shery: you are watching asia

does daybreak: asia. we are counting down to the major market obits. -- opens. investors bet the rally following softer inflation data. u.s. producer prices fall for the first time in two years reflecting a drop in energy costs. we were be speaking -- will be speaking by with fed president mary daly. a pipeline leak in the gulf of mexico is shutting down six oil and gas trails. abigail: u.s. futures to the upside now after the s&p 500 raised more than 1% in the new york session. a lot of volatility today with tech underperforming despite the fact we had data showing u.s. ppi also fell for the first time in july in about two years. also jobless claims are rising for second consecutive week showing a mart -- moderate labor

market that might bode well for what the fed might do. not an aggressive tightening as markets have feared. the 10-year jumping about 10 basis points. this 30 year at the highest in three weeks because of a weaker than expected sale. oil prices were gaining ground but right now in the asian session they are under a little pressure reversing the gains. we had really conflicting numbers. the iea raised its forecast for global demand. on the other hand, opec cut demand outlook saying perhaps we will see lifting oil this quarter. annabelle: bullish and bearish signals and speaks to what we see across the board. i will kick off with bonds. you mentioned treasuries. this morning, the aussie 10 year yield jumping. we saw that week auction demand. there is a real disconnect between what bond traders see and what equity investors are

looking at in terms of recession. equity investors are more focused on signs of cooling inflation that could actually need the fed to -- lead the fed to be a little aggressive in the campaign to rein in inflation. global stocks are now on track for their longest run of weekly gains since 2021. in terms of the futures of space, a mixed picture. new zealand trading on to the upside. the dollar trading tight. the yen looks like this. shery: breaking news out of peru. the central bank is raising the key rate to 6.5% from 6%. this is the highest since 2009. remember, peru continues to see political turmoil. target inflation is not sitting well with the central bank that has now hikes by 60 basis points to a level we have not seen since 2009. this is the 13th straight hike in a cycle that has added 625

basis points to borrowing costs in peru. this is following the bank of mexico raising rates to the highest ever as prices soared earlier in the day. we continue to see rate increases including argentina earlier today as well. all of these economies battle surging food and enemy cost -- energy costs. purdue -- peru the latest hike rates to 6.5%. we continue to see the debate over inflation, where global central banks are going. kathleen hays our global economics and policy editor joins us now as well as a garfield reynolds. as we see global central banks moving, in the u.s., it seems we are perhaps getting easing inflation numbers giving more leeway to the federal reserve. what are we seeing in ppi dated today? kathleen: a surprise for most people, most economists. at the same time, i am sure it

is a significant number for the fed to add it to its array of data it is looking at to assess where inflation is, where the momentum is, what is driving it. let's start by reminding everybody that the producer price index is wholesale prices, business to business prices form -- from raw materials to intermediate goods to the finished goods. in july ppi fell 0.5%. it was up .1% in june and it was expected to be up 1%. what this dented headline was impressive. the ppi year-over-year fell to 8.9% in july from 11.3% in june. it was expected to be around 10.4. core ppi to -- slowed to 7.6 sent year-over-year taking out food and energy. a key reason is commodity prices. this is why the fed will look at it differently in terms of lasting impact in terms of achieving what they want to

achieve with less demand. gas prices at the pump is not necessarily something that will convince the fed the trend is where it needs to be. 80% of a drop in goods prices. that accounted for most of the drop in the ppi monthly. that was due to a nearly 17% drop in gas prices. services prices are another smaller part of the index that has been one of the big drivers of the consumer price index. they were still positive. but, intermediate goods prices eased sharply on diesel cost. that the story. -- that is a big part of the story. how will this affect the fed, we don't know. but we are waiting for clues that may be will come up shortly. jobless claims did rise a bit. but even at this level, it's still a very low level of claims. the insured unemployment rate within the joblessness report is

1%, very low and consistent with a tight labor market. cpi is much more important. the fed, not enough movement in the labor market particularly after a strong jobs report a week ago to make them worry about jobless claims. shery: we were talking to vince cignarella in the past hour and he disagrees with this idea that there is a low down in the markets. he thinks we know quite a bit from the data we have. i am wondering how you see market positioning at the moment? garfield: well, my main concern is markets are too quick to call what the fed is going to do. in a lot of ways, the data picture is started to cohere around the idea that inflation and growth has peaked. that makes sense. after all, one way of bringing

down inflation is to take steam out of the economy. that is why the fed is tightening interest rates. the difficulty is even when you see these smaller than expected increases in ppi and cpi, and pace is still massive. 8.5% for cpi. more than 9% for ppi. those are not the numbers the fed will be happy enough about. to say, ok, we can rest. even if you look at some of the personal indicators, jobless claims, the idea that the jobs market might slow down, the fed wants to actually see that slowdown before to regards what is going on in the jobless market as any sort of a brake on its capacity to hike interest rates. the latest rose -- report we had the other week was that the job market was doing just fine thank you very much. so, given that, given the idea that inflation may have peaks

but is still really elevated, we are still not clear how much time and how many interest-rate heights it will take to bring it down. there is little reason for the fed to slowdown. if you look at treasuries overnight, i think some investors to some extent woke up to that idea, even if equities still, mostly, seem a little less concerned. haidi: garfield reynolds there was kathleen hays. let's get to vonnie quinn with first word headlines. body: merrick garland says he personally approved the decision to search former president donald trump florida residents. the justice department is asking a judge to unseal the search warrant. the search has drawn it a schism from trump and republican allies and focused on whether trump held onto presidential records including classified materials. >> the department filed the

motion to make public the warrant and receipt in light of the former president public confirmation of the search, the surrounding circumstances, and the substantial public interest in this matter. bettie ray: argent --vonnie: argentina's central bank raised its benchmark rate to 69.5% as argentina battles the highest inflation in 30 years. inflation surged to 71% in july against a backdrop of political turmoil and a steep decline in the value of the peso. this is the eighth increase of this year and follows an outside 800 basis point rise two weeks ago. opec expects global oil markets to dip into surplus this year. it downgraded the outlook for crude demand and a bolstered estimates for non-opec supply. it curtailed forecast for crude in the third quarter. it is a divergent from the international energy agency widths -- which boosted its

demand for international oil. a power failure in downtown toronto knocked out energy in parts of the city's financial district. it is investigating the destruction early thursday afternoon. some businesses were running on emergency power. the toronto stock exchange says trading activity it was not disrupted. global news 24 hours a day on bloomberg air and bloomberg quick take. i am vonnie quinn this is bloomberg. shery: ahead, we ask san francisco fed president mary daly whether it is too early to say elevated inflation is over. she joins us later this hour. next, mainstay capital management tells us how he is using a arbel approach to equities -- a barbell approach to equities. this is bloomberg.

shery: we are getting breaking news. hong ching biotech seeking pre-ipo at a $6 billion valuation. also they are seeking an amount of 400 million dollars in the pre-ipo round. they are looking at exploring the hong kong ipo as early as 2023 weighing new funding around

the crude value of an enzyme maker at about $6 billion. this is a shanghai-based company currently working with advisors on fundraising looking at an ipo next year but they have not decided on the fundraising side yet. they supply censuses blocks m signs and mrna raw material for -- block enzymes and mrna raw material for pharmaceutical firms. they have provided key ingredients for a number of covid-19 test makers in china. let's bring in our next guest balancing defensive and growth stocks. he believes elements of stagflation are already here whether we get a recession or not. the ceo and chief investment strategist at mainstay capital management, david kudla. let me throw up this chart that speaks to mixed signals and

ambiguity, not only in the economy, but feeding through market expectations and market positioning as well. we show the aeii spread showing the most since 2016, stocks of 20% from the trough about two months ago. you look at something like this. how hard is it now to have conviction in what is going on with the market and economy? david: i think it's hard to have total conviction. that we go a lot higher from here. even though hedge fund managers, and i have seen that statistic, how short they are currently, and covering some shorts, as we know, that has caused some short squeezes on the market on the way up. i think it goes beyond just what the institutional manager, hedge

fund managers are doing. i think it really gets to come look, -- two, look, we had great data in both cpi and ppi. that has resulted in this rally. but, the fed has a lot more work to do yet. it is hard to believe it is upward bound from here. the fed has a tough slog and we have volatility even until the end of the year. haidi: have you been encouraged by the most recent earnings season particularly as we see rear rotation back into tech, back into growth? even non-profitable tech. david yes. we need to keep in mind there were a number of companies that were right around the 4%, 3.4% of companies so far beating estimates. but, those estimates, those earnings estimates, those are largely revised down from where

they were earlier in the quarter. so, they are beating on early earnings estimates. they are good but not great. some of the speculative names that have gotten a bid recently make us more skeptical of this rally. you know, we like quality growth. that is one side of our barbell you referred to at the onset of the segment. but, speculative growth's getting a bit of that and that gives us some pause about this rally. shery: what about the stocks portfolio rate? we talked about the 60/40 for years. that is now seeing double-digit losses this year alone. is it time to put that to rest? where does that strategy go from here? david: in the first half of the year the 60/40 strategy, 60% s&p 500 on the 40% u.s. aggregate bond's down 10.5%.

if 50% of that was nasdaq and the s&p 500 closer to 15%. the 60/40 portfolio, the classic 60/40 portfolio certainly struggled this year. we think that is where we need to look elsewhere relative to traditional index type stocks and bonds. we have looked at alternatives. you had a segment in the last hour about liquid alternatives. those are good in an environment like the first half of the year. also, commodities. the cyclicals we moved more away from in favor of defense, defenses on one side of the barbell, quality growth on the others of the barbell. in the first half of the year, commodities, you know, those materials, energy, cyclical names. it is really, really well. shery: we have had a lot of action from the white house and congress as well, whether the chips bill and a semiconductors, r&d support, or, of course, inflation reduction. when you have more of these

fiscal measures, what does this mean for inflation in the broader market? david: it is just more spending coming at the right time. the reason we are in this place is we had monetary policy that eased for too long. we had quantitative easing for too long. we had over $4 trillion of fiscal stimulus in the u.s.. so, that is what drove the excessive inflation we are seeing that now needs to be unwound. to have another spending package come along at this time, more fiscal stimulus, that's just the wrong thing at the wrong time. so, you know, that just creates more of a problem for the fed in trying to bring down inflation and bring it down sooner rather than later. seema: --shery: david kudla always good to catch up. breaking news. president biden is readying plans to launch his reelection bid after november's midterm

congressional election according to multiple aides and allies peeking to bloomberg. remember, president biden is not the favorite candidate for right now among most democrats according to polls. they would prefer a different candidate. but, those close to president biden now described him as really boosted our recent legislative action that we just talk about, the economic and foreign-policy victories he has seen, and of course, he is also committed to again denying former president trump a return to the oval office. again, president biden is readying plans to launch his reelection campaign after november's midterm congressional election. there is

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op"dz"/inatango. watching softbank booking again of more than $34 billion. mitsubishi usg in focus after establishing its latest director lending bank trying to take a share of the low credit private market. earnings are due out from all of these companies. in south korea, july import prices rose nearly 28% and export prices are up over 16% year on year, remaining subtly in double digits for about 1.5 years. the country announced special pardons for the august 15 liberation day. those likely to receive presidential pardons are the samsung chairman. capitol and -- kepco and ncsoft

are reporting earnings today. haidi: opec expects the global oil market to tip into surplus as u.s. averaged retail gasoline prices fall below four dollars per gallon. since opec is trending -- trimming the amount of oil it needs to produce. >> they definitely see lower demand. they are setting a lower bar for the amount of oil they need for the market. that's big news. the iea today come out -- came out with a very different view. let's talk about opec. it said in the third quarter it will cut the amount on the market by about 1.2 5 million barrels today. that is more than .5 million barrels per day less than opec's

13 members pumped in july. so, it trimmed the forecast and boosted its view of non-opec supply. we are getting very different views from the international energy agency that boosted the forecast for global oil growth because of soaring natural gas prices and heat waves that caused many industries to shift over to natural gas. it sees little chance that opec-plus will increase outlook. you just saw in that bloomberg chart that many of the big oil producers, mainly the saudi's, are already pumping at capacity. many analysts say it's not that they are unwilling to put more oil on the market, they are actually unable. it is interesting that the iea believes the most recent move by opec-plus to only put a minimum 100,000 barrel hike in terms of output per day in september, they believe that was largely symbolic and may actually be a cut when you look at how russian

production is starting to decline. again, the saudi's end of the biggest oil producers have already been putting close to capacity on the market and the latest forecast allows them to pull back from that level. shery: what does that mean for the price of oil? we started below $90 a barrel this week. we have been seesawing since then. su: the iea boosting its demand forecast, i saw oil prices higher in the u.s.. they pulled back a bit in that asian trading. but the focus, is -- of course, is on gasoline. this shows where the peak was weeks ago. we have come down rather dramatically. we are below the four dollar mark after peeking above five dollars in mid june. many reporters were out in california where prices had been as much as seven dollars a gallon. saying, hey, prices are down,

but we are not exactly happy about four dollars a gallon, but, we will take it. signs of weakness in the futures market are what analysts are focused on. we have seen oil rather choppy over the last six months as bullish and bearish headlines. the most recent bearish headlines are we have pipeline outages in the gulf of mexico. shery: su keenan with the latest on oil prices, important for the inflation debate. we speak to san francisco fed president mary daly to get her latest on where inflation is going, the latest job numbers, and, what they mean for

kathleen: welcome back, i'm kathleen. we like to welcome our bloomberg radio listeners. if you have acceleration, it may

take pressure off the federal reserve to continue aggressively hiking interest rates, that's a big important question, not only for markets, probably the federal reserve itself. joining us to san francisco fed president mary daly. it's good to have you, it's great to be here in san francisco, just a few blocks away from the san francisco fed getting to talk about these issues with you. >> it's really good to see you and be in person. kathleen: i have to say, i always say the news gods are smiling on me when i interview someone like you. there's really important numbers have just come out. cpi,'s consumer price index for july, the headline broke significantly. the very next day, producer prices, which is the secondary portfolio prices. with negative on the month the first time since the pandemic. when you look at these numbers, how significant to you our visa's results? >> they are significant in that they are saying we are seeing some improvement, but they are

not victory. remember that the headline cpi number is still a .5%. i want to say it again, 8.5% on a 12 month basis, and that means the consumers are paying a .5% more this month than they were last year for the same goods and services, and that's too high. inflation is too high, but it is always important to start seeing come down a little bit. kathleen: think about those -- think of all the scales, you have one thing on one side on the other on the other side, so one has 50 basis points for the september meeting, the other has 75 basis points, as you see these numbers and anything else that comes out lately, like jobs, how do those scales wait now? does mary daly feel that 50 basis rate hike a little more or 75? mary: maybe the first thing i will start with the scale, 50-70 five does not just depend on a data point, even the important one like the cpi. i would like to say we are data dependent, not data point

dependent. how i think of whether it will be 60 or 75 as i look at a lot of things coming in, we have inflation numbers coming in, we have employment numbers coming in, we actually spent a lot of time, i know i do in my colleagues do, talking to businesses, households, community groups, people in stores, what are you feeling, and are you seeing signs of the economy slowing? all of those things, when i put them together, global risks in global growth, i have a baseline case going into september that is 50 basis points, that's where i've been since the last meeting, but i have an open mind about rather 75 is going to be necessary, and a lot of that will depend on the labor market, inflation, and whether we see those things slow enough to say while we've got the momentum we need to really fight inflation. kathleen: 50 or 75 is in the problem. i'm curious if you were just looking at those numbers, what would you say, what they support your baseline?

mary: 50 or 75? 50 supports the baseline. think about we -- where we need to be at the end of the year -- the numbers we just got say we have enough uncertainty about the path of inflation. it looks a little bit of improvement, so we want to wait for the next report, we had -- we want the inflation report in the employment report coming out before the next meeting and it really behooves us to stay data-dependent and not call it. before today, with those numbers in hand, as still think 50 basis points is the case, but i am open a 75 should that data evolve. i want to hit some of the big points first, and the other one is cover in terms of recession and recession risks, there seems to be frequently a sense in markets that once there are plans of recession if risks are rising, the fed will pull back. it is the fed, are you willing to let those risks materialize if you have to to risk a

recession if that's what it will, in the end, take to get inflation rate down? mary: i would like to start with this, we are a long way from evaluating those risks. at the employment report. people in the labor market, whether they are a firm trying to find a worker or workers try to find a job do not feel like it's a recession. now jobs are plentiful. the main marker for consumers about a recession is are they having a hard time finding jobs, is a hard to get a job and his their incomes falling. you don't see that right now, i don't see the risk of inflation of our preeminent risk. i see the most important risks we face in the economy as inflation is too high and it's been too high for too long and we need to bring that down. so when i'm balancing the risk, i'm really balancing how quickly can we bring inflation down without tipping the labor market over, and that's why 50 basis points make sense to me right now. shery: does the stock market bullishness right now, is that

challenging to the federal reserve given it could relax financial conditions, which is not with the fed wants to see at this moment? mary: we look at a broad range of conditions on the stock market is one of them. i'm also looking out mortgage interest rates and borrowing rates for businesses and consumers for a variety of things, and i really want those to remain tight and tie and tightening as we go, because we don't want financial conditions to relax, we want them to remain tight so we can continue to bridle the economy, take the accommodation out. the member financial conditions have been so loose in part because we were adding a lot of accommodation to get us through the pandemic. now we want to pull that back and we want the economy to slow, bring demand and supply back in balance and deliver a sustainable growth path that delivers on price stability and full employment. this is achievable but take some time to work its way through. shery: it's not the ideal -- haidi: it's not the ideal

scenario, but would you be comfortable or ok were triggering i session, even if it's a mild one to get over inflation? mary: let me just say what is true. i think about what i want to achieve, what americans really are expecting us to achieve, and that is a smoother transition. it doesn't require a recession. actually delivers on a slower economy that is still giving people the jobs they need, and the price stability they deserve. that's what i'm looking for, and that's what i'm focused on 100%. kathleen: i want to ask you about a story we just ran, a senator suggesting that their reserve banks need to provide information under the act, they are mainly concerned about the trading irregularities over the last year. is there something that the reserve banks are holding back? is there any reason why you would?

is there something that is being miscommunicated here? mary: let me start with the idea first acknowledging we did receive a letter from senator warren today, all the reserve banks and the board of governors were thinking about that we are looking over that letter and just received it this morning. here's the most important message for listeners, the fed is dedicated to being transparent. because transparency is how we build trust and trust is our most important tool. and so us being transparent about how we run our businesses, how we have our finances, and most importantly about what we are doing with policy, because inflation is high, is how we assure every american that they can depend on us to do the jobs we've got to do, which is price stability, full employment. in terms of the labor market -- kathleen: in terms of the labor market, what is the reaction function? mary: right now is strong. -- right now is strong and you are suggesting that's a reason you did a soft landing, what are

the triggers, are the signals from the labor market that would make you rethink that, that would make you have a shift in policy or just maybe worry more about getting a soft landing? mary: i really appreciate that question because the labor market has a range of data, and entire dashboard of data. it is too simplistic to simply look at the unemployment rate, although that's an important measure. i look at quit rates, how many workers are quitting, how many job openings do we have? we see job openings coming down and that's not the same as lay off workers. when i start to see workers they be getting laid off and those workers struggling to find jobs, them i would worry more, but right now i'm not seeing that. right now i'm seeing many workers finding jobs, very few getting laid off, and mostly people feeling that the labor market has a lot of opportunities for them, firms think that it's very hard to find workers, and everyone tells me, literally everyone that the

salient risk, the most important risk in the economy is high inflation. haidi: there's a lot of criticism that through fed policy we have seen distortions in the housing market that will have some level of long jail of -- longevity, even as policy changes. do you sort of address that? what we are asking is the stickiest parts of inflation is in a housing, shelter and rental costs. mary: i thick it's useful to start prior to the pandemic. we have had an imbalance in supply and demand and housing for a long time. housing units just haven't been keeping up after the great recession of the financial crisis, which was an important housing maker -- market crisis. it was already where we were during the pandemic and the pandemic minute worse because people were trying to move out, buy homes, interest rates were low. as we change the economy we raise interest rates. first thing we see is that the housing market is slowed. that will slow home price depreciation, and and then that

filters through to rental price inflation, so it will take time for all of this to work through the economy, but we are seeing the signs that it is working. shery: given the challenges in the economy we have seen congress on the white house step up with new gestation whether it's a chip act or inflation legislation act. when will those filter through the economy, and do you really think of those measures right now is the fed considers where to go in the next couple of years? mary: take all factors into account, including legislation. but the most important thing that people should know about the fed is, we work with the economy we have, and that is, right now, something that a variety of circumstances are creating high inflation, so if there are factors that reduce inflation, whether that's legislation that gets passed or slower global growth, or removal of supply chain barriers, we are prepared to adjust policy to accommodate those, but right now i think the unequivocal answer that everyone would have, if

inflation is too high, and we do have a lot of work to do. kathleen: i want to go back to the cpi reports, core services are continuing to rise, that's one issue. big dropping productivity, big jump in unit labor costs. in terms of your inflation outlook, is that one of the factors that suggests -- certain -- sure we saw a break in the cpi headlines, but some of the underlying forces are still going to push upward on inflation, like shelter costs and other services. so, -- >> will be look at the inflation that we get from reports, this is what i get from good news that the inflation came down, certainly some relief for consumers, but really i'm looking out the longer run in the longer run is driven by things like poor services. service is a lot of what we buy. if those prices are continuing to rise at a rapid clip, then we still have a lot of work to do. the shelter inflation, part of what i see there is the prices will stay elevated.

that price depreciation will fall off gradually. that's more anticipated. the poor services i'm watching gradually because we don't want inflation pressures to spread, and importantly we want inflation expectations of consumers to remain well anchored, which they currently are. kathleen: i have to ask about the l curve, it's inverted. it's been a very powerful signal on the path. how concerned are you about that? what are the signals you are seeing? mary: it won't be surprising to anyone that i watch all signals and it's one of the financial conditions. but what i see right now as we are in an uncertain time and there's not just uncertainty about what the fed will do, because there's a lot of conversation about what we will do in september, but people know the path we are on in our commitment to bring inflation down. it is uncertain is what will happen in the global economy, i think it should not be overlooked at central banks across the globe are tightening policies, so that synchronized

tightening of policy is tightening global financial conditions and growth is slowing globally. and investors and market participants are trying to figure that out and trying to figure out how the fed will react and how central banks across the globe will react and how the economy will fair. kathleen: a message from the fed, including you is that you expect another hundred basis points of hikes this year, and then possibly more next year. some people are more convinced of moving a 4%. is that the consensus that the data matters, but currently, the view is that right now, where we are where inflation is, we have to get to restrictive, and we have to get at least 100 basis points, if not, 150 or more to get not just some kind of near-term neutral, but the restrictive stance that will bring down neutral? mary: i see 3.4, which was in the summary of economic projections, what you put out four times a year.

that's about right for the end of this year, so another 100 basis points between now and the end of the year seems right to me. if you think of the neutral rate of interest around three, that means we are in restrictive space by the end of the year, and i do cs going up more next year and being more restrictive to fully bring inflation down. another important feature that markets didn't come in with is that i don't see this hung shaped part where we raise interest rates are really high rates and then bring them down. i think of raising them to a level that we know will be appropriate and then holding them there for a while so we can continue to bring inflation down until we are well and truly done until we have restored price stability. kathleen: everyone has their fingers crossed. san francisco fed president mary daly will be staying with us. up next, we will discuss the inequality of inflation. this is bloomberg. ♪

kathleen: welcome back, i'm kathleen hays here with haidi stroud-watts and shery ahn. we like to welcome our bloomberg radio listeners. inflation has been called the cruelest tax of all as it raises the cost of living for everyone, rich and poor, consumers and businesses, let's discuss the inequality with san francisco fed president mary daly. in terms of inequality of inflation, everyone feels the pain, but people with high income feel it a lot less in people with -- feel it less than

people with less money to spend. lower income people feel it more. have you yourself in your life ever experienced this pain of the inequality of inflation? mary: sure. anyone who grew up in the united states and the 1970's and early 1980's, we know what high inflation felt like, and you could experience it in various ways depending on what your income was. for me, i remember in very uniquely in my own upbringing is that, that was the time when we had to make real trade-offs about putting things back, not getting them. and what i take from that is i see it today. and that's the part that's really painful. go to the store, you can walk out into any store, any part of your community, and you could watch people and you will see them as they approach the aisle, putting things back as they approach the checkout because they don't want to face the pain and embarrassment of having the checkers say, that's not enough, or having their time, they put

it back there. that's an indignity. i think of this as the indignity of inflation. you are working, earning a living, you are getting wage increases and your wage increase, even if it feels good, isn't keeping up, so everyday you are falling behind. that indignity of inflation of what's really cool -- really cruel about inflation. it helps -- hurts people who have less and it hurts them more. it has the sense of you are trying more and still can't make it. kathleen: in terms of the inequality of inflation, break it down for us. it seems pretty obvious that if you have this money it will hurt you more, but in terms of more specifically what parts of the economy, who? mary: here's an easy way i like to describe it and it really is true. think of necessities, food, gasoline and shelter. housing, energy and food. those are the things were prices

have been skyrocketing. if you are in the lower part of the income distribution, you spend most of your disposable income, your paycheck on those three items. so you're trade-offs, which are taking place if you are in urban areas and you have less, lower or moderate income communities, you are making trade-offs between rent and gas for the car to go to work. food and school close for your kids when they return to school. are you going to get a backpack and a lunchbox or only a backpack or nothing? and those are trade-offs that really hurt groups. and what is remarkable now, because you thick of the average wage is growing at around 5%, and then inflation is growing at 8.5%, we are not talking about just this limited number of people in the united states who are having this indignity of trade-offs in inflation, we are talking very far up the income distribution, you're talking about middle america. people are earning a good living, thinking they've made it, and they are being chipped away at.

this spreads much wider than i think we understand, and that's the importance of talking about it. shery: and for those people, many of them want to buy a house, but at the same time we have rising rates, borrowing costs to clamp down on inflation, and that's really making mortgage prices even higher. so, when you have rent rising, when you have mortgage rates rising, how does really affect the individual? mary: one of the things that i learned when i go out, and you really have to go out and talk to people, you have to rely on hearing from them, not just introspection, and here's what i hear from young families and people thinking about trying to buy a home. what's really hard is when they say their money, they get an approval on alone, and then they go out and they are in an auction like environment and are being beat out for a house time and again, not by just a few thousand dollars, but by hundreds of thousands of dollars. so cooling the housing market, even if it means you pay higher

costs for the mortgage, puts them in a more competitive advantage. it's better to know the rules of engagement and better to keep up with them then to have it be so frenetic that you can even participate. i think there is please trade-offs, you mentioned them, but in the cases of people i'm speaking with in my community, boise, idaho, salt lake city, utah, phoenix, arizona, these are places where the housing market get so tight that young families can even get into afford homes and they see an economy that's more sustainable and inflation coming down is welcome relief. haidi: tilde sherry's point, that goes to future wealth creation. the impossibility of creating wealth in an environment where, as you say, the cost rates of housing are going up. how worried are you about the other puzzle piece? the demand constraint continues to play off, companies will pay off. lower skilled workers are

impacted first. mary: right now we are not seeing that. we do want to focus on how it's impacting the labor market and i spent a lot of time looking at that, but i'm not seeing or hearing that. what i'm hearing is workers have jobs. they can go out and find jobs. even when a worker gets laid off, they find quickly, another job. but they really feel is that inflation is breaking the back of the well-being, even when they have worked. firms want to catch up. they are still china fill plots that they've had open for months. so i think that this rebalancing still leads the economy would jobs, it just brings the inflation down and creates a more sustainable economy were people don't have to frantically figure out what they will do next month. i think just settling the economy down, bringing inflation down, restoring some sustainability to growth really helps everyone. kathleen: i want to come back to something you mention, it's so mary daly, you called at the put back index.

you go to the grocery store and you watch what people are doing, i know sometimes you talk to people. and mary that with food prices. the u.s., everyone is suffering, especially in less developed in poor countries it's much more serious and devastating. i think in the producer prices, that was one of the signs that was worrisome, this report today showed that wholesale food prices are rising, and that will make it even more expensive at the grocery store. so you're put back index with what's really going on with food prices right now. mary: that's a good question, if you go to a grocery store and observe, people are making choices long before the checkout market. they go down the meat counter, you start with the prime cuts or the leaner cuts, used buy beef for three meals a week, now you move to chicken, and then he moved to we won't have meet as often or we are going to not as wide as many guests to the labor day barbecue that's coming up

because we don't really have the resources to do that, so we will all go out and party afterwards, those are decisions that people are making. longer down the trade off it goes, the more painful it is. what was really painful was when i witnessed parents having a tell their children know. i know we get that usually, but we won't get that, or they go to the place and share one soda for four kids, even though every kid wants their own soda. it really is -- these are hard things and when you make those trade-offs against everything else, it makes it impossible. kathleen: quick final question, is that -- and a sense of what we have been talking about -- no matter what the cost, no matter how painful it is, it's so important for the federal reserve to get inflation down? mary: it is essential we get inflation down. it's a commitment we have made as the federal reserve to bring inflation down. people want jobs, but they also want low and stable inflation, we have to get them both. kathleen: thank you for giving

all of us some much of your time today, it has been a great pleasure. san francisco fed president, mary daly. haidi: we do have the market open coming up next in sydney, seoul and tokyo. this is bloomberg. ♪

shery: this is "daybreak asia",

we are counting down to asia's major market opens as we continue to get more data suggesting a cooling economy here in the u.s. ppi falling for the first time in two years for the month of july. by haidi, key question is, our markets getting ahead of themselves, especially when we have the likes of the san francisco fed president mary daly emphasizing that inflation is still too high? haidi: i love what she said, data dependent, not data point dependent. that means it leads to some parts of the markets are we are looking for the next few data prints to get a more cohesive feature of what's going on with the economy and therefore the fed policy. let's get a look at the starting of trade here in asia. annabelle: we've got the open here in japan, australia and korea as well as the open for cash treasury markets. keeping a watch on what the 30 year yield is doing. we had that week option of demand in the previous session. a signal here that the fed is really not done hiking rates, and of course you had that great

interview with mary daly, z/yen here is very range bound. they really should stabilize in the sessions ahead, it has been testing the upside in lower ranges of the current been. keeping an eye on japanese stocks. they are playing a little bit of catch-up trade because they were closed in the previous session for a public holiday. let's turn to the open that we have in korea this morning, keeping a particular watch on what we are seeing for the call stack here at trade. underperformance in the nasdaq previous session. watching the text -- tech shares. apple supplies and focus because apple says iphone buyers are going to keep on buying. korean won looking like this. this turned to the open we had in australia. particular watch on the aussie bond. we are seeing the biggest light for yields this morning since around mid june. stocks looking like this, meanwhile, oil coming online, brent crude. gotta spare a thought for those oil traders.

iea saying demand is going up. opec is saying the other thing. shery: continuing that conversation under mary daly, she has her 50 basis point hike as the basis for the next fomc meeting, but, she's open a 75 basis point hike as well, this is why, take a listen. mary: the scale, 50-75, does not just depend on a data point. i would like to say that we are data dependent. shery: basically that one cpi point does not a dovish fed make. our next guest is rotating into global fixed income in case the federal reserve over titans. daniel, good to have you with us. we need kit -- we continue to get more hawkish fed really contradicting some of the benign inflation numbers we are getting from the u.s.. how would your strategy of going

into global fixed income help? >> if you look at the offer for global fixed income, they are actually at a 12 year high, around the 12 year high. basically, if you think about it, if the fed does over tighten, growth slows more than expected, fixed income is very good place to be because of the offer. and we believe that if the u.s. 10 year yield ghost around the 3% or 3.25% level, then it's a pretty good opportunity for investors to be road trait -- rotating some of their equities holdings into fixed income. shery: fortis output asian assets putting that -- given that asian central banks are not catching up to what the federal reserve is doing and we have capital outflows already? >> i think a few things. first of all, global liquidity

is getting tighter because of the rate hikes. so you will be seeing money flowing from one equity region to another quite often. and it seems that right now, it is in u.s. equities, but you can see the s&p 500 did break about 4200 key resistant level, but it's hovering around there, so you could see there could be some rotation of money out from the u.s. equities as people try to calculate estimate whether the fed will over tighten a lot if they think they would be, the money could be flowing back to asia. chinese authorities are still very keen on putting out stimulus on the economies. so that there is some support to asian equities in chinese equities at this moment, as we see it. haidi: is the risk the pboc or are you worried about further

downside development from the geopolitical front? >> i think a few items here. in terms of china, i think they will continue to be stimulating, the biggest risk i think is really the fed over tightening. we do think that the chances of a 75 base hike is still very much there in september, but what they do in the press conference is what people should be watching out for. haidi: when it comes to the domestic pressure points for china, how closely are you watching what happens with and not just the property sector, of course missed mortgage payments, but also with starting to see potentially an overhaul, starting of the shadow banking sector, are there systemic risks that we should be worried about? >> i think the property sector front is going to be ongoing issue. it's not going to be solved

overnight. so, if you look at the fiscal stimulus that the government is putting out for, they are there to replace the lost revenue in the local government because of this property saga, and we do think that that is going to be continuing in the short term. but, if you look at the prices in the property bonds, and also in property stocks, a lot of this concern has been priced in, and i think that people need to be watching out for the fact that how much are the asset prices already pricing in the risk there for china property market and also for global assets as a whole. shery: what is that mean for what the pboc and chinese government does? because we continue to get the signals that they won't act as aggressively as many investors had expected. >> basically the latest inflation print was below

expectations, slightly below and china. but the officials are coming out and saying that they are concerned that this could go up even higher. so i think that it is going to be a balancing act between stimulating growth and also not overhyping the inflation worries, right? so, what we expect them to do is that they will probably be taking a more balanced approach -- approach. so the monetary front, they probably won't be able to do as much as they used to do, but on the fiscal stimulus front, we will continue to see them putting out measures, especially areas such as the stimulation of the internal consumption drive. because they do believe that right now, if you look at the situation there, internally generating growth is what they feel they are more secure about,

given the outside geopolitical tensions that they are seeing. shery: were to separate the chinese new -- chinese yuan, but it showing some of the weakness we have seen on the u.s. dollar, and we have seen a lot of stability in the chinese yuan so far. so, given the balance of fiscal and monetary policies and china, where does the yuan go from here? >> i think the yuan is probably going to be quite steady around the current levels because, if anything, the latest u.s. figure is leaning towards the dollar, probably capping out from here, or even going slightly lower. if you think that inflation may be tipping over, then the fed eventually does not need to hike as much as people were expecting, and you could see that a lot of the other currencies are either oversold or their areas need to be tightening the policies as well, such as europe.

so it's really a series of gain. one currency goes up, the other goes down. at this moment in time we think that the dollar is probably going to be studying around the current level and even going lower. that put less pressure on the yuan to depreciate. so the yuan will probably steady around here. as to the government's interest. haidi: great to have you with us. head of equity at standard chartered wealth management. let's get you the hong kong taking a look at the movers. annabelle: checking in on softbank. this is the first chance for traders to react to the company accelerating this stake sale in alibaba. that took a lot of strategist by surprise, but some are saying is a good news, the sale of alibaba stock because the company doesn't pay a dividend but others say it is a worrying sign. it is moving higher. in seoul, keeping an eye on sk telecom. it's one of the companies that's been deleted from the msci all country road index. let's turn now to look at the

apple supplies in seoul and tokyo at the start of trade. most of these moving high. the reason for that is apple, very confident in the outlook for the iphone, they are telling their suppliers to make at least as many iphones as they did last year. this is another signal that we are getting of the resilience of a high income consumer. also looking in on the big,. we seen the metal hitting a six week high. there are concerns around supply chain disruptions. cool inflation, another supportive factor. we are seeing some of the companies moving a little bit to the upside. shery: let's get to vonnie quinn with the first word headlines. vonnie: bloomberg has been told president biden is readying plans to launch his reelection bid after november's congressional midterms. a potential 2024 rematch with donald trump. polls suggest most democrats would prefer a different candidate. those close to biden say he's committing to stopping trump from returning to the oval office.

u.s. attorney general merrick garland says he personally approves the decision to search donald trump's for the residence. the justice department is asking a judge to unseal the search warrant. the unprecedented search has drawn criticism from the republican allies. it focus on whether trump unlawfully held onto presidential records, including classified materials. >> the department filed the motion to make public the warrant and receipt in light of the public confirmation of the search, the surrounding circumstances, and the substantial public interest in this matter. vonnie: argentina central bank raised its benchmark rate by 950 basis points to six he 9.2%. this is the country battles with the highest inflation in 30 years. argentina's inflation rates are at 71% in july against the backdrop of political turmoil in a steep climb in the value of the peso. this rate increases the eighth and follows an outside 800 basis point rise just two weeks ago.

opec says it expects global oil markets to slip into surplus this quarter. they also downgraded the outlook for demand and bolstered outlooks for non-opec supplies. they cut forecast for the amount of crude they would need to pump by more than one million barrels a day. opec's revision as a divergence from the international energy agency which boosted its demands forecast for oil. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn, this is. haidi: still ahead, a theory him developers are targeting their most ambitious upgrade by september. we get and insight by someone who has skin in the game. the ceo of australia's largest digital asset exchange. but first, san francisco's fed president mary daly says she's keeping an open mind on the fomc's next meeting. she's not ruling out a hike of 75 basis points yet. we hear from her next. this is bloomberg. ♪

haidi: san francisco's fed president mary daly said she's open to a 75 basis point rate hike in september, hammering home the central banks commitment to taming inflation. let's bring in kathleen hays with us, and, kathleen, it was such an illuminating

conversation and semi-different ways, but from a monetary policy perspective, reaffirming. i love this idea that data focused, not one data focused. kathleen: i agree, it's small, but i thought kind of powerful statement because we have the cpi for july, the headline year-over-year number broke re-substantially, and then we get the producer price index. and it's down, the monthly number for the first time since the pandemic, and it seem like the perfect set up for her to say, yes, my baseline is 50 and that's where i'm ready to go, but we can listen now to what she said. mary: this scale, 50-70 five, does not just depend on a data point, even an important one like the cpi. i would like to say we are data dependent, we are not data point dependent. really, how i think of it being 50 or 75, i think of a lot of things coming in. you have inflation numbers

coming in, we have employment numbers coming in, we actually spent a lot of time, i know i do in my colleagues do, talking to businesses, households, community groups, people in stores, what are you feeling and are you seeing signs of the economy slowing? so all of those things, why put them together, global risk, global growth, i have a baseline case knowing it's a september that is 50 basis points, that's where i've been since the last meeting, but i have an open mind about whether 75 is going to be necessary and a lot of that will depend on the labor market, inflation, and whether we start to see those things slow enough to say we've got the momentum we need to really fight inflation. kathleen: pivoting, not about ending this rate hike path. i'm still curious if you were just looking at those numbers, what would you say, do those support your baseline? mary: 50 or 75? 50 supports the baseline. the numbers we just got, the numbers we just got say that we

have enough uncertainty about the path of inflation, it has a little bit of improvement, we want to wait for the next report, we have the inflation report on and unemployment report coming up for the next meeting, it really behooves us to stay data-dependent and not call it. before today, with those numbers in hand, i still think 50 basis points is the case, but i'm open a 75 should the data evolved differently. kathleen: so we have another inflation report. i want to shift some of the big points first, and the other one is, in terms of recession and recession risks, there seems to be frequently a sense in markets that once there signs of a recession that if it's rising, the fed will pull back. is the fed -- are you willing to let those risks materialize if you have to to risk a recession if that's what it takes in the end to get the inflation rate down? >> i would like to start with

this. we are a long way from evaluating those risks. right now, look at the employment report. people in the labor market, whether they are a firm trying to find a worker or workers china find a job do not feel like it's a recession. right now jobs are plentiful, the main market for consumers about a recession is, are they having a hard time finding jobs, is hard to do job and are their incomes falling. i don't see the risks of inflation as our preeminent risks, i see the most important risk we face in the economy as inflation is too high and has been too high for too long and we need to bring that down. so when i'm balancing the risks, and really balancing how quickly should we bring inflation down without tipping the labor market over and that's why 50 basis points makes sense to me right now. shery: mary, does the stock market bullishness right now, is that challenges to the federal reserve given that that could relax financial conditions, which is not with the fed wants us yet this moment?

mary: we look at a broad range of financial conditions, and the stock market is simply one of them. i'm also looking at morgan's interest rates and borrowing weight -- borrowing rates for businesses and consumers for a variety of things, and they really do want those to remain tight and tightening as we go, because we don't want financial conditions to relapse, we want them to remain tight so that we can continue to bridle the economy, take the accommodation out. financial conditions have been so loose in part because we were adding a lot of accommodation to get us through the pandemic. now we want to pull that back and we want the economy to slow, bring demand and supply back in balance and deliver a sustainable growth path that delivers on price stability and full employment. this is achievable, but it takes some time to work its way through. haidi: it's not the ideal scenario, but would you be comfortable or ok with triggering a recession, even if it's a mild one in order to get over inflation? eric: let me just say what is

true is that, i think about what i want to achieve, what americans are really expecting us to achieve, and that is a smoother transition that doesn't require a recession, actually delivers on a slower economy that is still giving people the jobs they need and the price stability they deserve. that's what i'm looking for and that's what i'm focused on, 100%. kathleen: so we covered a lot of ground with mary daly and we do appreciate all the time she took with us. it's interesting to me on that question of recession and if they are willing to risk it in order to get that inflation, i don't think she exactly answered that saying, yes, we are willing to risk it, but i would put together what she said an emphasis on inflation and asked her that question two different ways that, yes, that that's the implication here. they are hoping they won't have to and calibrate with a 50 basis point, if it's ok, rather than

75, to kind of reduce the risk, but inflation is still the number one fight. so it seems to be the answer is, i guess that's what they're going to do if they have to and that's what mary daly seems to be implying to me. shery: i really like how she brings her back to american consumers. we had a separate conversation about the inequality of inflation. in this hit home for many people who are really having a hard time just getting their groceries because prices continue to search. the fact that she talked about u.s. rent really snowballing, not to mention mortgage rates always rise -- also rising, that the federal reserve is getting rates higher in a also means the rules of engagement are there, it's better for people to be able to participate in the property market then not being able to do that because the economy is just too overheated. haidi: i thought it was really interesting at a time when you see a lot of growth in central banks, including australia being criticized for being too dominated and focused on what businesses want, the business

forecast out of this, she's really so focused on wet american households are suffering at the moment. that other part of the conversation, the inequality of inflation, this idea of this put back gauge, that you walk to the supermarket and you see people putting back as they get closer to the check out of things that they know they won't be able to afford. we know it's not an issue of food security, it's an issue of income security because these are the things that they can cut down on when they can't cut back on things like rent or fuel expenses, for example. so i thought that was just a really cohesive conversation there with mary daly talking about not just the monetary impact on the past -- fast-forward of markets, but for everyday americans as well. kathleen hays, bringing all of that together for us. you can get a round up of stories you need to know to get your days going in today's edition of daybreak. that's at dayb on your terminal and also on the mobile in the bloomberg anywhere app. you can always customize those settings as well for news on the

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haidi: let's take a look at how futures in europe are opening up for the final trading session of the week. still futures looking flat. msci europe up by a 10th of 1%. following through well was a lackluster fuel session in its previous session. we saw health care, that offset the optimism that we may be seeing signs of not just consumer inflation in the u.s., but also that reading for ppi that came in as well that really spread further into that potential fading of the inflationary pressures scenario. dax futures trading in germany, unchanged at the moment, and the

euro holding pretty steady there as what we did have that fast and furious rally for the european stocks in july with that better-than-expected earnings season and that is really seeing the bottom -- broader markets struggle over the past few sessions. >> is take it check of the latest business flash headlines. china tourism's are duty-free, looking to's seek as much is 2.17 billion u.s. dollars in what could be hong kong's biggest offering this year. the world's largest retailer for travelers is already listed in shanghai. seen by bloomberg news shows that they will start taking investors orders at between about 100 43 and 106 he five hong kong dollars each. the insurance appears unconvinced by hsbc's arguments against the proposed spinoff of its age operation. the source as -- the store says the chinese insurer will lead to radical change. it is hsbc's largest shareholder, our sources

estimate a spinoff that will generate additional market value of 25 to $35 billion in reduced costs. apple has asked suppliers to build at least as many of its next-generation iphones this year as in 2021. that's despite worsening projections for the smartphone market. sources say apple is asking assemblers to make 90 millions -- 90 million of the newest devices. still ahead, china's largest chipmaker defines u.s. sanctions as slowing global chip demand with second quarter profit beating estimates. we have more on that next. this is bloomberg. ♪ 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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>> i have a baseline case going into september that is 50 basis points, that's where i've been since the last meeting, but i have an open mind about whether

75 is going to be necessary and a lot of that will depend on the labor market, inflation, and whether we start to see those things slow enough to say, now we've got the momentum we need. >> that was the san francisco fed president mary daly speaking to us earlier. but she set about where we go in terms of rate hikes, certainly the biggest basis going on in markets whether the fed can obtain that and whether the inflation numbers suggest we could see a fight moderation as to where that leads asian stocks, we are seeing the relative strength index approaching this key 60 level that could send us back higher into the next leg. healthy looks around this and green. we can see we've been in that correction territory, but we are breaking back to that 60 levels of the next move. let's take a look at where we are sitting for the broader markets today. we are seeing japan leading higher in the region. that is the first chance for traders in tokyo to react to that inflation data that we have

because markets were shot yesterday for a public holiday. the kospi sitting flat we are keep an eye a what the tech sector is doing. we saw underperformance in the nasdaq. australia and new zealand looking like this. let's turn to another story we are watching this morning. one story that has been very well read this morning is the story that we have on hong kong. specifically the population, the declines that we have in the city here going to get to more on this with vonnie quinn in just a moment, but what we are seeing is the biggest drop in about 60 years. i believe the details up to vonnie, but let's look at what that means for the gdp data coming out later today. this is the final reading for the second quarter, we are still in contraction territory, this will be a key metric to watch because we have seen the slowing of demand. also locally, there is a push to ease the covid curves, that's the way to stimulate growth. at the same time you have rising covid cases that could complicate that. let's get more now with vonnie quinn. >> you just saw the phenomenal

charge that was followed by a record 1.6% with more than 120 thousand people leaving the city in the past 12 months. that's the third straight annual decline leaving the population at 7.3 million. the government cited strict covid restrictions on factored in the drawer. a bloomberg survey shows hong kong's economy is expected to show little to no growth this year. a power failure in downtown toronto knocked out electricity in parts of the city's financial district where the electricity supplier said it's investigating began thursday afternoon. some businesses were running on emergency power. the toronto stock exchange says trading activity was not disrupted. the chancellor has, citizens a third package of financial assistance to offset inflation and the energy crisis. the government has the situation under control but is morning that winter will be tough as the war in ukraine goes on, the government struggles to address germany's reliance on russian gas, urging consumers to save energy.

the sister of north korean leader kim jung-un has revealed he was seriously ill with a high fever during the countries recent covid outbreak. she is blaming south korea for the outbreak, claiming it sent dirty objects across the border in the firm -- carried by balloons. north korea's is one of only two united nation member states that have not launched a covid vaccine program. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn, this is. haidi: china's largest chipmaker has defied u.s. sanctions and slowing global demands better-than-expected second order profit period our chief north asia correspondent stephen engle joins us now. the advances when it comes to their tech capabilities, was that a big part of how they managed to cruise -- cushion the impact? stephen: yes, they are facing a lot of headwinds enter come out with better-than-expected profits in the second quarter is definitely a good sign for fmi

see. but again, those headwinds are going to be weighing on them for quite some time because a couple of years ago, of course, the trump administration did slap these restrictions on smic as well, as well as other chinese chipmakers, basically the national security concerns citing fmi sees ties to the chinese military claimed that fmi see denied that. basically, fmi is saying the sanctions have the ability to develop more technologies, but among the big chipmakers is china. they are the biggest. they have claimed that they have progressed, at least a couple of generations and capabilities to seven nanometers, however, some industry insiders are saying -- essentially saying the company's designation of seven nanometers might not be based on the same criteria or the same standards of that tsmc, the largest in the world in taiwan.

so you take that claim with a little bit of grain of salt, but still, the numbers don't lie, 500 14.3 million u.s. dollars, that income was deep by 45 million u.s. dollars also revenue coming in at just under 2 billion u.s.. shery: how are u.s./china tensions really affecting the company? stephen: absolutely at every level. semiconductor manufacturing has become a chia political issue, and it's a collaborative business. you need ties with suppliers. one company cannot make every set of equipment or material that goes into chips, obviously. so, this blockade, if you will, by the u.s. company like fmi see , has prevented it from dealing with companies like nikon, as well as asml for some of the advanced equipment and materials that go into chips, so that has already the company on that front, but also, the bifurcation, as some would call it of the tech world between

china and the united states is also hurting its boardroom, another senior board director of fmi see has quit. we are getting confirmations through his linkedin page that tutor brown, who is this celebrated engineer in the technology space, he was the cofounder of armed holdings were armed limited before it was bought by softbank, and he's a pioneer, really, in many areas of semiconductor manufacturing. he was on the board but he says it's a bittersweet day today, nine years i resigned the international divide has further widened. he also cited the covid zero policies just became too hard to carry on having those board meetings in the middle of the night without seeing people in person. he hasn't been able to get back to china because of those strict covert restrictions. quick stephen engle in hong kong, our chief north asia correspondent there with the latest on smic. now, a chinese solar company also defined u.s. sanctions, the products expanding operations in

a region facing allegations of human rights abuses. the reporter joins us now for more on this story, and tan, you are saying the silicon industry has more than doubled its share price, what's going on with the company? >> it just shows the limitations that the u.s. government has when they are trying to curtail a sort of forced labor behavior outside of its own borders. this company produces silicone, which is probably silicone, which is the main product and solar panels. but, more than one year ago, the u.s. put trade sanctions on this company, it barred imports of its products, but since then, like you said, the share value has doubled, the family of the founder, their value has tripled, they are worth more than $12 billion now, and it just short of shows the limitations when you are dealing with this sort of international

world of one country putting extensions on another company. shery: it really speaks to the chinese companies dominance in this area, right? >> absolutely. china dominates the supply chain and a produces more than 90% of the worlds wafers that become solar cells and solar panels and , really what it says is that for the u.s. solar panel developers, it's more expensive for them to go out and find a new supplier than it is for chinese companies to go out and find a new buyer, especially with governments around the world trying to increase, accelerate their clean energy transitions to try to put a cap on climate change. >> coming up next, after years of delays, a merge may be closer than ever. this is the year of australia's largest digital asset exchange. we will be told why this could be a game changer. this is bloomberg. ♪

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haidi: over the last few months when it comes to ether versus bitcoin, showing we see the flashing of the blue signal, crossing above that signal for the first time since april. since that you know we have seen ether more than doubling in very much outpacing the games and bitcoin. this software update, how significant is it?

>> thank you for having me this morning to talk. this is a really pivotal moment for theory and. as we know, the second-largest cryptocurrency by market cap. tenets the currency platform by which the blockchain economy will be built. there is the analogy that it will tried to change the engine of the plane midflight. this is how all the agreement is connected between all the different holders of the miners of bitcoin and ethereum, and they are moving towards proof of state, which is a completely different mechanism, a totally different model for arriving at an agreement, which is also recognizing the foundation for an overhaul of the theory and more completely. if you do, on the booster, the founders of the theory tomorrow at work. he believes that about 40% completion. you change over from proof of

work to proof of stay and he anticipates that we are at 55% complete. so while, and it of itself, it's at 50% increase moving forward, still a lot of work to do, but what's really at the front of the piece of this is what they are trying to do with that move from the in defeating proof of work to the new proof of stake consensus mechanism. haidi: and it is audacious, and we talk about the benefits being transaction speed of the environmental impact as well, the last environmental impact could be a better way of putting it, but what are the vulnerabilities, because this is not a system that has been battle tested and what is still a very risky part of the market. >> i think that is a fair point. i think they would definitely recognize that it's away from the proof of work model and that

has the cap on blockchain economy more broadly, but is using proof of work. so this move away from proof of state, and tested in the battle sense, which is a big risk. i think it's breathtaking, and therefore it should be the ethereum where we need to address some of the security issues around proof of work moving into this proof or role in produces the chapter and certainly decentralizes the focus and control around ethereum, which is the increasing theory and reduced vulnerability. >> so that support of prices when it comes to ethereum and other crypto assets? how would that factor into the prices that we are seeing right now? >> i think it definitely plays a very -- i think what a points to is really about the maturity.

and we have speaking -- and we have spoken so much about this. this is the audacity of what we are trying to do. this is now going to become a flag bearer for the blockchain economy. this is why it's so thrilling to be in our sector, looking out what they are trying to do and see what it takes for the technological know-how to do what they are doing and see that it is thrilling. that's probably what's very exciting, i think that's what is engaging the crypto community. obviously we are still speaking within a broader macro picture and what's happening in the economy, we saw the numbers come out of the cpi number and all that data that will exceed the investor sentiment from the way we see it going. but this really pushes the economy forward and it's very exciting. >> tell us about those -- shery: tell us about those macroeconomic products. you see the 24,000 for bitcoin seems to be a resistance point we are not getting over in the asian session at least. caroline: i would agree with

that. the numbers had markets and industry data of these points. what we see is that there are buyers and sellers have gone away. we look at the ratio of the market and they are just not budging on this price point. so i think that they are holding it with the expectation that we are going to see a recovery in a return to the prices that we experience probably the latter half of 2021, so i think there is a lot of wait and see. and it probably mirrors a lot of what we saw in terms of liquidity and trading volume in traditional finance, but certainly reducing signs of the crypto economy and the smaller signs that you can really amplify that lack of liquidity and the impact that it on price. but the function is there and it goes to the conviction of those who are holding bitcoin and perhaps to the longer term. so let's see where we are in about 18 months time in terms of

that price point and in terms of where we are with liquidity m -- liquidity in the market and broader engagements. haidi: a successful merge, how much does it deepen the distinction between etherium particularly when it comes to fintech and the application? are you starting to see that being priced into the futures curve, or do you think that it's going to be reflected more in pricing? caroline: you have to keep in mind the purpose that these two assets serve different very much so. bitcoin is a stored value, it's a payments mechanism, so they are quite distinctive and quite different. but we are seeing with the ethereum and over the last bull market, we still had the application with the centralized finance with nfts. both of those jumped in their latency. when we get post-e merge as the other modifications that are due to come through on the ethereum

network that will get us in very clear, there's more to come once we get past the merge. with that plan ahead, we are going to see an increasing number of businesses and buildings on the ethereum platform. so i think we are going to see that and certainly it will the expectations given where they are now in their growth cycle. and i think we will see it increasingly getting priced and. shery: good to have you with us, ptc market ceo with the latest on the ethereum in the broader crypto assets. be sure to tune in to bloomberg radio to hear more from the days makers and get in-depth analysis -- analysis from the daybreak team broadcasting live. listen on bloomberg radio.com. plenty more ahead, stay with us. ♪

shery: global markets may be breathing a sigh of relief on easing inflationary pressures, but food prices continue to surge, logging the biggest jump since 1979. the company has been developing genetically modified drought resistant crops, recently winning approvals in china. we spoke with the ceo about the state of global food security. >> i think we have been working for many years to get technologies that can improve

connectivity of the major agricultural systems, particularly in crops like wheat and soil, and the way that our technology works is by improving yields in the face of adverse weather, particularly drought conditions. so we have shown to increase yields by 20% on average, which is quite significant if you think, in terms of productivity jumps. now, from one year to the next, we are only able to go it at a 1% rate to be able to do it's wednesday percent jump because of these incremental technology. i think it's a significant contribution to this issue. >> there's also hesitancy when it comes to genetically modified foods, right? we know that already we have those crops for animals, for feed, but you got approval for consumption of gm wheat in some countries. tell us about the progress you have made there, and also what it means for planting, not just consumption. >> it was a significant

challenge because of the same reasons that you indicated, it's the crop that we used to make bread, flour and things that we consume ourselves as humans, so we started working in gmo wheat almost two decades ago and it was challenging from a consumer perspective. i have to say that today's regain focus on food security has given us a tremendous opportunity to reignite that debate, and what you see is that when you are addressing consumers and talking about gmo's, one thing is to talk about gmo's of the past that were engineered for the use of synthetic chemicals. in a completely different aptitude is used when you talk about the gmo's of the future when you are engineering food so that you can better withstand adverse weather events or improve nutritional quality of the food itself. that has a possibility to move

this technology forward, which is approve consumption by humans in brazil, new zealand, australia and the united states. haidi: -- shery: you also got soy accepted in china. tell us about the challenges of adjusting to different regions because you are trying to do the same for northern u.s. and canada. >> soy is a much bigger crop india america from an economic viewpoint. it's one were gmo's have been accepted for the last 25 years or more, but it's always been challenging for companies to get the clearance in china, which is the number one customer, if you will, for beans produced, particularly in latin america. so being able to get that approval earlier this year was a significant milestone, one that enables us now to move forward with conversation in latin america, but also here in the united states. shery: crop solution ceo there.

on china be ready to curb some of the excess liquidities going around in the banking system as it goes to mitigating risks in the financial industries. it's get more from our asia stock managing editor. why do economists expect the pboc to withdraw cash through the mls? >> good morning. that's because, as we said, there just seems to be too much liquidity in the banking system right now, and the banks, instead of lending money out to corporations, they are actually using the cheap funding to add leverage to purchase chinese government bonds, and that is not certainly what the pboc wants to see, the whole idea of enriching banks investment books and instead of lending it out. i think investors overall come to a conclusion that the pboc has reached a point that the new

additional mandatory stimulus is not having this effect on the economy and market participants are calling for more creative measures such as using measures like coupons and consumption. in more measures to boost the infrastructure sector in the housing sector, so that's what people really want to see right now. shery: asia stock managing editor, as we look forward to the markets coverage at the start of trade in hong kong, shanghai and shenzhen. standby for bloomberg markets: china

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david: good morning from hong kong, it is 9: