heidi: you are washing daybreak

asia. -- watching daybreak asia. shery: nancy pelosi is set to meet the taiwanese president, china is ramping up his response with the most provocative actions in decades. anxiety over geopolitical tensions ease, futures pointing to muted opens in japan and australia as fed officials push back against the narrative that they will actually pivot away from tightening. focusing on bringing down inflation. we are getting breaking news when it comes to southeast asian lenders. annabelle: net income by one $.48 billion over a strong base on expectations for the second

quarter, baiting -- of beating the estimates. coming in at $2.8 billion. income is $1.18 billion. when it comes to the nonperforming loans ratio, at 1.3%, we are seeing one point $7 billion for the second quarter net interest income as well. allowances of assets as well, when it comes to second-quarter allowances for those and other assets, that is 72 million dollars as well. 3.2 billion dollars, we have seen when it comes to trading in ocbc stocks, it is a pretty positive outlook. no cells at the moment for ocbc. shares are down under 4.5% over

the past year. broader index in singapore is seeing a modern upside of the 2% -- a modest upside of 2%. annabelle: we are keeping an eye on what is happening in the on market. two factors at play here. the fed will not be pivoting as fast as anticipated. the inflation fight is really fast and those geopolitical tensions play a role as well. the u.s. house is visiting taipei -- u.s. house speaker is visiting taipei. the biggest move in the aussie bond space, let us see what we are talking about for the stocks picture, we are setting up for a steadier start for japan, australia looking a little flat. new zealand in the upside. china may not be so's forceful

in his retaliation, we will be monitoring those moves in the dollar. that is an negative -- that is a negative for equities. this is the final reading and moving into expansion territory at 51.1 and for the services side, more strength coming through, 50.9. new zealand and japan jobless rate, rising more than had been expected to 3.3%. wage growth is very strong, rbn said they are setting the stage for a stronger inflation sign. shery: we had a volatile session in the regular new york session, the markets change direction at one point. when nancy pelosi landed in taiwan, we saw stocks turn positive for a bit. we see the fear about an economic slowdown.

we had mixed earnings rolling in, that outweighed the oil demand outlook, crude is down .7%. the fireworks in the treasury space, we saw that really harsh turn around when it came to the treasury rally being wiped out and the 10 year reversal, so sharp that we have not seen this, we had seen it very few times in the past decade or so. we are talking about the 10-year yield after falling towards a 1.5% give it the really hawkish fed commentary. even by recent standards, we have seen a so much volatility in the bond space, this was really rare. heidi: it is quite odd we are seeing that back and forth when it comes to pricing of the geopolitical risk as well. nancy pelosi's taiwan visit has

prompted beijing to announce a military drills. the most provocative actions in decades. the united states security council spokesman says washington is ready to manage beijing's response. >> the u.s. does not seek or what a crisis. we are prepared to manage what beijing chooses to do. at the same time, we will not engage in saber rattling. we will operate in the seas and skies of the western pacific as we have done for decades. heidi: let us bring in our east asia correspondent. give us the latest on the ground. condemning the announcement of the military drills? >> as speaker pelosi arrived in taiwan last night, on the periphery that was -- there was

a gray zone battle between china and taiwan. what of taiwanese websites went down, victims of cyberattacks from unknown sources, that included the presidential office website and the foreign ministry website. we have also seen an incredible amount of reports of military activity in the seas around taiwan. that culminated after pelosi arrived. china planned to -- china planned to hold military drills after pelosi leaves and they will entirely surround taiwan and they have already signaled to aircraft and ships not to go anywhere near the zone they are holding these drills in. as she arrived, there was a

certain level of ambivalence about pelosi's visit. after she arrived, there has been a positive outpouring of support and and welcome for pelosi on her arrival. there were crowds during her plan as it landed, crowds greeted her when she got to, small crowds reading her when she got to her hotel last night. the question is through her itinerary this morning, she is expected to meet with the president as she is expected to meet with key lawmakers and she is going to have an online meeting with representatives from tft to see what benefits this brings to taiwan. shery: how does this further strained the u.s.-china relationship? >> they called this one of the

red lines it, they had warned repeatedly including with a conversation with joe biden last week, you should bring a warning there would be grave consequences and those who lay with fire will get burned. there is a front page editorial in the people's daily, the artist -- the paper of the communist party. they say there is serious difficulties for china and u.s. relations. the visit has hit the political foundation of their ties and the united states is playing the taiwan card. there is going to be six exclusion zones all around taiwan, starting tomorrow through sunday. after pelosi leaves, there will be military drills. we have not seen this kind of

provocative action from the pla since likely 1995 when china did a similar move after taiwan's first democratically elected leader went to the united states. they regard pelosi as second in line to the u.s. presidency after the vice president as an indication of the high level and sensitivity of her visit. they are taking allie's diplomatic action. the ambassador to beijing has been summoned yesterday for protests. we will have to see the next couple of days how far this military drills go to protest as a visit by pelosi to taiwan -- the visit by pelosi to taiwan. heidi: more than 100 taiwanese food exporters being banned, repeat of what we saw.

-- a repeat of what we saw. >> as you say, in the lead up to loc -- pelosi's visit, china announced a ban on food imports from hundreds of taiwanese companies, they export from taiwan to china and everything from honey, biscuits, cookies, cakes, and seafood. this is the latest in a long series of efforts to exert economic pressure on taiwan by beijing. they have gone after producers of agricultural produce in taiwan, last year, they suddenly banned pineapples from taiwan in september. they prevented bans on a couple of other different taiwanese fruits. taiwanese food is consumed in taiwan, china is by far the biggest export market for this portion that is exported.

one key thing is that these food producing regions typically keep active and support the president and democratic parties. heidi: we do have plenty of volatility hitting the market and we also had hawkish fed commentary as well. let us bring in guests for some reaction. shery: we saw this huge turnaround any risk sentiment. what are you watching? >> yesterday in new york especially people who are able to go back to focusing on the fed speakers. during the day in asia, there had been a lot of angst about how china would respond if nancy pelosi arrived in taiwan. so far, everything has been as measured response. -- a measured response.

the chance to go back at looking at the factors that will affect the economic fundamentals and the fed speakers are reminding everybody that the bottles contain inflation are far from over. we saw a huge turnaround in treasury yields. a sense of relief that people can go back to watching data and watching on the key drivers for the u.s. economy which in the near term is what to make it difficult for traders to put in major bets on the market. if the fed has not finished their job, they have more work to do in terms of taming inflation, we could see this inverted yield curve last for quite a long time in the u.s.. it will be a tough month ahead for people looking at stocks. heidi: even without the

geopolitical overlay of additional risk, you have your bread and butter set of risks that will create further volatility, does that continue for the rest of the month? >> it is hard not to see things coming down too quickly. we had as of report this week and is likely to reaffirm the position that the job situation is pretty healthy. to call u.s. in a recession is a bit of a stretch. when you consider unemployment is relatively low on a historical basis and jobs are still being created. that will get the attention of the fed. most of the economy is still at work, that is going to keep people, consumers are relatively happy and inflation is not going to go down easily in such a scenario is that. you have this tension between investors who may think that the fed is getting closer to peak rates and yet the inflation

numbers, they can see there is a lot of work to do. that kind of expression will come out through fed speakers and create short-term volatility. one thing is for sure, major data numbers such as employment, cpi, other trade numbers, we get a lot more intraday volatility around these key economic data sets. we are going to have high volatility around data. that will make it a little bit tricky for investors. shery: they are talking about the fate, we got st. louis fed president speaking at an event in new york. he says a new york session -- recession is not going to happen, a soft landing is reasonable. he is also cautioning that the

fed is committed to its inflation target, we have heard the hawkish commentary from the fed earlier today from the likes of the san francisco fed president as well as the chicago fed president. the fed has taken action to raise policy rates sharply and modern central banks have more credibility. in the 1970's we had the weight spiral and inflation surging. he also says that the federal reserve and ecb may be able to get relatively soft landings. the u.s. recession is not going to happen. believe that they are, of bloomberg subscribers can continue watching this at live go. later this week, you may have missed earlier -- some of the events you may have missed earlier. >> china's central bank has strained cash, the longest

streak since february. they have withdrawn around u.s. -- 3.6 billion u.s. dollars. that has helped with a seven day repo rate. hong kong's new chief executive has brought the lowest approval rating in a decade for a new leader. just 45% of people expressing confidence in him who is faced with tough covid restrictions white on the economy. 52% is what his predecessor started off with. a study in israel showing hospital workers who got a fourth dose of pfizer's covid vaccine was less likely to get covid. they showed a 7% rate of breakthrough infections, compared to 23% for those with three doses.

global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. heidi: we have more analysis and insights into nancy pelosi's trip as she prepares to meet the taiwanese president. caesar joins us to talk through emerging market risks. this is bloomberg.

shery: frederick rally being wiped out and the 10-year yield is asserting past that, two points of the present level. the dollar seeing the best day in three weeks. emerging market think the worst day since mid july or so. sovereign debt default issues, the dollar funding issues, let us bring in our next guest, caesar, it is good to have you with us. dollar strength with the rising treasury yields with how aggressive the fed and other central banks are being, we keep

talking about potential vulnerability for the emerging market economies. where is it coming from? is it a dynamic underneath that that is the problem? >> that is a long question because there are a lot of forces at play here. tuesday on the reversal in terms of the dollar and the fed, there is a link between financial conditions and markets. financial conditions or lose and you are saying that we are not out of the woods yet on inflation. we would expect continued choppiness. in terms of headwinds and growth headwinds, there is a different thing of which we have seen some. i have stated we do not think there is huge risks in the emerging market economies. we think the growth path and rates path will be quite choppy

over the next few months. shery: you are seeing some pockets of opportunity in china, the latest geopolitical tensions, do they have an impact in your view? >> so much one can talk about here, i would just say the latest hours of trading are encouraging, let us hope it continues in the next few days. these are the largest two economies in the world, it is an ongoing political development. i do not think the broader story is going away. the take away is that we find it across many of our clients, we should separate china exposure from the rest, that is not a judgment call to say that china is worse or better, it is an idiosyncratic risk and merits its own benchmark. that is an important take away.

heidi: does that mean you see the state of the chinese economy and the situation when it comes to the yuan being an anchor for other assets? >> i think to some extent that is true, the way i would think about it is china is a the second largest economy in the world and matters a lot for all global economies. we should treat that risk distinctly and frankly if you look at the white it has been trading -- how it has been trading, it has been more than global macro interest rates, inflation dynamics which i think is the market forecast -- micro forecast we are more comfortable in calling that geopolitics perhaps. heidi: where do you see more idiosyncratic or domestic opportunities at the moment? >> i would be clear that i do

not think necessarily does world is zero-sum. pressure on chinese assets is helpful in a progressive em. india has been a fairly while performing trade across em. structurally, it is an interesting domestic story. our strategists have been cautious because of the high evaluation. i think more technically, places like brazil, it is very interesting. tomorrow, in the western hemisphere, we will signal an end to the hiking cycle. there is a lot of cushion there. i think that is an interesting story as well. shery: we do have plenty more to come on daybreak asia, this is bloomberg. ♪

shery: catl has delayed announcing multibillion-dollar north american plant. this is due to tensions raised by nancy pelosi's trip to taiwan. the plant was supposed to supply up for tesla and ford. caterpillar has been hit by slowing demand in asia over all, they cited manufacturing costs as >> this is daybreak: asia.

fed officials want to see evidence the state -- inflation is on a downward path. the san francisco fed president handed the fed has a ways to go on reaching price stability with consumer prices rising in june, slower growth may be necessary to control inflation. >> we don't talk about recession per se, are we growing above trend? my forecast for this year's we will be growing below trend. that's necessary in order to get price increases, inflation under control. vonnie: vladimir putin will meet the turkish leader on friday. this comes after ships carrying grain set sail from odessa under a deal brokered by turkey and

the u.n.. the kremlin says the leaders will discuss the situation in syria. the u.s. is moving ahead with a plan. financial regulators are asking for comment and a step that involves the sec. in april, gary gensler said the reduction could help bring more transparency to the market. 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. annabelle: we are focusing on moves in the bond space, particularly following swings we had in treasuries. the elevated volatility in general. these are the moves this morning, mostly being felt in the aussie bond space. lines we are getting from the st. louis fed resident, he is

speaking in new york and saying, inflation can be slowed without leading to a recession, and the fed has developed a scale in what he calls an orderly matter. whether we do see a recession as well as -- is what is top and mind. we saw that in starbucks earnings, the ceo saying investors and high-end consumers are not giving up habits just yet. resilience is coming through in the consumer space. let's take a look at the equity space. slightly firmer start on those comments even though we understand the fed pivot is not around the corner just yet. geopolitical tensions are at play, we are seeing that in the fx space. the dollar strength returning,

that is playing into the yen, it's weaker, it has been testing the 100 day moving average. this is all after nancy pelosi arrived in taiwan. haidi: let's get more on that expected meeting, what the consequences might be. our next guest says we will likely get through this without a crisis. great to have you with us. what is the risk we will see a more forceful response from beijing? president xi is perhaps not coming from the strongest position in a critical year for him. guest: that's true. in comparison to previous crises the united states have experienced with china, the 1995, 1996 crisis, china is in a stronger position now which is

why there is a heightened level of concern in the united states. i take your point, for xi jinping, this is a critical window. he can't afford to be seen weak when provoked by the united states. haidi: what is the endgame? we continue to watch this relationship as the great strategic competitive relationship of our time. guest: i hope we get to next monday without this spiraling into a crisis. i think that's probably the most likely outcome. we will see days of tensions as the people's liberation army does a series of drills, exercises, the united states will move military hardware into

the region. i think what this signals is the bilateral relationship has unfortunately moved into a contentious period where it's beyond trade, beyond technology, we are seeing this move into the domain of military strategy. we are to have to be watching for slight missteps and calculations. shery: if you take a look at the military drills, some say this resembles a naval blockade -- should we be worried about a normandy-style invasion of taiwan at this point? given what happened with ukraine, tensions are very high. are these concerns warranted? guest: no for the sake of this short discussion. this is not a normandy-style invasion. what the pla is doing with the formation of the exercises is to

make it look like this is what we would do in a blockade, this is a threat, an attempt to be a deterrent message to say there is a price for these high-level engagements between the u.s. and taiwan. personally, i would not be worrying as an investor about this. i would be worrying about an experience or event where the pla rubs up against the japanese or u.s. air fighter and we are primed with the level of distrust in the relationship for that to spiral. i would put away the idea that xi jinping is going to wake up and say now is a good day to invade an island. shery: tell us about the reaction from neighbors. this cannot sit well with japan, south korea, where speaker pelosi is headed next. jude: you are seeing no real

distance between allies and partners. they are not going to want to create daylight. privately, they are watching this with great unease. there was some doubt about whether pelosi should have made the trip. i don't think anyone doubted she could make a trip, but why now? it's august. the 20th party congress is coming. this was almost designed to antagonize. a lot of partners and allies are going to have this approach of somewhat sympathetic as the u.s. tries to bolster the defense of taiwan, and on the other hand, apprehensive. this is a faraway prices. if you are japan, this is right in your backyard. haidi: this year in particular, talk to me about the insight you

have into the pressure points happening within china. the property market, regulatory crackdown. whether we see covid zero. what would be some of those conversations, faction forming at these meetings that might be happening? jude: before i give my analysis. one, a full on collapse or xi jinping is going to be purged from office. this is not the year xi jinping wanted to have it. starting with the war in ukraine, a significant economic softening, in large part the result of policy decisions. there are not structural forces the pressing economic performance. these are boneheaded decisions.

what is this going to lead to in terms of the 20th party congress and beyond? xi jinping will remain in power, but right now this is shaping the choices of personnel. there is probably a stronger bargaining hand for those looking to move their people into the bureau or central committee as opposed to xi jinping being able to run the deck. this is shaping the conversation about who will be premier in a different way than would be the case six months ago. xi jinping is 70 years old. he's pretty set in his ways. i would not expect a different policy approach. shery: what do you make of washington's messaging? jude: it's a mess.

i have to say, the best reassurance we could make to beijing is to have a clear message across the u.s. government without these wide deltas and swings. it's contributing to a volatile situation. shery: good to have you back. as we were talking about, these military drills in china are supposed to send a signal. either way, we are seeing heightened tensions across an important part of the supply chain. we are talking about the taiwan strait we have seen about half of this year's containers go through, almost half of the global fleet. we are talking about a very

crucial and busy shipping lane passing from china, japan, south korea, taiwan, to the u.s., europe, the middle east. haidi: it goes to the broader question. whether this potential uncoupling between the u.s. and china then creates a period of longer-term enduring structural inflationary pressures. you are seeing these in apple, tech stocks taking a slide. the idea we are going to see further supply chain issues, consumer boycotts. we see the impact on the ban of taiwanese exports going to china, already ahead of speaker pelosi's visit. it is calling the question of

whether we are going to see more economic forms of warfare and inflationary repercussions as well. we are going to continue to watch that. particularly as we count down to the meeting. we are expecting the press briefing as well. get around above the story to get your day going in today's edition of daybreak. it's available on the mobile and bloomberg anywhere app, customize those settings so you get the news that matters to you. this is bloomberg. ♪

shery: opec-plus's do together virtually to decide output policy but oil watchers are skeptical the coalition will answer president biden's call for more supplies. let's bring in su keenan. su: one analyst says opec are not willing to swing as much. president biden has pushed for opec and its allies to pump more.

the expectation is they are going to do, modest monthly increases -- leave that spare capacity for future use. it's almost an even split. it's actually the fact you have a milestone coming up, opec and its allies will have officially completed the revival of supplies they halted during the pandemic, and also, you have seen a pullback that has erased the entire game that resulted right after -- gain that resulted right after russia invaded ukraine. interesting things going on there. biden said he expects the leader to do what he can to boost output, and a lot of the white

house officials signaled they had confidence in that. people close to the kingdom say the kingdom is certain spent -- circumspect about his plans. tuesday, committee members got together and the outlook is a little more bearish than previously. there will be a lot more surplus coming on. in terms of where prices go, the reason we have seen prices decline is the growing concern about demand not quite as strong as it was months ago and that's a result of the old adage that people pullback at the retail level with gasoline, so demand is a bit lower. interesting to see how the meeting comes out. heck to you.

-- back to you. haidi: su keenan there with the latest. we continue to watch these developments in taiwan with the u.s. house speaker's visit expect to create more volatility. we can get all of the news when it comes to what is breaking across the asia-pacific, be sure to tune in to bloombergradio.com as well. lots more to come. this is bloomberg. ♪

haidi: jetblue reported a loss but the company ceo says he expects a return to profit in the third quarter for the first time since the start of the pandemic. he spoke to bloomberg earlier. >> if we go back to our april earnings call, we made a lot of adjustments. we pull down capacity. in quarter two, the unit cost came in at the better end of what we could expect. the difference in q2 is in terms of fuel price. we saw prices go up from a

initially guided the quarter. as we come into q3, we see a nice recovery. we are forecasting a profit, the first profit since covid came in. we have not changed the cost guide for the rest of the year. we have not done that. q3 and q4 we are both expecting to be profitable. not at all. i think we have done exactly what we said we would do, we just did it with a volatile environment. >> that is the supply side. let's talk about the demand side. there have been hence on other calls from some of your rivals that there is early evidence demand is starting to soften. it's very tentative, but the

early signs might be starting to appear. any evidence you are seeing that as well? >> not yet. we're having a terrific summer. it's incredibly busy. we are seeing load factors around 90%. even september, which tends to be the month in the quarter that is often not as strong as the summer, we are seeing good bookings. there is a lot of pent-up demand out there. they're looking at taking trips in september and october. that's going to give us good momentum into the holiday season, thanksgiving, holidays at the end of the year. shery: the jetblue ceo speaking with guy johnson. we're counting down to the start of trade in korea and japan.

the bok said to resend u -- we're keeping an ion earnings from banks, defense stocks are in focus. this with speaker pelosi's visit prompting china to announce military drills. in japan, we are watching for the release of economic data with services and composite pmi. the labor secretary seeking to raise the national minimum wage, earnings are due out from companies including nintendo. haidi: that's romantic recovery we saw in the -- dramatic recovery in the yen is coming to a halt. this is a key technical level we have seen the yen hold pretty much all year. is there an expectation we could see more haven demand given the geopolitical uncertainty? reporter: there is some of that.

it's the v-shaped recovery in the dollar yen after it got too robust. the dollar-yen is in a strong downtrend after running into a wall. even with fed speakers pushing back against the idea they will pivot towards a slower pace of rate hikes, the underlying concerns about the economy have not gone away. commodities have dropped back to emphasize the slow down fears. as long as the global slow down fears remain strong, the dollar-yen will be on a weakening trend. it will test the 130 level at

least a couple of times in the coming months. shery: what are you watching today, given the reversal in risk sentiment we saw in the new york session? garfield: it's a tricky one. asia in general might take a more broadly risk on tone. the rumors of what the visit to taiwan would result in are proving to be spoke year them the fact, she visited, the world has not ended, china is reading from the playbook. you could expect a little bit of relief. they are less worried about this back-and-forth with treasury yields. shery: our bloomberg chief rates

correspondent with a look at what to watch today as we continue to watch the open in australia, japan and korea. defense shares in focus. on the earnings front, the amd disappointing sales forecast put chip stocks in focus, keeping an eye on sk hynix. we have the market opens as we continue to watch and brace for speaker pelosi's meeting in taiwan. this is bloomberg. ♪

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shery: counting down to major

market opens as we continue to watch nancy pelosi's visit to taiwan, we are expecting her to meet with the taiwan president. local media reports say they will have lunch and she will be meeting democracy activists. haidi: we are seeing increasing escalations, military drills, missile exercises feeding geopolitical risk into the market outlook. markets are back to the bread and butter. annabelle: we have been hearing from the st. louis fed president who is saying a recession is not in the cards in the u.s. and a soft landing as possible, we are a few seconds away from opens in japan, also for treasuries, we

saw outsize moves in the 10 year. it's about those calls we are getting from the st. louis fed president, he is saying the fed needs to move rates into a restrictive policy and he wants it to 4%. we have seen a lot of moves back into the dollar. that is leading to the weakness back in the yen, holding pretty flat. testing the 100 day moving average. in terms of stocks, coming online to the upside. these moves in geopolitics suggest china may not be able to resort to more forceful actions, they are in a weakened position economically. let's take a look at the open for korea. some strategists say these moves we see could be a supportive factor for korean stocks. still keeping an ion the korean

won, sitting around the 1300 key level. in australia, the open of the asx 200. staggered start, is reactive to what we saw in the wall street session. the aussie dollar holding below the 77 level. oil in focus, we have opec-plus meeting later today. we understand they will be setting policy for september but not buckling from pressure to raise output. haidi: nancy pelosi's taiwan visit has prompted china to announce missile tests, some of the most provocative actions in decades. john kirby says washington is prepared to manage beijing's response. >> that united states will not seek and does not want a crisis. we are prepared to manage what beijing chooses to do. at the same time, we will not engage in saber rattling. we will operate in the western

pacific as we have done for decades. haidi: for more, let's bring in our taipei bureau chief and stephen engle. on the ground, what are you hearing in terms of expectations for the agenda? reporter: the focus is speaker pelosi's visit, all about chips and human rights. she starts off the day with a visit to taiwan's legislature, she is here to conduct diplomacy. then, she moves on to the presidential office where she is scheduled to meet with the president, they will meet for about an hour and we will see what they have to discuss. later in the day, there are

several other items. one is a meeting with human rights activists. some will include booksellers from hong kong. at some point before she leaves, she is scheduled to meet with tsmc, the world's largest manufacturer of semiconductors. human rights and chips sums up the agenda. shery: plenty of rhetoric from beijing including military measures. what are we seeing so far? stephen: we got the first words out of state media, state broadcasters saying military drills have begun. we will run through sunday where

they will conduct military exercises in zones that surrounds taiwan. there have been live fire tests, exercises and the taiwan strait. short of a military invasion or act of war, many analysts are expecting an increase of gray zone tactics. sam talked about the cyberattacks coming from beijing on the presidential office and other areas, other websites in taiwan, that happened yesterday. these exclusion zones. one time in 1995, these gray

zone taxes could be a plan -- play to further isolate taiwan and make the risk premium all the more expensive. there is still the military threat and that's why we can bring up this map. i tracked it last night. she did not take the direct route, she did not go over the south china sea. she did not cross the taiwan strait. she went south across borneo and around to the east coast of the philippines and up north to taiwan. a roundabout, much longer way. shery: as you are speaking, we are getting the latest from china.

we have seen some imports being banned by china, including from more than 100 taiwanese suppliers, now breaking on the bloomberg, halting -- what could the economic repercussions be for taiwan? given the rising geopolitical tensions? sam: that is the question for taiwan. it comes with downside. china has decided to express its displeasure with this trip. as you said, 100 companies, food

exports have been banned. we have military drills surrounding taiwan. the surround the entire island that's a big question is how much will this affect shipping? conditions have been absolutely terrible. how much the inclusion zones -- exclusion zones could disrupt shipping. haidi: i'd be curious to know what the popular sentiment is among taiwanese people with regard to this visit, what do they want in terms of the

endgame or status quo? sam: that's interesting. will she or won't she come to taiwan? that was met with broad ambivalence. since she has arrived, the change has been small but a vocal welcome, there were people welcoming her flight, people welcoming her outside the hotel. there were small protests, tens of people. broadly, taiwan welcomes these types of visits. taiwan is often excluded from broader international discussions. anything that puts them in the global light is usually seen as a benefit. going forward, exactly what kind

of benefits the visit will bring is what people are asking. we have seen there are going to be negatives, economic consequences, exactly how it benefits ordinary people is something people are asking today. shery: if you want any more details on this visit, get commentary and analysis from our expert editors. our next guest says growth is moderating geopolitical risks. rising markets have not priced in a contraction in earnings. good to have you with us. we are getting the latest breaking china has halted -- you

don't like taiwan at this moment. tell us how this heightens your view. guest: there are fundamental drivers increasing geopolitical tensions. fundamental drivers, base case is we expect global growth to slow down. we expect to see a slowdown in exports in those regions and if you take a look at the data, we see excess supply coming off. we expect outflows to continue on the back of slower demand and geopolitical tensions, equity markets and ethics markets to lagging the space. -- lag in this space. shery: you are not liking the offshore yuan.

guest: our point of view is the china pboc has the capability to ease. with inflation in china fairly benign, we expect the interest rate differential between china and edm markets to widen. in addition to that, we expect the trade balance in china to further weaken the yen. that is how we see it. haidi: when it comes to equities direction, does it feel like markets are looking for an excuse to be optimistic despite the fact there is a lack of support?

guest: we are in the camp that the fed will push deep into restricted territory. we are seeing contraction in the u.s., we expect to see a few more in the tar to deny that's on the table. if that happens we expect equity markets to sell off. even though we see [indiscernible] haidi: where do you see the

biggest risks when it comes to the credit space? guest: for asia specifically, the main issue around the property market may blow off further. that has seen some implications across the broader credit space. even though most other asian markets are exporting to china. from contagion implications, within hours space, [indiscernible] they look pretty attractive right now.

haidi: thank you so much for joining us. annabelle: we are checking in on asian defense stocks, those moves are slightly higher. this is with china starting a series of military drills. it's planning to encircle the island. in most significant show of force. there is a view that china could abstain or refrain from further retaliation given its in a position of economic weakness. caterpillar results are seeing a slowdown in revenue in china, particularly around asia. we are also seeing machinery stocks declining as well. shery: let's get to vonnie quinn. >> the chinese central bank is

draining cash, the longest streak since february. . the pboc has withdrawn 18 billion yuan. tepid demand for loans leaves a glut of cash in the system. it's pushed rates to the lowest level in nearly two years. the hong kong new chief executive has drawn the lowest approval rating in a decade. 45% of people expressed confidence. that is worse than the 52% carrie lam started off with five years ago. she left office with a 17% rating. vladimir putin will meet with the turkish leader on friday on a deal to unblock exports. this comes after a ship carrying rating sets all from odessa. the kremlin said the leaders

will discuss the situation in syria. president joe biden has chosen an official to lead monkeypox response efforts. a retail administrator will be the white house monkeypox response for nader. rising case numbers have prompted california and illinois to join new york. total infections rose to five thousand 800 people on monday. 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. shery: oil prices have been choppy ahead of the oil meeting later. we will get the outlook. before that, the fed may not be pivoting away from tightening just yet. we will have a read on the latest, next. this is bloomberg. ♪

haidi: we continue to get developments on nancy pelosi's visit to taiwan. we are getting reaction from the chinese foreign ministry, saying

some u.s. politicians are troublemakers, saying the u.s. should stop playing the taiwan card. we heard from the defense ministry condemning the announcement from beijing. that would be the highest ranking american politician to visit taiwan and 25 years. we heard beijing announcing these highly provocative missile test. potentially setting the stage for this kind of showdown as we continue to watch these meetings and the press conference expected from nancy pelosi after her meeting. we are hearing from the chinese minister, again, verbally

suggesting the u.s. should not play the taiwan card. let's take a look at how geopolitical risks are shaping out. sharp reversal of sentiment and a pullback when it comes to safe haven bids for haven assets like the yen, gold pulling back. we're seeing a positive picture across the region. the kospi could benefit. shery: we are seeing retracement when it comes to treasuries from that selloff in the u.s. session. the 10 year yield is heading towards 2.7%, talking about falling at first. we have the treasury rally.

it was about 2.7%. the volatility was intense. worst level since the onset of the pandemic. it does not help we have hawkish fed speak today. three official sent positive messages, there is still a long way to go. kathleen hays is here with the latest. crushing those expectations. kathleen: the fed did not signal the pivot, the fed decided there would be a recession. very quickly, jim was speaking at nyu, he was in a room with bond traders and economists. in terms of what we got out of the q&a, jim think they have to

get in restrictive territory. then depending on inflation, they can sit back, slow down, take that pause. they are going to pull off the regime change, his whole speech was about pushing inflation -- rates up so hard that it cause a recession, this is the 20 20's, and central banks people have more credibility, and that is what they can achieve the soft landing. jim is convinced they can pull it off and it has everything to do with this shift, having fought inflation, this will carry the data, that soft

landing. haidi: kathleen hays. let's take a look at how european futures are opening given we are seeing asian stocks holding up pretty well given we see that rising geopolitical risk, stocks slipping given mixed earnings results as these concerns, growing tensions between china and the u.s.. futures are off by half a percent. we are seeing softness when it comes to german-backed futures. much more to come on daybreak asia. this is bloomberg. ♪

shery: we are getting more reaction from beijing on nancy pelosi's visit to taiwan.

china is going to punish taiwan independence diehards, bowing criminal punishments on taiwan independence diehards, they will adopt criminal penalties over separatists. it follows commentary from the foreign minister saying some politicians are troublemakers and the u.s. should stop playing the card. we had commentary from the people's daily that the pelosi visit has hit at the political foundation, this as we heard that joint, naval and air force exercises had begun by china. coming up next, we will discuss the covid zero policy in china. millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction.

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shery: breaking news out of

japan. pmi for july coming in at 50.3. the composite much weaker, barely above expansion territory. this is not surprising given we are seeing the hit on pmi numbers. haidi: let's take a look at the numbers from singapore and hong kong, given we have similar headwinds plaguing export economies. hong kong dealing with covid restrictions as well as exposure to the mainland. take a look at the numbers for hong kong. this is what we are seeing in terms of a reaction for the hong kong dollar.

haidi: in terms of the analysis, there potentially could be upside for korean stocks. annabelle: korea and taiwan are similar in some respects with a high correlation and they have been seen as the beneficiary of these tensions, at the same time they are caught in the crux between the u.s. and china, the decoupling, the chip act passed last week which will provide $52 billion of support. it prohibits recipients of funds. both sk hynix and samsung could be rethinking their investments in the world second-biggest economy.

we had the lackluster outlook and points to weakness we are seeing in the broader chip outlook. let's take a look at the goldmine. haven play around nancy pelosi visit to the island. we are seeing gold makers declining in australia. shery: let's get more on the markets with mark renfield. we're talking about inflation and highest interest rates, the war in ukraine, tensions over taiwan. can you blame them for the volatility? >> it has been a wild few days and weeks.

if you look at the treasury yields, we were getting close to 2.5% in asia. treasuries were seen as the super space haven. it all changed around in new york with fed speakers who are trying to get the narrative back on the inflation page, there is obviously some concern around the fed the market has been too preoccupied thinking recession is coming and have taken away the narrative of inflation. he sees the great being for percent by the end of the year.

we have the jobs report friday, the u.s. economy is in a reasonable shape despite gdp numbers which show there will be some kind of contraction. haidi: we are seeing interesting moves across fx, some aversion play out? >> is pushing the dollar-yen down yesterday. it was 139 a couple of weeks ago. you saw positioning build very quickly, you are seeing a buildup on that.

where is the middle of that range? you can expect higher volatility in the near term, more headlines , new zealand jobs data this morning. central banks such as new zealand could be ending the rate cycle earlier, the rba yesterday with a dovish i, fears that new zealand and australia may be ending that soon as well. rethinking how far the interest rates could be for the markets, and for the moment, starts to favor the u.s.. the dollar strength will come back. haidi: let's get you to vonnie

quinn. >> nancy pelosi has become the highest-ranking american to visit taiwan and 25 years. china has announced missile tests. some of the most provocative actions in decades. policy greeted officials and is set to hold a joint press conference on wednesday morning. federal reserve officials want to see evidence inflation is on a downward path. they all hinted the fed has a ways to go on reaching price stability with prices ranging 9.1% in june. slower growth may be necessary to control inflation. >> it is, are we growing below or above trend?

my forecast is we will be growing below trend. that is necessary in order to get price increases, inflation under control. >> a study in israel shows hospital workers who got a fourth those of pfizer will less likely to get covid. health care workers showed a 7% rate of breakthrough infections compared with 20% of three doses. the u.s. is moving ahead with a plan that kind/the time bonds transactions -- regulators are asking for comments and a step that involves the sec. in april, gary gensler said the reduction could help bring more transparency to the market. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. haidi: china's zero covid policy

has been tweaked around the edges. let's bring in emma o'brien. perhaps we could see some effort to join the rest of the world in covid normal. that's not a given. reporter: we are seeing key indicators from xi jinping. havens like singapore, new zealand, they stomachs the big uptick in cases at the expense

of reopening. china is not going to take that way. xi jinping had an address last month, covid zero, keeping the virus out. shery: given the economic repercussions, why would presidency opts to keep china shut? reporter: in short, there are more pros than cons. at the end of the day, this is about avoiding fatalities. that is something that have made rhetorical hey with. they have staked a lot of the party credibility on, they have

managed to avoid deaths, 5000 deaths for the entire pandemic versus more them a million in the u.s.. at the moment, he has public support, they have managed to tweak covid zero, even during lockdowns, other things around infrastructure that they could bring into play to mute the impact of this. this is more about the economy for xi jinping, it's about politics, a policy he has staked his claim on. shery: opec-plus is meeting to

decide on president biden's request to tap more oil. we will discuss. this is bloomberg. ♪

shery: oil waivers on geopolitical tensions, we had

volatility in the new york session. we are seeing the downside in the broader commodities space, copper leading declines given we are seeing the question mark about the economic recovery, seeing the strong dollar as well. we're seeing the worsening of the property prices. not a lot of good news. haidi: they will be discussing the output policies for september. the key focuses on a group, let's get some insight.

why would they want to preserve that capacity? guest: the main thinking is is about the unity of opec was. is there enough cover to the light response to overtures? haidi: there are a lot of things going on in energy markets. you have demand and slow down headwinds, investment concerns

as well, how do they come out of this? guest: the main messaging will be about demand uncertainty. we have the risk of recession in the u.s. and europe. keep in mind, emerging market economies, on top of that, it's being driven by what is being driven in the property sector, but the covid zero policy could keep the economy contain for now. all of that is making the picture uncertain and given opec-plus wonderful cover to say let's wait and see.

prices have fallen since the beginning of june. shery: how do european guest stockpiles hold up right now? guest: that is going to be the big question. it's going to be based on was happening with gas exports. looking at gas flows, is looking whether they can get enough gas and is putting prices elevated. we have not seen demand takeoff. the covid zero policy has been

muted. that is the risk, if we see some parts of the chinese economy recover and see improvements continue, we could see the market tighten even more. that's a concern. shery: you mentioned covid zero. we're hearing reports it could be indefinite. what does that mean for the metals market as well? guest: in terms of the markets which are impacted the most, base metals, 40% to 60% comes from china. 70 to 75% of iron ore imports are chinese.

we can't see the property sector turning around. the end of the day, potential risk, it's going to remain very subdued. shery: take a look at how taiwanese futures are trading, we have seen downside, we are talking about the worst since mid july. we're at the lowest since july 20. we are seeing futures trading, pointing to the downside, geopolitical tensions, we are expecting nancy pelosi to meet later this morning, we have

heard reports about parliamentary visits and the meeting with democracy activists. haidi: we have seen increasing economic moves being made by beijing, halting imports of fruit and fish, we saw the import ban, importers and china as well when it comes to exports. key components, in particular when it comes to the construction industry which gets most, you are also getting economic pressure points as military drills and missile tests were announced as well.

more to come on daybreak: asia. this is bloomberg. ♪

shery: we are live in taipei. nancy pelosi was visiting the parliament as we see heightened tensions with report saying speaker pelosi will be having

lunch, i press conference, local media reports she will be meeting with local lawmakers and democracy activists. we continue to see the reaction from beijing not only when it comes to military drills, also, when it comes to the economic impact, haidi: heading to a long list. we are just minutes away, half hour away between the opens. let's bring in our asian equities reporter. what are we seeing in terms of investors trying to gauge action in taiwan? reporter: policy landed last

night, reactions see more restrained. they feel like it could be a longer, drawn out event, and investors -- in the short term, stocks are falling in hong kong, they feel like the reaction has been priced in. longer-term, it could be more significant. we could see the u.s. and china decoupling, and that has not been looked up by the market yet. shery: you are watching live pictures of nancy pelosi, we are seeing local media reports.

charlotte, tell us about the economic repercussions given the import bans, but also the chinese battery giant may not be investing in north american plants. reporter: as our colleagues reported, the chinese electric vehicle battery giant is putting office announcement considering the sensitive relations, this plant is intending to supply so the company is thinking to put off the announcement. we could see more, as well as you mentioned, exports coming up. investors are keeping a close eye on this. shery: we will be watching the

market reaction as mainland chinese equities as well as taiwanese equities, you're watching u.s. house speaker nancy pelosi meeting with lawmakers in parliament. a local press conference says she will be reporting with democracy activists as beijing reacts. haidi: we are seeing some economic reaction as well. halting on imports of citrus fruits, halting of exports. we are seeing the announcement of military drills circling the island. lots more to come. keep it here with bloomberg television. this is bloomberg. ♪

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