star yeah i'm haidi stroud-watts

in sydney. >> i'm annabelle droulers in hong kong. >> i am kathleen hays. conscious sentiment as traders recalibrate rate hike expectations. all major u.s. indices had their worst months since june. >> the cleveland fed president makes it clear she does not expect the central bank to cut rates next year. she says they need to be above 4%. >> australia holds a economic summit in canberra. now, august is ending with a whimper rather than a bang. the likelihood of a fed visit -- pivot is embraced after the jackson hole speech. jack josh -- jay powell gave a very hawkish message. look at the futures. a little rebound here. not surprising. it was not such a big move, just

the totality of all major indices having the worst month since june. the s&p down more than 4% in august. every major asset class fell in august. new york crude is now down about $.71. $88.84. for the month we had a drop of more than 9% in august. that was the biggest monthly drop since 2020, the start of the pandemic. people are worried about rate hikes. they are worried about slowdown in china. the 10 year. it looks like it is actually a little higher in yields and lower in price. look at the 2-year note. it was around this level yesterday. this is quite a month. the u.s. to year yield now at the highest level since november 2007. so, that's a big dramatic move in august. you have to wonder, if the

markets are already acting like this, have they priced enough fed hawkish and is in or is there more to come? this is a big question over asian markets. >> kathleen, is august is the guide, where are we looking for september? look at asia. we have sydney futures -- sydney futures like this. new zealand on line. keep an eye on the dollar against her g10 peers. jobs data from the u.s., adp numbers came through this morning. nearing the 140 level. there are other big data events in asia this thursday. south korea, gdp, and experts data do in the next hour. what is interesting there, we had industrial production data yesterday that missed what economists were expecting. ing points out that that weakness does not stack up well when the be ok is committing to more rate hikes year end.

pmi survey from china. we had unofficial reading yesterday. slightly better than economists had been expecting. broadly, it is a tale of two different regions in asia when it comes to how we are performing with the slowdown in china. north asian countries are in are faring well. southeast asia is doing a little better. still, we will get an update today, kathleen. >> annabelle and heidi, if the markets have not heard it enough, if jay powell did not make it perfectly clear rates would go up, possibly, higher than markets7 have been anticipating and there will be no bank cuts the cleveland fed president made it clear again. let's listen. >> my current few is it will be necessary to move the fed funds rate up to somewhere above 4% early next year and hold it there. i do not anticipate the fed

cutting the fed funds rate target next year. >> high yields, remember when we spoke to esther george, president of the kansas city fed at their symposium last week, she made it clear that she thought above 4%, 4.5%, possibly, even higher. it depends on inflation how it works. but, it is on the table now. i think it is interesting to wonder what the markets will do after this. >> yes, you have to wonder if there is more repricing of expectations to come. the other thing is you are getting increasingly analyst saying investors are too preoccupied with the fed outlook. mike wilson, the chief u.s. equity strategist of morgan stanley is saying investors need to press for more pain. he says the u.s. index stock index, particularly, the s&p 500 has not hit bottom yet this year. he is talking up out not -- about not because the fed will be hawkish but because the equity market is too optimistic

about the earnings outlook. he says earnings get cut -- if earnings get cut we will see the market bottom. they say that is probably between september and december. >> let's get more on today's top stories with bloomberg reporter emily raqqa and cross asset asia editor. emily, in terms of market moves today, what are you hearing from people? >> we have had the s&p 500 falling for four state days -- straight days. it is a pivot a lot of stock pools were holding onto over the summer that is starting to wane. the market narrative has shifted from will we are wont we get a soft landing to how tough is the growth slowdown going to be. .

yesterday, and s&p the shorts the s&p 500 had one of its biggest inflows since april 2020. >> what do we make of the fed reaction to the inflation battle as well as the latest jobs related market numbers? >> tightening financial conditions are definitely weighing on the bond market. we saw yields rise. the 10 year yield is now close to 3.2%. the hawkish rhetoric is there. the fed funds rate could go about 4%. it will stay there. what bonds, equities, and markets are looking at is we

will have this prolonged time of tightening conditions. and now we are looking at this paradox of growth recession. this is bad for equity. also, bad for bonds and financial conditions being tightened. the signal from the bond market. it's not positive now. we did see the treasury market having its worse months since april -- worst month since april. >> across assets for august, the broadest cross asset drop since 1981. emily, where do we go from here? talking about morgan stanley. the call that we will not see a bottom for u.s. equities, the s&p in particular until september or december? >> exactly.

that cross asset risk is really in play here for the month of august. stocks fell 4%. bonds and commodities also felt. it is trading in coronation, barclays notice. it is a key risk investing in -- investors are looking at coming the cross asset correlation between stocks, bonds, commodities at one of the highest levels in 17 years. as we look to september, that has historically been a tough month for stocks. now with correlations of this high traders are saying it could may be also be difficult for bonds and commodity then for any investor trying to use diversification for protection. they have a difficult road ahead. >> the last couple days, the asia trading week. we were watching equities closely. when you look at the move in the two-year the past several days, yesterday down around 3.2, 3.4. now it is 3.9.

a big move at the short end. it does that reverberate to asia as well? >> definitely, that steepening of the yield curve is something that will weigh on asian markets. certainly at the moment the futures are forecasting lower and we will likely see a lower open. yes it's interesting in asia. we do start lower and things tend to shift through the day. look, we have marks coming out of china today, the slowdown in the economy there, the various measures that the government is taking. those things are also something investors are looking at. it will likely impact asian markets. the steepening of the yield curve is definitely something that is not positive for equities in asia. >> bloomberg reporter emily

graffeo and cross to -- cross asset editor andreea papuc. >> a heightened outlook for global oil markets this year and next. they slashed forecast for this year's supply surplus in half to 400,000 barrels per day. next year, 300,000 barrels per day. the former was 900,000 barrels. australian home prices paid their largest monthly default in august. the country's largest market slimmed 3.2%. the national index includes regional markets and dropped 1.6%. this is the biggest since 1983. rising interest rates are expected to drive further fault this year and next. the u.s. justice department says white house records at donald trump's florida home may have

concealed big moves before a june fbi search. bloomberg forces say federal prosecutors are likely to wait until after the november midterm election to announce any charges against donald trump. taiwan is warning it faces severe challenges from surging chinese military activity. an annual armed forces report says taipei expects the people's liberation army to test more missiles and send more warplanes to create havoc. chinese aircraft have reached the median line almost daily since nancy pelosi's visit in august. global news 24 hours a day on air and bloomberg quick take. i am vonnie quinn. this is bloomberg. >> ahead, a hotel group hopes to grow fourfold in three years by increasing presence in the asian-pacific. their chief development officer joins us later to discuss those

plans. we will discuss market moves with optimal capital who thinks investors have not fully priced in quantitative tightening from the fed. this is bloomberg.

>> you are watching daybreak australia. i'm annabelle droulers. the fed is on pace to double quantitative tightening starting this week. the balance sheet will be shrinking by $95 billion per month, $60 billion in treasuries plus $35 billion of mortgage-backed securities. in order to shrink the treasury holding by $60 billion per month, september will be the first month the fed will need to sell additional non-mature treasury bills. in september it will need to sell $16 billion worth. that is the white bar you can see here. moving forward the amount of sales will vary month to month. money markets funds might take some of the two point $2 trillion of cash parked in the fed reserve repo facility.

we could see usage of this facility falling off gradually from record levels. kathleen, that's something to be keeping a close watch on. >> a feeling perhaps reverberating through the economy. our next guest says the market has not fully priced in qt quantitative tightening. even though this plan has been on the books for several months now. with us is frances stacy director of strategy at optimal capital. people i have been talking to the past several months say the big thing is you will double the runoff, right? from 50 billion to 100 billion. that in of itself will potentially affect liquidity at markets pretty directly pretty immediately. >> definitely. what is very interesting is the

nasdaq is 26% down from its peak. we already have that selloff in place. they have not been tightening at the rate they said they would tighten. about 17 billion a month over the last 11 weeks, almost four months. down about 52 billion on the balance sheets. if we jump that up to 95 billion from 17 billion per month, it's actually kind of acceleration in tightening. just from a mechanical perspective for viewers when you raise rates, basically, you are slowing the pace by this incentivizing lending at which new money comes into the system. when you are quantitative tightening you are yanking that out of the system and it reduces the critically -- liquidity mechanically a lot faster. >> what about businesses? what about borrowers? that has been pounded into my head.

that the actual cost of capital will potentially change the turn you are expecting. how will we see that not just through the bond market, but through the economy, even equities eventually? >> certainly it will disincentivize lending and for any businesses that have debt on their balance sheets where they have to raise money in that way, their debt service, depending on what their bonds look like, their debt service costs will go up further on the margins. in addition to the fact we are anticipating tax-cut advances. so wages are not still high because the labor market lagging indicator is still tight. i think we will see a pretty precipitous decline in some earnings and expectations. >> breaking news now. about the california government declaring a grid emergency. they are raising the specter of a blackout.

anybody in california knows that this water shortage, the drought, this is just the latest part of what is going on. can you give us a quick comment? >> a quick comment is i think that we set ourselves up for the risks and unfortunately fossil fuels will be with us for some time to come because of things like this. >> doesn't does conversely mean there is more opportunity and more need to quickly accelerate the transition? do you see opportunities in the transition process that investors should be looking at? >> while i think the fact that we are trying to accelerate is beneficial. but i do not think that yet the new energy sources can completely replicate old energy sources. i think that's why you're having great problems. but anytime we have challenges

geopolitically are great is at risk. i think a slower transition in the interim while we have geopolitical risk and potential recession is probably ok. i still think fossil fuels will need to be with us for the backup for the next probably decade unfortunately. >> when it comes to the rest of the year we had at morgan stanley saying we are yet to see u.s. stocks seeing a bottom. their criticism is we are spending too much time fixating on what the fed says or does. what about earnings? is that worse then we might expect after what has been a reasonable season? >> you know, as the fed strategy demands and as the labor market, which is their intention, gets loser, that will continue to weigh on consumers. consumer sentiment, of course we have quite a split in the country. 40% of americans have assets. they are down 15% to 20% this year.

21% of americans are living paycheck-to-paycheck. they are subject to variable interest rates on credit cards and things like that. that bottom part of the consumerism will probably drop out and weigh on earnings. there is no way to destroy demand without unintended consequences. back to the qt conversation. over the last four months we have seen quantitative tightening. the markets are down. the s&p is down 14.1% over that time. . if we go from tightening 62 billion to 380 billion, where will -- where we will be after the next four months iteration, you will see that that will weigh on liquidity and that will weigh on markets. there is a huge correlation to previous peaks of markets right alongside stopping asset purchases. that's hard to ignore. while they say we may not want to pay attention to the fed, unfortunately is important.

>> when you talk about the fed and the greenback as well, what assumptions are you making about dollar strength or weakness going forward? >> tightening begets a stronger dollar. when you consider weakness in the u.s. relative to europe or other places, the daughter gets even stronger. the problem is the fed will not give it because they want to. regardless of what they are saying and all of this hawkish tough talk, if there are the quiddity shortages in the system , every time we raise rates by 75 basis points and accelerate the balance sheet, we are doing this at a record pace. anytime you are doing it at a record pace it is hard when the system starts to recalibrate to catch the threshold for liquidity issues. >> great to have you with us. director of strategy at optimal

capital. get a roundup of this story to get your day going. today's edition of daybreak, even find that at dayb . customize the settings so you get the news on the industries and assets of the matter to you. this is berg.

>> a quick check on the latest business flash headlines. jensen set a soft target to divest more than $14 billion of an equity portfolio this year. the food delivery giant is among assets in line for the assessment and an estate sale could ease pressure from antimonopoly regulators. earlier this month's tencent denied reports it was planning to sell all of its may schwan stake worth $24 billion. alibaba is among the first group of company selected by u.s. regulators for audit inspection after last week u.s. inspectors

were granted access to the paperwork of chinese companies. baidu, young china, and jd.com have been selected. >> a look ahead at australia and new zealand. and canberra today executives, union officials, and experts will try to form a consensus on tackling high inflation, falling wages, and labor shortages. the australian is reporting the origin energy closure of its plant as well as growing threats of blackouts. next, federal prosecutors will likely wait until after the november election to announce any charges against former u.s. president donald trump. we will have more on that next. this is bloomberg.

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>> you are watching daybreak australia. i'm vonnie quinn with first word headlines. u.s. companies added the fewest jobs in august since early 2021. adp says business payrolls rose

one third 2000 -- 132,000. the jobs report due friday will show private payrolls rising by 300,000. said rose the cleveland fed president says the federal bank will need to raise its benchmark rate above 4% by early next year and she does not expect them lower through 2023. she expects inflation to drop to a range of 5% or 6% this year. >> the 5% increase is at any particular fomc meeting ended the key fed funds rate will depend on the inflation outlook that depends on the assessment of how rapidly demand and supply is coming back into balance and supply pressures are being reduced. >> india's economy grew 13.5% in the second quarter. still, it missed economists forecast for expansion.

particularly, in the vast services sector helped buy loser mobility restrictions. u.s. regulators approved covid boosters from a moderna and pfizer and biontech. concern is growing about potential new waves of illness in the coming months. covid vaccines until now have targeted the original covid strains even as different mutations emerge. global news 24 hours a day on air and bloomberg quick take. i am vonnie quinn. this is bloomberg. >> the u.s. justice department says white house records held in a storage room in donald trump's florida home may have been unsealed or removed before a june spi search. -- june spi search. courtney, they say they don't know yet.

if they were, what sort of crime did the president committed? what does it say about treatment of classified information? >> what we know is that the justice department through a court filing last night put forward images of some of the documents. i'm not talking about images where you could read what was on the document itself. that was blocked out. but, to give a sage of the type -- sins of the type of confidential information that the former president was keeping at martha -- mar-a-lago that could have been unauthorized. it is unclear yet exactly what the contents of those documents are and what charges the president could face. we now know more of the scope of what he was keeping there. >> the completely unprecedented nature of this is creating a lot of scrutiny for the justice department. we are hearing they are likely to wait until after the election

to announce potential charges. >> that's correct. the justice department has a policy of not putting forward any charges ahead of an election. our election in the u.s. is november 8. we are looking at 60 days before that election, mid-september. my colleagues in washington today got from their sources that the justice department is not intending to put forward any charges before mid-september when they hit the 60 day point. once we hit 60 days, until election day they are not intending to put forward charges either. what we are hearing is we should not expect charges before the midterm election in the u.s., if there are going to be any charges. >> courtney, i saw a new pool. 50% of americans support the prosecution of the former president over the documents. what is the popular appetite for where they go from here and the political appetite? it has been trying to keep

itself very separate. the president has been trying to keep itself -- himself very separate from the investigation to make it appear as neutral as possible, and that the justice department is independent from him. that is intentional to create a sense among voters that the justice department is doing this on their own. the political appetite going into the election, we are hearing from republicans today that these documents, they may not be an issue. the president may be declassified them before he left office. there is a lot of information out there that may or may not be correct. so the white house and the president is trying to keep very separate from this. to affect how voters see it as well. > in australia the new labour government is facing for labor challenges. the economic summit kicks off today. ben wescott joins us from canada

-- canberra. this comes at a time of future challenges when it comes to the property sector, pressure on households, rising rates, higher prices. what are key priorities going into the summit? >> this comes down to three big things. there is a skills shortage in australia. there is a jobs of dutch overload. it's resulting in slow wage growth and that is a problem because of rapidly rising inflation and cost of living pushing down real wages in the country. the albanese government brought together a wide right of people from business sectors, from unions, and major political figures including state leaders to look at how we can raise productivity, raise wages, and somehow solve the skill shortage. >> a couple things might be contentious. immigration reforms to boost

productivity. what's expected there? >> already this morning we heard at the business council of australia and the australian council of trade unions agreed to raise the number of migration camps to -- caps to 200,000 from 160,000. that is already announced and what we are expecting out of this. usually, immigration would be far more sensitive. because of the current skills shortage, there are not many more alternatives. it is looking like the biggest and most contentious issue is the push by unions for a return to bargaining agreements, these multi-company sector write agreement on wages. between unions and the companies themselves or the sector. this is something that business is very wary of. they say they don't want strikes across the country return.

nationwide strikes in certain industries. they are pushing back against this. however, the unions had one big win. they had at the council of small-business owners on board with this. they say they want to see these price targeting agreements to push a productivity and rates wage growth in their sectors. >> what about gender. reducing the wage gap as well, reduce -- increasing women's participation meaningfully. childcare has been such a big issue going into the summit. is this something the government will be able to address? >> the government has major plans to subsidize childcare from july 2023. it is already facing a big push not just from unions, not just from gender equality groups, but from businesses to move the timeline forward and start subsidized childcare earlier. all of the people in favor of it say this will raise productivity and raise the amount of women in the workforce, thereby, helping solve the skill shortage as

well. the government has been very reluctant to say yes to this because they are facing trillions of dollars in debt left over from the pandemic. so, basically, it is something he would like to do. we will see if there is any wiggle room over the course of the two day summit. >> bloomberg's australian reporter ben wescott. head, radisson hotels is planning a 400% expansion of operations in ages the next two years. the man leading that effort joins us next. this is bloomberg.

>> you are watching daybreak: asia. investors should brace for more pain ahead. let's bring in annabelle for morning calls. >> u.s. stocks may not have hit bottom yet? >> that is what the chief u.s. equity strategist at morgan stanley is saying. michael wilson is one of the biggest names in stocks on wall street. is big news is we have not seen the bottom. we have been struggling to find footing post jackson hole. then you have that anxious wait ahead of the jobs data. >> june was probably a low for the average stock. but the index we think still has

to take out june lows. we have used 3400% of the gross recession or soft landing. a proper recession would be close to 3000. the numbers actually come down quite a bit further. >>'s basic claim is that investors are being too optimistic about earnings. he says multiples will start to come down as earning start to be cut and somewhere in the middle of the process you will really see the bottom here. he sees that between september and december. he says investors are too preoccupied with the fed. he says they will always be late by design because they always focus on backward looking data, the labor market at inflation numbers. >> inc. of america says markets are under at his mating -- underestimating that risk still. >> this is from their derivative

strategy team. they are looking at pricing in the vix versus the broader stocks index. we are seeing s&p rebounding over the past couple months. the vix is in the dormant zone. the rude awakening we got from jay powell at jackson hole. he says this will need to lead to repricing in expectations. we have seen a concern about stockmarket complacency easing in the past week or so. still, the vix is topping around 25. you can see it trading around the 20 range the past month. that pales in comparison to other vix or volatility gauges for other asset classes. >> annabelle droulers in hong kong. travel for leisure is returning to the world, especially in asia. radisson hotel is ramping up expansion across the opec region

targeting 400% growth by 2025, 1700 hotels to add it to the current portfolio. joining us in the studio is the chief asia pacific development officer of radisson hotel group. the big hotel conference, give us an idea of what the vibe is at the moment, the enthusiasm. travel is back with a vengeance. >> yes. thank you for have mean. that having me. travel is back definitely. we have seen a positive impact on the travel and tourism industry. the cree -- three key indicators, all three indicators are only going up. there is a big emphasis. for the past couple years, the last two years were very difficult on people. people just want to go back to leisure destinations and see their family and travel around. we have seen good business in

the hospitality sector. >> your expansion plans are ambitious across the region. how are you factoring in issues that infrastructure investment is dealing with at the moment? supply chains, rising costs, shortages of labor? >> the plan has been in the making for two years. unfortunately, covid delayed the plan. the fundamentals are there. we are an international operator. but, we have local reach. we look at each market separately from an investment perspective and how we want to enter the market. all of those sectors have been impacted. >> when it comes to this key market for you, i know there are four. but, i am wondering even though none of those four are the chinese market, what is the impact you see from the fact that borders in china are closing. what is the future for the chinese visitor?

>> for us as an international operator we must brace for geopolitical shifts. the strategy is still there. the plan is still solid. china is a little bit slower than expected, but it's a long-term strategy. the hospitality sector as a long-term cycle. it will come back. we are positive things will rebound. >> to differentiate you from every other large, successful, multimillion hotel chain in the world. there will be a lot of competition and demand. what will set you apart in this new program? >> i guess we are really localizing our approach to owners. we have to be relevant to every market we operate in. we have been deploying some tools that are quite significant. we are dedicated to markets.

we have been working on new tools. we are looking at mna in some markets that we can eventually leverage on existing platforms. we are looking at partnerships. we are looking at being more aggressive on leases. these things make us above the competition. -- differentiated from the competition. >> investment, how are you financing it? >> for us in asia we are dedicating one third of the total investment allocation for the strategy plan. the expansion plan is aggressive but achievable. over the past year we have been refining and fine-tuning the plan to make it relevant both to owners and guests. >> what other growth strategies are you looking at? you have talked about tactical m&a, and organic growth.

what are you targeting? >> for australia the growth is exponential. organic growth will give us a steady 5%, 7% a year. if we want to expand the way we are planning to, we have to go through mna and exposition growth. >> what sort of access? >> we are opportunistic. we have k cds. we are looking at leisure destinations. it's a mixed bag of k cds and leisure destinations. they are either existing -- assets for conversion, waiting to either change hands or give their hotels international. >> when it comes to the pandemic shift, have you seen a shift in terms of trends, either in leisure travel or business travel? >> there is a clear shift, mainly on business travel.

we have seen a big increase in group traveling. before you had individuals traveling on their own. now it's groups. there is quite a percentage increase in group travel. group business travel. of, yes. people now don't have to travel. for us, we have to be able to capture the leisure business much more than before. people are traveling more even though the airlines are a bit expensive today. we see a big trend in leisure as well. >> it's great to have you here with us. ramzy fenianos at radisson hotel group. more on daybreak: asia is ahead. this is bloomberg.

>> the big story for august's risk off around the world across asset classes. there is no surprise crypto is having a tough day. a loss of .22%. ether is down. signs investors are pulling in. crypto is coming back. he told carlisle cofounder david

rubenstein his $1 billion bailout for ailing companies for the crypto downturn had mixed results. this episode of the david rubenstein peer-to-peer conversations was recorded august 17. >> i think it is coming back. obviously, a lot of this has to do with the macro environment. if we see markets crash again we will see crypto crash with it. if we see a market recovery we will see a crypto recovery with it. it has flushed out a lot of things that needed to be flushed out from the crypto space anyway. >> in may of 2022, a meltdown of tech values and also crypto. did you get nervous all of a sudden? that you would fall apart? >> not super nervous. it would definitely be a rocky road for the industry and you saw some businesses blow up when bitcoin hit 20 k. if we saw things meltdown much further than they did, if the

nasdaq dropped 30% or 20% and in the bitcoin -- and bitcoin went down 10 caper token, you would see another round for the industry. that would be more medium to long-term. >> no gray hair, i see. let me ask you this. when the bitcoin world was going down a bit, i think bitcoin peaked at 61,000 or something analogous at 23,000. -- now it is at 23,000. a lot of other cryptocurrencies went out as well. you bailed out some companies. what money did you use to do that? >> there are a few different versions of it. one piece is basically the balance sheet. we keep our corporate cash in dollars. we have raised a few billion dollars over the course of the last couple years. we are a profitable business. we also did acquisitions that

partially balances that out. we had cash left in that was on the balance sheet. >> wall street had problems early in the 20th century. mr. jp morgan himself use to go out and say, i will bailout certain companies. you were called the jp morgan of crypto. does that bother you? >> not too much. it is something i felt was the right thing for the industry. we were very explicit that we have a team of people working on this with your goal not to make a fortune during this. your goal is to do ok deals, not get our faces ripped off. contingent to that, do as much as we can to pay out the industry. the higher goal was trying to back out places other than maximizing on the deal. i would have loved other people to do it. >> you went in and bought companies. where those investments profitable?

>> i think some will turn out to be profitable and someone not be. one, wager, $17 million we put in there. i'm not sure if we are seeing that again. we had to make snap judgment calls. we made them such that if these turned out well they would be good investments and if they turned out badly they would be bad investments, but we limited the amount we could lose from it. >> fdx ceo they're speaking with carlyle group chair and cofounder david rubenstein. watch more of a dachshund that david rubenstein interview with sam beckman freed at 9:00 p.m. new york on bloomberg television. let's get a check of the latest business flash headlines. breach of contract and trademark infringement, a legal showdown between two of the most influential chip companies around the acquisition of a cloud startup that developed

chips that cannot be transferred without permission. arm has terminated this after sales negotiations. softbank's stepping down from his role as executive vice president after tech stocks slowed to a record loss. the founder takes over as managing the second vision fund. that's it for daybreak australia. daybreak: asia is next. we set up for the start of trading this thursday. this is bloomberg.

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daybreak asia live new york, sydney, and hong kong. we are counting