>> shery: welcome to daybreak

asia counting down to asia's major market opens. the top stories, asian stocks rally after wall street softer than expected inflation the fomc could slow the praise that space of heights. feds are saying this does not change their outlook for higher rates this year and next. and cashing in on softbank, floating $34 billion in alibaba following the investment giants record losses. haidi: we are saying -- seeing u.s. futures muted in the early asian session after the s&p 500 jumped to a high in cooler inflation numbers. we have a risk on day. the s&p 500 surpassing the 4177 level, the peak between the may to june rebound that signaled a higher high. that could perhaps mean more gains to come. nasdaq indices gained more than 20% from the june trough. it is now in bull market

territory. traders pair back as bets on more aggressive said tightening given cooler inflation numbers. two year yield seeking as much as 20 basis points at one point. around the 278 level. the dollar sinking. oil getting a little boost in the new york session. that's not sustained in the asian session. haidi: the question is really on the topic of being sustained. whether the rally can continue. we are seeing perhaps a lessening in volatility markets at least. dropping below the 20 level for the first time since april. you mentioned moves in the shorter end, the treasuries. we are seeing that reflected in the aussie three year yield as well this morning as it comes online, dropping fractionally. we see the fed perhaps given a mandate now to ease their policy somewhat. a big story in markets continues. the treasury carbon version. we saw the gap narrowing

slightly following the inflation trend. still, keeping an eye on what happens in the kiwi space as well. the to 10 carbon friday yesterday. in terms of what we are seeing for the equity picture, we are expecting markets to move higher at the start of trade. the asf x trade futures closing higher. new zealand already online. japan is closed today but we are keeping an eye on the yen this morning at aussie dollar. both currencies will change but it does not reflect major moves in the dollar in the previous session. that was the biggest move for the dollar index since march of 2020. haidi: let's get more when it comes to reaction to the u.s. inflation trend. i will bring in bloomberg's global economics and policy editor kathleen hays hays are cross policy editor andreea papuc. the fed will want to see more

evidence that one print of softer price pressures. kathleen: absolutely. it is against the backdrop of a strong jobs report, wages that are still pretty hot. it is definitely reassuring to the federal reserve to see the latest numbers on the cpi. it's far better than two weeks of headline weaker than expected, much hotter than expected, much hotter the last month. when you look at those numbers from 9.1 to 8.7, that had a lot to do with gasoline prices. gasoline prices go down. they go back up as well. so, it is kind of a commodity story there. then -- actually, i should say, 8.5%. when you look at core cpi, you can see that that is at 5.9%. for the second month in a row. it did not go up. but, it did not go down. it is staying where it was. what you are looking at is so important there. airfare is dropping. that is really good. shelter costs keep rising. rent is rising. mortgage payments. you translate the mortgage

payment into rent at a that continues to rise. that will not slow down. when people say, particularly in the markets, well, gosh, we got a little bit of a weaker number. maybe that will give the fed a mandate to think about easing. well, it is clear that far from thinking about easing, they are still pretty determined to keep on raising rates. let's listen to neel kashkari, president of the minneapolis fed. >> the idea that we will start cutting rates early next year when inflation is likely going to be well, well, well in excess of our target, that's not realistic. the much more likely scenario is we will raise rates at some point and then sit there until we get convinced that inflation is well on its way back down to 2%, or, i would think -- before, i would think about easing back on interest rates. kathleen: as many fed officials have said you cannot just have a peek at a little easing. you need months and months of sustainable to client. charlie evans, the president of

the chicago fed said on inflation data inflation is unacceptably high and he sees rate hikes continuing this year and into 2023. this consensus has not changed yet. our bloomberg economics team looked at core cpi around 6% year-over-year. is still pretty high. thanks it could be around 7%. there is enough in the pipeline in terms of wages, in terms of things like rent to keep them on the lookout for a higher number. the fed will not ease off in the face of something like that. shery: you need months and months waking -- waiting for this eco-data to change but the fed needs to make a decision in september. what are they watching for next? kathleen: these two months you get two sets of the two most important numbers. the bloomberg report used to be the big one. it is still very big. we saw wages continuing to move up. we saw last week productivity falling. labor costs were up more than 10% year-over-year. that is another force pushing inflation. so, when we get into september,

that meeting, we will be watching job support, does that stay hot? charlie evans is saying he sees a strong labor market with good fundamentals. that is another reason for the fed to say we have to stay on this path. and then next inflation report. this is a very important. in some sense you can say that today's report is not as big as that one. today's report is a little weaker, a little softer. if we get another next month, i think the most we can expect next, you guys, is, well, instead of 75, 50 in september. maybe the next meeting, instead of 50, 25. it will start easing. but that is the most we can expect. haidi: let's get more on market reaction, andreea, it was kind of a market primed to see a big rally on the back of this. andreea: yeah. look, i mean, the markets

reacted pretty much as expected. you know, it was expected to get that number softer. it was. look, remember, this is a market incredibly short at the moment. equities, hedge funds slashing. mutual funds pile into cash. retail indexes are being less enthusiastic because of inflationary pressure, because of these concerns about inflation. so, it wasn't the market that thrived. it was trying to get this fact and we will probably see that data in asia today. but, look, as kathleen said, like the fed, central banks are looking for more than one month. more inflation data, other economic data, will be incredibly important. it does feel to some extent like we are still in sort of a bear

market rally. that the market will get a boost when we get positive feedback. that the fed will soften. there are expectations the fed might not go 75. they might go 50. rates are still going down. we have heard fed officials are still determined to bring inflation under control. so, the overall narrative has not changed. because, because of this number. but, definitely, in the short-term, it will probably get some -- give some support to the bulls out there. shery: i mean, the rally has been incredible. we keep hearing it is a bear market rally. it is bound to stay. at the same time, you see technicals and resistance levels becoming the new support levels. and, the rally continuing. what is the next momentum? what is the next driver for markets for here -- from here? we have a lot of positivity from earnings better than expected. but what is next? what are the markets watching?

andreea: great question. i am sure that everyone is asking that. you know, there are so many unknowns for investors out there. on the performance side, you have had commodity prices easing. but, again, you have all of these negatives. you have the sectors. we were talking about the semiconductors. that decline in chip prices. there is a lot of different pieces there. i think investors are just trying to work through that. but, i think the main thing investors want to see is inflation coming down. as it was just said, yes, good news, or, some good news today. but, yeah. we are not out of the woods. haidi: bloomberg's andreea papuc

and kathleen hays. kathleen will be speaking with fed president mary daly tomorrow. 7:30 a.m. hong kong, 7:30 p.m. new york. vonnie: china's central bank says we will strike a balance between supporting the economy and a fighting inflation. the pboc monetary policy report warns inflation pressure may rise near term. consumer inflation make live about 3% at times in the second half of the year. the report came the same day data showed july inflation surged to a two-year high. china promised to continue regular patrols near taiwan after declaring an end to military drills around the island. the pla successfully completed all tasks in last week's exercises. he left open the possibility of frequent military exercises across the taiwan strait military line. it is in response to nancy pelosi's visit to taipei.

u.s., secretary gina raimondo says nancy pelosi's visit to taiwan obligated trade talks with china. president biden is looking at what to do with trump era tariffs on $300 billion worth of chinese goods. raimondo says the chinese officials were already hesitant to engage in talks and the fallout from nancy pelosi's trip does not help. west certainly, it has made it a little more challenging. at this moment. it is harder. but, i am hopeful that we will get beyond that and get back to a place where we can have more of a discussion. vonnie: the rhine river is set to become virtually impossible and a keyway -- key waypoint in germany. the watermark west frankfort will drop to a critical depth of 40 centimeters, 16 inches, this friday and is sent to continue falling. most barges will be unable to pass. that is shutting off energy and industrial shipments. global news 24 hours a day on

air and bloomberg quick take powered -- powered by over 2700 journalists and analysts in over 120 countries. i'm vonnie quinn this is bloomberg. haidi: ahead, u.s. inflation decelerated by more than expected in july, taking some pressure off the fed to continue on its hawkish path. we talk about what this means for major currencies with a big move in the dollar. next, a former senior advisor to the u.s. treasury department gives us his take on the fed right height outlook -- right height outlook. this is bloomberg.

this was a good report. >> the data allows relief. >> is nothing like we are out of the woods. >> the fed has plenty more work to do. >> we don't expect we are finished. >> the fed will hike in september. >> perhaps, 75. >> our goal is 50 basis points. >> it looks like 50, 25, 25, a more moderated pace. >> is still a ton of tightening. >> i expect at the end of the year the federal funds range will be 3.25 to 3.5%. >> the markets are not believing the fed is ready to bring inflation down anytime soon.

>> this is the first hand that maybe inflation is starting to move in the right direction, but it does not change my path. >> our guests reacting to the u.s. cpi print. our next guest says it is too early to say that inflation in the u.s. has peaked and at the moment we are seeing a powerful short covering rally mixed in with some liquidity. with us is dan katz, portfolio manager at amber waves partners. one print does not make a deflationary print. look at this chart that suggests on average the timeframe we need in order to get inflation sustainably lower. this really says that when it comes to the timeframe, it took 18 months for inflation to fall from above 8% to below 3% between 1981 and 1983. i don't know if the fed has a historical or comparable data point, but does that suggest we are getting ahead of ourselves?

diana: welcome -- dan: well, first, thanks for having me. i think the print today was good news. but as some of your guests said previously, this by no means we are out of the woods. previous rate hiking cycle is like the early 80's do indeed show it often takes quite a bit of time for monetary policy to work through the economy and start print out inflation. as you dig into inflation data, it's clear. even if inflation peaks. and that is by no means a certainty. inflation will remain elevated for a long, long time. a lot of that is down to the housing sector. because, of the way housing is, it is calculated in the inflation series. if you think about it, most people are on 12 month leases. even though we know the housing market has been on fire for the last year, although it has had signs of weakness recently, only

about one in 12 people are actually reporting prices. the reality is it takes four or five quarters for all the data flow through. so, we think there is a very substantial chance we will continue to see elevated inflation both because of housing and also because of wages. that will really be the key question as we look to where inflation is in 2023 and 2024 and what that means for the federal reserve. haidi: what does that mean when it comes to equity market volatility? the s&p at a three month high, the nasdaq 100 in a technical bull market. meme stocks outperforming the broader market, for some reason. so, this kind of exuberance. is it warranted? how do you position yourself given we need a few more months before we know what the rate hike or potentially easing trajectory will look like? dan: i do think we will see continued volatility in part driven by what you are seeing in the federal reserve.

i find it astonishing that the market is currently pricing in, not rate hikes in 2023, but rate cuts. as the market talks itself into thinking inflation and the fed will be easing in 2023 as the economy cools. we do not expect the fed will be anywhere near that position in 2023 because inflation will still be well, well, well above 2% target. i think there will be volatility through the market internalizing what is happening on the monetary policy front. i think there is a pretty strong chance for some of these exhaustion is shocks over the past year to continue -- exogenous shocks over the past year to continue. look at the geopolitical environment. in china, speaker pelosi's visit to taiwan. in europe, in the coming months, the european winter starts and russia finds itself with more and more leverage over its european counterparts. i think there is potential out

there for increased volatility through the equity market. shery: is that why you like to semiconductors and energy independence themes, those geopolitical tensions? dan: exactly right. at our firm, what we focus on is , what are the real global forces shaping the economy? how can you position your folio to take advantage of those? we try to focus on companies that are disproportionately exposed to the u.s. versus some of these other international positions. particularly, as it comes to their supply chain exposure. when you see some of this -- these exogenous shocks and risk events, companies that are relatively less exposed, say, fertilizer out of eastern europe or semiconductors out of east asia, they tended to outperform their peers. in certain sectors like semiconductors or energy, it really cuts across all industries. we believe there are

opportunities to choose our performers that are relatively more resilient business models across every sector. shery: what about the other big seem these days, -- theme these days, labor shortages? we saw unemployment rates the lowest since 1969. is this something you can play? dan: absolutely. what we focus on in our business, especially in public equities, is, the labor component of our per folio. what their labor policies mean for their ability to track talent and increase productivity in the context of a tight labor market. so, in our portfolio, we have seen results of choosing companies with relatively better labor practices that are able to attract talent and grow over time. stephen: dan katz, great talking to you. the amber waves partners portfolio manager. thank you. get the stories you need to get your day going on today's edition of daybreak.

terminal subscribers go to dayb also available on mobile and the bloomberg app. customize your settings so you get the news only on the industries and assets you care about. this is bloomberg.

shery: we're counting down to the start of trading in seoul with markets trading. over in korea, forecasters watch for more rain today after souls -- the worst storm in seoul in over a century killed nine people. money supply and trade data for the first few days of august. again in july while the country reported its fourth monthly trade deficit because of imports cost surging. lg, samsung fire, biofarma companies expected to report

second-quarter earnings today, haidi. haidi: softbank is expected to post again, more than $34 billion from selling down its stake of alibaba, cashing in on its most storied investment as global markets deteriorate. softbank will fall to under 15% at the end of june. disney is raising the price of its flagship disney plus streaming service by 38%. that's part of a plan to build on third-quarter results that based estimates failed and soups are progrowth. disney will introduce an add free option and raise the price to $11 per month. quarterly profits that beat estimates. demand for products helped whether supply chain challenges and flood a smartphone demand. the company which makes sony

playstation's used its sales to negotiate better deals for customers and suppliers. sampson unveiled the latest generation of its foldable devices. the new gallon see -- galaxy fold flip four has 45% more visible display. it has a hinge and upgraded cameras. while the flip four has an updated battery and bigger storage of up to 512 gigabytes. samsung holds steady despite surging costs in materials and shipping. shery: u.s. futures are struggling for direction in the early asian section. we saw losses earlier. those are paring back after the s&p 500 rose to the three month high. consumer discretionary leading the game in the new york session. risk on a sentiment really across the board. cooling inflation. perhaps, greater paring back of

aggressive fed tightening. a bid seeking their sinking below the key 20 point level. the s&p 500 topping the 47 -- 4377 level, the peak during the may june rebound. this is a higher hike. we may see more games ahead. we are not really see much movement now. we are seeing oil reversing gains as demand concerns continue. next, chinese trade groups accusing the u.s. of a struggling -- of obstructing global business with the newly cited chips bill saying it will cause unf this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going? yes!! and once in a lifetime moments. two tickets to nascar! yes!

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♪ vonnie: this is daybreak asia. the minneapolis fed chief neel

kashkari and his chicago counterpart says the central bank's path towards higher interest rate won't change until 2023. kashkari wants the rate at 4.7% and his chicago counterpart agreed, saying inflation is unacceptably high. >> the idea we are going to start cutting rates early next year when inflation is well in excess of our target is not realistic. a much more likely scenario is that we will raise rates to some point and sit there until we get convinced that inflation is well on its way back to 2%, or i would think about easing back on interest rates. vonnie: donald trump refused to answer questions from the new york attorney general into an investigation into potentially fraudulent asset valuations. the former president repeatedly invoked his fifth amendment rights in a deposition probing whether the trump organization manipulated asset valuations for

favorable terms in bank loans and insurance. it comes just days after federal agents searched trump's home. this reluctant president will visit thailand but will not seek political asylum, according to the foreign ministry. he fled sri lanka after angry protesters dissented on his residence, forcing him to resign. and arrival date is not yet known. the fifa world cup may be moved up a day. sources say fifa is considering a request from the south american football confederation to host an opening match against ecuador a day earlier than planned. if the change is approved, the tournament start november 20 and run 29 days and will give qatar an exclusive game on day one. 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. ♪ haidi: let's look at what we are

seeing across the crypto space. what are you watching? >> ether is the one that we are watching in particular because we did see it jumping as much as 9%. today, still a little higher. the reason is that the ethereum network could be moving toward the most important upgrade of its history. the bottom line is that ether needs to go through one final test before that can happen. many think it will be successful. parties are already being planned. it would then allow ethereum to transition to a more energy efficient system. bitcoin unchanged at the moment. we did see it declining yesterday after coinbase's poor earnings through the crypto exchange is under scrutiny, saying it is being investigated by the sec over its staking programs that allow users to

earn rewards for holding certain cryptocurrencies. let's look at crypto exchanges. we did see crypto linked stocks sold yesterday on coinbase results. staking services offered by many crypto exchanges, they are a key way to diversify revenues. this is a sector we will be watching when they open in a half-hour from now. shery: u.s. commerce secretary gina raimondo told bloomberg that nancy pelosi's visit to taiwan complicated trade talks with beijing as president biden mulls action on trump tariffs. let's bring in chief north asia correspondent stephen engle. it has been more than a week since the pelosi visit to taiwan, but we continue to see fallout. stephen: joe biden has not publicly criticized pelosi's visit to taiwan, but i am sure there were those in the white house advising that perhaps a low seek should not have made the trip.

she did and we are dealing with the ramifications. after eight days of military drills by china, that escalated the tension between china and the united states as well as china and taiwan. gina raimondo is the commerce secretary. this is what she had to say when asked if back channel talks between china and the u.s. have been complicated because of that pelosi trip. >> it certainly has made it a little more challenging at this moment. it is harder, but i hopeful we will get beyond data back to a place where we can have more discussions. stephen: joe biden is still trying to make constructive progress in the relationship with xi jinping at a fraud time. one sticking point is $300

billion in tariffs on chinese goods sent the u.s., which some say stoked the u.s. and gina raimondo did say he is still mulling and alteration of those tariffs, whether it means a cut or a change, we do not know. and she believes a decision will be made before not too long. still up in the air is the pledged face-to-face meeting biden and xi jinping say they want to make. but with tension over the taiwan strait and taiwan relations, that makes it perhaps a back burner issue right now. haidi: is beijing done with military drills, or do you think they will be commonplace? stephen: i think patrols are going to be commonplace. it was supposed to be four days of military drills in six exclusion zones. there was ambiguity as to how long these would go. china extended them through

wednesday, three extra days, a total of seven or eight days. now, the pla put out a statement, the people's liberation army saying it successfully completed all tasks. that come over those eight days, disrupted shipping lanes and aviation corridors, but it looks like things are returning to normal. however, it is widely viewed that as these drills were intense and were testing new technology, anti--- and one said they simulated an attack on the main island of taiwan, perhaps you jinping's strategy was to shrink the buffer around taiwan. and we saw more incursions across the midline of the taiwan strait, 180 pla war craft over those eight days crossed the midline of the taiwan strait. provocative, but could be a new normal for china' is dealings with taiwan, and especially the

dpp, the democratic progressive party. the white paper out of beijing yesterday essentially says the dpp is responsible for pushing the two sides closer to war. haidi: chief north asia correspondent stephen engle with the latest bid chinese trade groups are opposing the new chinese chips law, saying it will cause unfair competition. beijing is growing frustrated with a failure to develop tips that can replace u.s. circuitry. let's bring in bloomberg opinion columnist tim coleman, who says china painted itself into a semiconductor corner. are they close to being a master -- master chef at the moment? >> m.i.t. is the hero of china in terms of semiconductor manufacturing, but they are three or four years behind them

some, a world leader. that is where they were eight years ago, nine years ago, when the big fund, one of the large, chinese state-backed funds whose did the semiconductor sector. the last eight years, it is my contention that all this money and this egg fund that had been throwing around money has not actually helped china catch up. now, they have overtaken intel. but i don't think intel is the encz mark there intel has dropped the ball the best new year's, but they have not moved anywhere down the road in terms of catching up. shery: why? >> what they need to understand and what they are understanding now is that it is not just money, you can't just throw money at this problem and hope it is solved. china has been throwing money at

semiconductors a little more than 20 years, and they still trail. you need to build an ecosystem. you need to work with partners. samsung don't work alone, they were closely with partners in the u.s., japan, europe, in terms of materials, equipment, software which is used in designing semiconductors. it is a cooperative ecosystem. one thing china has been doing in the last few years, and a lot of this has played out in u.s. courts and elsewhere, they have been trying to steal and have been stealing technology from taiwan and the u.s. and are creating an environment where foreign countries and players are willing to sell to china, but not keen to cooperate on technology development because they're concerned about having that ip lost. if they keep up that attitude, they will be isolated and that will be a risk for china. nobody can go it alone. china certainly can't. haidi: what really lies ahead?

it is it a difficult position trying to balance its biggest markets, especially after the chip ban? >> the china market is essentially over for them. i don't think they will say it publicly. it is not the kind of thing they want to recognize. but because of u.s. sanctions and because they're big clients are in the u.s., apple, nvidia, qualcomm and others, the u.s. is where it is at. in a few years, they will be forced to choose. they don't want to choose, they want to be everybody's foundry. it seems to me they have chosen u.s., so the u.s. will continue to be an important market. they will build factories, they are building in the u.s., they will bill -- will build more of them. they probably want to expand in china at any considerable rate. i think over time, china is a market as a percentage of their revenue will be stagnant and maybe drop off. haidi: bloomberg opinion

columnist tim culpan. we talk the dollar weakening after a better-than-expected cpi report. that is next with the commonwealth bank of australia. this is bloomberg. ♪

♪ >> when you couple that with last week's booming jobs report of 528,000 jobs created last

month and 3.5 percent unemployment, it underscores the economy we are building. we are seeing a stronger labor market where jobs are booming and americans are working at we are seeing some signs inflation maybe beginning to moderate. shery: softer than expected cpi numbers leading markets to pair back expectations of a very aggressive rate hike. we saw the dollar sinking in the new york section, the worst -- session, worst day since march 2020. right now, muted in the early asian session, but weakness in the dollar sent all the other pairs rallying. the euro, the highest since early july after gaining 1.5% against the u.s. dollar. the aussie dollar surpassing the 100-day moving average, a two-month high. right now, not doing much for japanese yen holding at 132 level. we have the japanese markets closed today.

haidi: let's bring in carol kong , currency strategist at commonwealth bank of australia. most economists are asking for patients when it comes to the cpi print. we do need more data going ahead , but that doesn't mean the fed is going to veer off track. in fact, it has repeatedly said it will continue on its hiking path. what does that mean for the u.s. dollar? does it mean a further upside? it has been range bound at we see the chart it has broken through the 50-day dmi. carol: the july cpi report out of the u.s. was certainly a good one and was welcomed by global markets, with the u.s. dollar sinking across all major currencies. but what the fomc's sustained deceleration in inflation there

yesterday's data is a good one. nonetheless, we still need to see a couple more monthly decreases in underlying inflation before the fomc can start to think about pausing its tightening cycle. what it means for the u.s. dollar, in my view, is that the u.s. dollar can come up a little more. i think the market currently is still underestimating u.s. inflation and how sticky it will be over the medium term. and while markets have pared back expectations for the fomc fed funds hikes in the near term, now, markets are pricing in lower than a 75 basis point type for the september meeting, i think markets will later realize that the fomc will need to do more to bring inflation back to target. and it will of course support the u.s. dollar. haidi: what about the aussie

dollar? we see the risk on trade benefiting the aussie, does that have more to run? carol: the aussie dollar has really benefited from a weaker u.s. dollar and stronger commodity prices overnight. we are seeing the aussie dollar recover a little bit to a two-month high overnight. over the near term, the aussie is going to roll to the downside because the aussie is very sensitive to changes in the world outlook. and given the darkening global growth outlook with rising interest rates across the globe, i think aussie can follow a bid back toward 68 u.s. cents. shery: talk about darkening economic outlooks, europe is facing a challenging time. we saw the boost on the euro because of dollar weakness, but how long will this last? carol: the euro dollar and the

european economy are facing numerous headwinds at the moment. while the euro recovered because of the weaker u.s. dollar overnight, i am still errors on the euro-dollar. the european -- still bearish on the euro-dollar. the kick -- the european economy is still facing energy crisis and there are chances the euro will fall below parity. shery: let's talk about rate differentials. we have the ecb now sort of following with the federal reserve is doing. but one central bank that is not going anywhere near it is the pboc. we have seen inflation accelerating a little, but still benign compared to the rest of the world. where does that set us up for the offshore yuan? carol: yesterday, we did get the july cpi report in china.

and unlike the u.s. cpi report, headline inflation in china picked up, and core inflation gift a little. but overall -- inflation dipped a little. but overall in china, inflation in china is still pretty benign, as you said and over the medium-term, i i think it will still be pretty sick because of the covid lockdown restrictions. and those will continue to suppress consumer demand in china and keep underlying inflation pressures. what it means for monetary policy in china is that the pboc will keep interest rates steady and keep it easy monetary policy safe over the medium term. we heard the pboc come out yesterday and say that it prefers to keep monetary policy study and supportive of the economy. and of course, that will meet

u.s.-china monetary policy outlooks will continue to diverge, and that will be supportive of the higher-yield dollar-yuan, but the dollar is actually holding up pretty well recently and i think that is because of the very strong print in china we got over the weekend. it is just a matter of time before it is spiking higher. shery: carol kong, good to have you with us, senior economist for currency strategy at commonwealth bank of australia. we are broadcasting live from our studio in hong kong, listen through the app radio plus or bloombergradio.com. plenty more ahead, stay with us.

♪ shery: it is a quick check of business flash headlines. going is resumed deliveries of it seven 87 green liner with american airlines getting the first of nine jets this year. the faster u.s. regulators approve the boeing plan to address structural flaws in the carbon-fiber jetliner, deliveries had been halted.

the playmaker is working to clear a logjam of 120 dream lighters that have been built. elon musk is accusing twitter of hiding key witnesses in their legal battle. according to sources, muska says the social media company isn't producing names of employees responsible for evaluating the number of spam and robot accounts. elon musk recently sold $6.9 billion worth of tesla stock, saying the funds could be used to finance his twitter buy if he loses the legal battle. exxon mobil is considering expanding its global trading operations as commodity profits soar. sources told bloomberg the oil majors stepped up efforts after several departures over the past two years and is said to be reworking the pace structure for traders, including bonuses. haidi: looking at u.s. futures

come in the previous session, we saw equity retailers going off after inflation softness surprised markets bit the cpi running cooler than forecasted that is easing pressure potentially on the fed. take a look at this, treading slightly to the upside, the index hitting a three-month high. the big rally in c-shares extending the nasdaq 100, still modestly higher as we saw that rallying more than 20% above the june bottom. we are talking about technical bull market territory. dow futures up .1%, volatility sliding to a level last seen in april. the japanese prime minister has retained key economic posts in his cabinet, indicating japan is likely to keep the central bank's monetary easing intact. our guest joins us for more. what does this mean for the new cabinet when it comes to a policy perspective? >> we are seeing a continuation of some policies for the government is trying hard put up

measures that will help families battling higher prices for essentials, food, energy. andy economist rc that continuity is going to keep on track the ultra-easy monetary policy. but when we see adjustments coming down road, the bank of japan governor's term is coming to an end in april. we may see gradual policy shifts as the changes are coming to the central bank. shery: talk about a very interesting appointment, a male minister for the declining birthrate. what is this about? jon: one of the problems japan has faced for years is a gender inequality gap. it rang among the highest in the world. and the outgoing minister, one

of the few women in the cabinet, said there was indifference and ignorance, part of the reason to population is declining. and the appointment of the person to replace her is a man who doesn't have any children, in his 40's, and he sympathized with a pregnant woman. he tried on this pregnancy belly last year, which is put on the torso and simulates the weight of carrying a baby. shery: bloomberg's john herskovitz with a unique story out of tokyo. market opens our next. this is bloomberg. ♪

♪ shery: this is "daybreak: asia,"

we are counting down to asia's major market opens. japan on holiday, south korea and sydney coming online. interesting to see the reaction of the collude than expected cpi numbers in the u.s.. under the hood, it wasn't all great, but there was so much market relief. haidi: i am wondering if we are shaping up for a melt up in the markets, the nasdaq 100 in technical old territory come s&p 500 highest levels in month-end volatility coming way down to levels we haven't seen since april. shery: we continue to watch for any market reaction to those numbers. we have also heard a lot of fed speak this week, talking about even with cooler inflation numbers, that the fed could continue to tighten. haidi: speaking of inflation and economic growth, we are getting the final reading for

singapore's second quarter gdp. it is being lowered to 3% from 4%, up from 3% to 5% is now the new, is the previous guidelines. they are narrowing the 20 to four-year gdp forecast from three or 4% to 3% after 5%. that is a revision down. quarter on quarter, a construct -- a contraction of .2% against estimates in the prior reading of growth of .2 percent. not particularly positive. we are seeing stalling second-quarter gdp numbers setting a stage for a potentially third quarter economic contraction. in singapore, stronger headwinds with weaker growth in demand, high borrowing costs, as well as incremental gains in domestic demand from singapore reopening from covid-19 restrictions.

penta demand is starting to get satiated -- pent up demand is starting to get satiated. yesterday, we are from the prime minister warning that inflation and rates could remain high, and that productivity gains and industry reforms are necessary to boost wages and growth. shery: given how open singapore is, those trade numbers will be very important to what happens in the economy. same for south korea. we are getting the first 10 days of trade for the month of august and now, the deficit coming in at $7.68 billion. this as exports rose 23.2% year on year, a pretty strong export number. but at the same time, imports rising 34.1% year on year. and this seems to be a continuing narrative given that we have seen very high energy costs and a weaker korean yuan.

right now, the korean yuan surging against the u.s. dollar and falling below the 1300 level, this on the slower u.s. cpi number and perhaps expectations that the fed will not be hiking rates as aggressively as thought. the kospi gaining about 1%. every sector on the kospi gaining ground, communication services and materials leading the gains and reversing the losses we saw the previous session. haidi: let's look at australia, the big jump of risk appetite on wall street. that is feeding through to the early part of the asian session. printing strong -- pretty strong gains given the staggered alphabetical open here. the 10-year yield holding at 3.2 51 at the moment and the aussie dollar holding above 70 since

u.s. we saw the big risk on move benefiting from the weakness in the u.s. dollar as well. we are watching new zealand, given we have seen house prizes they're calling for the first time in 11 years. this is a big component of some concerns. we saw the yield curve inversion play out for kiwi bonds. at the housing market decline really picking up pace in july is a key part of the recession risk for new zealand as well as australia, where we have seen property prices across major cities decline. but take a look across the breadth of trading in asia. we just at the singapore gdp number coming through with the downward division -- downward revision to full-year gdp and even with the cpi print from the u.s. coming in softer than expected, rising interest rate sent higher costs continue be a theme. let's get the first word headlines. vonnie: china promised to continue regular roles near taiwan after ending military

drills around the island. a spokesman says the pla completed all tasks in last week's exercises. he also opened the possibility of frequent carry operations across the taiwan strait adm line. china stage the drills in response to nancy pelosi's visit. u.s. commerce secretary gina raimondo says nancy pelosi's visit to taiwan complicated trade talks with china. president biden is looking what to do with trump-era tariffs on pre-hundred billion dollars worth of chinese goods. gina raimondo says chinese officials were already hesitant to engage in talks on the fallout from pelosi's trip does not help. . >> it certainly -- >> it certainly made it more challenging. at this moment, it is harder, but i am hopeful we will get yonder that and get back to a place where we can have fruit discussions. vonnie: the chinese central bank says it will strike a balance between supporting the economy

and fighting inflation. as quarterly report warns structural inflation may rise in the near-term. consumer inflation climbed above 3% at times according to the report. it came the same day data showed july inflation urged to a two-year high. in germany, the rhine river is set to become impassable at a key point. german authorities say the water marker at kolb west in frankfurt will drop to 16 inches this friday and is set continue falling. at that level, most barges holding goods will be unable to pass through, choking off energy and industrial shipment. -- shipments. 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: the cooler than expected inflation data is driving markets today. let's get more from global economics and policy and or kathleen hays and contributor

garfield reynolds. kathleen, the market reaction was not just cooler inflation data, but expectations of what the fed might do next. how can we expect the fed to react? kathleen: we can expect them to wait and see what happens next month when we get more inflation data, more jobs data. and it is great that the headline cpi year-over-year came down a good bit. it went from 9.1%, way higher than the estimates come all the way down to 8.5%. but one thing you have to remember, one big driver here was dropping gasoline prices at the pump. great for american consumers after prices on everything else are rising, but that is not kind of shifting inflation that reassures the fed. and in terms of the core, that takes up food and energy, that has been pretty much flat at

5.9%. not as i as it wasn't 6.1%, but it is not really coming down and is expected to continue to rise for a couple reasons. even though if there is drop in 2020, we saw shelter costs, that is rent and implied mortgage payments, that continues to rise. and then, you see these core spending pressures, household furnishings up nearly 11%, food at home 13%, fuels and utilities, don't get mixed up, that is electricity, natural gas, those prices continue to owe up a lot. these things are going to continue to drive that court rate and continue to make the fed deal like a little bit of easing on the headlines from 9.1% to 8.5% is nice, but does not begin to solve the problem. bloomberg economics wrote today that they see, because of all these various pressures, that

the core cpi year-over-year is going to be heading towards 7 percent, nothing kind of thing that is allow the fed going to make a move haidi: and yet you see the market reaction and it looks like a market that was looking for a reason to rally. is this short cover happening or are we setting up for a melt up? garfield: i don't know about a melt up, given equities in the u.s. were reasonably modest in their rebound. but this was very much a relief for a lot of investors who had been reading the tea leaves and saying, inflation has peaked, it is going to come down, that does mean that the fed, it is still expected to hike rates in september, but the pace of hikes have to slow in the coming few months. that is one of the difficulties

when trying to parse what the fed is going to take away through inflation and what markets are to take away. because the fed is very focused on what we are going to do in the next meeting, the next couple of meetings, if they think they still need to hike. they don't want to let the cat out of the back. they might be thinking privately, this is nice and we might be able to call a halt to rate hikes sooner than we otherwise would have to and therefore, we would be more likely to avoid a recession. but they can't say that because if they say that, they encourage consumers to spend more, they put fuel back on the fire through their rhetoric when they are trying to take it off through their actions. so, you have got that disconnect. the market is looking at these numbers and saying mr. fled, we say inflation has peaked and is going to come down and you guys can stop being so nasty to us in

the fed is saying, this is nowhere near early enough for us to concede you might have a point. haidi: what is the early reaction we have had from the fed? there seems to be a lot of urging for patients as we wait for a couple of more prints. kathleen: i think they made it clear, they tend to hike the rate again in september. it is not if, it is how much. in the fed has already said out loud that they are watching the numbers, and when inflation starts coming down, they may very well not stop, but just slow down, go from 75 to 50 to 25. but they are not there yet. if you listen to neil kashkari, president of the minneapolis fed.

i will tell you what he said. i was so eager to hear, i forgot i wasn't supposed to come a but he said basically that this is ridiculous. it is not time to even think about bringing rates down because in station is -- because inflation is still so hot. charles evans, president of the chicago fed, said inflation is an acceptably i, the labor market looks very strong, and he sees rate hikes continuing into next year. and one thing i was people in the markets would listen to -- the fed made a mistake in the late 1970's and early 1980's. they thought inflation was going to come down. they stop hiking rates, it started going up again, they started hiking rates again, they pushed the economy into a recession. that is the kind of mistake they want to avoid. jay powell set a couple of months ago, the worst mistake we can make isn't hiking rates too much and causing a slow down, it is not hiking them enough and not getting inflation down. that is important for investors.

shery: especially when you have so much market bullishness. especially when you are easing conditions because of stockmarket bullishness, this chart on the bloomberg showing financial conditions are tight, but less tight than they used to be. what would this mean for the markets if we could be going the other way and having to do more much later? garfield: that situation is one where every step higher and equities in particular is just potential extra pain going forward. you are also going to have plenty of investors who are going to look at rallies like the recent one and start taking money off the table. indeed, there are signs that part of what set off the strong reaction we did get from equities was that a lot of

investors had been staying away or had taken that the clients we saw earlier this week, investors taking some initial gains off the table. if you had bought into the nasdaq soon after june's nadir that you have 10% or more on the table, that explain why people came out of the market in the run-up to cpi, because they knew you might get an upset -- an upside surprise. even with the gains, because we got the opposite, you are still going to have that. anybody stadion, now they are sitting on bigger gains, but they are looking at things like the core pce inflation which the fed looks at as the target, coming up at the end of this month. jobs numbers and cpi numbers next month, and going those are big risks and if they come in wrong, you could very rapidly be back towards the lows we saw

last month. shery: bloomberg's haidi: bloomberg's kathleen hays and garfield reynolds going through reactions to the cpi print. add we will have a conversation with the san francisco fat friday at 7:30 hong kong time. we are getting reaction when it comes to the monetary policy -- monetary authority in singapore, singing -- speaking about the propriety of the current economic policy good we did get a downgrade when it comes to the second quarter gdp number. we know that the msf has tightened the currency three times already this year and as indicated and will continue till until inflation comes down. the latest car inflation reading for singapore city at a 14-year high.

we heard from the prime minister yesterday saying that expectations are that cost-of-living pressures as well as rates will continue to pressure the singapore economy and households. let's get to annabel to look at movers because we also saw that big risk on move across crypto. >> yeah, especially in the ether space. it could be the biggest transformational change for that cryptocurrency network. we are keeping an eye on other exchange-link stocks as well. they are moving higher today in seoul, despite a report from coinbase. weak earnings from the previous session but today, coinbase said they were under investigation by the sec revolving around its taking program that allows users to earn rewards in exchange for holding its cryptocurrency. that sort of program is offered by a lot of crypto exchanges. let's turn to other movers today. still in korea, samsung this

morning just unveiled its latest generation of foldable devices. if you are a samsung fan, it is good news for you because it has better features at the same price, even with the costs of materials and shipping surging. a good sign. we are seeing a jump today in sydney i property developers, 1% given the current climate and a confident outlook is important does well because we have seen threats posed to the property market generally in australia in the rising rate environment. amp ltd. was ira the start of trade but is turning negative. reporting a slump in third quarter profit but a return of its capital sharing program for ship -- for shareholders. shery: a $50 million aussie share buyback, we will be going through those numbers with cfo james georgeson. that exclusive conversation is

next. this is bloomberg. ♪

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♪ haidi: australian wealth management company amp ltd. as dropped 25% in a challenging

economic backdrop. we are joined exclusively by cfo james georgeson. great to have you join us. given the big capital surplus situation, why no dividend issuance? james: good morning. we committed today to the $1.1 billion of capital returns and 350. -- $350 million by and $750 million of buybacks next year. we have completed two capital sales, the sale of our fixed income and equities business and another business. the infrastructure equity business internationally as well as domestically, they won't stop until september on november respectively. we are also subject to getting regulatory and tax approvals for capital returns. we will do the $350 million now

with in all market i back, to get money back into shareholder hands. haidi: when do you see the rest of the sale price distributed to shareholders? james: we have been through two sales that we are completing for the end of this year. we hope to do those in 2023. that is the guidance we provided today. our results, we think we will be in position to announce the structural means of those and the timing. shery: we are expecting high deposit costs to weigh on your results and we are saying that the bank's returns are well below their peers. does this give your company second thought of keeping the bank especially after you stop bank corp fail? james: we are committed to growing both our bank and platforms business in australia. we have come under pressure in the half. that was more to do with the

pricing of new loans, variable loans as well as a high proportion of fixed-rate loans which are lower margin. we have seen funding hold. we have passed on most of the interest rate rises to our borrowers as well as our saviors in deposit accounts, but we are not seeing that as a drag. we are just seeing a competitive force going forward, but we think it is an opportunity. we don't have branches, we have a lower cost to income ratio and they be an opportunity like -- opportunity for a bank like amp to outperform the market. shery: what about cash flows and when do you expect to get back to growth? james: pleasingly, we have seen our outflows reduced. $6.3 billion of net outflows at the same time last year and $1.9 billion this half, really big improvement. we are targeting our net flow

position by the end of 2024, so still 18 months away or so. our north platform did pleasingly grow $1.3 billion in the half, including penetration in the independent financial advisor market. so, we are looking at improvement but a road to go until we get to net positive. haidi: you have had big margin hits. does the pricing of the deal make you reconsider the value of keeping the bank? james: the value of suncoast is 1.3 times book value. it is a full price. the role of the ceo and the board is to maximize value for shareholders. it would have to be something we considered carefully. but we think there is a lot of growth opportunity and value that we can generate ourselves. but our core focus is growing the bank and going our platforms

in australia. haidi: we have heard criticism or speculation that you could have fetched a better price if you had been more patient. james: a really interesting question. we spent through death we spent a lot of time looking through the values of different businesses and testing the markets for prices we could extract. we wait that out carefully and we emerged in the better interest of shareholders versus sales, but the merger was not really going to generate proceeds for shareholders, where as -- whereas the trade sales generated proceeds for shareholders. we think the cycle of high interest rates is going to put on pressure, and valuations of real estate and infrastructure, that headwinds are probably

there, and private equity has had a good ride last couple of years and may be harder going forward. so we feel we have got good value in the businesses with the circumstances that are there. shery: james georgeson, good talking to you, amp ltd. ceo going through the numbers after earnings results. 20 more coming on "daybreak: asia."

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♪ >> when you couple that would last week's booming jobs report of-hundred 20,000 jobs were forecast jobs created last month

and 3.5% unemployment, it underscores the economy we are building. we are seeing a stronger labor market where jobs are moving and americans are working and we are seeing signs inflation maybe beginning to moderate. >> it is good news. we have to be cautious. a big reason for the good news, gas prices are leveling off. that is helpful to consumers. there are other issues like housing. we have to keep our eye on the ball. there is no silver bullet. >> we need to help bring prices down in a way that sustains the economic progress we made. we so more than 500,000 jobs created last month while the inflation print zero. we can keep making progress on that front and the way to do that from a fiscal policy standpoint is what the inflation act does, bring down costs for prescription drugs, health care

and energy while reducing the deficit. haidi: president biden end of the u.s. officials commenting on the inflation print. let's see how the markets are reacting. >> pretty risk on across-the-board today here in asia. markets moving higher after we did have that inflation print coming out, setting the stage for perhaps a less aggressive fed moving forward. in terms of the markets, japan is closed today, we are keeping an eye on the tech space today with this index outpacing the kospi index. we are seeing the index gained 10% since it slows a couple of months ago. we saw the huge move in the dollar index following the inflation print, the biggest move since march 2020. in terms of currency moves today, the biggest, outsized change we are saying is from the korean yuan yesterday, leading

declines in the previous session as the most among asian currencies along with the filipino currency. that is putting a cautious position out there. the yen is holding steady but in terms of trading volumes today, they are looking pretty elevated, a lot of investors seeming to come back in the market. haidi: the china central bank says it will strike a balance between supporting the economy and fighting inflation. the pboc says it feels consumer inflation may hover above 3% at times in the second half of the year. let's bring in our asia stocks managing editor. is inflation really a concern in china? so much of this part of the narrative has been the opposite story compared to the rest of the world. >> yeah, completely. it is hard to fathom why the pboc would be concerned about it. but the rhetoric coming out of

the quarterly policy report has been consistent with previous commentaries. and if were you to go ask an average mom and pop on the street in china, it is hard to imagine that they will tell you they are feeling that pinch of inflation. it is probably not the case in china, especially when all they read in the newspapers is where global prices are going through the roof. so, they are probably feeling lucky right now in china. but the pboc is probably worried about core inflation and important price inflation such as oil and gasoline, so that is why they are expecting to exceed percent in some months of the second half. but they seem to be sure they have the 3% target in control for fall 2022. shery: markets have rallied and investors are very optimistic about the chinese markets, because they expected a loss of fiscal support. what does the fact that the pboc

is very concerned, or a little concerned, about inflation mean for the markets? >> that could mean potentially that the bulk of stimulus might be behind us, just because pboc seems to want to focus on the fight against inflation. so, probably we are not going to see significant monetary support coming into the market to boost liquidity. what does that mean? the bond market will feel the biggest impact because they are the biggest beneficiary of passive liquidity that has been pumped into the financial system. we are seeing the overnight repo trading volume hitting all-time highs. and there seems to be a lot of speculation when people borrow cheaply and invest in higher yielding securities, and the pboc does not like that. you look at 10-year government bond yields, that has come down

30 basis points, so it is probably less likely for the yield to continue to drop. shery: our asia stocks managing editor. u.s. commerce secretary gina raimondo says president biden is waiting changes to tariffs on chinese goods. but geopolitical tensions with beijing could get in the way. she spoke in an interview with bloomberg's david westin. >> he is still concerned. it is a big decision. the geopolitical situation with china is complicated. candidly, after speaker pelosi's visit to taiwan, it is complicated, so the president is weighing his options. is really cautious, -- he is very cautious, he wants to make sure we don't do anything that would hurt american workers. but i know he is looking at it. we talked about it again recently and i expect he will be making a decision before too long.

david: find the scenes, are discussions going on? not only on the tariffs, but more broadly on trade, are there back channel discussions going on that could lead to something? >> i would say yes, but they are limited at this point. mainly because china has not been that interested engage -- that interested to engage. we are trying. we certainly think there is a benefit to having communication, back channel communication, but it takes two. hopefully, china will be increasingly interested in having those discussions with us. david: you mentioned nancy pelosi's visit to taiwan, to what extent does that slow down those channel discussions? >> it certainly has made it more challenging at this moment it is harder. but i am hopeful that we will

get beyond that and get to a place where you can have more of those discussions. haidi: u.s. commerce sec. gina raimondo. for more, let's ring in our chief north asia correspondent stephen engle in hong kong. clearly, a lot of reverberations in washington following that pelosi visit. so, how has the trip changed beijing's resolve toward taiwan. stephen: you saw eight days of military drills in those six exclusion zones encircling taiwan, to drive home the point that they were not happy with the visit. but also, according to taiwan, getting the people's liberation army, its air forces, naval forces and also rockets, to what taiwan says is practice of a potential invasion of taiwan. no one is saying invasion is imminent, but it did give china a good excuse if you want to call it that, to simulate

strikes on ships, potential missiles that japan says flew over the island, and really escalated some of these tensions that we have not seen since what is now known as the third taiwan strait crisis in 1995 and 1996. it has obviously stiffened the resolve beijing, which claims sovereignty over taiwan. now, we have to see, and i can tell from her tone, gina raimondo was a bit cautious by not declaring lindsay's visit derailed more constructive dialogue with china, but if you look at the optics and timely, it doesn't look like a xi-biden face-to-face meeting will happen soon. she also said about the tariffs, biden may be backing off on the

trump-era tariffs because it would maybe send the wrong message to american workers, but that is a decision rate hondo -- decision gina raimondo says could be coming sooner than later. shery: let's not get the vonnie quinn with first word headlines. vonnie: singapore's economy slipped into contraction in the second order, causing more challenges for the city state already grappling with worsening price pressures. gdp fell an annualized 0.2%, prompting the government to narrow its growth forecast. it is now expected in the ratings of 3% to 4%, down from 3% to 5% previously. minneapolis fed president neel kashkari and his chicago counterpart charles evans responded to softening inflation data saying it doesn't change the fed's mind about higher interest rates into 2023. kashkari said he wants the fed benchmark rate by 4.4% by next year.

evans said inflation is unacceptably high. >> the idea that we are going to start cutting rates early next year when inflation is likely going to be well, well in excess of our target is not realistic. a more likely scenario is that we will raise rates and then sit there until we get convinced inflation is well on his way back down to 2%, for i would think about easing back on interest rates. >> three quarters to 4%. shery: two -- vonnie: two former jp morgan employees have been convicted in chicago for manipulating gold rises. they were found guilty of using fake orders between 2008-2016. they will be sentenced this year, both men facing decades in prison.

donald trump is refused to answer questions from the new york attorney general into an investigation into potentially fraudulent asset valuations. the president invoked his fifth amendment rights. that was in a deposition probing whether the trump organization manipulated asset allegations for more favorable, -- more favorable terms for bank loans and insurance. it comes to days after federal agents searched trump's home in florida. 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: plenty more to come on "daybreak: asia," this is bloomberg. ♪

♪ haidi: china's chip bellwether expected to post another strong quarter. a company that makes car phones is beating profits as well. that's bring in our bloomberg asia check reporter. what did those results say more broadly about consumer-electronics demand? >> all i saw from earnings yesterday indicates demand for consumer-electronics had a better than just better quarter

than people feared. over the past weeks, we have seen a slump in demand. results yesterday show that demand for parts from customers including the likes of apple seems to be holding up. hon hai has raised its forecast, so that is a good sign amidst concerns over demand for customer electronics and whether it is going away or whether it is back. shery: what about smic, what can we expect from their earnings? >> bloomberg intelligence is expecting smic will post strong

earnings friday as well due to a boom in design and the automotive chip shortage. at the same tom, analysts will be keen to find out progress in smic's development of checks because a couple of weeks ago, we reported that smic seems to have come up with an emergency chip despite u.s. sanctions. that is something analysts will be keen to find out, exactly where smic pushed forward with technology building. shery: our bloomberg asia tech reporter debbie wu. china has criticized a law promoting chip production in the u.s. as a threat trade and an attack on chinese business. bloomberg has learned that senior officials in beijing are frustrated at a long-term

failure to develop semiconductors that can replace u.s. circuitry. our next guest focuses on china's rise, jordan schneider joins us from new york. china accuses the u.s. of unfair competition with the chips act. china faces the same it is agents because of state subsidies. does this with the u.s. on a level ground against beijing? jordan: if you can't beat them, join them. that is the lesson a lot of countries have been learning after what the chinese government has been able to accomplish through their industrial policy and subsidies to firms. we are seeing u.s. and eu as well as taiwan, south korea and japan lean more aggressively into industrial policy in general and semiconductor

subsidies in particular. it is a little rich for chinese state authorities to be criticizing the u.s. for using the medicine they have been taking for the past few decades. shery: at the same time, bloomberg's hearing from senior officials in beijing that they are not really satisfied without state money has been used in the industry, especially when it comes to helping semiconductors to catch up with western nations. how much as beijing achieved with these state subsidies? are we inefficiencies come to light? jordan: yeah. it is important to understand the goal. x hasi been making speeches for years talking about the importance of self-reliance, making sure choque-point technologies at the west has over china which allows it to put sanctions on firms like huawei are no longer around

the neck of chinese firms. and if that is the goal, typified by the maiden china 25 goals which hope to bring domestic, chinese to mystic content of core industries up to 70% by 2025, that is nowhere near happening. so, while there is progress, your previous correspondent did allude to new capabilities, it is not near what the chinese government was hoping for. which is why it seems heads have started to roll in key positions which were in charge of boosting the semiconductor industry. haidi: it seems like criticism when it comes to this protectionist incentive scheme applies to both beijing and washington. is it productive, what it could achieve? ed is there broader concern over a technical staff shortage that is playing out? jordan: all the money in the

world can't necessarily by you -- buy you the engineers for 40 years of intellectual property and know-how that you need to compete at the cutting edge in the semiconductors supply chain. haidi: you said you are worried about the taiwan escalation risk, we have seen the fomc choose sides in terms of which market they are now more caucus -- more focused on. how reliant are these chinese domestic tech names, how reliant are they on taiwan and broader western technology for the supply chain? jordan: they are completely reliant. there may be lower-end, older,

analog technologies in which china could make microelectronics, but the vast georgie of what powers the chinese economy, all the chips in every thing that makes a modern economy run, are using both, are connected both to taiwan as well as american ip. in a worse type in case sun reo where you do have a conflict involving taiwan -- in a worst case son reo where -- worst-case scenario what you do have a conflict involving taiwan, they are trying to ameliorate by spending $100 billion supporting the industry. shery: we have seen the u.s. try to rein in while way and -- while way -- huawei and

others. i much progress has the u.s.-made in containing chinese tech supremacy? jordan: it is the u.s. and its allies' game to lose at this point. while chinese companies are making progress and gaining in different corners of the value chain, the vast majority of the value add created in the industry is not by chinese firms and that is not going to change anytime soon. haidi: jordan, great to have your views, rhodium group senior analyst jordan schneider. tune into bloomberg radio to hear more and get in-depth analysis from the daybreak team. we are broadcasting live from our studio in hong kong and you can listen on the apple radio plus or bloombergradio.com. this is bloomberg. ♪

♪ haidi: a quick check of business flash headlines. a south korean company raises it

earnings forecast for the full year. the e-commerce giant earlier projected a $400 million loss in 2022 however, coping --coupang narrowed its loss to $75 million in the second quarter. softbank expecting to post a gain of $75 billion. the company is cashing in on its alibaba investment as local markets deteriorate. the bank's stake in alibaba will fall to 15% from 24% at the end of june. disney raising price of disney plus straining by 38%. it is part of a plan to build on third-quarter results that beat estimates for sales, profit and subscriber growth. in december, disney will introduce an at-supported version of the surface -- service and will raise the price

of the ad-free version shery: $211 per month. shery:markets across asia, you are looking at the kospi leading the pack, gaining 1.5% at the moment. asx 200 also up, .8%, reversing losses in the previous session. kiwi stocks up .6%. a lot of market optimism, risk on after inflation numbers in the u.s. there the market opening in china and hong kong. this is bloomberg. ♪

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