daybreak asia live new york, sydney, and hong kong. we are counting down to asia's

major market opens. >> stocks climb to a hawkish central bank echoing across markets, pushing up treasury yields. the cleveland fed president says the fed benchmark rate above 4% is where it will go. she does not expect cuts next year. china's communist party congress may set the stage for a shakeup of the country's top economic leadership. >> we are getting second-quarter preliminary. the south korea gdp crossing bloomberg. .7% when it comes to that cyclically adjusted quarter on quarter number. that is bang on expectations and matching again we saw in the previous timeframe as well, the first quarter as well. 2.9%, in line with the previous quarter as well.

we have been seeing growing fears of the economic slowdown. the weakness in you on. we saw a slump in industrial output data in july for the south korean economy. it could be this is resilience before a deterioration in third-quarter numbers. at this point we are seeing .7% quarter on cyclically adjusted. 2.9% for the year on year number. we are continuing to focus on chipmakers, seeing their first factory shipments in almost three years in july. the weakening demand future when it comes to semiconductors is a strong robert hurt for growth. the broader -- strong from enter for growth. these preliminary numbers are robust. >> that is probably welcome. in the u.s. market for the month is the big story today. every major asset class for

august, for stocks, for all major indices, the worst month since june. down more than 4% on the s&p 500. the clients today were not that bad. .6% to .8% on the three major indices. we now have a little decline. it has been sliding for a while now. the direction is still down. we move on to commodities first. this catches the eye. it down more than 9% in august on crude oil. that's the biggest monthly slump since the start of the pandemic. prices are continuing to decline on west texas intermediate. it's the monthly picture we are focused on. going back to the 10 year, the 10 year, the 10-year is continuing to fall a bit in price after a big move in the 2-year note since the j powell hawkish speech that seems to continue.

up to 3.4 nine is where the 2-year note is now. that is another high since november 2007. how much higher can it go annabelle? >> kathleen, to your point, if you are looking for any shelter in the global storm in august, it is a pretty futile endeavor. take a look at the cross as a correlation. you can see this picking up. that does really count in the diversity effect. it means basically there was no place to hide it. the selloff between stocks and bonds has been a hallmark of 2022 trading. now commodities are in the mix. we had every single asset class. focus on what the fed does. in asia we are looking out for japan and australian futures new zealand online this morning. we are keeping an ion the dollar.

wait and see ahead of the key jobs data. we are approaching a key 140 level now. also the hawkish fed speak is in the mix. >> it does not seem to stop. for more on markets are across as set asia editor -- asset asia editor andreea papuc and gutenberg su keenan. where does this go, and what does it mean for asia not even specifically today but for the rest of the year perhaps? >> great question. look, the markets are readjusting. there is a lot of uncertainty out there. there. there's a lot of confusion around mixed data. one thing we know for sure is tightening financial conditions are going to continue. at the moment we are looking at a soft start to asia following a

decline in the u.s.. his hawkish rhetoric. same story every day. but, that is what is concerning investors. that is what traders are trying to recalibrate. so, a soft start for asia. we also have a steepening of the yield curve. that's not a good sign for equities. plus, we have data coming down especially in china. we have asia pli coming down. we have a china manufacturing number likely to start with contraction. all of that is not boding well for asian equities at the start of the day. a further rest of the year, who knows? -- as for the rest of the year, who knows? but it does not look like a good second half. we had a jeremy grantham coming out and saying, look, the equity bubble we have seen in the u.s. has not burst yet.

a lot of investors are sounding the alarm bell that there is still a lot more pain to come for markets as we head to the end of 2022. >> more pain ahead when it comes to oil as well? three month, the largest losing streak in two years. >> there is a lot of bearish sentiment out there. you can see that the chinese economic slowdown, the fed rate hikes, all that is weighing heavily on price. you also have treasurers focused on iraq and libya ahead of the opec-plus meeting, the first meeting in a while where there is no expectation they would reduce output -- output targets. in a meeting ahead of the opec big decision a panel decided to tighten the oil market outlook for this year. they forecast slashing this year's supply surplus in half.

let's look at how oil prices are training. typically, new york and london training -- trading, you can see now into asia trading, west texas intermediate continuing to fall. coming down from the peak after russia invaded ukraine. opec-plus is now seeing supply for 2023. that is a huge change from previous projections months ago. there is the saudi pledge to reduce extreme volatility. the saudi minister came out a few weeks ago and said they want to address extreme volatility by taking oil -- taking more oil off the market, the opposite of where the biden administration it has been pushing most of 2022. >> you have been following the eu gas crisis in europe very closely. what is the latest on that? >> it is gone from bad to worse.

we are talking about how europe is fighting back. the u.k. is putting a price cap on russian oil. they want a larger coalition of countries to support that. the eu sanctions on russian oil will go into effect september 1. the real reality test for europe is now. gazprom is doing maintenance on the nord stream pipeline. that is limiting the amount of gasoline going to europe. that is a major concern. we had the eu commission president ursula von der leyen saying she believes president putin is weaponizing russian oil. that is what is causing the electricity prices to go higher. natural gas prices are going higher. natural gas prices have increased tenfold the past year. they are expected to go even higher. turkey right now is raising electricity and natural gas prices by as much as 50% starting september 1.

>> it is a new month. do we have any reason to be optimistic? >>[laughter] very good question. the way we are looking now, probably not. look, if oil prices come down, if there is any sign that perhaps there is some leading off of inflation and explain should -- and inflation expectations, yes. but from this point what we know is we will start september pretty rocky area investors and traders, everyone is still trying to adjust to the expectations that there will not be a dovish pivot anytime soon. that interest rates are going up around the world. and, they are likely to stay that way possibly for most of 2023. also, there is the possibility

of this growth recession, the paradox economists are looking at now where you would have this lower growth and low unemployment. >> let's get you to vonnie quinn with the first word headlines. >> thank you. the u.s. justice department says records held in a storage room at donald trump's florida home may have been unsealed or removed before his june fbi search. federal prosecutors are likely to wait until after the november midterm elections to announce any charges, if there are any, against trump. tehran forest -- taiwan it faces severe challenges from chinese

military activity. type a expects the people's liberation army to send more warplanes to create panics. australian home prices made their largest monthly drop in almost four decades in august. prices in sydney, the country's largest market dropped to .3%. the national index includes regional markets and dropped 1.6%, the biggest decline since 1993. rising interest rates are expected to continue this year and next. india's economy grew in the second quarter, the fastest pace in a year. still it missed economists forecast for 15.3% expansion. the vast services sector was helped by loser mobility restrictions. global news on-air and bloomberg

quicktake powered by more than 2700 journalists and analysts in more than 120 countries. >> ahead, despite recession on the horizon, business leaders are cautiously optimistic about future prospects. pwc will tell us more about the risks executives are facing later in the show and we told strategy with we are bridge -- with we are bridge investment. this is bloomberg.

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>> you are watching daybreak: asia. i'm annabelle droulers. the fed's encores to double its pace of quantitative tightening starting this week. the balance sheet will shrink by $95 billion per month, $60 billion of treasury bonds and a 30 $5 billion of mortgage-backed securities. here is what makes that unique. to shrink its treasury holding by $60 billion a month the fed will need to dig into its stash of non-maturing t-bills and let this go to the market to fill these gaps. this month's over $16 billion and next month just under $14 billion.

this will effectively drain liquidity from the system. the potential application is money market funds might take some of the $2.2 trillion cash at the fed's reserve repo facility to buy up treasury bills for selling in the market. we could see usage of the facility fall gradually from record levels. that something very important to be watching not only the next -- over the next few weeks, but months, ahead. our next guest says there is an increase within the pace of qt doubling in september. an investment strategist at tier bridge investment. are we not paying enough attention for the risk this poses? >> i don't think we are. i think investors still have to come to grips with the reality of what the fed intends over the next three to six months. that is price stability. they are more than willing to risk recession to do that. equities have been the drunkest asset class at the parties and

now the fed has removed the punch bowl. i think we are pricing in earnings expectations that are way too rose the next 12 months into 2023. the risk estimate has risen. my best case is a recession over a soft landing. >> where are you comfortable being constructive or overweight in the equities space? >> it's a stock pickers market, but i do think energy is very attractive here, especially after the selloff over the last couple months. valuations are compelling. you have not seen a lot of investment in that space and it is very tight, the global inventory situation. i think energy will hold up just fine. i do like utilities and consumer staples. these are bellwethers you want to run to in times of volatility and i think it is interesting that utilities and energy are the only two s&p 500 sectors

with over 90% of their constituents above the 200 day moving average. that is a rare occurrence. you have had such a rally over the last two months. energy, utilities, and consumer staples are my favorite there. >> come back to qt in jackson hole over the weekend. a couple panels, several people talked about the fact that quantitative easing seems straightforward. it is quick and you do it. but quantitative tightening proved much more complicated enter take much longer to work through the economy. is this something that could add to your bet on recession? >> well, think about rate hikes priced for the first year of the pricing cycle, the first since 1965. that is a lot of tightening in a short time. now, with qt doubling in september, you are amplifying the risks. i am not really concerned about

the quantitative easing going to 95 billion per month here. you're not really adding any real duration into the market that the market will have to absorb. a lot will be securities that are maturing. as we move further into the quantitative tightening process, six to 12 months, i will get more concerned about liquidity drain occurring in financial markets, but that's not a near-term concern for me. >> what is the biggest risk now to your outlook if you have that kind of group? how do you play that? you sit back and wait to invest? if you find investments to hedge? >> i think you want to actively sell around the environment. may be retail, those we saw back in june. i think the biggest markets now, maybe, in a big inflationary

environment, we will not get that from august cpi. but looking at the cleveland fed tool, the fed will clearly be looking through that. also, if you continue to see strong labor market activity and a strong payrolls report friday, given the survey we got yesterday, the fed will have to raise rates even more aggressively that is being priced. ultimately, that will cause a harder landing were deeper recession than what they are anticipating. >> are you expecting earnings cycles to be brutal? or are we with that? by what measure do you see that? >> i am anticipating a pretty robust measure do you see that? >> i am anticipating a pretty robust negative earnings revision cycle. q2 earnings, i think investors got that wrong. over 40% of s&p 500 companies, negative real revenue growth. i think margins are too optimistic. look at the last three recessions. you have seen earnings expectations down by about 25% on average.

soft landings usually see a 4% negative earnings revision. given the fact we don't know whether a soft landing will happen, i think earnings expectations need to ratchet down anywhere to 15% from the all-time levels we have seen. i think it's a rosy environment. it's clearly not priced. given equity markets over the next six months. given equity markets over the next six months. >> how do we know the stock market has bottomed? >> you will never know that until it happens. picking a bottom is notoriously difficult. but once you enter into bear market territory officially, at -20% levels, it's time to start thinking about dollar cost averaging into equities. once you hit the 20%, markets on average go down another 15%. you want the day the bear market

happens, looking out six months, the market, 4% on average, looking at 12 months, 11.8% on average. again, given we are not technically as a fair market again, once we hit the thresholds, we start the dollar cost average for opportunity that will likely pay off as we look out on the horizon. >> thank you for your sage and tear advice. -- clear advice. get a roundup the stories you need to know to get your day going on daybreak. terminal subscribers go to dayb . it available in the bloomberg mobile app. customize your settings so you only get

>> we are counting down to the start of trading in tokyo and seoul. in japan financial regulators are proposing easing corporate tax rules for crypto assets and lighter levies for individual stock investors in support of prime minister fumio kishida's efforts to reinvigorate the economy. softbank announced misra is stepping down from his role as corporate officer and executive vice president and toyota is another to watch in tokyo poised to invest around $5.6 billion for electric car batteries in japan and the u.s.. in korea, trade numbers for august later. officials said wednesday, watching korea very closely. the bok announced the second quarter gp -- gdp, the economy

expanding 2.9% year on year. and, ak pop -- a kapok etf launched. >> very cool. let's get the latest business flash headlines. tencent said to divest more than $14 billion of its equity portfolio according to the financial times. a food delivery giant is among the assets in line for divestment. earlier this month, tencent denied reports it was planning to sell almost all or most of its stake with about -- meituan stake. alibaba is among the first group of u.s. companies selected by u.s. regulators for audit inspections after last week u.s. inspectors were granted access

to the paperwork of chinese companies. young china and jd.com have also been selected. bytedance is planning to lower the price of its block option so it can retain employees. the beijing-based tiktok parent will cut options packages by about 20%. in august the bytedance valuation in private trading dropped to a high of $400 billion. -- dropped to three hundred billion dollars from a heil $400 bill

♪ >> this is daybreak: asia. loretta mester says the central bank will meet to raise its benchmark rate above 4% by next year. she does not expect to be lowered for the rest of the year. also told the dayton chamber of

commerce future hikes will remain data-dependent and she expects inflation to drop to 5% or 6% this year. >> the size of rate increases at any particular fomc meeting and to the peak funds rate will depend on the inflation outlook, which depends on the assessment of how average demand and supply are coming back into better balance and price pressures reduce. vonnie: a new report says u.s. companies added the fewest jobs in august since early 2021. -- research into the toots says business payrolls rose 132 thousand. figures are based on payroll transactions with -- of more than 25 million workers. -- officially monthly jobs report friday will show private payrolls climbed by 300,000. the opec coalition tightened its outlook this year. members struggled to reach targets. the alliance's technical

committee/forecast is by less than half to 400,000 barrels a day. next year, it sees a deficit of 300,000 barrels a day instead of an overhang. u.s. regulators removed covid-19 boosters for both moderna and pfizer biontech that are tailored to the latest omicron variant spirit the move comes as concern grows about potential new waves of illness in coming months. covid vaccines until now had targeted the original coronavirus, even as different mutations emerged. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. >> thanks. 30 minutes out from the open in japan, korea and australia. something else, the global aggregate bond index to fall into bear market territory. take a look. this looks at high-grade corporate and sovereign debt. you can see here, very close.

a with firm 20% from the peak. what has driven that has been the uniform chorus we heard from policymakers around the world from the u.s. to europe and asia that there is need for tighter monetary policy terrain and inflation. the hawkish fed speak setting the stage for trading in asia. we can take a look at futures positioning ahead of the open. looking at australia, negative territory. new zealand online to the downside. japan looking for a .5% loss. actually, the topic could extend its outperformance against the s&p 500. if history is a guide. take a look, you can see over the past five to 10, we have seen rises for the japanese benchmarks with what you see on the s&p 500. there is no historical trend for trading. what has driven that has been the outline, the boj speaking

with policy settings and also the yen. you can see, very close to the 140 level. a bit of debate whether that will be a hindrance to the economy. certainly something that has been helping its biggest exporting names. haidi: one thing we will be very much keenly focused on is the upcoming chinese communist party congress, likely to see its biggest overhaul and senior leadership in a decade including -- economic team. for more, let's bring in stephen engle there you -- household names. we might see a lot of new names. where are bets being placed? even though -- >> jeevan paper very likely get a third straight term as president. but, his economic team and those below him in the most senior

positions could look very different for the next five years. many of them are approaching or have already surpassed the mandatory retirement age of chinese, just officials. so has xi jinping, but he is likely to continue on. including the premier, he is not going to stand for another term. his 67, right around the age of retirement and has announced he will not continue. other individuals, the pboc governor really is the economic czar of china. li keqiang was supposed to be in charge of the economy. liu he has been a confidant of xi jinping. they knew each other in childhood and he is known to party leadership as mr. fix-it. here's is a fluent english speaker and was often across the

table with trump administration officials. he was a very high-profile that he is a very high-profile official. however, he is 70. he could say -- stay on as a close confidant of xi jinping, but if he were to leave, the next person to come in as perhaps the most important economic official in china, that person right now, all bets, you asked me about this, right now, the most likely replacement is the chairman. he is more of a politician had less of a technocratic. he does not speak english as fluently as he. he has strong ties to zhejiang ping. i want to -- xi jinping. i want to mention the pboc governor is a very important position and he could very likely be out. if you want a continuity candidate, liu he could reap --

could be replaced by the deputy governor. that is the way it usually works at the pboc. shannon studies at harvard and studied at cambridge and could be considered a continuity candidate. >> what about the pmi's later today? more into a slowing economy? stephen: absolutely. we got pmi's, the official ones yesterday. they were less than expected. the official pmi was a little better than the consensus estimate. again, it was below 50, indicating contraction. the chinese economy in august is continuing its downward slope from july, which the numbers indicated was slowing down from a pent-up demand boost we saw in june. the manufacturing pmi will be out this morning. it represents a, private manufacturers. that is the consensus estimate, right at the line between contraction and expansion. bloomberg economics expects that number to be lower.

a little more bearish at 49.7. we have weaker external demand being seen. that affects directly these smaller exporters in china. the lockdowns and one of the shipping hub -- the locked out of a shipping hub likely driving at lower. satellite data we are getting from the satellite data company showing activity as many e-commerce distribution centers is much lower than this time of year normally.

sentiment is continuing to be low through this covid zero slowdown. haidi: stephen engle. moving onto -- suing qualcomm for breach of contract and trademark infringement. the pay legal showdown. let's bring in carl -- paula. what a cooperative position for these companies to be in. >> as i see it now, qualcomm is clearly diversifying a lot. they want to get away from the phone business. when they purchased new via, that is what gave them the arm technology in the first place. -- rent the ip from arm, which is owned by softbank. qualcomm had to know that this would be an issue. i feel that they are going to move forward aggressively in this space. i expect they anticipated it. and that it is just going to play out in the courts. similar to qualcomm's battle with apple. >> we saw nvidia declining after these new rules of its business should have a pretty big impact on sales and growth. what is the assessment of what is going to happen there?

paula? >> i'm sorry. could you repeat the question? >> we are wondering about nvidia. >> the outlook for nvidia. the stock also trickle slide. there are these new rules that could impact business in china, therefore sales and the outlook. >> this is actually a big deal for nvidia. there gaming segment has been sliding. slowing because of the crypto market and whatnot. slowing consumer demand. they have been looking to the server business to offset those declines. now we are getting the government coming in, saying you need to get licensed to sell these high computer chips to china. that is going to pressure their

margins, pressure their sales because it is likely delays on the top will pressure their margins and their -- this is a pretty big blow. it does not mean it is permanent committee could just be delays in their topline. we are going to see weakness. >> senior analyst paula. next, a new survey shows than four/five of business leaders are focusing their strategy -- recession. this is bloomberg. ♪

♪ haidi: u.s. companies increased headcount at a sluggish pace in august. adp reports hiring is downshifting in a economy buffeted by rising interest rates. payrolls rose 102 data -- the smallest gain after an increase in july. a new survey by pwc showing layoffs -- a pull including more than 700 executives and board members across a wide range of industries. business and leaders are cautiously optimistic about future prospects. joining me as pboc joined global

leader for people and organization. one of the most interesting results for me is the fact that the people you told -- pulled are optimistic. more than 83% focusing business strategy on growth. only 30% see recession risk. do they see something other people don't? >> thanks for having me. what businesses are saying is throughout the pandemic they have basically said that we have no investment capacity to grow. that is really why they are leaning into growth because is the is something they control. can they make investments in digital? can they drive digital revenue streams? can they protect their business from cybersecurity? to do that, you need specialized talent. you need to attract it, retain and develop it. it may look confounding to grow and maintain talent and manage headcounts, but that is the complex role of leadership.

>> -- risk is the biggest they see. a lot of us are -- not affected by it, we just sit back and don't think about it. these business leaders are. >> absolutely. trusting your customers, the privacy of your employee data, it is so important. it is the capability that many have had to build and they are going to continue. whether that is educating people, developing critical talent, putting in the right controls and write risk culture, we see this as something that is going to be a permanent shift that firms are going to have to have strong capabilities. humans are going to be the first point of defense. >> you talk about the refinement of the trust strategy. is this something that has developed out of covid-19 and return to work? >> it's a great question in terms of work preferences and the role of business.

business is now seen as the biggest trusted entity. -- percent of executive that actually said they see businesses being the most trusted entity over the next 12 months. that is important in terms of whether it is customer trustor protecting assets, or how you make the tricky decision of layoffs. driving transparency, having good communications is an element of fairness around all of that. as we know, trust can take years to build, but can be eroded quickly. some of these are lessons of covid, but some can determine shifts in the role of being important to stakeholders. in this case, employees. >> we continue to watch for signs of change when it comes to the u.s. labor markets. certainly a lot of other companies -- economies are seeing shortages. the number one complaint we have heard from the c-suite here in australia and ross asia over the

past few months. this earnings season has been no different. what are the trends you are seeing in terms of the responses on skill shortages, talent shortages, headcounts? >> what firms are really doing is recognizing where they need talent. whether it is engineering, cloud technology, cyber, some elements to think about all the innovation to be in the health care space and technology. being able to play around the critical skills you need and how you are attract, maintain or develop them. they are using every lever they can to reskill people. there are not enough specialists out there. businesses working closely with their community, really giving people an opportunity to invest in their reskilling. we are going to see a lot more -- climate agenda. whether it is digital skills, working in an agile way, the leadership skills, how to lead

in a hybrid environment, the knowledge of climate. we see those continuing the need to invest because it is definitely part of their growth strategy. >> your survey of making remote work permanent is great for people who do it. it has had a lot of impact on real estate. apparently, that is one part of the business landscape that many of these executives are pulling back from now in part because of this bigger trend toward working from home. >> what is really interesting in this survey is that people are investing in real estate and doubling down because they want to make a return to office an experience. two to three days a week. but they are also looking at their portfolio and saying, where can we cut costs? they are using every lever possible. hybrid work is here to stay. firms are going to have to invest in that return, the

leadership skills and capabilities. it is no longer a debate of in the office or not, firms are going to have to make hybrid an option. it our survey, two thirds are trying to convince people to spend more time in the office. but 70% are increasing roles where it is appropriate. >> bushan sethi, what is the thing they fear the most? what to they worry the most about? >> we are seeing they worry about things they can't control. the inflation has been driven by the terrible war in ukraine. they can't control gas prices, they can't control the next year political. we see doubling down in scenario planning. taking all the data, inflation data, interest data, internal data from their own customers and employees and putting that together to say, how do we develop good agility and good scenario planning?

you can't predict the future, but you can plan and work with different organizations 50's different signals. whether it is how to grow my business or how to return to the office in an inclusive way. >> bushan sethi, pwc. fascinating. we are looking at japan, second-quarter numbers are coming upon us. to paint the backdrop, we did have the -- rise of about 3%. more broadly when it comes to capital spending, we have seen some level of weakness, but not so for the second quarter. 4.6% capital spending year on year. that is more than the expectation of 3%. capital spending software, we

are expecting 5.1%. still waiting to get those numbers through there as well. japanese companies second-quarter profits rise 17.6% year on year. stripping out software, that number coming to a gain of 3.5%. less than expectations, which were for 5.1%. be sure to tune into bloomberg radio to hear more from the days big newsmakers. get in-depth analysis from the team. broadcasting live from hong kong , you can listen via the app or on bloombergradio.com. this is bloomberg. ♪

>> the company says it percent sales growth in the current quarter fell short of its goal. employees ratcheting up pressure to abandon an artificial intelligence contract with the israeli government. a handful of current and former workers spoke alongside palestinian -- in san francisco to call for the company to end project nimbus. the project could give the military high end ai services.

nvidia following late trading after warning new rules governing the escort of artificial intelligence chips to china may affect hundreds of millions in revenue. nvidia says the u.s. is concerned the processors might be used by the military. the company is already facing a sales slump triggered by lower demand for personal computers. haidi: when trade opens in australia, japan and korea. we are just about six minutes away. australia will reduce operations here to covid carriers five days from seven days starting next friday. we will be watching airlines. company shares, giving us early home prices on their largest monthly decline in about four decades. we are expecting -- and prices come expected particularly across the pressure in major cities. watching japan, pledging to invest 5.6 billion dollars to boost ev battery production.

japanese defense shares in focus. seeking to record $40.5 billion in financing. that request is to enlarge its arsenal of -- oil stocks as well. crude expected to be in the longest slump we have seen since 2020. three straight months of losses amid these growth concerns. particularly coming out of china. take a look at u.s. futures at the moment. given we have just had a pretty end to the month. is there any optimism going into the new month? s&p futures up by about .6%. we see weakness across the nasdaq futures. tech heavy nasdaq down by just about 1%. the dow seeing -- extending losses. we continue to get the hawkish drumbeat. that continues to flareup when it comes to repricing asset

classes. we see a correlated drop across asset classes throughout the month of august. we are also dealing with potential warnings this is not just about the fed but we are going to see nasty earnings revisions to the downside as well. more about the fed's path that remains front of mind. asset management's coming up shortly but of course before that we get you the market open in sydney and tokyo. this is bloomberg. ♪

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♪ >> this is daybreak asia. counting down to asia major market opens. we continue to see the impact of

jackson hole. hoch's comments reverberating across markets. we are seeing the move-in the yen, dropping below the year to date. the weakest point since 1998. down for the fifth day against the greenback. kathleen: this is going to beg the question, raise the question, just how aggressive the bank of japan is willing to get if it continues to push dollar-yen higher and if they decide yes, they are going to have to buy war bonds. -- and jackson hole over the weekend said japan's economy needs more stimulus. they are not ready to remove stimulus, they are going to have to buy more bonds. haidi: we are just getting some numbers out of south korea as well. take a look, 28.2%. [please stand by]

haidi: we continue to watch for resilience when it comes to south korea prostrate numbers. particularly major markets like china. like the u.s., it has been the barometer of not just south korean growth or asian trade demand growth, but also broader global growth as well. we see largely a resilient picture still when it comes to these trade numbers out of south korea, despite when we have seen other indicators and korea showing we could be at some point leaning towards less ideal conditions for the economy. we have seen that weakness in the yuan as well. let's look at how this is playing into the start of trading. a lot to unpack. not least of which is the

renewed low for the yen. >> certainly a lot to contend with. kicking off what we are seeing in korea, we had relatively robust numbers in the trade data. add to that what you set about weakness in the data we had yesterday. gdp data also relatively strong. revised numbers coming in at 2.9% growth on the year. in terms of market reaction come in territory dominated by the hawkish fed speak. it's push to raise rates to fight inflation. we are continuing to see strength in the u.s. daughter -- dollar ahead of the important jobs data. the you want still sticking at a 13 year low. let's change it up because we are watching the yen closely, at its weakest since 1998. you can just see here, a little bit fraction in off the key 140 low. we are watching how that goes. it has been driven by the yield differentials.

, growth as well as high inflation before he considers change in policy. still, strong signals coming through in the last 10 minutes. capital expenditures looking good as well in the last reading , rising 4.6 on the year, well above estimates but not -- but not quite spread evenly because we did see a difference between software spending and outside of that market or inside that market. in terms of what else, if history as our guide come our markets team saying it could move higher. let's turn to the australia open. properties sector very much front and center. it is very rate sensitive and we are seeing australian home prices record their largest monthly decline in almost four decades. watching very closely what is happening in the larger market. down 2.3% in the latest. brent crude lower.

it just cap its longest monthly slump since 2020. tres distracting unrest in iraq and libya ahead of the key opec-plus meeting. kathleen: let's move onto to the cleveland fed predators and -- president saying the central bank needs to raise its central benchmark above 4% by early next year and leave it there to help cool inflation. >> my current view is that it will be necessary to move the fed funds rate up to over 4% by early next year and hold it there. i do not anticipate the fed having to cut the fed funds -- fed funds rate target next year. >> let's bring in our chief asia economics correspondent and -- it is pretty clear? >> it seems like the fed are really hammering home this message that they are deadly serious about raising interest rates. not only that, but leaving them

there for a sustained period. she spoke to the point where she said look, it should go above 4%. she exclusively said not only should it stay there for a long time commit she didn't see the window for when they should cut rates anytime soon. we have a synchronized approach. it started in jackson hole last weekend with this idea of hammering home the idea that there is no fed pivot, inflation is not under control and they have a lot more work to do on the policy side of things. certainly how i read this speech this morning, it is just another example of a hawkish, consistent message from the fed that rates are going up and will stay there and you can forget about a rate cut for the near to medium term. >> we are just processing this extraordinary number, record trade deficit. almost doubling to $9.5 billion.

that stated going back to at least 2000. inflation pressures elevated, energy prices globally. a lot of pressure on exporters. i am wondering what is the readthrough when it comes to what the be ok does. we've got widening deficits. confidence in moving ahead? >> i think so. it is interesting when it comes to exports because half the economy in south korea and we know it is a great bellwether. the government of korea expects exports to weaken, but he has laid out a more hawkish approach even though d is -- he has said the central bank of korea has to continue raising rates even though exports are going to soften. nonetheless, if we get significant downturn in regional trade in asia, all of these trade exposures will be heard by

it and that will impact monetary policy. pmi's will give us the latest read in terms of where trade in the region is going. by all accounts, most people are expecting a softening because global demand is coming off and that will impact central-bank quality. >> let's bring in our next guest to say rates will stay higher as a market spends august and want -- unwinding inversion. joining us is stephen from spi. what a great day to be here. let's just jump in on korea, what's happening to their trade deficit right after they had did -- opted to committing to another 50 basis point hike. put that part of the puzzle together, particularly for asia and korea. >> it's a short-term lifeline in the sense that it suggests economic activity abroad is still picking up.

but, let's be real, the economic activity abroad isn't really picking up. this could be part and parcel to a weaker currency outlook with a little bit of frontloading a been with tories. we are just trying to figure out the exact details and with the export data is revealing. we know china has been promoting their weaker currency to help exports. this could be along the same lines as to what -- is doing. >> the other big headline, yen dropping below the year-to-date low. its weakest since 1998. what is going on? what is going to happen? do you expect this to keep falling? >> -- differentials working in the dollar pot favor but there's this safe haven premium were a lot of investors -- let's look at the broader market in general. there's a lot of focus on the energy crisis, sure, but this safe haven bill to the u.s. dollar and a lot of it flows into the u.s..

a lot of big global investors are -- refer -- there is no risk in parking their money with the fed. i think the yen is paying the price. haidi: moving the two year yield just creeping. just 3.5% for the first time since 2007. we have been flirting with that level for the past couple of days. rising to 3.5% for the first time since 2007. is there a limit to the jackson hole reaction? we see the big moves and treasuries, the big moves in the downside when it comes to equities. the cross asset correlation is

something to be reckoned with. we haven't had an update to u.s. equities since that speech in jackson hole. at what point do we see investors adequately reprice fed expectations? >> the market has entirely given up on the goldilocks rule to moderating inflation. more importantly, the fed pivot. we have to focus on the data. we notice this week, stronger economic data being perceived by the market and a hawkish fed narrative. as we move into the payroll data this friday, there's possibility for more pain in the equity markets as economic data comes in strong. what could change that nadir -- that narrative is weak economic data. if the market starts to see a string of data, we -- rate cuts into 2023 that have been pushed out. they are playing a narrative on the hawkish fed. they are playing away from the fed pivot narrative and they are

pricing in higher for longer interest rates and yields. this is -- currently for u.s. equity markets. haidi: switching away from the u.s., i know a lot of people are tired of talking about it, a completely different monetary policy scenario to be found in china. take a look at this question, i am wondering if you find opportunities in china. where do you see the most value in the chinese markets? >> it is an interesting market because we are seeing easing in china. as far as economic activity, china requires a combination of support for -- we see a pickup in orders for the rest of the world which we are not so sure about if we move into the recessionary world more importantly, we are trying to move out of restrictive mobility. we are coming up to the communist party leadership.

-- would be great for pboc. at least to the extent experts while not hurting capital outflows. i think we will keep our eye on that market but overall i think there is going to be some appeal for china assets. those of the chances to -- markets may start to position. haidi: great to have you with us. >> taking a look at what happens in the tech space, specifically these are the companies that tencent, the chinese tech giant has a stake in. we had the financial times reported that the company could be looking at divesting a large portion of its holdings in

different companies listed. obviously a big strategy shift. last year, the company declining to sell shares in jd.com and southeast asia -- that has a little speculation and more could follow suit. we are seeing -- from lots of companies. another sector we are watching, these are social media companies in asia. we are watching that because we did have the snapchat parent planning to cut 20% of its workforce. slowing sales there, because of that, any projects that don't contribute to growing users or the company's augmented reality division will face slashes to budgets and other constraints. thank you -- >> let's get the vonnie quinn. vonnie: taiwan warning it faces

challenges from surging chinese military activity getting closer to the island. an annual report says taipei expects the people's liberation army to test more missiles and send more warplanes. chinese aircraft have breached almost daily since nancy pelosi positives it in august. -- tightened its outlook for global markets this year and next. members struggle to meet outflow targets. the alliance/targets in half to 400,000 barrels a day. next year, it's easy deficit of 300,000 barrels a day instead of an overhang of 900,000. in report says u.s. companies have the fewest job since early 2021. they adp research institutes this business payroll rose 132,000. -- more than 25 million workers. economists think the monthly jobs report due friday will show payrolls climbed 300,000.

global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: still, one of the top ranked most influential -- and the -- sector will join us. [indiscernible] that's later on. next, china's biggest leadership overhaul in a decade may be on the way. we will take a look at -- when it comes to president xi's key economic plan. this is bloomberg. ♪

>> let's take a look at how futures in europe as we go. the equities session extending that monthly decline, sinking to the lowest level in more than six weeks. we continue to see bearishness play out. just about .8%. -- negative by 1%. part of it for german backed futures as well. they see more aggressive rate hikes by the fed and the outlook for the ecb as well, really creating this downward spiral.

energy stocks continue to slump. we did see oil headed for the third monthly drop, the longest losing streak in more than two years. that underperformance and utilities as well. a monthly decline of over 5%. >> to china. this year's upcoming chinese communist party congress may see the biggest overhaul in the decade including the possible replacement of president xi's key economic team. let's bring in stephen engle. where are the bets being placed? >> it's interesting. xi jinping is going nowhere. he is going to secure his third term at the upcoming party congress october 16. behind closed doors in beijing, they are going to decide who is going to get shuffled off to the sides because of mandatory retirement ages. and who is not necessarily been oil enough to xi jinping. the top two things you need on

your resume for the new position on the economic team is experience and loyalty. by next march, when the national people's congress meets, we could have a new premier -- most likely we will. we could have a new economic czar, probably the most powerful economic position in china, held -- held now by liu he. we could have a new pboc governor. we could have a new banking regulator. that is a big overhaul of the top economic roles. there's not enough time to go through all the possible names, but here's some of the rising stars that could potentially be uplifted into the top positions. let's talk about liu he. he is 70 years old. he could stay on, but essentially he80 is mr. thick -.

fix-it and is a friend of you jinping since childhood and he is often across the table from american officials, when they negotiated during the trump administration. but he is 70, so who is going to take up perhaps the most powerful economic position in china? that is the big question for economic waters. another favorite is a man named fung, more of a politician than a technocrat, not necessarily an english speaker like leo hua, and most importantly, he is very loyal to xi jinping it could be a major shakeup. lee ko chan is a man who was supposed to be in charge of the economy, but was overshadowed by leo hua. is stepping down after two terms. who is going to be the permit or? the number-two position in the

powerful standing committee after jean jinping -- xi jinping? the favorite right now is the commonest party head of shanghai, loyal to xi jinping, he imposed a covid lockdown in shanghai, which brought him scorn from the people but praised by beijing. it is going to be a very interested already conference coming up. it will be behind closed doors, so we will have to read the tea leaves, but when they come walking out of the party congress with xi jinping at the front of the carpet, we will know by who will be trailing him and by how much. haidi: a challenge when it comes to the slow down in the economy, pmi's showing the impact of multiple shocks the economy. the pacing numbers are unlikely to be more positive given a look at smaller, privately held companies.

stephen: the manufacturing pmi is out later today, we got official pmi's in manufacturing and nonmanufacturing which include services and construction. they were below estimates. but this represents smaller, private companies and i a lot of them are exporters. when you have a correct sport command from abroad as well as weaker domestic consumption, you are likely to get a weaker number. bloomberg economics expects the number to come out less than 50. below 50 indicates contraction and bloomberg economics thinks it is what to be 49.7. haidi: chief moore north asia correspondent stephen engle. up next, -- chief north asia correspondent stephen engle. this is bloomberg. ♪

♪ romaine: let's check in with annabelle droulers in hong kong, big pieces of data. annabelle: this has been a busy morning for us in the last half-hour. at the top of the hour, a record trade deficit in korea in august almost doubling to $9.5 billion. that is the biggest going back to 2000. it does put us on track for the first deficit since 2008. what is driving it is the rising commodity prices and the yuan. what we are seeing on the yen is different, and basically right cotswold topic.

kathleen: this coalition is tightening its global outlook as members struggled to reach output targets. let's get details now from bloomberg's energy reporter. what is expected, there is a lot riding on this? >> there is expectation that saudi arabia could act. while there is a tighter market going forward, some people in the market have hinted that there is a disconnect where prices are and where we are going. because of that, if you are expecting a tighter market, it has been falling pretty significantly the past few months due to a more hawkish tone from the fed. traders expect that because the fed will keep interest rates pretty high and continue these large sites, that there will be a recession later this year and that will cut demand for oil and other fuel.

on the flipside, saudi arabia is saying way second, we are in -- wait a second, we are in a market that is still tight, russian crude is off the table, people are still drawing their cars, driving their cars, the market should be higher so because of that, you could see saudi arabia cutting supply. haidi: bloomberg's energy reporter stephen stapczynski. this is bloomberg. ♪

♪ vonnie: this is daybreak: asia first word headlines. the central bank will have to raise their benchmark rates above 4% by next year and she doesn't expected to be lowered by the rest of 2023.

she also told a chamber of commerce that the size of future hikes would remain data-dependent but she expects inflation to drop 5.6% this year. >> the size of a rate increase at any given fomc meeting at the peak funds rate will depend on inflation, which bans the assessment of how rapidly average demand is coming back into better balance and price pressures are reduced. vonnie: the indian economy grew 13.5% in the second quarter, but still missing economists forecasts. it was underpinned by robust domestic demand and mobility restrictions. australian home prices made their largest monthly drop in almost four decades. corelogic reports prices in sydney slid 2.3% and in melbourne, 2%. the national index had the

biggest decline since 1983. rising interest rates are expected to drive further falls this year and next. the justice department says white house records held at donald trump's florida home may have been removed or concealed. that suggests an attempt to obstruct the investigation. sources say federal prosecutors are likely to wait until after the midterm elections to announce charges, if any, against trump. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ kathleen: we are taking a look at very important manufacturing numbers. japan is taking up, this is the purchasing managers' index, closely watched as a sign of where prime rights are going. but look at south korea.

just as they get that record trade deficit, just as they see their chip exports go down in value and volume, there pmi has gone considerably worse, 49 .8% to 47.6% is no small move. i want, 44.6 after 44 point -- 43.7. philippines are looking better, and indonesia as well, and thailand. but the main question is, when china's economy slows down given the big impact on economies around the region, it is interesting to see that south korea looks like it has taken the hardest hit. >> that is right. interesting when you try south korea to taiwan, because those economies are very heavy exporters and very tech dependent. you can see the contrast between north asia and southeast asia

and that does point to very different pitches because you have the salvation nations that export commodities, the ones that are needed by china. and you have other countries like korea, taiwan exporting electronics, so they are more elastic, those goods. today in asia, we are risk off today, the start of the trading month of september and if history is a guy, this is not a great month for us. august was also a downer, cross assets biking, commodities also a big one at it because the selloff of stocks and bonds has been the hallmark of trading here. a very busy morning. just the trade numbers coming through from korea, we did have that record trade deficit in august, $9.5 billion, the biggest we have seen since 2000. it sets us up for an annual

trade deficit. what is driving that is energy prices and import cost and on the flipside, you have yuan weakness at a 13-year low. the two-year yield spiking above three point 5% for the first time since 2007. we had loretta metzger quashing the idea we could see a rate cut next year. at the yield differential is also driving those moves in the yen this morning. haidi: dropping to its lowest since 1998. as far as the surge when it comes to treasury yields, keeping pressure on the japanese currency. we talked about that pairing that has been underpinned by a big resurgence in u.s. yields. so much of the impact has taken place after the jackson hole speech by fed chair jay powell, asserting that commitment to inflation targets. let's get more from our senior fx rates reported, ruth.

ruth: just when yen traders thought they could catch a break, everything turned once again, the lowest in 24 years. it comes down to the fact that japan is now the biggest outlier when it comes to monetary policy. the fed is hawkish. the rba and rbc are following the fed's lead -- rba and rbnz are following the fed's lead. there is potential for japanese officials to engage in intervention if the yen slides further. gsfm are really bearish on the yen. and we are close to the 140 target now.

kathleen: it is like a hive of bees, those bears are stirred up now, so how aggressive do we expect the bank of japan to be? last time we were breaking through lower levels for days if not weeks, the boj got top and beat them back. can they do that again? >> it is a coin toss at this point. 140 is the target people have talked about, the line in the sand where we could see potentially strong intervention from the boj or ministry of finance. we shall have to see is what i would have to say. it is 50-50 on how effective it could be paid the key thing to remember when it comes to intervention is that it is often not a one-way gain. you need central bank years to agree -- central bank peers to

agree to central bank intervention in the first place as they wrestle the yen back to normal levels. kathleen: ruth carson. ipo's suffer a slump in the rest of the world. let's bring in our bloomberg reporter for more. what has been driving the push for ipo's in china at the moment? >> good morning. it is interesting to see this phenomenon in asia when it comes to ipo's. in china, we have a lot of companies coming to market to raise funding through the sale of new shares. we are talking about all size companies, midsize, smaller ones and the major conglomerates, big names that maybe would be in the international markets in different circumstances. we do have a monetary policy in

china that is going the opposite trend of what we see elsewhere. raising companies -- raising money is still cheaper such companies. those companies, making sure they lock in those costs at the current level. there is still demand in the local market and the international market is good for ipo's in general, not just for chinese names. >> what about performance, are they holding up after their debuts? >> good point, yes they are. we have two major deals on mainland china in august that raised more than $1 billion and they rose more than 40% in their first day of trade. there has always been common sense within china's markets that ipo's tend to jump in their first day of trade. we see that prevailing for the small deals and midsized deals and very big tickets, who haven't seen major ipo's of that size in global venues such as

london, new york over the past few months. and china is definitely bringing those to the market. and chinese investors are the ones mostly buying those deals. we are talking about chinese issuers selling shares to chinese investors mostly, and they are pretty happy with this very outstanding performance in the first day of trade and first weeks of trade actually. haidi: coming up next, checking asia's health care tech sector opportunities. and influential investor will be joining us from the sidelines of a summit. this is bloomberg. ♪

♪ haidi: about 40 minutes into the session, another down day when it comes to asian stocks. they are taking the tailwind when it comes to u.s. equities and have not managed to see again every day since jay powell's speech. the nikkei two to five down, the kospi also extending losses after a doubling of the trade deficit, and a huge surge of imports in the most recent

rating pointing to inflationary flashers, supply -- inflationary pressures, supply chain pressures and energy costs. the big story when it comes to fx is the yen slide picking up pace. treasury yields have been surging higher. the yen hitting a 24 year low against the dollar, clearing out the previous day's low. we will watch that pairing. to that end, the treasury two-year hitting 3.5% for the first time since 2007. kathleen: a dramatic weekend it is not over. business flash headlines, qualcomm setting up a legal showdown with one of its biggest customers. it revolves around the qualcomm acquisition of nubia, which developed ships to develop with licenses that can't be transferred.

ubs in hong kong and turmoil in dear -- dealmaking. the bank has trimmed workers and investment banking, capital markets and real estate. snapchat is getting 20% of its work force and cutting back investment in straggling businesses to rein in cost and refocus after a slow down in ad revenue growth. the company says the 8% sales growth in the current quarter fell short of expectations. haidi: [indiscernible] hosting its annual biotech summit, bringing together industry executives and investors. our next guest is one of the most influential investors in the china health care sector. we welcome nisa leung of qiming venture partners. i want to start broadly and ask

high-profile investors where they are finding value in china at the moment? i know attack and health care is where your focus is, but when you look at the landscape of opportunity and innovation in china, where do you see growth and innovation? nisa: nice to be on again. the last year or so has been quite volatile. the xpi dropped over 50%. but the bc investment globally for the first half of 2022 was $43 billion investment, 43% down from the year before. china is 40% down from the year before. the number of deals is up 13%. that signifies there are a lot more of early-stage investments and what is also interesting is this year, there were 670 deals done in health care and in china, there were 630 -- 670

deals done in the u.s. and health care and in china, 630. diagnostic devices, attack health care and so forth. even with the national group purchasing organization and the price got, the price cut is relatively milder than previous rounds. so, we see a lot of opportunity when it comes to investing in the infrastructure of companies. we have had 33 ipo's since early 2020 and 25 of them were in health care. what is interesting is, a lot of ipo's are in big areas that are very established in the u.s.. the largest insulin, monitored

cancer screening, medical records, all these type of companies are very well-established in the u.s. and elsewhere. but in china, since the health care system only really started investing in the last 20 years, we are starting to see more of these companies become enough to go ipo. on top of that, we are seeing a lot of new modalities globally, so investors have been putting a lot of money into new modalities. because of covid, we saw a lot of investment going into health care lovely the last two years. and that has created a slow down a bit in pmp funds and longer investing, crossover funds. health care funds like ours are still very active in the market. haidi: correct me if i am wrong, but i think you said you invested in 25 health companies so far, do you think of an exit

plan for any of the men can you share any names? nisa: we have invested in close to 500 companies in china, about 200 and health care, but we have that 25 health care company ipo's since early 2020 within our portfolio. and we are typically about 65% series a investment, and we continue to step up in companies until their ipo. it is great to nurture them when there are only two or three people coming up and they put out the ipo on their own. we also see a lot of great opportunities within our portfolio companies that have not had an ipo. when we did the portfolio review in the last few months, we have seen our companies with revenue that is still growing quite a bit. but companies that are in development are very focused on

cost cutting, laser focused on developing and identifying products and asset that are high-impact. kathleen: what is your view of the chinese government policy toward this sector? how much is it helping these companies? nisa: it is interesting because, six, seven years ago, we were talking to portfolio companies and we don't understand what some of the big pharma were selling generic drugs at a few times of the prices they were selling in the u.s. that doesn't make sense. we need to take down generic drug prices and that is what the government has been doing, taking down the generic drug prices so that there is more money going into innovative

drugs paid that is what we are seeing. and on top of that, because drug pricing in china has come down a it, it really pushes chinese companies to think global. and i think that is where chinese companies can really play a role to provide affordable drugs and devices to developing countries. i invested in a company nine years ago, and back then, they didn't have the covid vaccine. but because we have so many children's vaccine problems in china, and every country has a children's vaccine program and when they imported children's vaccine, it was too expensive. they need to develop their own vaccines. that is what this came up, they came up with a suite of children's vaccines and are able to develop a vaccine.

for that, we decided to invest in the company. it is that kind of thinking. we did the same thing for founded by a few years ago, a gentleman founded who was the founder of a company acquired by pfizer and they are now the leading gene therapy company in china. just looking at the program they have, the treatment for muscular dystrophy in children, after one treatment, the children were not able to sit up, but now they are able to swing and run and eat fairly well. that is huge. they are also working on parkinson's and eight a lot of others. what we are also seeing as how we take prices down so it becomes more affordable. haidi: such an incredible space, we appreciate your time, nisa

leung managing partner at qiming venture partners. breaking news crossing the bloomberg when it comes to china junk bonds, returning 6.8% in august, their best month in a decade. the embattled space we are talking about, hi-yield bonds rallying in the month of deliver the best returns in 10 years after greater government support for the property sector, which has been hit by crisis after crisis. all that is creating support the narrative that perhaps the worst of what has been more than a year long rout is over. real estate firms returned 6.8 percent according to our bloomberg data, the best month since february 2012 and putting an end for now to a record, 11 straight months of losses and lifting average prices off all-time lows as well. more to come on "daybreak: asia," this is bloomberg. ♪

♪ haidi: 14 point $5 billion from its listed equity holding as part of a shift into radically. partial divestments are the pipe lien -- pipeline. let's bring in chief markets

correspondent sofia horta e costa. sofia: tencent has a broad portfolio of companies. tencent and alibaba were dominating the internet space, and investing in these startups. that has been a problem for chinese regulators, where you have a duopoly controlled by two companies. what we know is that tencent is, according to this report, looking to divest holdings. tencent is big, a portfolio of more than $50 billion u.s. that will weigh on the market because traders tend to look at what a potential target could be, they look at which stock has performed well recently, which would make sense to exit for tencent and when you start looking at clearinghouse data for any hong kong listed shares, you see if any shares show up in there. and you saw what happened when

speculations surrounds those kinds of stock, byd and warren buffett selling their stake as well. it is already on the market. >> sofia costa e court appeared -- sofia horta e costa. that is it, stand by for "bloomberg markets: china open," this is bloomberg. ♪

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