heidi: good morning. we are counting down to the major market open. shery: the top stories this hour, the fed doubling down on rate hikes, throw pulsing another 100 basis points as possible and denying the u.s. is in recession. heidi: speaking to dennis lockhart about whether this is enough to rein in inflation, whether he sees an inflation -- a recession,. shery: meta reporting the first ever quarterly sales decline. shery: we are seeing the downside pressure in u.s. futures, this is after the s&p 500 sores. -- soars. slowing the pace of rate hikes, and nasdaq 100 saying the best

day since 2020. we had a treasury yields falling as well. we had oil also rallying in the new york session, holding at about $98 a barrel. this is coming at a time when we watch what is happening with the after hours trading session, they are all losing ground. meta first ever sales decline, qualcomm has a lackluster forecast. we are seeing rallying around 6%, they have good sales despite the fact that prices were also higher. heidi: let us take a look on how asian markets are shaping up to the fed decision, getting more hawkish hikes ahead. take a look at australian futures, potentially a gain of almost 10% -- 1%. the fed is straining a bit as

you see the u.s. dollar sliding, hitting the three week low. the kiwi equity session is up by .9%. it continues to be really about the fed processing what the iteris at about he does not see these really high risks of a recession. it will be interesting to see the pricing given, another 75 basis point move that perhaps takes us to a place where it can sit back and wait for the data. it does seem like we are getting more indications that there will be more to come given the that the fed chair does not see a recession on the horizon. back to pack increases -- back-to-back increases. shery: that is why we are skeptical when it comes to the market probably. we had a bigger othello following that and we are following june and july hikes,

we have not seen hikes since the 1980's. right now we are watching recession concerns. that was a lot of the questioning during the press conference today, we are getting a second quarter u.s. gdp numbers. we will see a positive growth. we will watch what the data says, we are joined by our global economics and policy editor kathleen hays. what was the key message? look at the market reaction, right? >> this happened the last couple of fed meetings. how they are positioned before whatever message they took away. if you are listening to jerome powell, reading the policy statements, inflation is still much too high and he said get it back down to its 2% target, it is over 9%. there is the need to bring in

flation down. an unusually large rate increase, no decision met yet. the rate hikes and the size will depend on the incoming data. markets liked it when he says it will be appropriate to slow the rate increases at some point. when you listen to what he says, about a 75 basis point rate hike, he is focusing on the fed's dot plot. listen to this. >> we are going to be guided by the data. you can think of the destination as broadly in line with the june sep. it is only six weeks old and sometime it can get old really quick -- sometimes it can get old really quick. this is the best guide we has as to where the committee thinks it needs to get at the end of the year.

>> he is telling us to look at the dots. the economic forecast against the not. the fed expects to get up to 3.5% on the funds rate by the end of the year. he is saying that we have the same plan in place we had a month ago. i think this is a very important message. >> really important message when it comes to rising recession risks. jerome powell is pushing the fact that the labor market remains strong, not overly concerned. >> i do not think the u.s. is in a recession, markets are starting to head that way. draw markets are robust, there is a path to a soft landing. we need to see growth below potential. the economy needs to slow demand

and bring down inflation. the new york fed president said that the fed will have to hike rates quite a bit more than markets expect. he expects the key rate going up two of these 4% before all is said and done. others say in 25%. -- say it may go to 5%. heidi: it was all right we saw this pretty fierce rally given that -- it was odd that we saw this pretty fierce rally. >> i cannot repeat it enough to put the caveat up front, this is a big mess of moves after the fed reversed the following session. this is something to keep in mind, analyzing what happens in night. there is since that a 75 basis

point hike is possible. it does not sound like it is written in stone. after that, they will revert back to 15 basis point or even 25 basis point hikes for the duration of the year. the tightening from the fed will continue, not as aggressively as we have seen in the last few meetings and perhaps even the september meetings. the notion of the fed's goal of a soft landing in the economy, a lot of people thought that was a far-fetched notion, that a recession was inevitable with inflation and wage price increases. i think the chances of that got a bit larger today, if not quite a base case. that is because of the fat and pretty solid -- that is

because of the fat and pretty solid reports. solid earnings, microsoft, visa, during the day. making the case for a soft landing perhaps a bit less far-fetched. shery: yields are plunging, the five year yield also down as much as 11 basis points. can we assume we are seeing peak rates? is it the ongoing narrative? >> i think this year it is dangerous to assume anything. there is growth, growing optimism that we have seen the highs for yields. the inversion of the yield curve is very troubling for a lot of people for that reason. you cannot stress aggressively rising treasury yields and

interest rates as a whole off of the list of concerns for the moment. a stronger dollar, massive rally in the dollar, it seems to have cracked. that is a good tailwind for multinational u.s. companies, the big large-cap companies that have a lot of exposure to overseas sales. a little bit more risk, and only in the u.s. stock market but also in the risk treasury market that this inflation will keep yields skyrocketing higher. shery: good to catch up with you. you can follow all of his commentary on the live blog at mliv go. there is an assist -- analysis from editors. now to vonnie quinn. >> joe manchin and chuck schumer have struck a deal on a tax and energy policy bill, breaking a

deadlock to enact major parts of president biden's agenda. it would raise an estimated 739 billion dollars in revenue and reduce revenues. it would provide for energy and climate change. a speech by xi jinping in which he says china is facing more risk than ever before, domestically and internationally. he assist the nation is entering a new phase and offers strategic opportunities and increasingly complicated problems. he praised the communist party's response regarding the taiwan strait. australia is slashing its gdp outlook, blaming inflation and global risks. a treasurer will outline the new target of 3% for the fiscal year. the economy is still growing but

challenges are too, that includes inflation which is at a two decade height. restarting after two years, as china eases parts of the pandemic regime. china will resume weekly flights from narita in august. fcc chairman says u.s. and chinese officials must reached an agreement to avoid delisting chinese companies from american stock exchanges. it could fourth alibaba and others off they nasdaq as soon as 2024. in may need an update. 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: the latest big hike with victoria great, what she thinks is an overdone knee-jerk reaction from the markets. shery: dennis lockhart discusses how the central bank may be at a greater risk of going too far to tackle inflation. this is bloomberg. ♪

>> we are committed to returning inflation to 8% objective. -- two hour 2% objective. we assess how our cumulative policy adjustments are affecting inflation. ongoing and freezes -- increases will be appropriate. the pace of increase is dependent on the incoming data and evolving outlook for the economy. i do not think the u.s. economy is in a recession. there are too many areas of the economy that are performing too well. we think it is time to just go to a meeting by meeting basis and not provide clear guidance we had provided on the way to neutral. shery: let us bring in our

policy editor kathleen hays, standing by with our next guest. >> 20 us is dennis lockhart. it is good to have you back on with us. after jerome powell's press conference, they like that he is that it will be appropriate to pause. he said watch the dot plot from june. what is the message here? >> the message is that there will be continuing rate increases, although i think starting in september, as he said, it will be meeting by meeting. i think the catch up phase and the face of getting to neutral is over and we are in a new phase.

slow down, that is a reasonable picture of how the next few meetings and months will play out. >> powell referred to it as neutral but the pce is at a 6.38, cpi is at 9.1. that is so far above the funds right. we have a negative funds right. how could that possibly be neutral? >> as estimates are not clearly have big ranges of potential -- as estimates have clearly big ranges of potential. we should not refuse restrictive territory or real positive, real rights with the notion of neutral. neutral really is where they think, in normal circumstances, the growth of the economy and the downside risk is in balance. this neither is stimulative or contractionary. that is what neutral is supposed

to mean. two -- 2%-5%. >> what jerome powell is telling us is look at the dots which show rate hikes continuing into next year, they are telling us we need to raise the funds rate well above neutral to get to the point where it is no longer stimulative and i can finally start to bring inflation down. as of that the conclusion -- is that the conclusion? >> they will need to raise the funds rate a little bit more. close to 4% is the current projection. that may or may not be sufficient. shery: jerome powell said he did not think we were in a recession in the u.s.. what was he thinking of as a

characteristic of a precision for him to think we are not there yet? do you agree? >> he is thinking of something that is very broad-based and a fairly long duration that leads to a couple of quarters. he is thinking of an employment market that gets hammered pretty badly by the performance of the economy. i thought in his comments he put a lot of emphasis on a positive employment market and that is the principal reason why i think he can deny that we are in a recession at the moment. heidi: how tricky is this effort?

[indiscernible] >> get into the treasury and protected securities. they are focused on that. going forward, i think that dependent on how stubborn this inflation is, they will continue to monitor expectations. it will be an important factor in their decision making >>. >>what about the risk of recession?

jerome powell has acknowledged that those risks are rising. the fed has to keep hiking rates. until it sees the economy slowing down. they have to do it recession or not? >> the longer we get unacceptable inflation numbers, the greater the risk becomes it seems to me. they have to continue to attack and the risk of an overshoot i think increases. they are looking in the rearview mirror at the numbers that are relevant to prices last month and the month before that. it is not an exact science how they set the policy rate. if inflation turns out to be very stubborn, which it could be, it seems to me that the risk

of recession and the risk of a mistake rise. >> he needs to keep hiking rates until he sees -- he is sure that inflation is heading back to 2%. recently, someone to find that as not peeking but going down month after month, not just the core, the headline too. what do you think that they need to see now? >> they need to see a series of positive numbers. that means more than one month. i think the next two or three cycles, you have both the cpi and the pce indexes, the next 2-3 cycles will be very telling. if you get into the october

meeting and it has been a series of good ratings of inflation progress, there may be a slowdown in the pace of rate increases. they need more than one month, one month is not enough to go on. if you remember in the press conference, he put particular emphasis on the word compelling. i think that was a telling comment on his part. heidi: is this the death of forward guidance? we have seen other central banks really come under a a lot of criticism for the way that the guidance turned out to be wrong throughout the pandemic. what a central bankers be feeling for guidance if they got it wrong? it is more of a hindrance than a help? >> the kite is on the course of the economy, i think he -- on the course of the economy, i

think he nailed that. the uncertainty. nobody knows where the economy will be 6-9 months from now. the guidance on policy, i think he took a break with the last couple of meetings where they were fairly concrete about what to expect in the next meeting. we have eight weeks until the september meeting and he did not commit. he said it is a likely 50-75 delete do not know. -- 50-75, but we do not know. >> former atlanta fed president. heidi: we do have much more to come on daybreak australia. this is bloomberg. ♪

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>> the fed needs re-anchor itself. the economy is running ahead of it. >> he is pretty confident that there are neutral. i think they are more concerned about what the federal funds rate is. >> he refused to basically to answer the easing question. >> it is hard to argue we are not in a recession, one indicator the leading economic indicators have had four down prince in a row on a monthly basis. every time that has ever happened it is essentially a c know we are in or we are about to enter a recession -- a sign we are in or about to enter a recession. shery: our next guest says the

market reaction was an overdone knee-jerk rally. while we see a big selloff after this is done -- well we see a big selloff after this is done? >> we saw this huge rally in june and it was not good news. there was nothing in there that was surprising. we had hoped for 100 basis points but we are not surprised at all and 75. there is not a lot dovish things in there. you parse through all of the words and changes and there was not a lot of material changes to the leave. it was not like it was very dovish. they will have a little less clarity going forward.

they may slow down, it is not like he indicated they will stop anytime soon. the market breathed a sigh of relief that it was not necessary. tomorrow, we wake up and realize that earnings are not that strong. we are going into a hawkish tightening cycle and a weakening economic cycle. if we are arguing about the definition of recession, we are probably in a recession. shery: we will see what the numbers and whether or not we get that call. let me get to one of your points. earnings have not been that strong, you think? >> think about what we need, let us talk about math. we have 8% earnings growth that puts us at 2.2. how much earnings growth are we actually seeing? the s&p 500 is so tech heavy, we see some respectable earnings but neither microsoft or google have a good way, i think that is

going to be a defining moment with apple and amazon. is amazon going to follow suit? are they going to buck the trend? we see how they handle the pressure. if you try to do the math, if you are saying earnings growth and energy is expected to be lower, 2.2 is still 8% growth year after year. if you start doing math, and you realize we are butting up against 4000, where are we overvalued and we are not getting earnings growth? heidi: tell us about what you actually do have conviction on at the moment. when you say you are looking for companies who have been pretty resilient earnings as well as from leadership? >> i am still a little defensive. i will fully admit i am ready to update my thesis if we see confirmation. the fight is not actually being

accommodative or communicating well. we look for defects, capital cash flows that are more resilient to an economic slowdown. they have a low real loser -- they have a loyal user base. it will be a bit more protected against the rights in the u.s. dollar. the rally has come on the heels of the dollar backing up a little bit around the market rally. with the fed hiking, you may not see the dollar break down, you may see it continue up. we like to play -- chipotle. it is tech forward it and what they are going to attract customers, they have their apps. they are putting themselves at a good price point, even though the prices have gone up they have passed their costs onto the

consumer and they are still cheap relative to eating out to other places. chipotle is a good answer for a lot of people that i want a dining out treat without quite the sit down restaurant cost. heidi: i was chuckling at the idea of the semantics of what an recession is. is it impactful when you look at the forecast and i'll look for energy? -- and outlook for energy? >> the concern is in my opinion that europe rolls over this fall and winter because of the energy crisis. if germany catches a cold, we tend to get sick. we have to be wary of what is going on globally. we need to see stability in energy prices which we have seen. around $100 a barrel of oil,

that is a bit more sustainable and palatable. a little less pressure on the consumers. that is not enough to help. you are seeing slowdowns, urc manufacturing, all of these companies warning. look at sherman williams and other companies out there warning about how inflation has eaten to profits. companies are reducing footprints. reducing headcount. the u.s. economy lives and dies on its consumer and i think it is fascinating when you try to parse from earnings how healthy is the u.s. consumer? amex says everyone is spending on travel and walmart is saying that people do not have any money. you have this dichotomy of the wealthy and the main street. our economy needs the main street and the general population to be healthy and spending. the consumer is under some stress. i am not bullish on said can

have growth for gdp, there is a lot of stress and i think the fed has to hike until something breaks. i know that they are not supposed to hear about recession, they do not care about recession, they care about the labor market. we are in a weird time period where the labor market is tight. although people are getting wages because of inflation, they are losing on a real dollar effort. heidi: great to have your views, let us get you the first word news. >> wall street journal reporting a group of offshore creditors to ever grant automatic an explanation over the seizure of cash by local banks. they do not believe that they explained the cash that was guaranteed to the banks without any form of disclosure to investors. president biden has tested negative for covid-19 and has ended his isolation. he is that covid-19 is not gone,

americans cannot avoid serious illness with vaccines and treatment. he tested positive for covid last week and was working remotely from the white house residence. >> ba.5 means many of us will get covid, even if we take the precautions. that does not mean we are not doing anything wrong, covid is still with us. it has been for 2.5 years. our fight against covid is making a huge difference. >> a bipartisan bill that includes grants and incentives to build semiconductor manufacturing. if bill also includes money for research, trading, and five g technology and is expected to pass the house later this week. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. shery: meta-shares are falling,

let us bring in ed ludlow. what stood out to you? >> the advertising side is under pressure and budgets are shrinking and it has been a weird week because they did not show strength that alphabet did a couple of days ago. >> we seem to have entered an economic downturn that will have a broad impact on the digital advertising business. it is not about how deep or how long the cycles will be, as a situation works more than it did a quarter ago. >> i heard you talking about the definition of recession, mark zuckerberg calls it economic downturn in the advertising market. the ephemeral short video platform, they are going to the

audience but not making the same amount of money from it. very little discussion from the metaverse, the focus is pushing back against an ad market under stress. heidi: for everyone wondering about a recession, look at qualcomm's numbers and they are not positive there. >> earlier in the week, texas instruments comes out with a stronger outlook. what they have done is downgrade the forecast for smartphone chips at the lower and mid end of the range. we are not talking about high-end handsets. lower cost android handsets, it is worrying in the context of the consumer. we hear from qualcomm on how they did perform and the ceo is saying that they did perform very well and there is a

challenging environment. interesting that we get that lens, 24 hours before apple reports earnings. qualcomm is one of the biggest makers of smart chips -- tips for smartphones. i want to see what happens with apple. heidi: we will stay with earnings, second-quarter sales for the next hour. shery: we get divisional breakdown of samsung, just in a couple of hours and this is after we saw the sales be when it came to earlier this month, a jump of 21%. it was a narrow beat when it came to revenue. the stocks already fell 20% year to date. we are saying it at the cheapest in four years. there have been some problems when it comes to moving inventory. you can us went up this chart and see how we are still seeing

excess inventory for samsung. is not just samsung that has had problems, it is the whole narrative of consumer demand. south korea's chip exports are jumping 50% for the month of may. we had data from qualcomm showing the forecast for the current order. they were warning of the second half. there is a lot of caution when it comes to what samsung can say that could really surprise markets to the upside. heidi: we can watch out for of that when it comes to samsung's earnings later on the bloomberg on bloomberg go. we are getting some reaction to the 75 basis point rate hike from the vent overnight in asia. the deputy prime minister talking about the need to closely monitor risks and take preemptive steps in the south

korean economy to prepare for the third quarter. talking about the government and the bank of korea's increased capability on global risk. the fed decision was in line with expectation. we heard a couple of weeks ago that south korea is not worried about capital outflows at this point given that it is become concerned with the hawkish fed hikes. and his to find these market risks for a lot of asian central banks. one of the earlier movers in terms of being weaker to increase rates. they have a better buffer is closer to the five-year average when it comes to the policy rate buffer. we have plenty more to come, more reaction here in asia to the fed's decision. this is bloomberg. ♪

heidi: another 75 basis point hike, guidance in terms of expectations, we thought treasury yields taking a drive -- dive as a traders are dialing back a bit. chair powell does not see a u.s. recession. this was across the australian

on market, all the way down to the 10 year. we saw the reversal given that we have bonds really reacting in the cpi number, missing expectations. the three year yield popping, pulling back -- dropping, pulling back the rba hikes as well. let us look at the to head for new zealand. the activity outlook index, we are watching retail sales numbers. australian trader -- a lower growth outlook for this fiscal year and a cut to the gdp as well as higher interest rates. the australia open after the biggest auto producer reported earnings that fell short for expectations. that is a tough act to follow.

we are looking at the outlook and china risks. >> rio tinto warning of a flow of global growth -- a slow of global growth. goldman sachs iron ore falling as well. the overwhelming bulk of their earning comes from -- their earnings come from iron ore. rio tinto's as a forecast of $500 million to $7.5 million. there was a miss coming at $8.5 billion. half of what we saw last year. despite all of this, the ceo is requesting investors retain a bit of perspective. this is what he had to say. >> we follow a policy of payout ratio and we normally pay out around 50% in the first half and that is what we have done.

the $4.3 billion represents the highest dividend ever. when you compare it against. >> rio tinto has net cash on the balance sheet and that is probably the right thing to do in an uncertain environment. shery: they also say that the iron ore project may be moving a step closer. what is happening? >> this has been bested by numerous delays, mostly over ownership and infrastructure. it has been aggravated by political changes we have seen in guinea. one of the issues is the railway line that is meant to link the mind to a planned port -- mine to a planned port. there are three main players, not just rio tinto, of course,

the guinea government. there are some signs of a breakthrough though, details are pretty hard to come by but we may be very close and it could happen very quickly. watch this space. shery: rio tinto reporting a sharp decline and cutting dividends in half. the latest side of the mining industry being squeezed by recessionary worries and rising prices. the ceo spoke exclusively to bloomberg about the earnings report. we began by asking him if the reports threatened the position to greener energy. >> i think the opposite. what has happened is the price of gas, the price of oil has gone up and that means that it becomes a more attractive to invest in renewable energy. rio tinto uses a lot of gas and fuel. if we can replace that with renewable energy, we have a better case in a higher price

scenario than we had before. what the world needs to make the energy transition is an energy transition. we start doing more solar and wind, except we are doing that because we have a target of having our carbon foot by 2030. i think it is the wrong way to focus, the world needs innovation and if it lacks energy, it will pull on coal. getting enough renewable energy in place and i see it happening in different places, china is investing enormously in renewable energy. right now, for us, we are actually taking off with some really big renewable projects in australia as well. >> i have spoken to several of your predecessors, inheriting

the mess and the commodity bust after the issue in china. how do you think you are going to define your approach in this moment? how would you characterize this? >> i believe it is an amazing company with amazing assets. i am keen on working on the cultural development of the company, unleash the full potential of all of our leaders and future proofing our assets and that means also decarbonizing our business. we have a big carbon footprint, we can see a path forward. shery: speaking exclusively with bloomberg. be sure to turn in to bloomberg radio, get the in-depth analysis from the daybreak team. we are broadcasting live from our studio in hong kong. listen 80 by the app or at bloombergradio.com -- in by the apgar bloombergradio.com.

this is bloomberg. ♪

heidi: a quick check on the flash headlines, cells, and car prices increased. taxes more than tripled, well above the $2.3 billion estimate. adjusted earnings jumped $.68.

ford is doubling down on the ev future, funding the business. supply chain issues continue to hit the biggest plane makers. it has -- boeing has described decreased its plans to return output to the pre-covid rates. jaguar land rover expects semiconductor shortages to ease and ramp up production of its luxury suvs and sports cars. it saw a quarterly revenue dropped 11% from the earlier would it on inflation, adverse currency movements, and an aging model offering. suzuki has a lower than expected

earnings. net income was 126 million dollars at the end of june. shery: coming up, more on the fed's second big rate and the post fed rally. plus, tom james of creflo capitol discusses his top traits and other opportunities in commodities. that is it for daybreak australia, this is bloomberg. ♪