>> good morning. welcome to dave brat australia. -- daybreak australia. >> good evening from the world headquarters in new york. the top stories this hour. there were selloff in two months.

treasury yield called hawkish. china seeing a deepening property prices. the central bank is urging banks to lend more. the saudi arabian energy minister warns of extreme volatility in the oil market and it may force opec-plus to cut output. u.s. futures up slightly to the upside early in the asian session. this after we saw the s&p 500 plunging today. we are talking about some consolidation after the best start to the third quarter since the 1930's or so. there seems to be a lot of pessimism, nervousness about what is going to happen at jackson hole. we have a lot of positioning ahead of what could be the hawkish fed for the symposium. we also have oil prices under pressure in the new york

session. this is all at we heard from the saudi oil minister. this is all about what we are seeing with supply so opec-plus could be forced to act. all eyes on what is happening in the european energy prices. look at this chart on the bloomberg. there was panic overnight when it came to the gas prices and power prices soaring. more politicians came out, really wanting people to brace for tough times ahead. we continue to see this pessimism over where the economy is headed and the dozen p.m. saying that potential europe could see 10 tough winters ahead. >> the euro hitting the lowest since 2002.

we are seeing a pretty risk obsession here. new zealand is online as well in the red. commodities could take a hit. technical indicators suggesting we could see a bit of a downturn. a lot of this is based on how hawkish the fed is at jackson hole later this week. that has driven a lot of investors back. let's change over and take a look at other risk assets. bitcoin has also been slumping over the past few sessions. down around nearly 10%. a lot of this is down to what is happening in the chinese economy. a lot of those here. you can see what we saw in the previous session is moving at the north american market. that is this ongoing issue with

the chinese economy. the slow down to the property sector. dps tracking chinese property stocks. a lot of moves really stabilizing that industry. >> the property sector is one of the reasons why we saw loan demand so week in china. we are hearing from the pboc, really revert is one of the pages of the table, calling on state owned lenders to stabilize the country by lending more, issuing more loans to the real economy. they said that in a statement, they were improving credit support for exercises, green development and innovation as well. we are consolidating economic recovery. the problem here is the confidence hit to the economy.

all of this as to the fact that we are just not seeing that demand. you could ask lenders to issue more loans and lend more. >> all of this uncertainty, dementia what is happening in china. leaving investors to see what is happening after the fed heights -- rate hikes are done. and also, the fed having to ease. the market is wrong to expect a central bank to expect a long-term when. we are seeing a stock tip in the world economy that even as inflation retreats from peak, we still have issues with supply chain disruptions. imagine things happening in china right now.

the war in ukraine continuing. maybe the fed will carry out that dovish pivot. let's bring in our guests. let me start with what we are seeing in the markets. there seems to be a lot of positioning right now to what is going to happen at jackson hole than what we can expect. >> we have seen this rally start to cool off. the market has shifted from earnings being better than expected to looking ahead to this jackson hole meeting and traders are positioned for a more hawkish fed. bloomberg news had more out today about the hedge fund space. the question now is as that

expectation for pal to come out and say they are going to raise interest rates, has that already been priced into the equity market or are the next few days going to see some volatility down ahead? >> with his most recent rally, we saw the meme money chasing moments. is that seeing a reversal? >> to no one's surprise as the benchmark equity indices have come off, the speculative areas of the market have come down. i'm looking at bed, bath & beyond after that. an incredible rally that the company had. it was not just bed, bath & beyond, it was stock. we are definitely seeing those

sensitive areas of the market start to come off. the traders have been shorting those funds and making a lot of money. there is the goldman sachs basket shorting the market. when shorted stocks fall, short-sellers make money. >> we have seen the bond space surpassing that 3% level but we have what is happening in china with the economic uncertainties as well. how is this all playing into the treasury space? >> the treasuries are very focused on jackson hole and jay powell and other central banks. that they really push back against this market is visioning for of the session and central banks will hike a lot and then cut a lot.

as much as they did in the 80's. with that going on, there is not much liquidity. it is very interesting how they can see a few choppy trades in a range of assets and equities as well. there is a feeling that nobody wants to go along into jackson hole. that is the short-term set up. in some ways, powell's task increments in the market that conditions should be tighter -- the moment, the market is making conditions not that tight. >> we are seeing further efforts by policymakers in china. the question is the effectiveness when it comes to encouraging more lending. >> there are two sides to this. the special loans we first learned about on friday and then got a bit more meat on the bone

yesterday with the pboc statement saying they want a policy bank and all banks to lend more to the real economy. but these special loans could be upwards of 29.3 billion u.s. dollars. that is a much-needed boost for these developers who have projects who have not been able to raise the necessary cash to finish the project. that is why you have the morgan boycott in some 90 cities. in china, the government wants to stem that unrest. they also wanted to get the property sector moving again and contribute to about 30% -- upwards of 30% of national gdp. that is one thing, to stem the flight. it does not necessarily stimulate new demand for mortgages. we look at the loan cuts from yesterday. analysts are essentially saying they would like to see those short-term borrowers stabilized.

the five long-term rate will cut potentially mortgage rates down to an average mortgage rate of about 4.3% because essentially there is a floor on mortgage rates in china. larry who essentially says that could be an unprecedented cut for the average mortgage rate but again, it goes back to your question. will will that stimulate demand in an extremely slow economy? >> we have a voc action. potential in action from the bank of indonesia later today. what will be driving in the asian trading session? >> i think it is going to be you caught between these two conflicting and converging forces.

between what is going on with china and what is going on with the u.s.. we have authorities struggling to convince anyone they can avoid a long-term slowdown. we have the fed willing to risk a recession in the u.s.. that is the longer term concern. both of those factors are pushing the world's largest economies toward a severe, coordinate slow down. that also makes it a very rough outlook for asian equities in particular but also the global equities. let's get you over to vonnie quinn in new york with the first word headlines.

>> opec and its allies may be forced to cut output of the futures market as it becomes increasingly disconnected fundamentals. it is disturbing the basic contents of the market. the group meets to consider other targets. the u.s. state department says the program is closer than ever to be revived. the by demonstration will provide a formal response to the european union. the u.s. says it is encouraged that tehran seems to have dropped demand including listing designations of the revolutionary guard of the terrorist organization. israel's central bank has oppressed most economists by delivering the biggest rate hike in over two decades. the central bank has increased rates in four straight meetings, marking the longest hike since 2008. officials have been racing to

get ahead of inflation amidst this accelerated economic upswing. dr. anthony fauci will step down at the end of the year. he has monday national institute of allergy and infectious diseases since 1994. -- 1984. he has guided the organization through the hiv and ebola crises. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. click still ahead, the jackson hole symposium and we have someone who was there at the very first content -- conference. markets are nervous about

everything. this is bloomberg.

>> a look at u.s. futures right

now. seeing a little bit of upside. most indices right there, this after u.s. stocks saw the worst thing in about two months. we are talking about the likes of apple, microsoft, each losing more than $80 billion in market cap over the past two days. the meme stock frenzy unraveling speculative corners of the market. this as we continue to see u.s. dollar strength move toward the bloomberg dollar index at a one month high. let's bring in our next guest who says the markets are nervous about everything as we look ahead to jackson hole and things continue to roll in. good to have you with us. we are at the tail end of earnings season. we really heard a lot about those retailers that chart on the bloomberg showing how confident consumer confidence is. whether it is expectations, the

university of michigan numbers that have dropped off in the past few months. >> if we are only talking about this week, the answer is probably no. what we are hearing is we are hearing about their tale of well and that they ordered the wrong stuff, the order to mussed stuff in the last quarter. the quarter ended for most of these retailers june 30. they are trying to clear themselves of this unwanted stuff and we are not getting a really great snapshot of what happens during back to school at this moment which we usually do at this time. i think investors are focusing on what the fed is going to do.

they are driving our economy. i think we will get some kind of indication on how the fed is thinking about things if not what exactly they're going to do on friday. >> do you expect central bankers to be as hawkish as they have been signaling in the past few days with all of these fed officials coming out? especially given that we have been talking about the retail sales numbers from july? when you exclude gas and auto, still pretty resilient. >> they are that fine line. right now, they have the cover of a pretty good job's number and unemployment isn't terrible. it is not rising. last thursday, it fell. the average four-week unemployment number is not going up dramatically. we are going to get between now and the real meeting which is at the end of september, we are

going to get another job's number. i think that is a big input for the fed. to really understand what the economy is doing. i think they're probably going to back off just a little bit from what they actually want to do which is not a 75 basis point increase but they will still increase. not enough to really make the people who are nervous more nervous right now. >> can you talk about these companies being good growth drivers? what companies can actually whether that uncertainty depending on what we get out of monetary policy and where the economy heads? >> sure. i am looking at some pretty big picture companies. one is ups. we really like ups. the new ceo is an outsider. she is relatively new. she is an outsider that did not grow up in the company. so she does not have the -- that

kind of mentality. she has been firing clients that are not profitable. i love that. let them go somewhere else to ship the goods if they can make money. that is what they are supposed to do, return shareholder value. coca-cola is thinking out of the box. they are adding alcoholic beverages to their lineup which i don't think will be a huge hit, i don't think it will be a huge purveyor of that. thinking out of the box, asking what our customers want and they are giving it to them. >> i'm glad you mentioned technology. do you see any kind of tech leadership returning? >> i do. it is the thing that drives productivity. i keep going back to that. i don't really care about that special case.

netflix and facebook and things of that ilk. i understand they will be an advertising vehicle. what i really care about is technology that is productivity. i think secretaries are forced for productivity. that should drive revenue. >> you can get around above the stories to get your day going on daybreak. you can find that there. you just get all the news on the industries and assets that matter to you. this is bloomberg. ♪

>> a quick check of the latest business flash headlines. elon musk has subpoenaed his

longtime friend, jack dorsey in the legal battle with the social media giant. he is seeking to collect documents to show that twitter understated how much of its customer base is made up of spam and robot accounts. tons of people have been subpoenaed by both sides and the expedited trial will be in october. zoo projected sales and trade that fell short of estimates. they see annual sales growing at $4.4 billion. down from this may projection of as much as 4.5 5 billion. offices have reopened and competition intensifies for microsoft teams. citigroup is shaking up all of this after leaving more than two decades at the firm.

they will pursue opportunities outside the company. she will take over as chief of the currency division. the company surprised investors with a profit lowering in july. let's take a look at how u.s. features are tracking down after we saw that fall ahead of the keenly awaited comments from jay powell at jackson hole. take a look at where u.s. futures are sitting at the moment after the equity session so that worst fall in about two months. there is more hawkish rhetoric

from fed speakers later on. dow futures are up by about .1%. we are seeing aussie futures for the equity session looking a little bit weaker as well. more to come here on daybreak australia. 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! find rewards like these and so many more in the xfinity app.

>> you are watching daybreak australia. chinese authorities are taking steps to shore up the property sector. the pboc and the finance minister are offering $29 billion in special loans to travel developers -- they are calling on major financial institutions to increase loan issuance for the economy. japanese lawmakers in the usa

the government making overlapping trips to taiwan despite possible backlash from beijing. indiana's governor has also visited to the south economic partnership. taiwan's export orders uninspected they fell in july. the median estimate was for 6.2% increase. all of this with the exception of electronic products that include semiconductors. the pakistan central bank has kept its benchmark target rate at 15%. authorities also expect imports to do -- to decline. they are grappling with one of

asia's fastest inflation rates. they will raise rates by 525 basis point this year. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn, this is bloomberg. >> hedge funds are unleashing record bets that the fed will stick to its hawkish script. we are seeing this rapid positioning for higher rates. >> that is right. this is a key corner of the derivative market. it is interesting what we have seen over the past few weeks. if you bring up this chart, you can see what we just talked about. you're seeing it in the treasurers market as well. a few details going on but what we are seeing here is a sizable net division in futures referencing the overnight financing.

this is the wager that will really benefit here if we see the fed ruling out a dovish position at jackson hole. all of this in terms of the size and scope of that, we are talking about $17 million of cash risk on the table per basis point move. the pace at which had funds -- hedge funds had built up -- this is on expectations of a hawkish fed. this is playing into treasury markets as well. particularly in the shorter and. we have seen a bit of a move here. capital market saying it is not so much a surprise that we are expecting a hawkish fed but the magnitude of the rise is what is catching there i. >> what are we hearing about the move from the deli given that it is sitting at a 20 year high? question that is right. it is quiet interesting what they are saying here. they are saying this u.s. dollar

strength is really being driven by these expectations of a hawkish fed later this week. what they are saying is there is so much expectation and so much defensive play in the market, there really could be difficulty for the fed to meet these expectations. we could end up seeing the dollar strength looking a little bit overdone. >> big market moves ahead of jackson hole. we are going to get more clues from policymakers on where rates are headed and of course, one type of targeting monetary policy that has been used is the taylor rule. according to this rule, the fed funds rate should already be at that 10% level. but of course, i over simple fire. let's bring you the author of the taylor rule. kathleen hays is standing by with our special guest.

it our guest was at the very first jackson hole symposium. >> john taylor, a professor of economics at stanford university. so many more accolades you can put with your name. but let's go back 40 years ago. let's go back to 1982. inflation was crushed finally. there were two recessions. what was the mood? what was the conversation as all of you looked at what had happened, try to figure out what had happened, were you happy you have gotten through it? are you worried it would happen again? >> we rumored how difficult it was to get through it. we had inflation raging through

the 70's. it was not an easy time to get rid of it. he did not wanted to come back again. what an amazing conference, what an amazing place. but i emphasize is don't get off-track when it comes to business. i think it was the right thing to say. >> controversial to stay on track. to maintain tight policy, it seems at that point, people had learned that lesson, inflation was enemy number one. we had to do everything to avoid getting it out of control. let's fast-forward. you have the inflation almost as high as it was back then. what has happened? what went wrong? >> at they we got off again. the rates were quit low. by that measure, we have inflation, seven or 8%, but if you want to measure. and the interest rates doubled a little bit.

i don't think it is a draconian move. i think it is the kind of thing we have seen in the past. i think we should be optimistic it can cure the problem more easy than in the past. >> the fed hike rates at about 250 basis points so far but inflation is so far above that funds rate. they are talking about causing this for the first half of last year. didn't have any monetary policy -- any monetary policy tightening done yet? there is some discussion about that, they will indicate they are on the way. i think what is most important now, that we learn from history on this, learn from experience

and whether that can communicate this. they need to do this by a monetary policy that reduces inflation. that communication, that stipulated with the policy will be like. it is very important right now. >> when it comes to where we are at and the markets, we are seeing extreme bullishness. not so much today but we are seeing the rally just continue to build. over the years for you, what will have financial conditions played? in order to bring down this bullishness that we are seeing. >> they have to pay attention to the markets, obviously. they have an impact on the markets and vice versa. this is what needs to be done.

i think what the markets don't like is uncertainty about what is going to happen. there is more uncertainty today. that is why the markets went down. the more that the fed can communicate where it needs to go, that is why these rules are advantageous. it means we have to move a little bit further. hopefully that will cure the problem more rapidly than people expect. >> you flagged the scenario, early deceleration, risking the issue around credibility and then the risk of inflation causing a recession. i don't think it needs to be part of the cure. if we let inflation build up over time like in the 70's, it is seven years of higher and

higher inflation. if we nip it in the bud, things don't have to have these negative effects that people worried about. they like to worry about it but it can be a stipulation. this is good monetary policy. this will make the economy healthier. the economy has not run that will recently. this is better for jobs, this is better for the economy. >> i have questions from one of your fans, one of our viewers out there who is concerned. how can jay powell avoid becoming the second coming of arthur burns? we had a devilish fed tilt for a long time. do we risk a late 1970's moment where we declare victory on inflation and then inflation soars back again about six months later? >> arthur burns said it is not

monetary policy, it is something else. it was a mess. each of the emphasis of what really needs to be done. that is why they eventually made the adjustment. it was hard because of so many years. we don't want that to happen. we want to be a more stimulative, communicative indications of what the objective of the fed's. that is what is unlike arthur burns. i think jay powell has said -- i think commute getting about what used to be done is very important. >> jay powell mentioned at the last conference that the fed was neutral. i thought he must have meant long-term neutral. where do you see neutral? particularly in the near term or the medium-term. when you have a fund rates so far below, how can we call that

neutral? >> sometimes it is interest rates of 1% or 3% and that sounds neutral but need to go above neutral. we need to get these inflation rates down to the 2% number. eventually i think it has to go higher. it is not neutral in the sense that it is neutral on all sides. >> so if you are sitting around the table, would you be saying 4% is not going to be high enough? are you looking at something like 4%, 5%? a stunning crash in inflation, that is something people are not expecting. >> we want to take actions to bring it down. those actions will require someone higher risks.

but that is the reason for our strategy. it will be higher but it depends on inflation. i think the contingency plan is what should be emphasized. the fed publishes these rules in his reports. it is easy to look it up and see what they are doing. sometimes they are in, sometimes they are out but they are in right now. >> i think i missed what you said. i think 5% is where we should aim. >> that is not high by historical standards, that is for sure. but it could be higher. i would not say it absolutely did. if inflation doesn't come down, i think inflation will come down. let's get there first. >> we will. that is what everybody is hoping for. thank you so much. the professor of economics at stanford university, john

taylor. i think we have a lot of good ideas ahead of jackson hole. >> that crucial how speech will be coming through. we also have some pretty big interviews. stay with us for our conversations. the bank of korea boss will be joining us as well. >> the saudi arabian energy minister says opec-plus may be forced to cut production as future markets become increasingly disconnected from the fundamentals. we have more on that next. this is bloomberg. ♪

>> let's take a look at the commodity space. we are seeing a little bit of a rebound when it comes to wti. the asian session is just about the $90 per barrel level. we did not hear from the saudi oil minister warning about the disconnect between the futures market and supply from the mental analysts saying this is the saudi's looking to do whatever it takes to keep prices supportive. we are talking about the potential return of the iranian supply given that negotiations are ongoing. look at gas futures.

we are talking about that for senior high given how european prices also soared on concerns about supplies but for more on those comments from the saudi oil minister and oil markets, let's bring in su keenan. we have the markets hanging onto everything that opec-plus has to say right now. what were the indications coming from the minister? >> the comments made an already volatile market even more so. extreme volatility and the lack of liquidity right now in the market is causing the futures market to move in ways that are disconnected from the supply demand of fundamentals. they see the futures market increasingly disconnected from fundamentals and sherry mentioned opec-plus might be forced to cut production. you're looking at the u.s. benchmark. that is brent crude.

this is a benchmark for the rest of the world. as for volatility, they had a price of about $13 in august alone and sherry mentioned it will come back just a little bit in asian trading. the trade near 96. the real story is that the first five months of the year, we saw oil prices surge. this is all exacerbated by the drop in trading volume by concerns about inflation, rate hikes, all of this detracting from the price. that has exacerbated the move even further.

>> we are seeing gas futures moving in the opposite direction. it is unconcerned that supplies can be cut. we are seeing european countries very dependent on russia. you are looking at the dutch natural gas futures, european futures in general surging about 20%. that was the real concern there. look at natural gas really quickly when you get a chance. you will see the u.s. natural gas also drops off in a big way, hitting fresh for senior high's, natural gas in the u.s. is up 150% year to date. that is because of a drop in supply and demand. and this latest surge is taking off on that european price move.

if we drop back into the bloomberg, russia's gas prep which explains the surge you are seeing in those european prices, much of europe, particularly germany remains dependent on russia for its natural gas supply. any cutback at this point escalates the energy crisis. >> plenty more ahead on daybreak, this is bloomberg. ♪

>> zoom's low early trade after projecting sales short of wall street estimates. let's get more from john butler. the lowest quarter we have seen in the company history. what are the indications for the growth prospects of this company going forward? >> i think they are pretty good. i was listening very hard and looking very hard at the numbers reported this quarter. there are definitely some green shoes. they had a huge pull forward and demand during the pandemic. this led to overly the ballooning of revenue in the online segment for the consumer segment as i like to refer to it. now, pivoting back to their roots and enterprises.

that is actually going fairly well but it is a transition year that we are in this year. as disappointing as the results were this quarter from a growth standpoint, i think some of the vital signs for a return to vendor momentum next year where there in the quarter this year. request that transition as offices start to reopen what what does this mean for competition? >> there is different competition from microsoft teams. particularly as they make that move into enterprise. one thing that microsoft can do and is doing is they are including teams in some of their larger microsoft office 360 sales. that is a headwind that zoom has to contend with. the one thing i would say is definitely in their favor is during the pandemic, everybody

stayed connected using zoom. so the decision-makers are aware of this and probably used it themselves during the pandemic. zoom is very user-friendly. there is an element of friction there that they can lean on. in some of these sales. >> what is the distinction between enterprise and consumer at the moment? is there anything you can do to target that growth? >> zoom definitely has the salesforce focused on expanding an enterprise which was about 54% this past quarter. that is up from 52% last quarter. they are making headway but it will take time. in the consumer segment, the resistance they had was

converting freemium accounts to paid account. so they are really having a hard time generating new users but they are doing a good job of limiting term of existing customers. they were not specific about what they are doing their but it is definitely an area of focus for them in terms of coming up with initiatives that are overcoming friction there and converting premium to paid account in the consumer segment. because that was john butler there. let's get a quick check of the latest business flash headlines. pfizer has asked the u.s. to authorize a covid booster shot against the new covid variant. the company says it will be able to ship upon the emergency optimization. they are canceling about 13% of

their shortage and extended capacity code. coming up in the next hour. why wells fargo does not see if it -- inflation falling as fast as the economy and how investors should readjust their portfolios in the material space. daybreak asia is next. this is bloomberg. ♪

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>> your "bloomberg daybreak: asia," that's coming to you live from new york, city, hong kong we are counting down to the market open. a downbeat mood ahead, opening up