenzhen, about 100 companies are forced into this closed-loop symptom -- system. it's a big day for central banks with the fed decision as well. haidi: we are getting the boj minutes. we know the governor stood firm against market expectations. we are hearing lines about the importance of wage growth, the appropriateness of the easing measures to lift these mages. annabelle: we had new members speaking yesterday, indicating they will continue with that easing policy. we have the open of japan, and

we are keeping an ion cash treasuries. treasuries are pricing in a less hawkish fed move. in terms of the yen, holding steady, tight trading range ahead of the meeting later. japanese stocks are coming online lot, more positive than what we are seeing. we had gdp data out of australia, it beat on estimates. 2.9% on the year. in terms of stocks, the mega cap tech stops, alphabet, we will also have -- walmart, another focus. that is a key bellwether for

retailers. that is said to weigh on broader asian stock trading. two key sectors. we have the world's biggest gold producer posting a profit miss, energy names and focus. oil coming online a little bit weaker, we have seen focus turning away from recession fears. that is tight supply. shery: back to the fundamentals when it comes to that. we are with the head of aipac equity strategies. always good to have you with us. our investors to pessimistic? guest: i see value in certain markets.

i'm worried we might not be there yet. value can be found anywhere. things are starting to pick up in china. shery: mother its global central bank tightening, or regulatory crackdowns? guest: my own suggestion is probably we will not see as much. we have seen most of the regulatory crackdown in the china internet. on the front of interest rates,

that will continue, probably. bond markets already looking towards 2023. that is supportive as well. results season for walmart, apple, that will be quite important. that is what i would focus on. haidi: the dollar strength. how much of an uplift is that? guest: a stronger dollar is not good for asian equities. my colleagues believe there might be a little bit more strength to go. if the dollar does weaken, it will be positive for asian equities. that is something we have to watch.

haidi: how strong is the consumer? signs of demand weaknesses, apple cutting prices by $90, but still it is a symbolic shift. does the property prices have implications for household wealth and resilience of the consumer? guest: absolutely. the story is not good. people are not confident at the moment. people have lost money in companies or projects. the stock market has not done so well.

the question is, will it be stronger? we see the property market starts to slowly recover. it might be that the margins are better in about a years time. that's when the valuations get a little bit higher. shery: are we going to see recovery in the memory sector? guest: investors are to underway. we are cautious on tech in general. further earnings cuts might have to go through there. if you are significantly underweight, you have to be

careful. it could be that we are close to a bottom. i would not be surprised if we see the sector starting to offer good value. it could recover, that is something we have been hoping for in the early part of next calendar year. that could be a signal that the sector is going to perform better. you are going to be ready to do so and not be too cautious. haidi: always great to talk with you. breaking news, alibaba will be applying for a primary listing on the hong kong exchange. they will become a dual primary listed company. that is coming through, pursuing the primary listing on the hong kong stock exchange.

we are hearing from the hong kong exchange. more companies with the secondary share offerings are considering primary listings, others may not have a choice. more of these companies and secondary shares. they are applying for the primary listing on the hong kong exchange.

it's part of the big trend when it comes to a lot of these major companies, moving back to the hong kong markets. annabelle: in terms of what we have moving in the session, walmart is a retail bellwether. adjusted earnings per share

moving back, oil is lower this morning. little jump in names. this is the world's biggest gold producer. the concern is about inflation. we are seeing stocks moving weaker. shery: let's get to vonnie quinn. >> south korea's expansion accelerated last quarter. household and government spending helped absorb ahead to trade. consumers face a challenging environment. the european central bank may not be done with increases in

interest rates. a member told bloomberg the rate increase in september also needs to be significant. the ecb is trying to reduce inflation more than four times its target. russia is reducing the flow of gas to germany. they say it will cut shipments to about 20% of capacity, blaming maintenance issues. one in six turbines remain in condition. it's a troubling prospect as the eu heads towards the winter months. in britain, they are pledging tougher stances on china. the former chancellor says china is the largest threat to britain. the foreign secretary is pledging to crackdown on chinese-owned companies including tiktok. >> we should be cracking down on those types of companies. we should be limiting the amount

of exports. 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, a closer look at the deeper housing prices. coming up next, covert is flaring up again, inditex manufacturing hub. [speaking foreign language] this is bloomberg. ♪

shery: tech shares under pressure. we have oil prices gaining in the new york session. given the tight supplies, market is pricing in remarkable strength.

wti is down. of course, it would have to be china demand. shanghai is adding 10 high risk areas subject to lockdown. we are seeing china -- it seems like a cautious mood. reporter: it's reflective of the trend we are seeing nationally. cases have been going south.

still, we are seeing restrictions, lockdowns. china continues. 100 of companies are being told to go into this closed-loop symptom -- system. there tested consistently to keep covid out, it's a way of keeping manufacturing going. it could make it more intensive, particularly if we see cases at this level, particularly in the community. haidi: how much so that dense confidence in terms of investment?

reporter: you have seen some pressure on the chinese stock market. people don't know what to expect, the unpredictability. indications from xi jinping that this is a long-term thing, that they are shifting. it will weigh on the outlook for these companies. shery: tell us about the closed-loop systems. columbia last, are they effective? reporter: it started at the beijing olympics. targeting zero cases or

suppression of the virus. keeping people within a bubble where they consistently i've tested to make sure they are bringing covid into the sanitized loop system. they work effectively, they require a lot of organization. when tesla used one during the shanghai lockdown, they found beds, even a former training camp was able to house the workers that they were ferrying to and from the factory. they require a lot of logistics, allow companies to keep moving. we have seen pushback from workers, a computer company's are riots. particularly when infections got into the loop and people were frustrated.

haidi: our managing editor. let's get some more news when it comes to alibaba. this is remarkable, almost a decade after the failed attempt. moves that can make shares of alibaba much more accessible. the move is expected by the end of the year, part of a growing transfer towards primary listings in hong kong. remember back in 2013, we had alibaba abandoning plans for the listing in hong kong. the hong kong exchange is refusing to allow alibaba to

handpick board members, they have been planning for several months but the talk said ended and they turned their eyes to new york instead. this throws up a lot of questions, it currently has that listing on the market, but the rise in transaction value has also been an element when it comes to that shift. we will get a lot more details on this breaking news. plenty more to come on daybreak asia. this is bloomberg. ♪

shery: alibaba says it will apply for a listing in hong kong.

alibaba has it secondary listing , so why do they want to do this? haidi: it seems we do not have steve at the moment. we are talking about those alibaba lines when it comes to applying for the listing. when you take a look at this chart on bloomberg, trading in alibaba u.s. shares remain about triple. if you get a primary listing in hong kong, that will make shares accessible by mainland chinese investors. shery: it's interesting. it feels like yesterday you and i were covering that first attempt in 2013 for alibaba to get that listing. there is controversy in terms of the governance issues, that was

an abandoned attempt that listing. we also had heard this is going to be part of a more broad trend to shift towards primary listings in the financial hub, looking to get a piece of the chinese equity investor, what have you. really interesting they are planning to use hong kong for the launch pad of that strategy. shery: we are seeing billy billy win shareholder approval, so as you mentioned, the hong kong exchange ceo looking forward to more of these listings in the future. you can see softbank rallying.

here's a quick check of the latest business flash headlines. walmart tumbled, citing the need for lower prices to clear out bloated inventories. the company sees adjusted earnings falling as much as 13% and says u.s. consumers are shifting to spending on necessities amid soaring inflation. apple has announced a discount in china on its iphone 13 before the launch of its next-generation devices. the company will take up to $89 off the price of a topline device before the discount as china's economy struggles with covid lockdowns. bloomberg has learned investors are weighing sale bids with a discount of about 30% of its april valuation.

that implies a $30 billion loss in value. sources say weaker sales and criticism will impact the ipo timeline. haidi: let's take a look at futures, focus on the session risks, energy, security risks. shortly after the resumption of the pipeline being operational, it's an ominous sign with capacity being cut to 20%. you are taking a look at a downside of one corner of one son, msci europe treading water at this stage, german futures, recession fears rising. we did see european stocks erasing most of those gains, investors being beholden to to

these monetary policy risks as well as the energy crisis escalates. shery: the energy crisis being felt, but given the restrictions we see in china with covid lockdowns, we are seeing oil prices under pressure. wti and brent down 7/10 of 1%. coming up next, we dive into china's property prices and the wider implications with an independent economist. this is bloomberg. ♪

shery: alibaba applying for a primary stock listing in hong kong. let's bring in stephen engle. how significant is this? stephen: it's interesting. it is something we have been following for quite some time. alibaba wanted to list in hong kong, could not get the proper rule changes. in listed on the new york stock exchange, had a secondary listing in hong kong in 2019, but because of the banks of the united states, volume shares of outpaced 9988 in hong kong. to move this primary listing to hong kong, potentially alibaba says by the end of this year, would essentially make it a dual primary listing.

what would that do? the primary listing would allow it to join the stock connect program hong kong has with shenzhen and brought in the investor base, it would allow investors to invest in alibaba rather than going through the primary listing. good news for mainland investors who want to get into the story. the backdrop for all of this is the uncertainty towards u.s. shares. those shares like 250 other chinese companies listed in the united states are under a bit of uncertainty because of the sec push to get chinese company to supply the audit reports.

that is unresolved at the diplomatic level between china in the united states, there has been rumors of some deals but if there is a cloud of uncertainty. potentially, i am not saying it will be due listed, it does not preclude or mean alibaba -- it's interesting in the fact alibaba could potentially be forced to the list from the new york exchange. haidi: it's interesting timing from a lot of different angles. we know chinese equity markets, the outlook is murky. this coming home listing suggests at least good tool listing will be quite a popular shift for a lot of chinese firms. stephen: absolutely. i have talked to the ceo of the

chinese stock exchange and he told me this is going to be a driving pipeline. we know the pipeline in hong kong has dried up because of regulatory issues, the slowing economy and other reasons. long-term, the pipeline looks good for the homecoming. it is going to be a driving trend, especially if there are probes, as well as chinese government probes. this will be likely a driving trend and alibaba looks to be at the forefront with a proposed primary listing for hong kong.

haidi: an enormous time for stress and uncertainty. consumer boycotts of mortgage payments. that risk spreading to the banking system. our next guest says unrealized losses are likely trillions of dollars worth. for more analysis, let's bring in an independent economist. i feel like we have been talking about this same story in different ways. there is always a rolling ball of debt, losses when it comes to the chinese economy. the question is always, where does it land? guest: it's like other east asian countries like japan, china has a high savings rate,

and the fixed exchange rate you can pass the cost onto savers because people have nowhere to go. haidi: therein lies the problem. there are very limited options in terms of where and how. what does that mean for wealth creation in china when the property market is losing competence, when the equity market is losing complement -- confidence? what else can they do? guest: if you look at the experience of japan, the process of developing and building up the country. money has to go to where the government wanted to to boost

the economy. these projects will not have high returns. if you look at the economy, you have bubbles but eventually everything comes back to the ground. people in china cannot get rich. the government is happy with it. shery: there will be more uncertainty given the regulatory crackdown we have seen across china, breaking right now, we heard from alibaba that they will be applying for a primary stock listing in hong kong. what are the implications of

this for the financial markets? guest: there will be a supply issue. the government's decoupling is inevitable, the chinese government is doing it first to avoid a shock. overall for the market, it's oversupply. shery: do you see more of these moves coming for other chinese companies as well? guest: tech companies all need to do list. that's in my view. the chinese government has decided that the coupling is inevitable, why don't we do it now? haidi: what does this mean for ant financial?

trying to align themselves closer to what the party wants. guest: they understand that. it's not their choice to make. the chinese government has been asserting control. there are a lot of reasons, they must come in. they must be obeying the chinese government. talking about youth

unemployment, stalling expectations of young people, millions of people unemployed. how big of a concern is it when it comes to congress? guest: the economy depends on exports. domestic demand is sluggish because of the zero covid policy. china has a labor shortage because the labor force is shrinking. the issue is, a lot of graduates are getting high salaries because of the shadow banking

system or internet second. -- sector. these areas have come back to earth. people are disappointed, searching for high salaries that are not there. haidi: we are looking ahead to the meeting at the end of the month. what are your expectations? what options remain for policy markers, given there are elements of the slowdown that are structural and perhaps can't be addressed productively by the usual playbook? guest: i don't think the government will do a lot. they will do some. there is a general except him's of slow growth in the coming years. it's not like the government wants to do everything to get to high-growth. what i see are the big infrastructure projects, small

cities do not have to men for properties. they're trying to integrate the cities. hopefully they will boost property demand and efficiency. that is a good idea, in my view. then there is the case for tidying up the property sector. finishing them, so there is no waste. other than that, i do not see a lot more to come. shery: indent -- independent economies -- we have breaking news. coinbase is facing a probe into whether it improperly let americans into assets that

should have been registered as securities. the sec scrutiny has increased since the platform expanded the number of tokens in which it offers trading. these are according to two. that led the regulator last week to sue a former coinbase manager and two other people. now, bloomberg has learned the company faces an sec investigation as we continue to see downside pressure on cryptocurrencies. bitcoin holding above $21,000. coming up, the philippines president promises to never return to lockdowns and his first state of the nation address. this is bloomberg. ♪

>> this is daybreak: asia. china says it is getting prepared for nancy pelosi's possible visit to taiwan. her staff has not ruled out plans to visit but no final decision has been made. the trip to asia could come days after unexpected call between

president biden and xi jinping. china is forcing companies to operate within a closed loop for seven days as shenzhen battles a covid outbreak. operations are limited to employees living in a bubble with no contact. president biden's doctor says his symptoms have almost resolved. the white house physician said the president is experiencing some residual nasal congestion and minimal hoarseness. he tested positive last week, is being treated with paxlovid. federal prosecutors have charged nine people with insider trading and coping -- including a former member of congress. they were accused of passing information about deals and splitting trading cross -- profits. the former indiana congressman is accused of trading

confidential information. 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: let's turn to the philippines. the president has delivered his first state of the nation address, pushing to tax digital services and pledging to sustain robust spending on infrastructure. take a listen. >> i see some light filtering through these dark clouds. we have assembled the best minds to help navigate us through this global crisis. shery: what were some of the key takeaways from the speech? reporter: within the first five sentences of his speech, the president was already talking about the economy. you can see how it -- much

importance he is placing on the economy and economic growth. he echoed some targets mentioned in the past. grow the economy up to 8% from next year to 2028 when he is expected to step down. the president promised sound fiscal management, he said he will accomplish this by reforming the administration. he promised to make spending more efficient. as you mentioned, there is a plan to impose taxes on digital services voters as part of a bigger plan to adjust. haidi: when it comes to energy supply, what is the plan there? reporter: this is one of the key sectors the president emphasized.

he talked about it in the context of improving supply, lowering power rates to make the philippines an investor friendly nation. he pushed for new power plants, highlighted renewables, he wants renewables to be a bigger part of the mix, particularly in wind and solar. also, there is a push to revisit nuclear strategy. he says he wants to study smaller nuclear plants contribute to the energy supply. shery: we have another alert reporting 19 local covid cases, a little bit of easing when it comes to infection numbers. the reason we are following covid cases and shenzhen is

because china implemented the closed-loop system. let's get a check of the markets. annabelle: those lockdowns we are seeing in china, another headwind facing investors. volumes are muted, it's a wait-and-see mode. megan cap tech stops -- stocks, we had the warning from walmart. one stock in particular we are watching and japan is softbank jumping, the headline is alibaba is applying for a primary listing to be in hong kong. that would make its shares more accessible to mainland investors, but also a broader shift of moves back into asia,

right now, those rules stipulate that more than 55% of shares are in the secondary listing, it needs to become the primary one. alibaba is well below that level at around 18%. billy billy is also below the 20% mark. that also ties into the vision beijing laid out for hong kong in the hand over anniversary, it echoes what we heard earlier that hong kong's distinct advantage is it is an international competitive city, not like any city in mainland china. haidi: companies operating in mainland china transferring a record amount of funds overseas in june, raising concerns about capital outflows. we get the details ahead. this is bloomberg. ♪

shery: as we continue to watch the latest on the covid outbreak, one provinces reporting 402 local cases. we cannot understate the importance of the world's

second-largest economy, especially for asia and europe. interesting that germany and south korea have posted trade deficits with china. haidi: economists are saying a lot of this downside is due to a loss of confidence, as well as a loss of operational ability as we see covid zero continue to have an impact. countries directly exposed to chinese demand, germany a major trading partner, especially when it comes to manufacturing, high-tech goods. we talk a lot about china being a drag or when it comes to raw materials, but that overshadows the fact that the majority of imports are manufactured products both domestically and -- we have seen germany and south korea shift. meanwhile, companies operating within china transferred a

record amount of funds overseas, the latest warning signs for officials concerned with capital outflows. let's get more from bloomberg's stocks managing editor. we have seen the exasperation with the number of these companies operating in china being told to work in closed loop systems. what are we seeing as a driver for high remittances? reporter: we are talking about $40 billion with companies moving money offshore. that's the highest ever according to the regulators. there are a variety of reasons. key among them is the dollar strength, companies may have preferred to park the dollar profit offshore because the fed is hiking rates and the treasury is offering higher yields. that has exasperated moving

money offshore. the second reason is payouts. the dividend outflow has increased between may and september. the distortion also happened because of the lockdowns in april and may, a delay in transactions. that's why we are seeing a bigger number in june. haidi: the latest on capital outflows from china. that's it for daybreak asia. market coverage continues. standby for bloomberg markets: china open. this is bloomberg. ♪

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