haidi: welcome to daybreak us earlier. shery: good evening from bloomberg world headquarters in new york. the top story this hour -- china's official g-v falls into contraction as lockdowns continue to weigh on the economy. haidi: evergrande fails to deliver apron limit area structure plan, feeling anxiety. shery: house speaker nancy pelosi heads to asia, skipping mention of a possible stock in type -- possible stop in taiwan. the nasdaq 100 seeing its best month since april 2020. we had a big earnings week with big tech and a big earnings, amazon and apple adding almost 200 billion dollars after solid results. oil prices under a little pressure but we had gains in the

friday session given we saw exxon mobil and chevron coming out with record quarters. the 10 year yield still around the april low but shorter data yields were higher given that we got price gains coming in a little higher than expected, including the pce number which is the one the fed targets. it's another big week -- we are talking about 75% of earnings result from s&p 500 companies beating estimates. this week, we are watching caterpillar. they weren't -- they warned we might see slowdown. we are watching airbnb because we are watching for the travel rebound. and we have alibaba and we are hearing this fcc has added the company to its list of possible delisting's. they have a three deadline now. annabelle: that is another

headwind facing tech stocks in general. we have central banks meeting in india and australia. futures mice, we are looking mixed ahead of the open but in terms of the currencies base, a bit of weakness in the dollar. the yen is holding around the 50 day moving average. it seems crazy that just a few weeks ago we were talking about 140. the aussie dollar is trading flat. you mentioned the best month for u.s. stocks since 2020. in asia, it was a different story. we did see asian stocks gaining 1.5% but take a look at what momentum is suggesting. looking at a down trend here, driven by what we are seeing in hong kong. we have the covid zero policies and that tech lockdown and policymakers signaling they are not going to go big on policy

support even with the worries we have in the property sector. haidi: geopolitics is also in focus. we've got be itinerary of nancy pelosi's asia trip. there was a lot of concern from beijing the house speaker would visit taiwan. the itinerary does not mention taiwan, it highlights visits including japan, korea and singapore among the stops she will be making, with a focus on security and economic collaboration as well as democratic governance. we also saw china holding military drills in the taiwan straits, so perhaps a bit more of a show of force, after beijing suggested there would be repercussions if house speaker did stop in taipei. shery: that economic collaboration important at a time when we see china

sputtering after we saw a little recovery in the shanghai reopening. back into contraction territory and we are also talking about evergrande. we are expecting some sort of recovery plan to come out of this indebted develop her and we've only got preliminary restructuring, let does it mean when we are seeing mortgage boycotts throughout the country and what does it mean for the broader chinese economy and how the chinese economy will feel repercussions for the rest of the region. haidi: let's bring in stephen engle for more. also are chief rates correspondent for asia. i will start with you on evergrande. there were concerns we may not get this by the self-imposed deadline. what does this tell us, the fact we did not get more than the briefest of details. stephen: keep in mind evergrande

is the most indebted develop in china, the poster child for all the problems in the property sector in china. there was a massive restructuring of its executive suite, a new ceo and cfo. i am not giving them a pass but they are essentially saying evergrande faced unintended complicated and challenging manners -- matters. i'm fumbling over my words as he was trying to explain why they did not come up with this restructuring plan as the country did promise as late as june. a couple of months ago, they said they would have this plan ready for offshore investors and onshore investors by july 31. it did not happen. they came up with the luminary restructuring principles but failed to give any more clarity on that extensions, on asset

sales, and there are broader implications for the chinese economy that is already sputtering as we saw with the tmi data. -- the pmi data. shery: those numbers were surprising. we knew the chinese economy was struggling, but after the reopening in shanghai, perhaps the we were expecting 50.3. any number below 50 indicates contraction. the estimate was 453.9 but that manufacturing bmi is going to be reverberating perhaps on the markets today. bloomberg economics has a few

hot takes on this, essentially saying china's recovery is sputtering after a short spurt in the wake of the shanghai opening. it is abrupt loss of momentum for the economy and clearly the property sector and up fresh outbreaks of covid-19 are taking a toll on the economy and their assessment is this data we've got on the pmi, when we were expecting 53, it is grim across the board. haidi: we do have some more details about how speaker pelosi's trip to the asian region -- no mention of a stopover in taiwan and no mention of visiting indonesia despite our reporting suggesting that would be a destination. tony: that's right. pelosi and her team have's -- have kept the schedule very close to their best. that said, it is hard to overstate that tension these plans have created even though they have kept them under wraps for obvious reasons, including

security, given the chinese threats and rhetoric. it seems she will go to singapore first and then to the other three countries and, as we have said, no mention of taiwan. but that leaves open the possibility she will make a stop there. shery: tell us about that's chinese threats. we are seeing beijing held live firing drills in the taiwan straits. tony: yes, and those are the first of their type that have been announced by china in at least a year. so that gives you a sense of the concern here and the risks. you also have to say it comes against the backdrop of persistent tension between the u.s. and china. pelosi's trip was a topic when

biden and president xi jinping spoke last week. according to people familiar with that conversation, biden basically said pelosi is not my branch of government. she's in a different branch of government, not the executive and i can't control her agenda, which you could imagine would not have satisfied the chinese president. on the other hand, she has had support from both republicans and democrats in congress for this trip. it also comes in a very long tradition of pelosi taking on china and being a thorn in china's side, especially in human rights. on tiananmen square in the 90's with a sort of provides -- improvised pro-democracy better

when she was a junior member of congress. that is an additional factor for policy, which is is personal for her up to a point and her convictions. haidi: given the big contraction we saw and factory activity, these concerns of mortgage losses at chinese banks, what does that suggest when it comes to the trajectory for chinese equities? garfield: that chinese equities will continue under the fold the way they have. the key thing is markets in u.s. can anticipate our anticipating the fed will ease off arts rate hikes. in china, it seems they need

more stimulus that had been thought. the chinese authorities are signaling that dangers outweigh the long-term benefits. that would send a signal to further, further pain and further underperformance relative to the u.s. but you have some of the other markets in asia not as directly affected by covert shutdowns and the real estate problem and the chinese authorities reluctance to address that strongly in a way that they have said before they might do. shery: let's turn to vonnie quinn with the first word headlines.

vonnie: president joe biden has tested positive for covid for a second consecutive day as he deals with a rebound infection. the president will extend isolation measures just three days after he was cleared of the virus. minneapolis fed president neel kashkari says the fomc is committed to bringing inflation back down to 3%. in an interview with cbs company admitted prices are continuing to rise beyond the fed's expectations and wages are not keeping up. he said the economy is far from where the central bank would like it to be. >> we are going to do everything we can to try to avoid a recession but we are committed to bringing inflation down and we will do what we need to do. we are a long way away from achieving an economy back at 2% inflation and that's where we need to get to. vonnie: alibaba has been added to the growing roster that could

face the listing from the new york stock exchange. china and hong kong refused reviews, citing confidentially look -- confidentiality laws and national security concerns. turkey says a ship of ukrainian grain may depart as soon monday. it's the first since an agreement was reached with russia to allow the transfer of rain through the black sea port. the timing is yet to receive a go-ahead from the united nations. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie. this is bloomberg. haidi: still ahead, why earnings season is better than -- even though clarity remains murky.

he sees companies securing properties to head off a third arm's year. this is bloomberg. ♪

haidi: let's take a look at your week ahead -- the rba expected to raise rates by 50 basis points. the are b.i. and bank of england also set to hike their rates. economists are expecting 50 points for the boe. we will also get jobless claims this week. they will likely show fewer job openings as optimism on the u.s. economy to tear rates. the opec-plus meeting gets underway thursday. the biden administration is hoping saudi arabia can ease oil price pressure by pumping more crude. shery: we are expecting results from an -- a raft of tech

companies. paypal, uber and airbnb are set to report. in asia, results from alibaba and toyota are due thursday. alibaba may give details on a move to seek a primary listing in hong kong. that is your week ahead. let's bring in our next guest who says the earnings season has been the right medicine to soothe and oversold market. always good to have you with us. despite the more positive calls, we've heard companies cutting costs, having more layoffs, cutting capex as well. is this a sign they are in trouble or is it more precautionary? >> it's not a sign they are in trouble, it's a sign they are worried about execution. it's just the medicine we need as we enter this quarter with deeply oversold conditions.

in the face of underlying fundamentals that were not so bad, we are starting to see the fruits of these reports, three quarters of companies are beating estimates. a medley, those estimates were a really low bar. some with profits at about a 6% rate. companies are focused on free cash flow and very focused on operational efficiency and earnings increasing costs into increasing revenue to maintain those margins. anybody who doesn't succeed is getting treated savagely by this market. shery: part of that earnings boost coming from big oil. we had really strong results from exxon and chevron. but i'm wondering how long that can last. will there be political clash? we've seen countries try to

impose new taxes on these corporate profit windfalls. andy: politics is always a tough one to call. but if you look at what's happening at the energy companies, it is precisely the case they have turned 10 years of really difficult times, 10 t -- 10 lean years into operational efficiency and cost control. they are now taking hundred dollar barrels of oil and turning them into profit. there could be backlash for the refiners because they are the ones seeing the biggest windfalls spread between what they can charge for a gallon of gasoline and what it cost to purchase oil. haidi: we see this historic shift to value when it comes to u.s. equities. how long can that be sustained or is that the popular traditional thing we see for the rest of the year? when i -- andy: if you are a

stockmarket investor, you should stick with what has worked for you so far this year and that is sticking with value, which is heavy on materials and industrials because the companies have made themselves profit machines over the past few years and the underlying price of those commodities are fundamentally undersupplied. look at oil. once production gets ramped up, it could become a lower price. in the meantime, they have a recipe for high profits going forward. it seems like oil will not deviate much from $100 a barrel, resulting in a long track record of profitability. the other thing that's going to continue to work is quality. focusing on countries good at generating free cash flow and have the discipline to deliver on it, the best is dividend payers. companies with a history of

paying dividends naturally have that discipline and require it to be able to distribute equity to investors. haidi: when it comes to bonds and credit, do you see the duration rotation continuing or at this point, there still quite a bit of duration risk aversion. andy: that is what is interesting here. if in stocks you want to do something that has worked all along, and bonds come you want to do something different. avoiding duration has worked well. it's likely to work less well going forward. here's why i think so. one is inflation is going to become a back burner issue the more problems some issues may start to become, in particular, worries about a recession. we just have to quarters of negative growth and that the informal definition of recession. going forward, we are likely to experience something that feels

like a recession, a reduction in employment and reduction in corporate activity and corporate profit. in that environment, investors are going to be concerned and find the current rates available in bonds attractive. vonnie: always great -- haidi: always great to chat with you. get a round up of the stories to get your week going. terminal subscribers can go to -- you can customize those settings so you get the assets that manage -- that matter to you. this is bloomberg. ♪

shery: here's a quick check of the latest business flash headlines. elon musk has fired -- has filed his counterclaim against the cancellation of the $44 billion deal. it is set for october 17 in delaware. a delaware court judge agreed to fast-track the filing. live tons of may face further disruption after pilots voted for strikes if necessary to force a wage deal. the pilots union voted overwhelmingly in favor of walkouts which could trigger more cancellations on top of the

7000 flights affected due to staffing shortages. a spokesperson said constructive discretions -- constructive discussions are underway to solve the conflict. boeing has received the luminary clearance to restart deliveries of the 787 dreamliner aircraft. the grounding over a manufacturing flaw, damage the playmakers repetition for bloody. boeing has voted for a strike by 2500 machinists. annabelle: let's get a look at the set up and it comes to effect this monday morning. an edge higher when it comes to the u.s. dollar. still setting under 70 u.s. cents, but the aussie finish last week almost 1% higher. the kiwi dollar at 60 to 80.

dollar yen holding at 133. we see the dollar losing quite a bit of ground over the past few weeks as we get the recession versus no recession, is the fed looking to move toward a dovish project replaying into what has been an astonishing run for the greenback. given we saw the bigness when it comes to great activity, these concerns continuing when it comes to evergrande. the bloomberg dollar index holding just a little bit weaker. lots more to come here on daybreak australia. this is bloomberg. ♪

vonnie: you are watching daybreak australia. china's factory activity

contracted unexpectedly in july as covid restrictions dragged on the economy. it fell from 50.2 to 49. china's recovery has been fragile as officials focus on stepping out covert outbreaks with lockdowns. evergrande has failed to deliver a restructuring plan it promised by the end of july. instead, it handed out a list of restructuring principles. investors are waiting for clarity on how they plan to deal with $300 billion of liabilities. u.s. house speaker nancy pelosi 's schedule for asia trip does not mention a possible stop in taiwan. the statement from her office as she will visit singapore, malaysia, japan and south korea. beijing has warned there would be consequences if she does go

to taiwan. china held a live fire drills in the taiwan straits on saturday. the president of sri lanka says the imf rescued deal -- has been delayed. it has been pushed back because of street protests in the last week. sri lanka is looking to the central bank for crucial items. myanmar is extending its state of emergency for another six months. the military government says the country needs more time to return to stability and prepare for elections. the state of emergency was declared in february last year after the military toppled the civilian government. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. shery: we are seeing signed china's economic recovery is

waning. let's bring in annabelle. what are we hearing after the latest shocking pmi numbers, not to mention the lack of fresh the meal was measures coming last week? annabelle: that restrained fiscal response we are hearing from officials in beijing desk of the outlook for the growth target. we saw officials quietly slipping away from the 5.5% growth target for the year. they are saying the upside is three point 5%. the major headwind does remain covid zero because that impacts labor issues and private consumption. if we can change on, the biggest contraction we saw was in the smaller businesses. we did have those ongoing outbreaks in shanghai and beijing but there are provinces where most of the labor-intensive businesses are

the focus. the contraction that was the biggest drag for small businesses, down 47.9. haidi: treasury yields likely to have further downside. this is about the reaction we are getting to the fed. the first is growth indicators are softening and the second is the fed is going to stay data-dependent. markets interpreted that as a signal we could see the fed is data dependent. that means we could see the end of the hiking cycle in reach. that's the call standard charter has on treasuries. even if the fundamentals remain challenging. we are seeing that in terms of the dollar direction because the dollar is failing to break above that key line. we do usually see the dollar

weakening in july. that was not the case in the previous month. looking ahead, we have technical indicators and history saying the dollar should weaken. shery: on the fed, here is what larry summers thinks. he's concerned the central bank is engaging in what he calls wishful thinking about bringing inflation down from a four decade high as he spoke to bloomberg's david westin on the latest edition of wall street week. larry: we were not sure what was going to be happening with wage inflation. we hoped the indications in some of the monthly surveys that earnings growth was slowing and that might slow the whole inflation process would materialize. that is not happen. looks like inflation is running at a stable rate. still 2.5 points above where it

was before that whole episode started. it depends on how you look at the figures but no evidence of a significant decline. if you look at the private sector and take out benefits, then it is going up a bit. if you look at 12 month figures going up a bit, those may be the wrong things to do. it may be better to look at the overall figure but it's showing what i have been saying for quite some time now. which is we are an ingrained moderate to high inflation economy, nothing like 9% inflation is built in, but inflation above for looks to be pretty securely built in. if productivity growth doesn't accelerate, it could be worse

than that quite easily. i'm pretty uncomfortable with the current situation and i think it points to the difficulties the fed is facing going forward and confirms the broad diagnosis that we have an overheated economy that is not going to fix itself and therefore we are not likely to get out of this excess inflation situation without having a recession. david: you have been steadfast on this program and elsewhere on your views on inflation, yet there is a day bait going on -- a debate going on with the market and economists, with the market saying they will hike and then start backing off next year. economists say the economy doesn't look that way, we are going to have to keep going and keep it pretty high. what do you do when you have

that kind of debate? a: we will see what judgment the fed makes. the challenge they are going to have, and it is an agonizing challenge and why it would be better if we were not in the kind of configuration we were in and would be better if we had not over stimulated the economy last year. on the one hand, i think you are likely to see a significant slowdown in growth, you are likely to see recessionary forces develop over the next year. on the other hand, it's going to take a lot to get the inflation out of the system. the danger is they don't persevere strongly enough in restrictive policy and that is what gets you a stagflation situation where growth slows and you don't beat the inflation out of the system. you don't complete your course

of antibiotics and your illness comes back and drugs and bacteria resistant. on the other hand, i don't think we can deny if they do what's necessary to contain inflation then it's not going to be a happy economic situation over some interval. secretary yellen said yesterday that she held out the prospect of getting out of this without unemployment going above five. i have in norman's respect -- in norman's respect for her as an economist, but that statement greatly surprised me. not as much as the fed saying we would get out of this with 4.1% unemployment but i don't see any

basis for thinking either of those statements is a reasonable protection given what we know. haidi: former treasury secretary, larry summers, speaking exclusively with david letson. australia is set for its deepest tightening for a generation, raising the risk of an economic slowdown. but are you expecting this week? annabelle: -- >> the reserve bank of us really it is expected to continue its monetary tightening. an interest-rate hike tomorrow, which would be its third back to back 50 basis points increase and the sharpest tightening in a generation. shery: how concerned are we when we see home prices flying for a sixth consecutive month?

>> right now, the economy is being described by policymakers as robust. we are seeing signs of a hot economy and unemployment is at a 50 year low. spending is still strong but there are fears of a slowdown next year. the reserve bank is expected to forecast this week, which is expected to show and economic slowdown over the next two years. haidi: how strong is the australian consumer, when you talk about the property sector? what is data showing? swati: we are seeing a very sharp and rapid slowdown in the housing market. in fact, it started before interest-rate hikes began. but since may, when the first

rate hike happen, we started seeing a rapid fall. however, it looks like households are in a stronger position to handle this. in fact, even banks have a much stronger balance sheet today then six or eight years ago. there are signs things could go pear-shaped from here but overall, households to look like they are in a very slow -- a very strong position with a high savings rate to withstand a fall in prices, higher interest rates and inflation as well. haidi: a big week ahead for us trillion policymakers. our next guest says the next earnings season is better despite the lack of clarity. this is bloomberg. ♪

haidi: taking a look at the day ahead for us really at and new zealand -- the prime minister bracing for a new leader. we are watching australia's monthly inflation gauge and manufacturing pmi.

concerns over a shortage growing and a record number of delegates are expected to take part in the biggest mining conference. we are starting off on tuesday -- reporting season here, how many rising costs and recession concerns. our next guest says results are likely to be better than expected. we've seen in the u.s. that it has been a mixed bag where some results have come in marginally in line or slightly better but the outlook has been quite murky. >> it is going to be tricky. there's quite a lot of fear price into market already. australia as a nation has stashed away 200 billion for savings over the pandemic and

wage inflation through almost every industry we look at. australia is in decent shape but the outlook is uncertain. the impact, it could take up to 12 months and we are not expecting a lot of companies to give a lot of forward-looking guidance. good earnings season but uncertain outlook. we think there's a growth slowdown. haidi: since we have had the were in ukraine break out, there has been a standout when it comes to earnings. when you look at the regional pictures, it pops out. some of the highest expected, do you expect the upside to continue if you try to seek out

the sectors that would do well in australia? julia: i think the opportunities are in certain commodities and cyclicals that have sold off to take energy and aluminum markets, for example. yet you have stocks -- they've got good balance sheets and good cash flow. i think they would do quite well. but on the flipside, the market has been hiding. there is a price to pay and that's why it is selling quickly. shery: what do you make of the consumption-oriented stocks? we city -- we see retail sales

growing the pace of growth has been decelerating. will we see more scrutiny on the demand side of things as well? julia: i think so. as we pivot from good student services, consumer stocks will be under a bit of pressure. if you look at the semiconductor industry, they are forecasting computers and phones decelerating. we are quite wary of goods but we liked services. names like qantas and corporate travel, but they are taking market share as well. shery: still you have that consumption resilience compared to other economies if we are starting to talk about recession here in the u.s. and europe.

we have seen those that are more globally exposed. julia: yes. i think something we are keeping an ion is the exposure to europe. i think australian companies are in a good place. in that short-term, europe is reliant on russian gas and there's no getting away from that. already you are seeing companies we talked to talk about deterioration in the consumer and said volumes were down 8% in europe the last quarter. we are wary about australian names that are more exposed to europe. but u.s. housing is very resilient. haidi: when it comes to

china-exposed names, even though we had the shock when it comes to pmi, for a lot of uncertainty? julia: we are seeing a lot of uncertainty in china. but as we come out of the lockdown, trends will improve. one of the chief things is the battery materials space. so ev x alteration is accelerating and you've got prices high and supply takes longer. they are flush with cash, so in certain pockets, the property market is going to come through but the government is not

purposefully stimulating to the paid it was 10 years ago. haidi: we are watching out for earnings, under pressure to deliver stronger results and pushing for a breakup. executives do to meet hong kong shareholders for the first time in years on tuesday, expected to face questions. shery: we will ask those questions when we speak to the hs ec cfo. if you are watching from hong kong, you can turn to your bloomberg. get commentary and analysis from our expert editors. this is bloomberg. ♪

haidi: we do have new zealand building permits coming and what they fall extending the fall of 5% we saw previously in may. we have data showing this talk of houses available increased so inventories are it exceeding historical average. looks like it's turning into a buyers market for new zealand. we are seeing the average asking price falling in july from june.

yes trillion prime minister is planning a referendum to change the country's constitution and set up a representative indigenous body in parliament. paul allen joins us with more. what is the indigenous voice of parliament intended to achieve? paul: it's one of the oldest civilizations in the world, as there is evidence of them inhabiting the continent 60,000 years. at the same time, these groups are among the most marginalized and impoverished. a report released last week showing them going back on all sorts of metrics from education to suicide. inch b-17, leaders suggested this idea to have ace separate body to advise parliament on these issues. now following up on an election promise, the question being do you support an alteration to the constitution that establishes

add aboriginal and islander voice. that's due to happen by 25. shery: australia has a patchy record when it comes to referendums. what are we expecting? paul: it sure does. there have been 44 referendums and only eight have been successful. the most famous recent failure was the vote for australia to become a republic and pitch the queen of england as the head of state. that failed and anthony albanese says he does not want to repeat the mistakes that are made then. people agreeing with 49 but disagreeing with one and therefore voting it down. it would be a referendum on change first and then the wording would be debated later on. these have a better chance of success. the opposition leader says he is keeping an open mind. shery: paul allen joining us from sydney. coming up, expectations of

china's cmi data including a possible improvement in the manufacturing and nonmanufacturing sector. we got the shocking pmi contraction in the numbers that came over the weekend. we look ahead to japan's start up seeing -- start up scene. that's it for daybreak australia. daybreak asia is next. this is bloomberg. ♪

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shery: