haidi: we're counting down to asia's major market open. shery: apple and amazon's earnings beat expectations. shares jumping after hours. haidi: the u.s. economy shrinking. shery: u.s. futures are higher at the moment. we are sort of seeing bad news is good news phenomenon again where we are seeing the economy

in the u.s. contracting for a second consecutive quarter. you have people thinking perhaps this is a slowdown for the tightening cycle. below are paring back the bets of aggressive fed rate hikes. the 10 year yield breaking through the 2.7%, the lowest level since april. we are also seeing oil continuing to gain ground in the afternoon session. take a look at after hours, apple narrowly beating estimates for analysts on wall street. tim cook saying the supply and demand picture looked significantly improved in china. amazon doing well. they not only beat when it comes to second-quarter numbers, but they also had positive revenue outlook. their expenses were lower than expected. intel slumping, they had a sizable miss. >> let's take a look at how this shaping up. look at australian futures.

we are seeing an upside of about 1%. watching the aussie dollar as well because the gauge of u.s. dollar strength inching lower after the reports. the 50 dma the descending trendline looking to confirm that bull case going forward. kiwi stocks up. the positivity is flowing through to the early part of the saturn -- session. we are also getting new zealand july consumer confidence rising. that is a gauge. that shows you more positivity given that we have seen not just the new zealand economy in australia but also in the u.s. feeling the effects of these -- the escalation of the rate hikes and the yet to be seen determination that we will see a

big decrease in inflation. we're are still waiting for the pass-through. the u.s. slowdown we have seen in the latest economic report card putting the u.s. on a path toward an ever more likely in session. -- recession. what are the implications for the u.s. consumer? the economy is losing momentum in the u.s. in the back half of the year. we are seeing consumer spending coming in weaker. >> interesting that this comes right off the back of chair powell saying he does not think the u.s. is in the recession, we have to see the job numbers. not surprising then you have xi jinping talking to joe biden for over two hours mentioning the economic policy for the coordination needed globally saying the u.s. and china should work to get the world out of recession risk. the big elephant in the room was taiwan.

we're hearing from sources that they are going to try to get an in person meeting. let's get the latest from jodi schneider and kathleen hays. what was the big take away from this china u.s. meeting? this was the fifth conversation these two leaders were having. expectations were already low. >> i guess the most important thing we just learned is that the aides to both men were talking about having an in person meeting. they were directed to start planning an in person meeting. they have not had one since joe biden became president. they have had these five conversations. that would be a big deal if they were to meet. the other take away was on the issue of taiwan. president biden according to the readout from the u.s. side said that he warned his counterpart xi jinping against military

action to try to reunify taiwan with mainland china although he did say that the u.s. would not support a declaration of independence by taiwan. a little bit of back-and-forth there. china for its part came out and said it is the resolve of the people of china to see taiwan as part of china and they will stand by that. in the past calls, readout from china was that the call was constructive. we did not hear that language today and it is probably over the issue of taiwan. haidi: what is the latest when it comes to the trade front and the proposed considerations? >> we have been hearing for some weeks now that president biden and his administration were considering relaxing those tariffs on chinese goods under

the last administration. they had been kept in place under joe biden. we had been hearing that from weeks. we heard from janet yellen and others. apparently, there has been a big debate on whether to relax those and we have heard no more even after this call. it may have been discussed on the call, but we didn't see that on the readout. shery: it's interesting that the leaders went into the meeting in a week or per ash position domestically. the second quarter of contractions. >> technical recession and things are not looking feeling good. shery: we will let you recover. jody, let's talk more about what is happening with the u.s. china relationship and perhaps the weakness we talked about when it comes to their positions.

if president biden heading into the midterm elections, xi jinping also having another party congress, is that affecting the dynamic? >> i think so. on the u.s. side, president biden has a lot to worry about with the midterms. one of the reasons he is thinking about reducing tariffs is that he could bring down inflation our and that would help him in the midterms. >> how was your throat doing? >> it's that time of the year. just inking about recession and technical recession, no matter how you define it, the economy is not looking anywhere near as good.

the consumer is slowing down. consumer spending up just 1% year-over-year. in any kind of healthy economy, you want to see the personal consumption expenditures 2%, heading toward 4%. this is a big slowdown. if it wasn't for people taking flights and going to the doctor, you would have had an even more negative report because good spending fell 4.4%. after that stay-at-home spending, we have pulled back. investment in housing construction and more, that was down 14% year-over-year. maybe there's a little bit of good news even if we are heading toward recession, i love this chart because it shows you the red bars. once you get the red little bars, you know it might be heading in that direction. the pce deflator, that is the

key gauge on a quarterly basis down from 5.2%. the national bureau of economic research continues to say that technical recessions don't count. it seems to me that what's important is the internal numbers. the housing market getting hit by higher mortgage rates. consumers pulling back. the fed has said this has to push ahead even if that economy slows down. >> risks when it comes to china's economy as well. the best outcome for the economy, that's nice. [laughter] what does that mean? >> mine is from 5.5% to know target. it isn't offering any big stimulus either.

they will dole out $220 billion over the course of the next year. they might be cutting one of the key rates from the pboc but we are seeing that yet. -- we are not seeing that yet. this is the way to avoid the unfavorable light this would cast on xi jinping and his policies to show how you are missing your target. if you don't have a target, you can't miss it. they're also saying they aren't going to help property developers. housing project must be completed and xi jinping himself saying that local governments will be supported to use their full bond quotas. they're going to encourage local governments to lend the money to property developers. also the people who have

purchased homes and need to start paying for them. this is to countries having a downdraft and it remains to be seen how bad it gets. shery: here in the u.s., lawmakers are doing their own thing about the competitiveness of the u.s. economy. >> the house passed a bill $52 billion for grants and incentives for domestic semi conductor manufacturing. it took one year. this has been called a competitiveness bill and also national security issue. shery: to help counter the u.s. china rivalry there. haidi: let's get more on tech earnings. apple, amazon shares jumping

after posting upbeat results. let's get details from ed ludlow. given that we have been talking about what it means for their business that apple has offered discounts on the iphones. ed: the reality for apple was a mixed bag. iphone ipad performing well. macbook and wearables not performing well. this was a company that suspended guidance. i don't know what apple's definition of guidance is, but tim cook gave us guidance that things in china are -- improved on the demand and supply side particularly in the month of june. sales beat estimates in china. it will be interesting going into the september quarter where tim cook says revenue will accelerate. they are being disciplined was spending. his words were liberal with spending while continuing to invest in spite of recessionary environment which he said is

standard operating procedure for apple. street likes what it sees. in some ways a relief. a big part of the china story is the supply chain where china plays a key role for apple is improving. shery: we are expecting amazon to be a wildcard. they did pretty well. ed: amazon once again proves it is greater than the sum of its parts. a narrow beat and strong outlook for the third quarter. everyone focuses in on prime. they have raised prices, yet subscriptions group. look at aws. a lot of customers are startups, yet they continue to invest in their cloud capability. advertising is another beat coming through for amazon. they outperformed on rick and mortar and a quarter where they closed their stores.

but they seem to like is andy jackie discipline pulling back on operating costs. in an environment where the demand might not be there for prime, they are getting more focus on cloud side of the business. >> jack ma plans to relinquish control of ant group. he could reportedly transfer part of his controlling power to other officials. tokyo has reported a record number of new daily covid cases. infections top 40,000. the prime minister has ruled out re-imposing restrictions but

some local governments are imposing their own measures. extreme weather events link climate change caused $65 billion in losses in the first half of the year. the linked to climate change has been called extremely clear. floods in australia were the costliest so far. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. haidi: still ahead, our guest says -- apple and amazon's latest results are providing reassurance to jittery investors. shery: up next, brazil is looking ahead to greater growth prospects.

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>> brazil recently raised its gdp growth estimates for the year and downgraded inflation expectations. we are joined by brazil's economy minister. great to have you. i have to start with comments

that you made back in february. you said that the federal reserve was sleeping at the wheel on inflation and you called it right, they have been raising rates aggressively since then. are you concerned that we should see -- we could see a u.s. recession taking down the world economy and brazil with it? >> the trap of synchronized recovery was already evident to us. we have the war in ukraine hitting food and energy. these are adverse supply shocks that call for stagflation. it's a very tough environment ahead. also the end of labor arbitrage something that came -- kept

inflation under control for 25 years. alan greenspan talked about that how in the mid-20's, the threat of stagflation would hit the western economy. brazil is out of sync. brazil is at the beginning of a long cycle. revised our growth forecast to plus 2%. inflation revising it downwards. >> let me ask you about inflation because you are still expecting big spending to come from the government. with that exacerbate price pressures? >> brazil is probably one of the few economies in the world with fiscal balance. we have a commitment to fiscal

balance. brazil has a fiscal surplus, a primary surplus and we had a deficit of 10% and it moved to zero this year. because all of our expenditures were temporary. health, direct income. we removed the fiscal stimulus during the rebound. >> that is all great news for the economy, but i wonder because we are talking about the public spending cap again and that being changed potentially next year, will that spook investors? will it make inflation even worse? what kind of changes are you expecting for the spending cap? >> because growth is accelerated and inflation is going down and we are generating -- the unemployment rate was 15% one

year ago. now, it is 9% and going down. we are generating 700,000 jobs every month. we created 14 million new jobs in the last two years. brazil is really out of sync with the global economy. in general growth dynamics, like i told you last time, with everything that is going on now i told you six month ago listen you were concerned about brazil and i said take care of the u.s. because we will take care of ourselves. what is going on in brazil now is we are at the beginning of a long cycle. we have $200 billion. ♪

>> the brazilian currency was

raised the most against the rest of the world this year. we lost something against the dollar as you begin raising interest rates. we dropped to 1% the beginning of the year against the dollar today. most currencies went down sharply. we would be resisting. i am very comfortable with the forecast for the brazilian economy because they are confirming our expectations. at the beginning of the year, it was a change from minus one part 5% -- minus 1.5% to plus 2%. unfortunately, the problem will

stay for a long time. i reaffirm that the central blanks -- central banks are way behind the curve. >> >> that is what we started the conversation with is that there is a massive risk of the u.s. and potentially global recession. that would cause a collapse when it comes to commodity prices. heavy factored in lower commodities prices into your forecast? that would be a pretty major capitalist or central bank as well as the economy. >> unfortunately because inflation will stay longer than you think. commodity prices will not go down. they will just stop going up for a while.

i think that brazil has a very diverse -- diversified economy. we are removing taxes. remember reagan when he reduced the taxes then the u.s. began re-industrializing itself against the threat of japan. we are reducing taxes in brazil. we are reindustrializing the country. we have the cleanest energy in the world. dutch companies, german companies, spanish companies are coming to brazil to exploit wind and solar energy. >> let me go back to the spending cap because you haven't told us if you're willing to change it or what changes -- we have to. this is the one question that

are investors really want to know about. >> let's talk about the spending cap. the spending cap was to control -- the government. we are going from estate driven economy to a orchid driven economy. when covid hit brazil, we had to protect the vulnerable and the jobs. temporarily, we went through brazil. in one year, we were spending 26.5%. >> we are coming toward the end of the show, but thank you for joining us. this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going?

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vonnie: joe biden and xi jinping have told aides to plant an in person meeting -- to plan and in person meeting. it would be the first face-to-face meeting since joe biden became presidents. their call today was described as candid and substantive. china's top leaders have pledged to achieve the top outcomes possible while sticking to a strict zero covid policy. there was no mention of the 5.5% growth target which many analysts say is impossible to achieve. the u.s. economy contracted for a second straight quarter raising the chances of a recession. gdp fell at an annualized rate of .9%.

the report showed decreases in business and government spending and residential investment. >> we know there are challenges ahead of us. growth is slowing globally. inflation remains unacceptably high. it is this administration's top priority to bring it down. >> the house of representatives passed a bill that included $52 billion in grants and incentives for domestic chip manufacturing. it now goes to joe biden for his signature. the vote attracted support from 24 republicans who defied a last-minute push from gop leaders to oppose legislation. hong kong government advisor says more covid-19 vaccines should be made available for children under the age of three soon as possible. he says the shots are safe and effective. .

hong kong's covid expert advisory panel is expected to discuss toddler vaccinations next 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. i'm vonnie quinn. this is bloomberg. we had gained traction when it came to the equity rebound defying some of the naysayers that said it was a knee-jerk reaction from the fed. the aussie dollar is also seeing the effects of the risk on sentiment sitting under $.70 u.s.. if you look at the technicals, it looks like we have a little bit more for the bullish case going into next week. kiwi stocks also seeing nice

gains. the u.s. futures, it looks like we are in positive territory despite the drumbeat of a recession. s&p futures are up by's extensive 1%. -- 0.6%. it is about the recession fears rising. the economy a lot of data points are coming. our next guest says that history shows recessions are the best cure for inflation. great to have you with us and we appreciate you joining us so late in night. when it comes to the blunt assessment that recession is the best cure for inflation, does

this play into the narrative and the fine line that jay powell was trying to trade in his commentary? >> good evening. it has been an interesting journey for the fed because we have been lagging the market significantly. the funds rate based on the forecast is 3.8%. yet the bond market is already sending a complete different signal. jay powell offered something to the market yesterday which was somewhat unexpected. basically a dovish pivot in the sense that suddenly he throughout all guidance. i think this is explaining a lot of equity rally we are seeing in the last couple of days. we will see next week if the fed

is going to taper down these optimistic expectations again as they have been with doug since of speeches during the summer. -- dozens of speeches during the summer. >> how does that inform your strategies at the moment when it comes to this market given that with every selloff we see, it feels like there is a distinct lack of conviction? >> this one is different. we have been bullish since mid june. we saw some of the most oversold ratings since the financial crisis. then there was the 10 year yield which has been key chart this year. it hit 3.5% which was exceeding what we saw in 2018 at 3.2% when the fed ultimately was forced to pivot because the bond market already signaled that the construct we have been building with free money over the past 15 or 20 years cannot handle

sustained high rates. when markets bottomed in june when the 10 year hit three point 5%, the market was signaling recession. no further, you cannot sustain this. the bond market then started pricing in more of a recession by reversing dramatically and we broke a major trendline in the 10 year and now we are looking at a topping pattern which suggests bond yields could go lower. markets are liking this at the moment, that's the signal that is being sent. >> you are thinking this is a bear market rally. how long could this be sustained and given that we are still seeing good job numbers that we are going to get more confirmation this week with the cost index next week with the monthly job numbers, where does that put us when it comes to trying to figure out what the fed will do next? >> classic bear market rally case, we saw it in 2000 and 2008. you get through an initial selloff that is vicious and

fills up a lot of negativity in terms of sentiment. key technical disconnects and also support levels. then the bear market rally comes to catches everyone by surprise. it just keeps going up. it forces shorts to cover, it brings back optimism. is your classic sentiment trap. 2008, we saw the rallies go back up to the weekly 50 day moving average. i don't know it's going to happen here, but certainly at this rally that we are now seeing in the nasdaq and the s&p it broke some downtrends. the bulls are not in the clear at all. with this rally, we're going to start approaching key resistance levels. >> are you buying the dips right now? >> we have been.

as we are approaching 4100, we are getting short-term very oversold so we will have to look at tactical cells. the key coming out of jay powell's speech yesterday or press conference rather is that now everything is going to be pivoting off future inflationary puts. tomorrow, the core inflation or report that the fed follows, if there are signs of relief this has been supportive of a notion of the fed pivot where they might want to pause. if inflation remains hot, that is going to be a continuous pivot for selloffs. i want to raise one important point. the fed with its rate hike yesterday has reached a point of historic downtrend because the debt has gotten larger each cycle the fed has been able to raise rates less and less and we have already reached the historic trend.

my view in general is if they are forced to go higher from here in any significant way, they will not be able to avoid a larger recession. this is key happens in the next few months. in front of the next fed meeting in september. >> how key is the next direction for the u.s. dollar? it seems like it could get a boost from global recession risks or the continued divergent story. is it going to be continued risk for u.s. equities? >> in recent weeks, we had an inverse correlation -- when we reach the trendline,

that supported the massive equity rally that we saw. what aided that as well and part of the dollar strength was related to the fact that the ecb was even slower than federal reserve. they finally raised rates for the first time in 11 years. this is also a game of relativity between central banks. to the extent that the ecb follows through in september and beyond, that could continue to support a weaker dollar. if there is any sense that the economy is going to slow down materially and inflation does not roll over, any dollar rally will pressure equities again. >> time now for morning calls.

this one perhaps really reflects what's happening in the markets. this one thing bad news is becoming good news. he argues that when the economy is slowing, inflation measures will likely fall. but will bring the end of the tightening cycle closer and markets will like that. >> corporate bonds now when it comes to the outlook, j.p. morgan thinks the latest rally in high-grade corporate's will probably fade fast. while valuations may save the rally near term, the markets will quickly reassess and we can again. take a look at what we are seeing when it comes to the early move in the bond markets in australia and new zealand. we're just seeing the numbers when it comes to following along and treasuries. the 10 year yield dropping 16 basis points. the treasury yield slide

happening after the unexpected economic contraction. we are seeing the market implied forecast for the fed past decline as well as we head into next week where we get the rba vision as well. -- decision as well. coming up, apple results are upbeat. that and the outlooks of big tech. >> this is bloomberg. ♪

>> let's take a look at the after hours big tech movers. apple is still seeing strong gains of over 3%. reporting third-quarter results that narrowly beat estimates. we did see imax and wearables worse than projections.

amazon putting to bed some investor concerns about potential lack of spending by inflation concerned consumers. intel is the underperformer there. they slashed their forecast as well. >> let's bring in our next guest. after all that we have seen in the past few hours and across the week from big tech, let's start with our question of the week. which of the text giants has the biggest upside? >> upside from here to the end of the year, apple and google. for very different reasons. apple i believe there guidance for september although it was in line with the street, i think there is upside to that. more importantly is that their product roadmap for the next 12 months is as good as it gets. they're going to launch 11 new

hardware products. a typical year is 7-9 new products. i believe investors will be more optimistic about this. don't forget there is still a golden large market that they're going to pursue in health care, ar and wearables. i believe it will also do something in automotive. you put that together, they have opportunities to get into big new markets. >> what about dollar strength? >> i think that some of that strength is going to see a move when amazon and after hours.

you have to look back and think that this recession is going to get worse. where are consumers going to be spending their money and time? i have not talked about google, but i don't think that the resilience of these companies especially apple and google is factored into the market even with the recent move higher, i don't think. if i could just give a quick data point to put it into context, their search business was up 14% in the june quarter. facebook was down and obviously what happened with snapchat. even though the stock has moved up recently, i still think there is meaningful upside. >> when you look across the

broader new york faang plus, we have seen a reversal of gains. does it tell you that there will be a investor expectations to prove that they can be recession proof and relevant in a higher trading environment? >> yes. the answer is they will have to deliver. you see apple up, amazon up, google up. all of those when you go up, expectations move higher. i think that yes there is the dynamic that is important that investors should be aware of. when good things happen to companies, expectations go higher. if i am wrong and they are not recession proof, they could go down measurably. i think that ultimately, it's

not that they won't be immune, but not to the same degree as traditional companies. yes expectations are moving up. i wouldn't put them in the category is being high. part of the reason is if you just listen to the apple earnings call, it was two out of three questions about their implied guidance. there's almost the disbelief that there would be this kind of guidance which is essentially in line with the street. what that tells me is even though these companies are outperforming, analysts and investors are still skeptical. that they can ultimately power through. that does keep high expectations in check. >> with intel, how much of the slowdown is correlated to what's going on more broadly in the economy?

are you confident when they say this is the worst that it gets? >> it's pretty bad. we are owners of intel and not what we wanted to see. the reason why we own it is we do believe that we will get a boost. it's not about this quarter or next quarter. in intel's case, it's about ultimately being a second source of -- in the u.s.. i think there's going to be more of this kind of shift away, every country is going to be focusing more internally. intel, they have a fundamental challenge which is there chips are not being desired by their and customers. that's a real problem and i think they will sorted out ultimately and i will think they will have a strategic advantage.

patience is a virtue. we have it and we will need it because it's going to take time for them to get that up and running. >> quickly, we have a surprise congressional budget deal that creates a lot of incentives. does that change your view on companies like tesla at all? >> it does. it's a nice boost. people are going to get nice rebates for purchasing electric cars and tesla's are still the best value. i think that this is a multiple year tailwind and they are in a good spot. >> great to have you with us. be sure to turn into bloomberg radio to hear more from the days big newsmakers. we are broadcasting live from our studio in hong kong. there is more ahead.

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>> let's look at the day ahead for australia and new zealand. australia is scheduled to release data. the australian financial review is reporting that the bank of

australia is hiring more engineers and software developers in melbourne in an effort to attract the best people from across the country. >> you will be is suing a chinese developer and its units in hong kong. the bank alleges that it breached terms by reallocating loans and allowing shares between the units without the banks consent. it adds to broader signs of -- among china's property debt crisis. a ceo told bloomberg tv that he is also concerned about getting caught in a sanctions crossfire as geopolitical tensions rise. it had announced last week that it is terminating the 12 year manufacturing partnership with the automobile group. coming up, we will look deeper

into the call between joe biden and xi jinping. tensions grover taiwan. pat anderson joins us to discuss giving australia's indigenous people a seat at the table in parliament. that's it for daybreak australia. daybreak asia is next. this is bloomberg. ♪