haidi: welcome to "daybreak asia" counting down to asia's major market opens. shery: futures rally on upbeat sand fed tightening. bonds over driving higher. the u.s. economy shrinks for a second quarter, fueling recession fears and president and president xi plan and in person meeting of what's being called a candid conversation. that coming against the backdrop of rising tensions over taiwan. haidi: as we continue to see the fed 75 basis point rate hike, we are seeing from the south korean finance minister talking about that 6% range of inflation expected in july. we are getting industrial output , through month on month rising one point 9%. much higher than expectations of a contraction of 8/10 of 1% for the month of june. we are seeing ip rising 1.4%

year on year. that is missing expectations for that year on your number that was expecting a gain of two point 1%. we are continuing to see these comments from the vice finance minister. south korea will face a trade deficit in july on the cost of rising energy imports. getting breaking news when it comes to some of these reports. coming through with their numbers. second quarter net income coming it out 1.11 billion sing dollars. that's in line with expectations. second quarter is payment charged of 137 million sing dollars. that's a net interest margin being key for the first half at 1.63% are in nonperforming loans ratio coming it out one point 7%, issuing an interim dividend or share with 60 singapore cents. the rising rate environment is a boost of margins for the year driven that we see the net income driven by interest rates.

one of the singapore banks expected to list their profit by over 20% as a result -- as a result of the fed rate hikes. that interim number is showing that they are leading some of the singapore bank earnings with that booster that comes from lending. shery: with second-quarter earnings from tech giant is what boosting u.s. futures. amazon and apple beating expectations. that's leading to that gaining u.s. futures right now. after the s&p 500 already closed at a seven-week i. we are talking also about, potentially, bad economic news being good news, given that investors are paring back bets of aggressive rate hikes. we have a 10 year yield plunging through that 2.7 percent level at the lowest since april. in the asian session we have oil going higher towards that $100 a barrel level. haidi: take a look at the set up in asia. looking positive when it comes to australian future.

a pop of 1% in the open when a cons -- comes to bond yields. we saw that continued in treasury and that has been extended when it comes to australian sovereign bonds. three years in particular, you'll dropping 16 basis points it really didn't start after we saw that miss on cpi numbers on the downgrade in the economic outlook. watching dollar-yen sitting at that 134 handle as we see more moves in the greenback. we are looking at president joe biden with the in person meeting. it comes as just after a two hour 20 minute phone conversation between the two leaders on thursday. that's get the latest from bloomberg senior executive editor, john liu and kathleen hays. taiwan came up and that's always going to be topped. but take us through the take away from these talks, whether it's encouraging that we see now plans underway potentially for an in person meeting.

john: there weren't any specific deliverables so-called coming out of the meeting, except for the plans for face-to-face get together, which is substantial. president xi jinping has not been outside of china since the pandemic. he was in hong kong but not off of chinese soil. so, if there were meetings face to face, the chances of there being deliverables from that are much greater. obviously we had the indonesian president in beijing earlier this week as well. indonesia is hosting the g20. there has been some speculation about whether or not president xi would go to indonesia for the g20 later this year. so that potentially could be a venue where you could have the two presidents me. shery: president xi jinping coming off of that meeting where we were expecting some sort of economic announcement, that we did not really get any new stimulus measures. what's going on. john: i think the most interesting thing from their polar bear statement was a lack

of any mention of big new stimulus. the leadership is saying that they want the best possible outcome the economy can achieve this year. there was no mention of the 5.5 percent gdp target for 2022. they mention it in april. the lost time -- the last time they talked about the economy, they are missing the target but trying to get to the best one without going to big stimulus flooding the economy with liquidity. haidi: a lot of economic headwinds for the u.s., this gdp headwind and he said quite bluntly, the best cure for inflation is a recession. kathleen: and that's what the fed realizes, and that's with the fed is hoping it can avoid. in terms of where we are now, u.s. in recession or near recession, it's for sure that the u.s. is much closer to recession then it was even six months ago. when you look at the latest numbers, and the second quarter

of the year, the decline was down zero point 9%, that's more than expected. it to be positive and that's on top of what we saw on the first quarter. and the worrisome thing and here's the consumer. the consumers the driver of the u.s. economy has slowed down dramatically on a year-over-year annualized basis. is down to personal consumption expenditures down to 1.7%, down from 1.8 percent, the court reporter in its healthy economy is closer averaging between 2.5% to three percent. when you look at consumer spending, services good at 4.1 percent. people are traveling and going out to eat instead of buying new sofas and things like that, so surfaces that 4.1%. business investment down 2.7 percent, that's worrisome when you look ahead. this is his are pulling back because they are not confident and don't know what's gonna

happen, that's a problem, residential investment down 14%, this is the issue, the national bureau of economic research set is not a real recession yet, but i understand mormor why a lot of people said, may not be, but is starting to feel like one. shery: chair powell, yesterday giving both the hawk something, the denver side of something that he might consider a slowing down the pace of tightening at some point. the hawkish side being he is still sticking to his summary of economic projections. so any idea what the policy path will be? kathleen: at this point, and i think this is what jay powell was telling us yesterday, even though the gdp number was weaker than expected, everybody knew this would be another week number and that yes, the u.s. technically looks like it's close to recession and some of the broad indicators are looking weaker. jason powell talks about the strong labor market over and over. here's the fed's dilemma. you can see how much the white

line, the growth of gdp has slowed down we could see how much the inflation has gone up, and this is what they have to deal with. one small, subtle difference. since yesterday, bank of america and wells fargo said they will still do the 75 basis point rate hike. they are betting it won't change jay powell and his colleagues path, while goldman sachs and jp morgan are thinking they will pull back to the 50 basis point rate hike. that's exactly what jay powell left open. it's still going to be a big hike. six months ago he said, another 50 basis point hi, now we will say, that's a little more dovish. at this point it looks like they're pushing ahead. they will keep hiking rates and they don't have any choice. inflation is too high, they have to do whatever they could do to bring it down. and yes, if recession is the cure for it, apparently they are ready to do it, at least for now. >> our global economic and policy editor kathleen hays with john lewis our top stories. good to have you with us. we are watching for signals from

the ground when it comes to the health of the economy, right? we are getting earnings in the latest coming from tech giants, apple and amazon. let's turn to bloomberg and ed ludlow as we start with apple. >> china is a big story. they beat on the topline overall. strengthen iphone, strengthen ipad, we weakness in wearables. they were talking about how it disrupted the covid related shutdown in china where they were both on the demand in the supply side. this is a company that suspended guidance. i have been joking about this all afternoon. if this is an guidance, i don't know what is. in an interview with emily chang, tim cook talks about the headwind playing out in the third quarter. in the months of june in particular, around that june 18 sales time in china, they saw strength and they do see growth in revenue accelerating into the september quarter, the fiscal fourth-quarter, apart from and the services area. it was a mixed bag which shares

around 3% after hours holding steady there. overall, pretty optimistic about what it's seeing. haidi: amazon, this is interesting. we were speaking earlier and he said this is a better indicator than warm up because there's still room to grow for online. what is the amazon result telling us about the economy and consumer? >> we were bracing. you can see how much shoulders have relaxed following those earnings because, it's interesting, prime day was on july 11, they just reported that what they showed was prime subscription rose. they beat on the top line and gave a strong outlook for the third quarter, which basically rubbish the concerns that the market had about the retail side, which was given to us by walmart and target, cut their outlooks on the offensive earnings on the weaker consumer. you have to remember we have to look past prime and where amazon performs on the top line was also aws and cloud, which has held up well amid some tech

companies pulling back on cloud spending. anna performed well in advertising, which we forget is a growing part of the business. on the bottom line, $.20 a share loss. that almost all contribute to a write-down in the value of its investment. two consecutive quarters of write-down. so, and ends up not being a great possible quarter. but the future is really bright for amazon. they emphasize cost-cutting operations, kostka and under andy jaffe we mover way from our reliance on prime to aws on the streets like that. this is a monster move in after hours. >> bloomberg's ed ludlow their peer that's get you to vonnie quinn with the first word headlines. >> billion or jack ma plans to relinquish control of ant group according to dow jones which says the decision is part of the company's efforts to move away from alibaba. he could reportedly transfer a part of his voting power to other ants officials, including the ceo. aunt was forced to reorganize under pressure from the chinese

government. tokyo has reported a record number of new daily covid cases and jumped 40,000 breaking the previous mark of 45,000. there is a more infectious omicron subvariant. the prime minister rolled out re-imposing nationwide restrictions. some local governments are issuing their own measures. hong kong government says more covid-19 vaccines should be made available to children under the age of three as soon as possible. the advisor says they are safe and effective. children under three all he have access to the chinese shots. hong kong's covid expert advisory sensor first toddler vaccinations next week. extreme weather events have six he $5 million in total losses in the first half of the year according to reports. the german reinsurers as links to climate change is extremely clear. australia has the costliest

disaster so far this year, closing losses of $3.7 billion. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. haidi: still ahead, with australia promising indigenous inclusion would be a focus for the government, we speak to the cochair pat anderson about giving indigenous people a seat at the table. >> up next, president biden and president xi talk about a backdrop of rising tensions over taiwan. we will dive in with stephen, the national committee on u.s. china relations. this is bloomberg. ♪

shery: this is "daybreak asia". china and the u.s. working on plans for president biden and president xi. this as tensions over taiwan continue to rise. we are joined by the president of the national committee on u.s.-china relations. good to have you with us. what was achieved at this meeting? >> i think the mere fact that the meeting occurred was an accomplishment. we had speaker pelosi -- and i

was derailed. the meeting itself, the fact that it occurred, the fact that there were reasonably positive statements put out by both united states and china is progress, because you have to start from the baseline that the relationship is deeply, deeply troubled. the elephant in the room to the conversation was speaker pelosi strip, the fact that it occurred , literally one week before was interesting. it's -- you've heard mentioned on this program that is likely between november 15 and november 23, president xi and president biden would meet in person on the sidelines for the g20 and apac meeting in indonesia and thailand, respectively, which is great news. and to the extent that remains on track, i think that's a positive, it kind of puts a

floor on the u.s.-china relations. shery: the white house hasn't really taken a public stance when it comes to speaker pelosi strip, potentially to taiwan. why and what would benefit president biden's hand in dealing with beijing? >> president biden has said the military does not support the strip. in that is his way of saying he does not think it is a good idea. obvious the it is politically very difficult for him. he's in a position where it's kind of -- today it's almost a lose-lose. if speaker pelosi doesn't go, he's going to get criticized by the republicans and others as being weak on china, if she does go, we have the potential for a real rupturing u.s.-china relations, which not only is going to affect markets, it's going to affect trade, it's going to have a very broad effect. so he's in a lose position.

haidi: i'm going back to what you said about it's really encouraging that this conversation even happened in the fact that we are there, does that speak to the level of deterioration? because it shouldn't be this way, right? the leaders of the two biggest economies, most powerful economies of the world and that a phone call is really exceeding expectations? >> yes, it's a sad commentary on the relationship. it is truly elated that a phone call between the president of the united states and the president of china is viewed as a real accomplishment. it was a little surprised to learn that it was a phone call, it was in a virtual conversation. they did not see each other on camera and it was consecutive interpretation. when it's consecutive -- it's two hours 17 minutes, consecutive interpretation, it basically cuts that in half. so you had about an hour in

eight minutes for the two presidents to talk to each other. obviously they are setting the path for secretary ellen to speak with leo and for secretary austen to speak with china's ministry of national defense for katherine tai to speak with them. for a lot of cabinet level meetings between the united states and china. and that's very much what i think this call was about, is allowing for the working level, working level, cabinet level officials, both in the united states and china to work on substantive issues that can result in progress. haidi: we spoke to fraser how yesterday and he said that his expectations were exceedingly low and he was certain that they would be met. in that sense, do you expect them the deliverable from an in-person meeting to include something like the alleviation of trade tariffs?

>> i expect it to be meeting on the alleviation of trade. the tariffs i've been calling for the ending of these tariffs since our elections in 2020. during the transition i called for the elimination of all the tariffs that were imposed from january 20, 2017, through the present. they should all be eliminated. it is a real statement about how toxic the relationship is that we in the chinese cannot agreed to eliminate all of those tariffs. you have been talking on this program about inflation, were inflation is -- cutting the tariffs now and inflation, but it depends on who's estimates we listen to between 50 and 100 20 basis points of inflation. that's a good thing, china's economy is basely having a serious slowdown. the 5.5% number is not going to

be achieved in ending the tariffs on the u.s. side would be beneficial to the chinese economy. so it sounds like a win-win. but the toxicity of the relationship is so severe that even these win-win efforts are unable to succeed. i hope that we see in ending of most of these tariffs. it's so destructive. shery: just quickly, what about russia, could we see beijing softening their stance? talk about lifting tariffs, but the uss to get something out of it. the ambassador has talked about that being leverage, so could you see some sort of change in the stance when it comes to russia from china? stephen: china would -- china imposed reciprocal tariffs on the united states when trump imposed those tariffs. so all of those tariffs would be wiped out. i think russia is a completely

different issue. it's very problematic for the united states to see china kind of -- china's propaganda apparatus supporting the russian position on its invasion of ukraine. and that adds to the toxic environment. and when you talk with chinese officials, they don't fully understand that the russia issue bleeds over into every other issue, and it doesn't sit there. china's policy on russia's no good. does not enough. it affects tariff issues, it affects the -- strategic issue. it affects military listed affects, it affects rules that are going to come out on u.s. investment into china. so all of those things are effective in each issue bleeds into the other, and that's problematic for the business community. haidi: great to have ufs.

we appreciate your time and giving us the view as president of the national committee on u.s.-china relations. you could get around above the story in today's edition of daybreak. go to dayb and you could customize those settings so you just get the indices and assets that you care about. this is bloomberg. ♪

haidi: a quick check of the latest business headlines. falls sorts of analysts sales with the cutting forecast for the year. second quarter revenue fell 22% to $15.23 billion and way below the $18 billion estimate. the world's biggest maker of computer processors was weighed down by a drop in demand for datacenter chips and when it comes to pc shipments. shares tumbled as much is 12% in the after our session.

suing the chinese developer and its units in the hong kong. the singapore-based bank said that its entity breached terms by reallocating loans without the banks consent. the g factory in china is alleging that government officials are increasingly meddling in business. the ceo told bloomberg that he is also concerned about getting caught in his sanctions -- as geopolitical tensions rise. plenty more to come here on "daybreak asia". this is bloomberg. ♪ so many people are overweight now and asking themselves, "why can't i lose weight?" for most, the reason is insulin resistance, and they don't even know they have it. conventional starvation diets don't address insulin resistance. that's why they don't work. now, there's golo. golo helps with insulin resistance,

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shery: getting breaking news out of japan, we are getting the

tokyo cpi numbers. you're on your growth of 2.5% for the month of july. this is acceleration faster than the estimate. it's also accelerating from the previous month. the core cpi number year on year is still above that 2% level at 2.3%. this is beating estimates, also beating the previous month. exclude energy in its growth of 1.2%. really all of these numbers are showing how strong inflationary pressures are across tokyo right now, and of course tokyo is always a signal over nationwide prices will go, which just shows that we will stay above that 2% inflation target nationwide for a straight month. as we get these tokyo cpi numbers really coming in much higher than expected. haidi: you have to wonder what a passed through as it comes to what real wages. interesting numbers when it comes to labor market. missing expectations actually higher than estimates --

expectation. 2.6% expectations for two by 5%. expectations were looking for the markets to continue. we see it up cut ratio of 1.27. slightly higher than expectations of 1.25 and really jumping a little bit higher from the previous month. we did expect the reopening from the covid lockdown in china. probably supported hiring when it comes to manufacturing. but very interesting when it comes to the recovering employment conditions that is expected to moderate in july. this comes as we heard from the boj deputy chief whose largely expected to be a favorite to take over governor kuroda, saying he expects stronger wage growth despite what we know is being will rages -- we'll -- real wages falling. shery: will he change that abenomics, that really easy monetary policy that we see from the boj and government kuroda going into next year? that's the question. we are looking at futures at the

moment, pointing higher, at least when it comes to s&p many futures and also tech companies soaring after hours after we had those stronger-than-expected results coming from apple, also amazon. apple narrowly top -- tossing estimates. amazon jumping second quarter sales, topping estimates on third quarter revenue outlook, which of course gives you an indication for half the consumers that are still little bit resilient, despite second-quarter gdp numbers contracting again. haidi: at least when you look at people that shop amazon versus walmart, we are looking at that broader sentiment passing through to the final trading session. chicago nikkei futures up by three tents of a percent. we are already seeing pretty strong indications of a start up of cash trading and sydney. dollar-yen also pulling in a bit as that 134 handle. we see another risk indicator in the aussie dollar, seeing some of that strength going into the rba meeting next week.

up by a sense of 1%. we also continue to see australian bond yields extending that site. really considering that rally that we started seeing after the cpi earlier this week. we continue to see the u.s. rally at future sessions gathering defying calls from the skeptics in the aftermath of the fed decision for high price of 75 basis points. let's bring in bloomberg's chief rate correspondent for asia, garfield 1 -- garfield reynolds. happy friday. two of these sessions had a broader rebound, but it does seem like there's a little bit more resilience with rebound in the naysayers who might've expected it to stay overnight. garfield: it's ashes the -- it's actually interesting if you look at the monthly figures here. equities -- u.s. equities are of something like 6%. i think it's on the month -- anyway. globally, equities are up by about 6% on a return basis.

so, this is a rally that's building on top of what has been a very healthy month for equity performers. that is building into the narrative that despite what was a very, very robust inflation number earlier this month, the fed is expected to slow down the pace of rate hikes, and that is a huge focus. the short-term, that makes sense in the longer-term it's a bit of a worry. because of the reasons for that expectation that the federal slow down rate hikes. and the reasons for that hour that the economy is supposed to slow and slow markedly. and that is the difficulty. our equity investors -- are equity investors rushing too soon to celebrate the good times without looking at the potential that those good times, as a were on the fed front, are underpinned by the e, economic

saying that it will continue to hang over the equity space. shery: like bad eco-news equals good news with her because of the markets. he saw that dynamic play out for a while. but traders are paring back and adjusting the fed rate hike expectations, which were already seeing it really translate on how treasuries are moving. >> exactly. i mean on the other point, we talk about been is being good news for equities. a bit strange. bad news should be good news for bonds. so, the rally and bonds make sense on that front. for everybody its, does inflation come down. so i want to talk that investors may be are not properly understanding what jerome powell was saying, with the fed is saying. i don't know that that's right. i think that they are pretty on point and understanding that the fed is open to slowing down. my biggest concern is that the

market looks extremely optimistic on how rapidly d unless it does follow through with that, unless we get rapid obvious slowing in the inflation poles, we are not going to get the sort of rapid slowing and fed interest rate hikes that people are looking for. the market is now pricing and when it comes to the fed rate. the price of indexes for some of the business survey out of the next week, and then we've got payrolls, which could bring some good news that might undo those equities and the bad news bulls. and then of course looking further ahead for the inflation print. those numbers all have to come in and the right balance of their -- of bad but not too bad

economic outlook, as it were for bonds and equities to continue performing the way that they have been performing this month. shery: chief rate correspondent -- haidi: chief rate correspondent for asia. let's get to vonnie quinn with the headlines. vonnie: president joe biden and xi jinping told me they plan an in person meeting on thursday, with boat -- which both leaders warn one another about the rising risk in a confrontation over taiwan. if it happened it would be the first face-to-face meetings in spite of became president. the latest call was after two hours 20 minutes. china's top leaders have pledged to achieve the back economic outcome possible while sticking to a strict covid zero policy. at a key policy world meeting, they gave a downbeat assessment of growth and do announce any big stimulus. the 5.5 percent global target which many say is now impossible to achieve.

leaders urge better oversight of property sector. the u.s. economy contracted for a second straight quarter, raising the recession. gdp fell of an annualized rate of 9/10 of 1% following 1.6% decline in the first three months of the year. show decreases in business and government spending and residential investment but the labor market remains strong. >> we know there are challenges ahead of us and growth is slowing globally. inflation remains high, and it's this administration's top priority to bring it down. >> the u.s. house of representatives passed a bill that included $52 billion in grants and incentives for domestic trip manufacturing. it has been sent to the president's desk for a signature globally win for his ministration. it attracted support from 24 republicans to divide a last-minute push from gop leaders. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries.

shery: billionaire jack ma plans to relinquish control of ant group according to the gel jones which said the decision as part of the company's efforts to move away from alibaba. bloomberg opinion columnists as their own views and she joins us now. so, according to the dow, jack ma plans to seize control of aunt, why would he be doing this? >> there are a lot of reasons. i think jack ma just can't get beyond his past. there has been nagging questions online of china's fears as to who really owns aunt. the complex ownerships and private equity firms. jack ma has valuable shares that he passed out to his friends. unfortunately, earlier this year, aunt received the investigation from the

committee. and that's really scary because the whole corruption campaign. they have cut a lot of high-profile figures and i think jack ma probably didn't want to deal with it. another important point. china's consumers have been very good customers. and the chinese society has not seen a full credit cycle for the consumer space. they have always been good, but once a consumer start to feel pinched on their balance sheet and start to default on their consumer loans. and that's the bread-and-butter. probably jack ma just did not want to deal with it. he didn't want to be accused of settling stable banks with bad consumer debt. so he just wants to not deal with this whole thing, i think. haidi: it is a complicated and some would say, scary time to be a billionaire, less entrepreneur founder and -- in china at the

moment? quakes yes. i think the issue is that before, if you thought that you can make 30 billion, at this point you can only make 3 billion. but in a way i want to bring a forward and say, it could be good for the chinese companies as well. with the real estate and developers, we see that funders have outside influence and all of these companies. and if they know that they cannot be there forever, maybe they will set up a professional mendham -- management see much faster. so, it's good and bad. but for sure, for the founders, they cannot make it -- make as much money as before. haidi: the golden age seems to be over. our bloomberg opinion columnists with her take. coming up next, discussing the struggle for australia's indigenous people taking a seat at the people and parliament. that's from the co-chair next. this is bloomberg. ♪

haidi: australia's indigenous people are making new ground in their struggle for equality. the government closing the gap for four out of nine socioeconomic indicators that have actually worsened. they have pledged greater focus on the indonesian -- indigenous community, including having a voice in parliament.

the opposition integral party is threatening their push. joining us now is a cochair of the dialogue. great to have you with us. really appreciate your time. i spoke with him just a few weeks ago after the outcome of the election as she spoke about how important it was to get consensusbuilding before that issue goes to a referendum. i'm wondering how you see the process of getting that consensus within the community. >> it is a really long struggle, it has been going since before 1840. in each generation of us has had ago at trying to get us some power and influence and a seat at the table to be respected, to be acknowledged and to be acknowledged as the first people of this beautiful continent of ours. the current process has been five years since the statement at a convention of constitutional conventions of

the small community. and we gifted that statement to the australian people and seeking their support to assist us to finally achieve some structural reform as to how the country deals with us going forward. the group that i have been working with, we have been doing that for the whole five years since 2017, and we've got quite a lot of support, we've been talking all kinds of peoples, groups, faith-based groups, all kinds of organizations, the corporate sector, private individuals and so on. and under that process, what is happened to the missing ingredient was that the current prime minister has pledged the support of the party, and all the government to support this,

which would call for a referendum. they have the necessary leadership that's required to progress this whole political agenda, which is nationbuilding and will make a huge difference to the country. haidi: we have seen criticism, most notably and recently from entities that this is a symbolic move. would you say it substantial as well? how would you suspect the enshrining of the indigenous voice to practically give rise to improvements when it comes to institutional inequality, structural inequalities within the economy? >> yes. the coalition and power in the government they didn't support, but there is a new one. there is a lot of movement -- political movement because currently we have a parliament that we have never seen before.

the stable hold that the major parties have had has been ported down considerably by the large number of independence that have been elected at this time and it's a lot of women in parliament, which is new for australia, so it's a different parliament. there is a different move and i don't want to be too confident, but things. we felt a lot of things in the world have changed and it's also changing here in australia. and we have had the referendum for so long, i don't think we had a bad record because it's very difficult to change our constitution. but because it's so different, maybe none of those -- it's like a clean slate. shery: how do you respond to those who say that this would actually drive a wedge among australians? >> drive a wedge?

it starts like any other. there are all sorts of people who have different views. but as i said, this is nationbuilding on this is a real opportunity to change. to change how things have happened in this country. because we cannot continue on the outskirts in our own country. a has to change. it's going to be difficult, but i think this is probably the best opportunity we've had. we've talked about a foist up parliament in the 1920's. so nothing is new here. in this generation, all of us over 80 have a real opportunity. there will be all kinds of people with different opinions, and that's why it's going to be really difficult, but nevertheless a national conversation is happening as we speak. and there are different points of view. but, it has changed.

haidi: i'm just wondering on a personal level, yourself included, the minister included, that has been fighting this fight for a long time. i'm wondering when it comes to the activism side, are you seeing that renewed enthusiasm, because as you say, there is expectations for a clean state that there is a lot of optimism, or is there fatigue as well? >> there have been lots of achievements and gains for us over a long amount of time, but they have been earned by our activists, nothing has been given. we had to fight for everything, and we will continue to fight. that's the only way we have been able to make any progress. generation after generation after generation have had a go at making some real structural

reform. in this generation's opportunities -- it's our time to push the agenda again further. so we have been doing this a very long time. and like i said earlier, the calls forced upon is not new. it would include the 1920's. it's been the same thing since forever, a long time since nonindigenous australians came to our lands. shery: it was really great to have your insight and dialogue. we have breaking news out of japan at the moment. we are getting industrial production numbers and they are coming for the month of june, the luminary month on month growth is of 8.9%. greatly beating expectations and also an expansion from the previous month always contraction of more than 7%. the year on year figures are

still in contractionary territory, but much smaller than the economists of 3.1%, which is sort of in line with the size of contraction that was on the previous month. in this coming at a time when we were expecting better numbers for the month of june, given that it was the first time that shanghai was reopening from lockdowns, so that really helped ease those supply constraints. haidi: we are also getting retail sales of the numbers of june, a pretty big mist. a contraction month on month of one point 4%. expectations have a slight gain. that year on your number coming in at 1.5 percent, really weakening from the previous month. reside 3.6% clip from a, and 2.9% was the expectation for june. we did see them rising for three straight months in may, really adding to hopes that we saw consumption driving the economic rebound the second cordis of japan, but that seems to be seen some weakness.

we are also getting those boj summary opinions from that june policy meeting. one boj members saying they should not hesitate to add easing, it's needed. we know that that is really the determination of governor kuroda in terms of standing -- really staring down those markets that had been calling for an expecting for a more hawkish pivot. lots more to come. this is bloomberg. ♪

shery: here's a quick check of the latest business flash headlines. united overseas banks reported that horizon second quarter profit driven by higher interest rates, net income grew 11% to just over 1.1 billion singapore dollars, which is around 805 million u.s. southeast asia's third largest lenders as it expects higher rates to continue to drive higher margins for the rest of the year. singapore airlines swung into profits for the three months through june thanks to a surge in demand since the restrictions ended across much of the world. the airline posted a net income of 268 million yuan dollars in the quarter, compared with a loss of 296 million for the same time last year. the passenger load rose to 79%, the highest since the onset of the pandemic.

shell has reported record profits for a second consecutive quarter due to high oil and gas prices. the london-based company also announced it will bite back a further $6 billion of shares in the third quarter. the second quarter net income was almost $11.5 billion. quick some of the stuff we are watching with the opening japan and korea happen shortly, apple suppliers and focus obviously on the expect, but still pretty up the with parts of the report. lg intertec and some of them that we will be watching in the asian session. also watching asian chip shares. the big miss from intel. quarterly sales the cladding 20%. forecast will be in focus. this is bloomberg. ♪

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shery: this is "daybreak asia" and we are counting down the ages major market open as we see the second quarter consecutive contraction in the u.s. of recession growing louder. this at a time when even china's leadership is really giving the assessment of the economy. but not necessarily announcing any new stimulus measures. haidi: no, just hoping for the best outcome of the economy. that seems to be where we are at. we are watching the big tech earnings. he talked about weakness when it comes to consumers. that was pretty evident when it comes to intel, that amazon is really giving a lot of retailers hope that perhaps there is for the runway for consumer strength. shery: we continue to watch that in the u.s. futures market's. we have seen the upside really being felt across this as we continue to see the japanese markets opening and really feeding through that optimism through the open. we are seeing the knee cake gaining for a third consecutive session.

he also have tokyo cci coming in a little bit hotter than expected. we have very strong industrial production numbers. we continue to watch the japanese yen holding steady at the 134 level. look at how strong that is against the u.s. dollar, it rallied against most g10 currencies. this as we are getting those minute lines from the july meeting. one member saying that it's appropriate to keep easing to help wage growth, and that they need to watch the impact of bond buying on the market function. we have seen that big whale and the japanese bond space. we continue to watch the 10 year yield in japan as we watch the treasury yield below that 2.7% level as well, falling to the lowest since april. i mention very strong industrial production numbers in japan. same thing for south korea, which beat estimates. we are seeing the strength in the equity market with the cause? also up 7/10 of 1%. we are even seeing some strength for the korean won, which is quite rare these days, but it

still below the 1300 level. we are seeing samsung electronics gaining a 10th afford percent. this is interesting because we saw that profit mr. from samsung is really all to do with earnings and what we are seeing on the ground. haidi: take a look at them setting up in the first few minutes. start of trading in australia. up by a quarter of 1%. we are seeing leadership across pretty much every sector being in the green. but utilities, you materials are some of the big gainers in the early part of the session. watching australian bonds. aussie bonds extending their best month since 2012 after that gdp number from the u.s. showing shrinkage in the economy for a second quarter. see the aussie dollar edging higher after breaking a key trendline, suggesting we could see more of a robust rally in the case going into next week's rba meeting as well. shery: let's bring in our next guest who sees china as the most preferred and their asian

strategy. the financial advisor and managing director at ubs. good to have you with us. i have to ask why you like china at a time when we continue to see the stress and the property sector, even chinese leadership coming out, not really announcing any new measures at this point? >> china has always been one of our favorite areas in terms of asia and a really has a very tough time the last few months, the last year and we think, especially with the zero covid policy, but we are seeing a light at the end of the tunnel and hopefully there will be less drastic measures in terms of covid restrictions. and people are coming out of the lockdown and businesses are coming back. we hope in the second half, even with the government not announcing any policy support, but we feel like that should come in the way in the second half, and there should be more

growth in the e-commerce sectors, the gaming sectors, and some of the sectors that really got beaten up in the first half of this year. so, we want to focus a little bit on the growth and their potential in china. shery: we have seen the leadership talk about really maintaining that reasonably ample liquidity, but i wonder who will take it, given this chart on the bloomberg that shows the rates continue to fall as there is money up there, but banks are not really taking the demand for loans pretty weak. >> yes, the demands of loans is weak. one of the biggest concerns we have in china right now is the property market. that could definitely have a spillover effect into banking, into the debt system. so we are hoping that the government will eventually step in and provide some type of policy support in the area and

maybe help with some of these areas for some kind of recovery. haidi: you still quite like commodities and oil even with the recession risk? >> yes. there has been a recent drop in oil and commodities, but still, supply is very much in demand right now. so, with the reopening of the economy and with that going on, even with the talks of the rate hikes and everything, going into the second half, we still see a 10% to 15% upside in commodities. especially with the recent drop in commodities. haidi: i assume that means you are quite constructive on australia then? >> yes, we like australia, british equities and addition to china.

haidi: what about fixed income, what opportunities are you seeing in there? >> fixed income, we are still very focused on short dated bonds, short-term bonds because of how fast rates are going up. but we are getting and then liking areas with more opportunity for some of the preferred and longer-term bonds. but in the near term, we still want to stay very short with fixed income. shery: we are -- we are seeing broad upside across asia and the u.s. it seems that recession risk for the u.s. has been typed in. what are the economic concerns going forward that could really cause more volatility in the markets? >> like with the fed meeting yesterday, i don't think the fed made any specific indication of what would happen with rates. the fed is less hawkish, but i

think it really depends on inflation. that is their number one goal, to fight inflation and to bring inflation back down at more sustainable levels. so it will really be -- it will really depend on economic data. it will depend on august cpi numbers and on-the-job numbers. and that will ultimately drive the decision on the fed. so, with all the rate hikes we experience in the first half of this year, it will have a longer-term impact on the economy. so, we are neutral on equities at this point. we are expecting markets to remain volatile until we have a better idea of the pace of the rate hikes. and regardless, it's going to have a longer-term economy, so the slowing and growth is going to stay for a while, and we just advise our investors to be cautious in position their portfolios that can stay strong

in all scenarios. haidi: financial advisor and managing director at ubs. let's take a look at the early movers in this part of the session. tech and chipmakers, a very big focus we are watching with the likes of samsung. up by have a percent. we had pretty bad numbers out of intel at 22%, decline is less than the forecast. we are not backing off plans to expand it to the areas. businesses watching these apple related stocks. managing mostly to soothing fears with products to try to revive sales and iphone demand is helping just narrowly toppled through estimate and the last quarter and expectations with tim cook that revenue will start picking up again in the coming months. we are also watching some of these carmakers when it comes to nissan. we did get a earnings beating estimates for more profitable car sales, really dealing with supply chain snarls and searching raw materials focusing

on the profitability end on the models that they offer. and see the upside of 1.5 percent, mounting aggressive push to make itself more influential in washington. it's really been on the well-being pull it and getting some deals now when it comes to that crucial relationship with -- with that electric vehicle tax credit extension, making it into the climate and energy package that was unveiled overnight. let's get to vonnie quinn with the first word headlines. funny: billionaire jack ma plans to relinquish control as part of the company's effort to move away from alibaba. he could transfer a part of his voting power to other ant officials, including the ceo. and he's forced to reorganize under pressure from the chinese government. tokyo reported a record number of covid cases. infections top 40,000, breaking the previous market of 35,000

amid an outbreak of an omicron subvariant. the prime minister has ruled out reimposing nationwide restrictions. some local governments are issuing their own measures. the u.s. house of representatives passed a bill that includes $52 billion in grants and incentives for domestic chip manufacturing's. the bill has been sent to president biden's desk for a signature delivering a win for his administration. 243 to 107 votes. they decided a last-minute push from gop leaders would oppose the legislation. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. shery: evergrande only has two days to unveil his preliminary restructuring plan. a look at china struggling property sector would come aside later this hour. but up next, president joe biden and xi jinping agree on at least one thing after that phone call, meeting face-to-face.

more on that next. this is bloomberg. ♪

haidi: let's take a look at how we are seeing trading into the starter this friday. in asia we are seeing the positive sentiment listing. all stocks across nikkei 225 we are ups extent of her percent. australia has seen just about everything sitting in the green. a nice pop over 1%.

utilities in particular, materials doing quite well. which speaks to some of these alleviated recession fears at this point. korean stocks up by a 10th of 1%. we are watching them with a pretty mixed bag of her earnings between amazon, apple and the bad news out of intel. kiwi stocks up by 9/10 of 1% as well. joe biden and xi jinping are in agreement on at least one thing, following their more than to our phone call late on thursday. they want to meet in person for more of what was discussed, let's bring in our chief north asian correspondent stephen engle. how constructive or the talks and where the talks, particularly when you consider those two hours, included in the time it takes for translation? stephen: that's right. there was candid talks and they were described by the white house as subsidence to. but again, that word constructive was not necessarily

used, as it was the last time the two leaders talked back in march. the chinese side, the ministry of foreign affairs used that word, constructive. maybe that's really because of the differences over taiwan and how they want to play to their domestic markets. both doug and their heels on the taiwan issue. but biden did reiterate the one china policy under which only beijing is recognized as the government of china. but he also warned xi jinping against military action to re-unify the mainland with taiwan through force. of course, as expected, xi xiping used much of the two hour 20 minute phone call to read a great beijing's claim of sovereignty over taiwan all the ministry of foreign affairs did chime in with the statement of their own, and they are usually much more strident in their verbiage. they essentially said, whoever plays with fire will get burned. so, that's a stark warning, and it really kind of points to the elephant in the room.

i'm not calling nancy pelosi an elephant, but you know what i mean, figuratively speaking. nancy pelosi tomorrow or later today friday in the u.s. is headed for her asian tour, which sources say will include japan, indonesia and singapore, and potentially taiwan. taiwan has not been ruled out. she's under domestic political pressure to make a symbolic stop in taiwan. the pentagon is saying, don't do it at this time. nothing was necessarily resolved on that matter between biden and president xi, but they talked a lot about it. shery: lots when it came to that very important meeting in beijing, what did we get? stephen: we did not get much, to be honest. we were expecting for the news flow may be to get some sort of word on more stimulus for the chinese economy, which is kind of stuttering through its covid zero recovery, if you will, if you want to call it that, and whether the housing market chaos could be getting more support.

there was not necessarily more concrete measures, at least on the housing front, but at least the authorities did talk up support for getting these unfinished properties that have prompted mortgaged boycotts by many buyers to get them at least completed. xi jinping, no doubt wants to avoid any kind of social unrest ahead of the party congress coming up later this year. also, they didn't really mention the growth target. very few, if any, economist of note say that the chinese economy will meet that about 5.5% growth target this year because of the slowdowns caused by lockdowns in the first half of this year. they simply said they will ensure that housing projects are completed, and also that the best outcome possible is what they will strive for for the chinese economy. shery: bloomberg's stephen engle if there with the latest from hong kong. we are seeing weakness in the u.s. economy, two quarters of negative gdp growth may not mean

a recession, at least not yet. the big question remains, what does this mean for the federal reserve? kathleen hays is here. i have to say i was surprised this morning because i saw the durable goods numbers yesterday and we thought we would not go into contraction, and we did. kathleen: there is a lot of things moving in that report, and the consumer, that's part of it. even though the u.s. is in a technical recession, the national bureau of economic research and the arbiter of when we are in a recession still says, not yet. one of the big things they look at is jobs. but the numbers themselves, let's start there. -1.6% in the first quarter, down nearly a full percent in the second quarter. and when we look at the components, consumer spending, like i said, it only rose 1.0% at a quarterly annualized rate in the second quarter. it was 1.8% the quarter before, and when you are in a healthy

economy you have personal consumption expenditures going much more quickly. 2%, 3% and more when you look at my list of elements. when you move on to services spending, up 4.1 percent, that's a very nice shift from the pandemic when nobody could go out. what's happening now is good spending is plunging. people bought a lot of stuff and now they are pulling back, particularly with prices rising. walmart, target, remember that, big inventory bill, this is why. that's probably a lack of confidence and uncertainty about things going down 2.7%. residential investment down 14%. that's housing, that's mortgage rates, which had soared because the fed is having jumbo rate hikes. one piece of good news, the inflator edged by 5.7 percent down to 4.4 percent. so, the question you asked at the beginning, what is it mean for fed rate hikes?

most people don't think they will stop. the question is do they slow down, if at all. we find out today that bank of america and wells fargo are looking for the 75 basis point rate hike. goldman sachs and jp morgan have a 50 point basis rate hike next. we have two months now before we get the next meeting. numbers will be very important. any fed speakers will be watching closely to get more clues about what they are saying and thinking. haidi: bloomberg's kathleen hays. the outlook will be over key in terms of how much further we see in this rally. checking in on futures in europe at how we are opening up, looking like we will be extended with euro stock futures up 7/10 of a percent. we are seeing a 1% gain when it comes to msci europe futures and the futures are looking robust. not a great deal of movement when it comes to the euro. we are seeing the u.s. dollar. european equities did rise to the highest level just about seven weeks on the expectations that perhaps the fed will slow

the pace of interest rate hikes. also very busy when it comes to earnings. the energy side of things is also seeing a -- which is the european gas prices come down as russian flows are starting to steady, lb it, low levels after -- albeit, low levels after initial signs. it comes with the u.k. business confidence as well. that slump is what we continue to worry about for the economic outlook and wage growth, as well as hiring growth. shery: we will be passing through those issues when we get those earnings results. up next, apple and amazon's upbeat numbers providing some reassurance markets. we will dig into the markets and the outlook for big tech. this is bloomberg. ♪

>> we certainly are seeing continued inflationary

pressures. >> what we try to do is it good, better, best in our portfolio so people who need a more value offering can find it in the unilever portfolio. >> we are not sensitive to where people spend or what they spend on, we are only sensitive to how much they spend in total. >> so far, we have not seen reduction in demand in our saving, so demand for us, currently, is strong. >> big brands, market share during covid and in some categories in some countries we are seeing a strengthening of private market shares. >> a business like ours we have multiple levers that help us to handle the inflation. we are very surgical and careful on how much pricing we take and where. shery: global ceos on how inflation is affecting consumer demand. we are watching apple suppliers across asia today after apple reported better than expected iphone and ipad sales.

shares of amazon also jumping in the extended u.s. rating as the online retailer gave an optimistic outlook. su keenan joins us with the latest. let's start with apple because we also saw some improvement in china as well. su: they did. in fact, they saw a significant improvement, which we will get to in a moment. apple has just enough good news to ease investor concerns about slowdowns in defense shares up as high as 4% in extended trading. fiscal third-quarter revenue and narrowly beating estimates with iphone sales holding up better than expected. as for other takeaways, revenue and the june quarter rose 2% to 83 billion. demand is still strong for iphones and ipads, that was a surprise, but other products for mac, wearable, missed expectations, services also missed. apple getting enough supply due to some factory shutdowns and

china, that a big part of the china story is that the supply chain is improving at the close. tim cook is seeing significant improvement. so the numbers are faring better than some tech peers. coke had an interview with bloomberg's emily chang and told her that the company was dealing with some softness and a slower economy but that he expects revenue to pick up again in the fourth quarter. haidi: if you look at amazon, its easing concerns about the resilience of the u.s. consumer. su: in a very big way. that stock was up as much as 13% after hours as investors very quickly show if their reaction to the strong sales forecast and the fact that it has beat its estimates. better than 13 point 5%. now the forecast operating incomes of the current quarter will range from breakeven to 3.5 billion on sales, which may increase as much as 17% to as

much as 130 billion. amazon once again showing that the sum of its parts is greater than the sum of its parts, i should say. its web services, profitable cloud computing services generated sales of 19.7 billion. that's a big eat. advertising also on a big beat. the company continuing with a focus on cutting costs. the ceo andy jassy with the pandemic area expansion, which you may have recalled that it had way too much warehouse space and way too much workers. one analyst pointed out it's better than expected result in strong guidance that leave amazon and a better position than walmart, for instance, to whether the inflation storm. it has a much higher end customer as opposed to walmart, which is seeing a customers shift the lower end merchandise. back to you. haidi: su keenan with the latest on the big tech earnings. let's get you a check of the

business flash headlines. intel falling short of profit estimates of cutting forecast period second-quarter revenue fell 22% to $15.3 billion, way below the $18 billion estimate. the world's biggest maker of computer processors was weighed down by the drop in demand for datacenter chips and a steep decline in shipments. shares tumbled as much as 12% in after hours. dow jones is reporting that instacart expects to go public before the years end. that's earlier than wall street expected. instacart confidentially filed for an ipo earlier this year and is said to be in a process of responding to comments from the sec. they this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going? yes!!

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♪ shery: breaking news. the new york times is reporting

that the u.s. plans to offer updated booster shots in september. pfizer and moderna booster shot that would be reformulated. they decided they will not be expanding existing booster shots to americans under 50, because they should wait for the second booster that might be more effective. this is according to people speaking to the new york times. the biden administration expects to begin the new booster campaign in september, because pfizer and return or have said they can deliver those doses by then. let's get to vonnie quinn with the first word headlines. vonnie: china's top leaders have pledged to achieve the best top economic outcomes possible while sticking to their corporate zero policy. there is no mention of the 5.5% growth target which many analysts now say is impossible to achieve. they also pledged better oversight of the property sector.

president joe biden and xi jinping have planned for an in person meeting. during a call on thursday. if it happens, the meeting would be the first face-to-face meeting between the two since biden became president. the latest call which lasted two hours and 20 minutes was described as candid and substantive. the imf lowered its growth forecast for the asia-pacific region this year to 4.2%, 0.7% lower than what they predicted in april, and well below the target of 6.5% last year. the downgrade is reflecting economic shocks from the war in ukraine, china's slow down, and raising global interest rates. the u.s. economy contracted for a second quarter, raising chances for a recession. the gdp in the u.s. fell at an annualized rate of 0.9%. the decreases in business and government spending

pointed to it, but the labor market remains strong. >> we know there are challenges ahead of us. growth is slowing globally. inflation remains unexpectedly high, and it is this administration's top priority to bring it down. vonnie: 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: we are seeing a broad market rally across asia right now with materials and energy leading gains. looking about the wti, headed towards $100 a barrel. brent is already at the $108 level. we are seeing a second contraction here in the u.s., perhaps signaling a recession. we will have to see if the nber decides that it is. but so far the bad economic news is translating to good news for the markets, perhaps traders

peering back expectations of a rate hike. 15% of asia-pacific companies have reported, the biggest positive earnings surprise from consumer discretionary. let's get more from the markets with the chief rates correspondent for asia and mliv contributor, garfield reynolds. what are you watching for sustained direction in the markets? we were skeptical about the knee-jerk rally that we saw after the fed, but we continue to see gains across the board. garfield: yes, in the short-term there is the potential that equities might pull back a little bit. they have had such a strong month and a strong week. we might see some rebalancing of flows, we might also see some nervousness going into the weekend. there is the potential for a fresh rush of european gas tensions, and there is also business surveys at the beginning of next week that

could do a bit more to emphasize the economic downside. fed officials will start speaking again next week now that they had the meeting. so there is some risk there. side watch perhaps for some nervousness from stocks in particular, but also possibly bonds. there have been some strong moves, and although so far they have survived the first 24 hours, which the last couple of times post-fed was key, there are still plenty of downside risks out there, and the concern is that were both bonds and stocks, we are seeing a bear market rally. we had an extraordinarily bad first half. now we have had a really good july. it's august going to be as kind? especially if you remember that a lot of times, august is the month when geopolitical and other risks have come out of

left field to hit markets. so there are already existing geopolitical risks, i wonder if that right be on the back of people's minds as well. haidi: this six week-high in the yen, is -- what else is driving it? garfield: short covering is part of what is driving the pace of the gains of an. but the direction owes a lot to the building narrative that really broke out to become the consensus, after the fed meeting. that we have had the peak for, if not inflation, the peak for expectations for aggressive fed hikes. so if the fed will slow down the pace of its hikes, it is hard to see the yen pushing lower than it got to. it got to just under 140 per

u.s. dollar, to the weakest in 24 years. that got to be a very clouded and profitable trade. now that it looks unlikely that the yen can push significantly lower from where it had gotten to, there is not a lot of point in sticking with those trades were too long, especially that japan's currency has shown that when it gets momentum, it can move a long way, very fast. so why not take your profits and run? [laughter] haidi: bloomberg's mliv contributor, garfield reynolds there. a lot to watch out for what it comes to the start of trading across mainland markets and hong kong. we are looking at billionaire jack ma, planning to relinquish control of ant group. that is according to dow jones. the decision is part of the company's efforts to move away from alibaba. . let's discuss with our bloomberg

opinion columnist shuli ren. is this to try to get a clean slate for ant financial question mark and is it a smart move? shuli: i think it is for jack ma. he can't move beyond his past. there is always this nagging issue since ant financial released its ipo prospectus, as to who owns ant. he controls 50% of the company. but if you just have 100% of the company, and back then there was a $300 billion valuation, that is a lot. and even scary for jack ma, china's anticorruption watchdog came in to see what the fintech's relationship with state-owned banks is. that is very scary.

president xi jinping's anticorruption campaign has nailed a lot of very high-profile banking executives. this week we found out that the minister of i.t. is being investigated. and i think jack ma probably doesn't want to deal with it. if ant was still worth $300 billion, he would stick around. but it is worth $30 billion now. he doesn't want to stick around with it. shery: jack ma was a poster child of what anti- -- entrepreneurship would look like in china. what does this say about the broader seeing that we are seeing so many challenges for this personality? shuli: the notion of fungus is very elevated in the tech and real estate development sector. entrepreneurs need to realize that before if you were expecting to make $50 billion,

now you can only make $5 billion. the chinese government can effectively push you out. on a positive note, i think that it is companies like ant financial or tencent, they would try to form a professional management team as soon possible because the founders may not be there forever, they need a second or third income. so it is not a bad thing for chinese companies. shery: shuli ren, bloomberg opinion columnist there with the latest on jack ma and on the broader entrepreneurship seen in china. evergrande will unveil its preliminary restructuring plan. will the world's most indebted property developer meet deadlines? our guest joins us next. this is bloomberg. ♪

haidi: the clock is ticking for the world's most indebted developer, evergrande. the company had previously said it was on track to deliver a preliminary restructuring plan earlier this month. our next guest says it will not be a surprise if the restructuring plan is delayed again. joining us is zerlina zeng, senior credit analyst at credit sites. does delaying give evergrande time to negotiate more deals at

this point? guest: yes. the delay is not a big surprise to the company. there was more about the resignation of the ceo and cfo. -- creditors are not willing to extend. i think that the announcement, if it happens, will be quite a milestone for the high-yield property bond because it will set a template for the restructuring of defaulting developers. investors are very closely watching the issues. the recovery ratio, the treatment of offshore bondholders as well as some of the details in terms of asset sales. so overall, this is still a big event to watch for. haidi: what are you watching out for when we finally get the details of the deal? zerlina: i think first, in terms

of some of the details of restructuring, maturity extension, the installment schedule, and then the government involvement, both the central and local government in terms of how they assess their asset sales, and the involvement of state owned companies. and we're also watching for the treatment of offshore bondholders, especially the key bonds, who will get paid first, the supplier, the home buyers? the down payment payers, or the bondholders? whether it is onshore offshore. shery: you continue to mention government involvement. does this give us reassurances about the property sector that we will not see systemic risks despite the continued mortgage boycotts? zerlina: i think at the moment, our base case scenario is that we don't see elevated systemic risk for a few reasons. first, the government is

involved in their action has been quite swift both the central and local governments. against, we think china's banking system is relatively well-capitalized, so we don't see that default is contagious for the other sectors outside of property. but of course, we are seeing very elevated property risk for the chinese economy, a is likely going to be a drag on the economy in the second half of the year. and if we have a better case scenario here, we will see some risk emerging from the smaller banks and along the supply chain of the property sector. shery: which is why you are staying cautious china high-yield developers. what about industrial names? we see a spillover? zerlina: so far we are not seeing a spillover in terms of default risk. but moving ahead, there will be very high trading volatility, some of the high-yield

industrial names had been sold off in the past because of headline risks, and i think this will continue in the second half of the year. in terms of their founding costs, a lot of vividly owned, high-yield industrial names have more access to funding both onshore and offshore. there dollar bond funding costs have been high. even though at the moment we don't see elevated contagion risk, volatility is going to stay. haidi: what did you get out of the politburo meeting in terms of government and policymakers' intent on how they plan to address these issues in the property sector? zerlina: i think they are still standing very firm, in terms of housing is for living and not for speculation. that view hasn't changed. but we do see the government trying to improve stimulus policies pushed out in the first half of the year.

they are trying to encourage banks and also asset management companies to extend support to the property sector. they are also emphasizing that they will ensure the home delivery and to ensure social stability. the other aspect of the politburo meeting is also about transmission and implementations such as infrastructure policy, adding credit to the real economy, as well as addressing unemployment issues in the youth. even though there were no big-ticket infrastructure stimulus measures pushed out, the focus here is about transmission and implementation. shery: zerlina zeng, senior at creditsights. this as we continue to see upside. a bit of divergence in the nikkei, now gaining ground with industrials. the topix is up 0.2

percent. encouraging numbers out of japan, growth of 8.9% month-on-month. australia is also gaining ground at the moment, 1% up. we continue to watch the aussie dollar. we saw the rarely with iron ore prices rallying and kiwi stocks, gaining ground. coming up next, china's leadership has issued a total order -- achieve the best economic growth well stick into a strict covid zero policy. . more on what that means for the market and the economy, next. this is bloomberg. ♪

haidi: the ceo of stellantis has been talking about the effective supply chain snarls and the energy crisis and what it is having on his business. he told bloomberg that he expects prices to drop as well as the global economic slowdown. >> transaction prices have increased significantly. that is a consequence of the imbalance between supply and demand, which is a consequence of the semiconductor crisis. on the other hand, we have been suffering from a significant cost inflation, coming mostly from energy as a consequence of the ukraine war in europe, and a consequence also of raw

materials' cost inflation, mostly on steel. what we see now is that as some actors are anticipating a slowdown of the global economy is not a recession, we see that the price of steel is not going down, which is a good thing to accommodate eventual lower prices moving forward, if the semiconductor supply was to normalize. that may happen on one side. on the other side, we expect some of the raw materials will cool down and that will bring the business to, i would say, the usual point of management that we had in pre-covid times. the two will to a certain extent complicity charter. >> you mentioned higher energy prices. i wonder how stellantis is planning on merging through the energy crunch in europe and the inevitable second effects of

that including the broader economic slowdown. >> indeed, this is a point of tension. we are by far the largest manufacturing footprint in the european region. and we are very, very limited in germany, which will be the first country to suffer from this energy crisis. we have only 3% of our production made in germany, as we have plants everywhere in europe. so we are very much robust against that kind of situation, even though we are now preparing for a short-term contingency plan to protect our german plants from the gas supply crisis. but we don't expect that to be a big problem for our company as we have a very large manufacturing footprint in southern europe, which is much less affected by the energy supply crunch.

shery: that was that stellantis ceo speaking exclusively with bloomberg. . china's top leadership gave a downbeat assessment of economic growth, that did not announce new stimulus policies. let's bring in lianting tu for more on this. markets and investors had been watching to see whether or not we would get more of that economic support from authorities. how are we expecting them to react? lianting fish that means the government is downplaying the target of 5.5% growth for the year that many people think is impossible to achieve. does that mean there will be significant stimulus down the pipe? it doesn't seem apparent from the statement last night the politburo. it seems there is no big changes in overall economic policies around china. but they did mention something i thought was interesting, to stabilize the housing market.

that could essentially be translated to making sure the housing projects that are unfinished finished, and in order to avoid further mortgage boycotts. that could benefit a few sectors, including real estate, but also, steel and construction. haidi: we are seeing china's sme's willingness to hire workers is closer to a record low. what is the telling us about business confidence? lianting: yes, that is according to a survey, a second-quarter survey of 300 sme's. about all of them, only 4% of the respondents are willing to increase staff in the third quarter. really worrying, because smes employ about 200 million people in china. the unwillingness to hire people means they are likely to play a leading role in -- they are unlikely to play a leading role in driving economic growth.

unemployment numbers in china are worrying, especially among the younger generation is a lot of college grads are unable to find jobs. i think unemployment among that group is about 20%. shery: and we of course had president biden and president xi jinping speaking over the phone. we did not get any details on what happens to u.s. tariffs on chinese goods. lianting: there have been increasing expectations that biden may scrap some of the tariffs imposed on chinese goods. as you said, there isn't much coming out of it. i think market participants are expecting very limited upside in terms of momentum from any positive development in the tariff talks. people are jaded towards the incremental shifts in the bilateral relations between the u.s. and china. i think people are really looking at the diverting

monetary policy, looking to take hint on how chinese markets will go and the chinese yuan will go. and also the unfolding property crisis and how that will end. haidi: granting to, our asia stocks managing editor. with all the things we will be watching, including the stocks we will be watching when the market in hong kong and the mainland open in a half hours time. apple suppliers are in focus after better-than-expected earnings from apple. jack ma is reportedlyplanning to relinquish control of ant group, according to the dow jones. we will be watching for b aobao trading, and stellantis as well. this is bloomberg.

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