>> good morning and welcome to daybreak australia. shery: good evening from new york. china's trade surplus hits a record, easing concerns about waning global demand. haidi: the central bank is supposedly fall from -- far from done at bringing inflation down. shery: biden's domestic agenda moves closer to becoming law with the senate passing that tax, climate, and health care bill. u.s. futures at the moment are unchanged. three weeks of consecutive gains in the u.s. stock in the asian trading session. positive data and earnings outlook looked good. 80% of the s&p 500 already reported results.

competing profit estimates. treasury yields rallied across the curve. two year yield added almost 50 basis points friday. we are seeing some downside in oil prices after they gained ground friday but still below $90 a barrel. concerns of recession continue but we were watching the odds of the fed rate hike being bigger than expected and now traders are putting a 75 basis point hike for september given that jobless rate fell to 3.5%, the lowest since 1969. so a record number of americans on payroll now. haidi: this all feeding into where we sit with the inflation debate. let's look at asian markets. it's a big week for australian

earnings. key pressure supply chains and costs will be major themes this week. looking at the futures in sydney shaking up flat. we expect little early change monday morning. aussie dollar holding at 69 after the dollar traded in the major currencies. we saw studying for the aussie dollar. stocks finishing last week 1% lower. kiwi stocks trading flat. it dollar at 135. closing up 1.6% friday, the best week for the dollar-yen in three weeks. inflation, it seems like in spite of global inflation, the debate is how quickly will the

skyhigh prices come down. spending, demand uncertainty are playing part of the future. we see inflation decline -- we will see inflation decline but at what level and how central banks will reply if they want to achieve a soft landing. shery: we will be watching. some key sectors including ev and renewable suppliers and watching some big tech names after senate democrats passed a landmark tax, health care, and climate bill after years of infighting. we have it at a price tag of $437 billion. not the original $6 trillion envisioned by the president but it means it's the largest investment ever made in the u.s. towards fighting limit change.

medicare will be able to negotiate drug prices so we will watch all of these. it is about the inflation picture and recession. mary daly saying the fed is far from done in bringing down prices. for more let's bring in kathleen hays and garfield reynolds and stephen angled. -- stephen engle. kathleen, what is mary daly adding? kathleen: what she added even before this report came out. the fed has been signaling that we are going to keep hiking rates, even if the economy slows down. things are looking strong. payroll up 528,000 in july, more

than double the forecast and sharply up from the month before. jobless rate is back to pre-pandemic levels, 3.5%. lower than the estimate of 3.6%. a 52 year low. average earnings accelerated month to month and kept steady at 5.2% but if you look at the monthly number you get what looks like 6% so that is why the former treasury secretary, one of the most respected economists thinks an economy that is getting too hot for the fed to stop hiking rates and let

inflation keep rising. >> everything in this number says to me overheating not yet under control, not on path to being under control. so i was not gratified by these numbers but my concern was actually magnified. kathleen: the july cpi report is the big focus. it's very important. down the road people think cpi will ease for the monthly report. we will see and increase. mary daly and michelle bowman both say they are open to 75 basis point rate hikes. mary daly saying the fed is far from done hiking right.

she said they were nowhere done. she also told reuters that inflation will determine the size of the rate hike. she seems to be equally open to 50 or 75 but michelle bowman says as long as inflation goes up, 75, the bigger rate hikes will be on the table. haidi: tell us about the market reaction. it seems to take us away from hopes of a pivot. you see some segments of the market potentially looking at another hike. garfield: the market will coincide with the jobs report and we are already sensing they were in trouble in terms of what they expected from the fed short-term. part of that is that it has been

a very long time since we had inflation -- the other thing that is happening is that even as yields go up short time i expect flattening to extend because a year ago it was -- the market was right when it said the fed needed to wake up to inflation and act rapidly to bring it down. at that stage it was correctly pricing in its own expectation that the fed would be slow. so part of the reason the market was worried about inflation was because the fed was not. now the market is failing to take into account that in order for inflation to get to breakeven rates and be under control, they are not pricing in that in order for it to happen, the fed has to go more restrict the.

not even mildly restrictive territory at the moment on a historical basis. so the fed is going to have to go higher. two year yields are good have to go up. the further the fed goes up and the earlier of the more likely we are to get a recession. we have never had inflation tamed from this level without fearing a recession in the last 60 years so long-term yields are likely to come down but short-term, both types of yields are likely to go up, especially shorter ones. shery: we have seen the gain of 20 basis points in one session but those slowdowns are global now and it looks like china trade numbers seem to have alleviated at least some of the fears. stephen: yes i know. we had lockdowns in shanghai and elsewhere so exporters had pent up demand to get stuff out the door and to clients around the

world but there is weaker global demand and weaker domestic consumption in china so we are seeing the trade surplus rise to a record because exports rose more than expected, 18% in july. but there is pent up demand. bloomberg economics feels that will taper off and we will see smaller export growth over the year. the real story when you look at trade surplus is yes there is temporary export strength but the import side of the equation is fairly week. property sector, threat of flareups, covid, overall week domestic demand is weighing down imports. if exports go up and imports do not meet expectations you will have a record trade plus --

surplus. exports are expected to slow over the rest of the year, leaving the economy more vulnerable in precious from the property sector and covid flareups. so a good shot in the arm for a withering chinese economy, but will it last? haidi: always a dose of realism. kathleen hays, garfield reynolds , stephen engle. let's get to vonnie quinn. >> good morning. taiwan says it will not bow to pressure from china after they simulated attacks on the main island. china's people's liberation army said they conducted exercises to focus on grand straits. officials did not say if drills will be extended. antony blinken says tensions need to be de-escalated.

he is also looking to strengthen american alliance with the philippines. cabinet officials visited the new philippine leader and reiterated their commitment to a treaty. they have quarreled with beijing over the last few years because of chinese increased presence. mass covid testings and lockdowns as another 182 infections were reported sunday in china. authorities say movement will be restricted for everyone. the u.s. senate passed a landmark bill with a slims down bill. it was passed after a year of democratic infighting. 51 democrats voted in favor, 50

against. the bill will head to the house. 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. this is bloomberg. shery: still ahead, australia's earnings season is starting to pick up. how cost pressures affect the country's biggest corporations with the head of australian equities. next, k2 asset management gives the outlook on china's market after the economy saw a record trade surplus. this is bloomberg. ♪

>> i do not think the fed hasn't right now. now when we are seeing unambiguous inflation after this number accelerating after this number, after the eci, after the

atlanta fed, we have by every reasonable measure a core inflation, inflation running this somewhere plus or -5%. that is not acceptable by any dimension. haidi: larry summers. looking at the week ahead, skyhigh inflation expected in the u.s. will approach a peak as global growth sputters on commodity prices plunge. job data from last week putting pressure on the fed for a more aggressive rate hike. we will get data out of china, expected to leave room for the pboc. title into central bank poised for liftoff, expected to hike by 25 basis points after holding rates at .5% since may 2020. shery: on the earnings front,

plenty of results this week. foxconn industrial, toshiba set to report and reveal earnings thursday. bank of australia reporting and softbank earnings come amid reports of increasing pressure on the ceo. a very busy week ahead. haidi: let's bring in our next guest that says policy error is a key risk with the macro harder to get correct. head of research at k2 asset management, george, always good to have you with us. take a look at what to year yields are doing. we have had massive volatility in the bond space. falling in surging all over the place. one is -- what is the bond market telling us on who is correct when it comes to where yields are going and the fed is going and economy could go in the next year?

>> good question. we try to be predictive in the bond and equity market and one will rise, but which one? there is volatility in both and in the rally of risk assets in july illustrates the concern and difficulty of trying to be predictive going forward with credit conditions and what policy will do. so the reality is when you look, the yield curve where it is at a much higher at 50 basis points across the curve in version increasing [indiscernible] rising more aggressively through the cycle to address inflation measures. that is the reality. trying to second-guess how that will happen. 75 basis points, there is no

alternative for the fed given the language. we all know the bond market trying to be predictive on how the annual year on year cbi so outside that commodity but [indiscernible] it looks difficult to get a 3% -- shery: if we have more spending on the physical side of things, the u.s. democrats spending -- passing the bill, do you factor that in as extra spending now or do you price it in for the future? some analysts talking about a boost for ev makers and perhaps more taxpayers for big tech giants. do you think of the political angles to the markets right now? >> yes. as the bill goes to the house, there is a transition component to it and a tax aggregate going

forward but higher rates are not conducive to risk assets the way rates are going and in aggregate there is a higher cost for the years ahead addressing this difficult transition for economies [indiscernible] it is an additional cost for corporate america but required. that's why i look from an aggregate perspective. it has to be done regardless. haidi: you are still constructive when it comes to commodity and energy. this church just chart shows why. we have seen so much positivity when it comes to earning estimates for the mining stock in green. they are sitting at a record.

given the ongoing environment that is expected to gradually deflate, does the shine we are off of this a little? >> yes it's been wearing off since march. the march quarter was very strong. going forward being neutral we do [indiscernible] we do not think capitulation is the way to go but neutral position depending on where you are. there are concerns that ways on future earnings but i have contributed a lot to the earnings and meeting expectations. it just means the materials and energy in general will continue to pump out a lot of cash which

is a nice cushion to have with the uncertainty of evaluation going forward as central banks need [indiscernible] the federal reserve has not gotten their economy under control yet and have to do tightening had and that puts strain toward the correct valuation but for energy a neutral position seems reasonable. no capitulation is the way to go. haidi: how correlated when it comes to the ongoing weakness we see in the property space? >> high correlation. australia market, high correlation to mortgages. [inaudible] [indiscernible]

there is a lot of concern with -- but the new mortgages of the last year or so will be strange going forward. there is still a lot -- the sentiment is not there. high rates are yet to come in australia. haidi: george, always great to chat with you. some breaking news in australia, the aussie 25 dollars per share proposal has been rejected and

the nonbinding takeover proposal at rosie mineral -- oz minerals. not in the best interest of shareholders. bhp advises the board it accumulated because minerals -- oz minerals and appointed co-financial advisors. oz minerals share price up 3% as of the last close. as we get more big earnings for the australian this week. this is bloomberg. ♪

shery: u.s. futures continuing to slide. but three weeks of gains. traders packing and the possibility of a 75 basis point rate hike after solid jobs numbers. up next, we will discuss this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes.

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australia. san francisco fed president mary daly said the fight against inflation is not done. and another 75 basis point rate hike. china's trade surplus hit a record in july, growing 18% year on year. climbing $100 billion. imports climbed by two point 3%, slightly below forecast. a cease-fire with palestinian militants has taken place in gaza. there were three days of violence after israel launched an airstrike.

fighting killed dozens in gaza, including 15 children. india has elected a new vice president. he won by 350 votes. he serves as the chairman in the upper house of parliament. 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. this is bloomberg. i am vonnie quinn. haidi: we are getting response from bhp after oz minerals rejected an offer. bhp is it disappointed that they will not entertain the offer and are rejecting the bid.

but they are saying it was highly opportunistic and bhp has a stake of less than 5% and really a significant undervalue in their view of their work. this as we can have continued efforts by the bhp to get out there checkbook. they have really built things up and have been looking globally for more transformative deals. shery: let's look at the u.s. senate. they just passed a landmark health care bill, speeding up a slimmed-down version of biden's domestic agenda. the bill is expected to have passed in the house on friday. let's get more with wendy benjamin. climate, health care, taxes. a wide-ranging bill. take us through the takeaways

that will impact the economy the most. >> you are right, it was a very broad bill and shrunk over the last 1.5 years from $10 trillion to more than $400 billion and covers a lot of climate issues and tax issues and prescription drug pricing. for the first time, medicare will be allowed to negotiate drug prices and to cap the out-of-pocket drug expenses for people at $2000 per year. it is ending limits on a lot of tax credit electric vehicle purchases. there will be 15% corporate minimum tax and and $80 billion

boost in the irs and reduce our carbon footprint by 40% over the next decade. haidi: there are a couple of things that are not addressed that secretary yellen wanted like the $10,000 cap on local and state tax deductions. are they going to be proposed separately or is it a loss? >> i think it is a loss until after the midterms. as soon as the house passes this bill, which they still have to pass it, but as soon as they do and the president signs it, congress is out for another month and then they spend early fall campaigning for the november midterms. if democrats hold on to the house, they can readdress some of these issues. if republicans gain control of

the house and senate as expected, it is less lately. -- less likely. haidi: wendy there with the latest. u.s. jobs growth suggesting the fed will press on with rate hikes to support inflation. marty walsh spoke with bloomberg >>. >>looking at the different sectors, most of the economy has recovered. the jobs companies had pre-pandemic have returned. it shows good wage growth and gains. manufacturing has come back to be on pre-pandemic levels. with that chips bill that will be signed into law next week we can manufacture more in the u.s. which will help us with inflationary pressure about microchips and semi conductors. >> what a turnaround since the pandemic.

can we take a minute to think about how much we have recovered. you think these jobs stain -- job gains will be sustainable. >> we were shutting down businesses and restaurants and did not know what the economy held in thinking about where we are today is incredible and i think in my opinion this will be sustainable moving forward. we will have a new type of economy. we are still dealing with inflation. i think we will adapt and adjust and move forward and the infrastructure law that was signed into law, we will see more investment in american roads and bridges and with the chips bill we will have more investment in manufacturing and hopefully the bill worked on in the senate will work on environment and climate change and prescription drug crawl -- costs well hell -- will help. what has happened in the biden

administration, these are all good investments to move our economy and move america forward. >> i wanted to talk to you about negotiations on the west coast. you said next month if you come on the show when we do not have a contract, we might have a different conversation. are we close to one? >> i do not know how close we are to getting a contract but one thing that has happened is both sides agreed on health care which is usually a big sticking point. it was negotiated and solved about 10 days ago so i am very pleased with that and now they are onto the next phase of negotiation. when you think about contract negotiation the biggest sticking point is run health care pensions and now we are moving forward on other issues to tackle so i feel good where we are.

i probably should have used my words better but i am very confident where we are in negotiation now and i am not concerned and i stay in close contact with the longshoreman union and companies on the ports to offer any support needed but every time i talk with them they say we are moving forward. shery: marty walsh speaking with bloomberg. whether u.s. inflation has hit a peak and now the global economy is slowing down and commodity prices sliding. let's look a morning calls. goldman sachs chief economist talk on a podcast and we see a narrow path of a soft landing but the normalization of supply chains and dissipation of other factors will contribute to taming inflation but he says there is still a lot of excess heat in the economy that will be painful. >> looking at the business it's

been an impressive amount of improvement in the last few months so i think that part will not be that difficult. but the hard part will be getting back down from 4% to something around 2% and for that we need a labor market adjustment. it is continuing to be overheated. haidi: an update on u.s. inflation later this week with consensus estimates suggesting we have perhaps seen the peak. as we wait for those numbers [indiscernible] volatility in equity has declined along with recent rallies. a reflection of the high level of uncertainty for the economy and market and lower volatility might be the calm before the storm.

warren buffett pouncing on the slump in markets to buy up equities. do you think that buffett is following the age old adage? >> a net buyer of equities in the second quarter by 3.8 billion dollars or 45 point $2 billion in 2022. comparing that to 2021, a net seller. what else happened was the appetite for buffett stock has been a big buyer of berkshire hathaway in the past. [indiscernible] it's not necessarily meaning

that buffett is going bearish on its own stock it's just that it being a lower priority as for which stock -- petroleum being one of them. raising questions about buying the energy by -- energy giant. [indiscernible] 100 $5.4 billion at the end of june compared to $106 billion at the end of the first quarter. shery: what about warning signs that investors can take away from the numbers? >> operating profits came in at 9.2 billion dollars in the second quarter for insurance and railroad businesses but on business in the division stood out, geico, personal auto insurance business that reported in underwriting loss of $487 million. berkshire says those geico

losses came from higher claims and an uptick in used car prices and there was an auto parts shortage but strategists are also looking at other factors like the policies declining. a sign that higher premiums are weighing on consumers and they could be losing market share in a push to get a better price elsewhere. analysts say watch for signs of further deterioration ahead. shery: still ahead, reporting season in australia and rbc capital market says they see margin reservation is a huge team in the face of surging and elation. the discussion is next. this is bloomberg. ♪

haidi: australia and new zealand not likely to get a lot of upside trading. the job some -- the jobs report from the u.s. and the release of australia's -- new zealand's two-year inflation. sydney opening their doors to vips and we are watching oz

minerals that rejected a takeover proposal from php, who says -- php, who responds saying they are disappointed. investors are looking to see the threatening of corporate profits. karen joins us in sydney. you're talking about margin degradation being one to look out for as a result of rising cost pressures. >> it has been front of mind. input cost, wage inflation, and price increases coming through. i think the problem we will have now is how to withstand them. there has to be acknowledge that there will be margin pullback. haidi: when it comes to sectors in particular, earnings per share at the moment is sitting at a record in mining.

head and shoulders above the pack. what about the inflation site without deflation? >> there is earnings and great balance sheets. the issue for the moment has been wage inflation. it definitely seeing cost pressures come through across the board. we might not see [indiscernible] shery: tell us about where opportunities are because with costs surging, the rba hiking rates, how much will it help the banking sector? >> the banking sector typically does better in the early stages of the cycle to see some expansion they have not seen in a long time but the flipside

turns into what happens to demand and we've been having a low credit cycle and loss rate for years so that might change so it is positive but medium-term might be more negative. shery: wage inflation great for the workers but what about labor challenges companies are facing not only because they have to pay out more but because covid, there is not an adequate supply of labor. will that get better and how much does that -- how much does not affect corporations this earnings season the next? >> it's been an issue. the airlines, industrials, it's led to higher wages. ongoing wage inflation will continue being a problem. especially in the industrials

companies and i expect to see similar in australia than in the u.s.. it is a driver for cost so it will be heavily focused on as we head into reporting season. haidi: will companies be more conservative going forward? >> they have to see -- they have to be. money costing more. you have to have a more conservative approach. i suspect the balance sheets will be more about conserving firepower. haidi: you see consumer discretion holding its head above water just. the correlation, we are told households are robust and recessionary risk in australia is not the same as in the u.s.. does it show through when it comes to how consumer stocks are performing? >> we've seen a big shift from goods to services.

people bought online during covid and now money is converting to a services-based economy but consumers are closely watched. when people are conscious of the fact that all costs are rising they are more conservative about spending. haidi: karen, great to have you with us. shery: looking at sovereign debt markets in asia, australia and 10 year yield jumping above the 328 level after treasury yields rallied across the two year yield jumping almost 20 basis points in the 10-year treasury yield above 2.8 percent and kiwi yields also reversing some losses we saw in the friday session and the 10-year yield above the 345 level after a strong u.s. job numbers leading

to investors pricing in more aggressive tightening to come from the fed and perhaps from other global central banks. tune in to get more and get in-depth analysis and listen on our app or bloombergradio.com. more ahead. stay with us. ♪

shery: we're looking forward to softbank earnings and traders are bracing. expectation at this point is a a net loss of $3.1 billion for the quarter that ended in june. there investment coming under scrutiny now. we know holdings include doordash, wework, coupon grab, they all suffered and they follow a key metric, -- haidi: incredible that softbank continues to not be able to catch a break even as investors

cycle back into technology stocks and earnings recently have been positive. the alibaba effect. primary listing attempts in hong kong added a little shy into that part of the holdings but when you look at other pressures, operational pressures softbank has been under, a talent drain as well adding to all the pressures to deliver. they are losing a growing number of top executives at softbank and more responsibility on the founder's shoulders as we see the outlook generally for the japanese conglomerate turning dark. the total number of top-level departures from vision fund is at least 10 since 2020 so he's kind of on his own as he tries to plot a new course back to success for the company. you can turn to your bloomberg for more on softbank earnings

and all the stories you need to know. you can get commentary analysis from experts. let's get a quick check of headlines. [indiscernible] the transaction could be announced as soon as monday but a number of investors group have the right to match. lori l acquired a part of assets this year raising antitrust concerns in the u.k.. a bid to acquire signify health as an expansion into services. cvs is among firms seeking to submit initial bids this week for a strategic alternative. the state bank of india has posted an -- the lender

increasing numbers and income fell from the year earlier. sbi reported rising costs but a surgeon credit growth and easing pressure. india's biggest fuel retail has suffered one of the worst quarterly losses in years. the petroleum and oil companies with losses in june. shery: up next, looking at india's economy. inflation numbers out of the country as well as china and interest rate decision from thailand. we will discuss with uvp. this is bloomberg. ♪

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