>> welcome to daybreak australia. >> we are counting down to asia's major market open. >> the top stories this hour, u.s. stocks made a surprising late date reversal. the dollar surging to another record high. >> chip stocks selling off. >> china's covid zero policy hold strong. hong kong is said to be targeting november and to hotel quarantine. let's look at the day on wall street after four days of the post jackson hole klein, finally the stock market pauses. as we look at the futures market, we can see that we are down a bit.

today we have the jobless claims and the manufacturing survey stronger than expected. the big jobs report comes tomorrow. will it be stronger to push the fed to another rate hike? let's look at the 10 year yield. what a week for the two year yield. we just mentioned the dollar. there is a lot of concern about global demand and aggressive fed rate hikes hurting oil. >> goldman sachs told us earlier there is an opportunistic tone coming into markets.

overall, it is expensive to be sitting in cash right now. new zealand is online sitting flat. this is really a story of the strength coming through. we just saw the pound touching 1.15 for the first time since 2020. keeping an eye on what is happening in the yen this morning, pushing past the 140 level. this is a seriously high-stakes move. big stakes also on the political spectrum. >> we have joe biden getting ready to send a very strong antitrust message saying it's a

threat to democracy. the semi fascist stance is something democrats are hitting hard. democrats are trying to get that away from joe biden and get the focus on the threat of donald trump after the insurrection and now as it looks like he was holding onto some top-secret documents. it will be interesting to see what joe biden says tonight. this is apparently a big deal for the democratic party. >> the timing is interesting because the fight against inflation, the energy crisis and the impact on household has been front and center for the white house.

with gas prices coming down, it seems like they feel like they have opportunity to address what has been at the forefront of the biden campaign all the way through to him winning the presidency which has been the reclaiming of america's democratic process. we will bring that to you live as the speech is delivered by the u.s. president. take a look at what we are watching in terms of the market sentiment. this is a gauge that looks at wall street sentiment toward equities on a monthly basis based on these allocation recommendations provided to the bank of bloomberg. this gives us a little bit of array of hope for stock falls. so much of this hinges on the data we're going to get when it comes to the debt -- labor

market. >> the question of bearishness, stronger data today and maybe tomorrow we don't know however is strong data good enough for the stock market? if the economy is doing better, that might be a plus. dig in with our cross asset reporter. the u.s. market reaction today muted waiting for the jobs report tomorrow? >> exactly that is what we are seeing. we saw a rally in the last two minutes of trading. the s&p 500 was able to get into positive territory. finishing the day largely with traders waiting for the rob porter. the fed has said over and over that they are interdependent. -- data dependent. this meeting is going to use the

data from the cpi release we have coming up but also the jobs report on friday in the u.s.. it's a big event that people are looking at. was looking at a survey from research firm and most market participants are expecting the number to be higher than expected and risk off meaning a good job number will be bad news for the stock market tomorrow. >> looking that the dynamic and how the treasury will react to the result as well it piercing a continued resurgence in yield. the two-year is highest since 2007. what is this telling you about the fears that this could lead to even more fed hawkish this? x i think the fear is that almost no matter what the data says, more fed hawkish this might come. the way fed officials have been speaking, the cause starting at jackson hole then getting

stronger throughout it, it's going to be difficult it will take bad news for the fed to say 50 basis points. i think it helps to explain some of the resilience in stocks because there had been people who were going back into the bond market in particular one of the favored place has been flattening expecting 10 year yields to rise at a slower pace than two year yield. so far, that has not been happening. staying in cash or going into bonds is not so great. maybe a better risk reward is

there for equities as perverse as that might sound given the strong expectation for high inflation and high rates. >> i was going to ask about what we make of the dollar surge. is there a risk to the dollar rally depending on the numbers we get? >> we have already seen the dollar spot index hit a record high. strategists who are looking at the dollar may be turning a corner and seeing a decline into the fall being incorrect as we see the fed is being more hawkish than the other central banks around the world. in terms of the sport -- forces that i speak to, they are not expecting dollar weakness.

they are thinking as the fed will continue to be hawkish and more hawkish than the ecb and i can japan, we are going to see that continue. >> speaking of ink of japan, we sought the dollar yen breakthrough. how does this all together? because the fed is so forceful, will asia traders also look at the jobs report? >> yes, they will be waiting for the jobs report especially because we have a u.s. holiday on monday. that adds to the desire to not take on too much risk in the way of positioning going into the holiday weekend. they will also be watching closely what's going on with yuan.

it is all a bit further away from the psychological barrier of seven per u.s. dollar. that is going to be a key issue. in general, the dollar dominance how much is that going to continue and this strong dollar puts a lot of pressure on risk assets and sentiment across asia. setting up for what could be a very eventful friday session in asia. let's get the vonnie quinn. vonnie: hong kong is targeting an end to the self-quarantine in november. sources tell us that the chief executive wants to signal that hong kong is back in business

despite the objections of some in the administration. the final decision is said to be hinging on covid cases and sentiment. where told a plan would later shift to a long-term strategy of selling that you want investment. elizabeth holmes has had her longshot appeal thrown out by california court. lawyers have been trying to get her fraud conviction overturned by highlighting accomplishments. the judge upheld the guilty verdict. she will return to court next month for sentencing. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn.

this is bloomberg. haidi: still ahead, we will talk about the u.s. jobs report. coming up next, we will talk about strategy and these markets. this is bloomberg. ♪

it is setting up for jobs day. looking at u.s. futures. looking mildly positive. we saw a surprising late day reversal taking stocks in the u.s. higher. we are awaiting on the u.s. jobs report. he we sawtek surging. the dow is flat at the moment.

semiconductors mixing out on the rally. treasury yields continue to search in anticipation of the data. our next guest says that as long as real rates continue to rise, equities will remain volatile. you get a feeling we are still in process of repricing and finding our footing in this market. where does this land particularly with the degree of uncertainty that remains? >> thank you for having me. we need to wait for the real rates to continue to rise and then stabilize. we had an unusual combination where we had negative real tenure rates for almost two years during the pandemic when the federal reserve cut rates so low and that's not normal. all of us learned in our business school classes that the

way you value something is through valuing the present value of future cash flows but if you have a negative real rate, it makes it hard. it's no surprise that you saw this enormous s&p multiple expansion. now rates are positive again. we need to wean ourselves off of the sugar high. investors need to get used to the fact that are not going to grow to the moon, money is not going to be free and as long as rates are positive and rising, we are not going to see the kind of valuations that we did before. you have that combined with a question about where we are in the economic cycle and are we going to be in a recession or not. get this tug-of-war between growth and value stocks. >> take a look at this chart, the bloomberg dollar index sitting at a record high.

the overall dollar index is at a 20 year high. how much of this is a complicating factor for risk assets and sentiment? >> the sense of the u.s. dollar has surpassed all expectations this year. although it could exhale in the near term, we think it is set to continue. at the health of the u.s. economy compared to many other economies. with a strong u.s. dollar, we think it will continue to put a lid on exports and also a lid on other equity markets and how quickly they can appreciate. >> does this become the kind of market where they say the first people who pick companies rather than sectors or big cap tech etc.. regardless of what the rates are doing on some level, i imagine

one company might say i can still make money, i am still worth buying. >> if we look for the last couple of years, it was all about factor investing and you needed to own the big cap tech stocks. then it started leaning toward value investing. if you look at this year, we started off at fairly spins of levels. then the fed did surgery -- erase inflation added to the volatility. factors are going to be volatile and will not be is pretty double as they had been in the past. looking at individual stocks makes a lot more sense in our minds certainly until valuations and aggregate get to a lower level and -- >> where is the best place to put your money in terms of countries and regions? with the dollar rising so much,

with the fed hiking aggressively, do you stay away from emerging markets and in the u.s.? or do you say that there are countries like asia like japan or china are a good place to look for stock to buy? >> we can always find some good stocks somewhere in some countries. looking top down from a macro perspective, we are overweight the u.s. and underweight international and we have very little exposure in emerging markets at all. where we are looking for emerging-market exposure and one area that is interesting is mexico. because of the close economic linkage to the u.s. and the possibility of potentially on shoring to areas poster the home. we think that given the debt problem and china, it's a long time before we are likely to invest in china. looking at other countries and asia, with japan it is a

constant battle against deflation and what's going to happen with inflation trends currently. it's something that could be interesting, but for the most part we are sticking with a strong u.s. dollar its with the technicals are telling us to do, that's with the fundamentals of telling us to do so we are trying to stick closer to the u.s. economy. >> it sounds like you are getting a real clear message. up next, companies on wall street asking employees to return to the office. details ahead. this is bloomberg. ♪

>> one company has asked for a more consistent return to the office.

what do we know about what they're asking and the timing? what is the business necessity for them to pushing this? >> they're asking people to be back in the office on a consistent basis, but still offering the flexibility that people have come to expect. wall street's biggest banks have been pushing employees to come back since last summer. they have been aggressive for other industries haven't. they are taking this opportunity ahead of the long weekend that the final hurdle for some people to come back to the office. >> is this something that you get the sense as it spreads from one big bang to another that

this is something they're going to have to do? are they making that clear that this is more of an as needed than as want to condition? >> wall street knows that it has to tolerate flexibility because the labor market is still competitive. if they don't offer the kind of conditions the tech or other industries are able to offer, -- have to be alone but flexible and have to have awareness of that. at the same time, the message is that dealmaking or entry-level roles, that is where the intentional office-based culture comes from and they may feel the pressure to come back or.

>> moving on to business flash headlines, one company repeat of -- reportedly cut 4000 jobs. executives are meeting in singapore. starbucks has named its next ceo. he will join october 1 and take over fully april 1 of next year. smart, is giving estimates for sales. broadcom shares rose about 2% in late trading. >> coming up ahead of friday's

jobs report, an economist says why she thinks the u.s. is heading toward a more conservative pace of hiring. this is bloomberg. ♪

vonnie: i'm vonnie quinn with bloomberg's "first word news."

president biden is said to make an address tonight. he is shifted into campaign mode ahead of the november midterms. you can catch a speech live at 8:00 p.m. in new york here on bloomberg tv. the president of the atlanta fed says the campaign to cool inflation is far from complete and policymakers will work to achieve 2% market. pakistan's former prime minister has been awarded bail. the charges relate to a speech he made which have been said

pose a threat to officials. two u.s. senators created a bill that will crackdown on entities shall companies that maintain agreements with chinese companies. under the agreement, chinese companies will have to use new symbols with brokers providing warning labels to investors. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. haidi: the 21 million residents in southern -- southwestern china or in lockdown after being given just a few hours warning. it sparked panic of buying as groups race out of town with fears over a lengthy lockdown like shanghai.

let's bring in stephen engle in hong kong. what's the latest that we know? >> it's another blow to the area which is at the heart of one of the most populated provinces in china. it has been under a drought and power shortages, now it is under a full citywide lockdown. 21 million people. ever given six hours notice from officials before the lockdown was imposed last night. there was panic buying, supermarket shelves being stripped of products. we have people anecdotally racing out of town to get to the countryside to ease their pain. we don't know how long this lockdown is going to potentially last. shanghai is the big example. they were told originally it was going to be an eight day lockdown with mass testing and sealed off residential compound.

that lasted two months. not every city that has gone into lockdown has had a lengthy lockdown. one province lasted only one week. again, the uncertainty has added to the angst and the protest online at least about the approach to covid zero which xi jinping is sticking to steadfastly. they have had 900 cases in the last 10 days and that has warranted a lockdown of 10 million people. industries going to be affected. they have automobile plants volkswagen, volvo, toyota. it is not as shanghai as it contributes to about 1.7% of national gdp, but this is a

sentiment thing. this is the sixth mega-city that has been put into lockdown. people wonder who is next. >> hong kong is next, but for something very different. we are hearing that hong kong may scrap a scheme. what do we know? >> it looks as though the chief executive who was sworn in on july 1 taking a different approach than carrie lam who relied heavily on her health department officials because there is said to be a bit of a debate going on within the powers of government between the health department and those who want a more competitive playing field for hong kong and singapore opens up.

we're hearing from sources that as of november, they are leaning more toward relaxing down to zero. let's hear conversation from yesterday. >> is always my intention and the governments intention to allow maximum connectivity with the world as cases come down, there will be more room for me to do extra things. >> he was noncommittal on that specific report, but there has been other evidence that the city is readying to open up ahead of the big financial form. they are inviting global banking heads followed by the rugby seven sporting event which is usually an annual event where lots of people fly in. they want to reduce that hotel quarantine down to zero ahead of that and the evidence is indicating that the hong kong

airport has been doing a stress test for increased surge in passengers and whether they can handle the load numbers as airlines have reduced their capacity to hong kong. the government says those trial runs went smoothly. >> let's stay with china for our morning calls. some say it could reach a key psychological level this quarter. what is this key level? >> it is actually seven, but i will get to that and a moment. you have a lot of issues facing china economy. the covid crisis, the property issues. even there has been some support from officials but as it has been pointed out, we are seeing and easing and financial conditions going on for months, but that has not been enough to

create any local confidence. the yuan could reach seven against the dollar which is the key psychological level. leading up to jackson hole, they had already been setting the daily fix well below the estimate. what they are really wanting to do is stem the slide. the reason for that when you look at the roots of the issue in the economy, we're talking about the housing crisis covid and week local currency is how they're going to help with that. >> with all the big moves in the dollar, what are we seeing for the yen? >> what jp morgan is saying is that we could see further weakness from here.

we are already at a new high. they are saying that we could get to the low one 40's even 147 which would be a level that puts a lot of pressure on the bank of japan to act. or the government to intervene. let's change now to look at what is driving that. it's all about the yield gap we see between the u.s. and japan. there's not much to change that because you have the hawkish fed . it is still going with the dovish stance. >> let's discuss where the federal reserve may be going next especially after friday's big u.s. jobs report. our next guest attended the

jackson hole conference last week. great to have you on our show. i want to start with jackson hole, because the jobs report such a big part of the next decision. what was the message from jackson hole particularly when it came to the labor market and this jobs report? >> there were two big takeaways.

number one, monetary policy is hard now. not just in the u.s., but in economies around the world. number two, the fed is operated for a long time that announced of prevention is worth a pound of cure. they were able to prevent acceleration in the inflation rate so we are now stuck the pound of cure. jay powell in particular was transparent that the pound of cure would be paid and there would be pain in terms of lower economic activity that might be translated to both the labor market, the housing market, and even equity markets because of the hike in interest rates they have to do to bring inflation down. >> the jobs report is key. and the cpi report coming up, those are the last two reports before the september meeting. the consensus for payrolls is about 300,000. your survey suggested it could be weaker. what number are you looking for? >> first of all, i would like to add jobs are always key. to the fed, it's about inflation. carless of what they see in the jobs report on friday, that doesn't change what they have to do to get inflation down. they have to keep hiking rates.

what needs to be done is the inflation target rather than pumping of the jobs market. secondly, i think they're going to see a slowdown in the labor market numbers. it's probably not going to be the same as the slowdown that we saw with the client based. this is no longer a forecast that we report. it is an estimate of private sector payroll based on adp's numbers. what you're going to see in the report is close to consensus or maybe a little lower. i'm looking at 290,000 jobs. the key numbers to watch is the wage rate. that's what's important to the fed. whether or not the tightness of the labor market that is being exemplified in this report is leading to a wage crisis spiral that the fed has to take control of her. >> when it comes to lifting the hood on the jobs numbers, i know

you have spoken before about the pressure on smaller companies. how much further downside you see when it comes to these more sensitive industries and companies and where we might see the biggest job losses? >> i think that's where we are seeing softness, you are absolutely right in the interest rate sensitive sectors if you look at those for example the housing market and mortgage rates. the financial sector when it comes to people in the real estate and mortgage market sectors. a slowdown in housing, you might see at their. you might see it in hospitality. picking small firms struggling to add headcount. part of that is the competition with larger firms. my take away is this is a very unusual market. we have a high rate of job vacancy still. some of the softness and

weakness is not because of lack of demand but lack of supply on the side of workers. that's why the labor participation rate is so critical. when it comes down to for the fed is wages. wages matter a lot when you're trying to bring down inflation. >> then you have potentially this anecdotally we are starting to see it come down when it comes to energy prices. does that add an extra level of fiscal stimulus which encourages risk we could see a wage price spiral? >> that's an interesting concept. the one thing we want to see enterprise -- energy prices fall, but that would maybe due to more capacity for firms to negotiate higher wages. that's an interesting way to look at the dynamics in the market. my take in your question is that

it's complicated right now between prices and wages. we know that firms from our own survey data, they are confronting wage setting in an inflationary environment where workers are not shy about asking for cost-of-living increases in this tight labor market. the firms are faced with the choice of how to pass that on to customers. that could lead to the higher price dynamic. >> they are waiting to see again this jobs report and cpi report to know how aggressive they have to be. do you think this is the kind of number 300,000 or 290,000, is that going to be enough for them to go to 75 basis points? >> that's an important

distinction you're making. they might use this number, the jobs number to have a more aggressive stance. the fed likes to go and has been successful going low and slow a moderated 25 basis point in a steady protectable way. what we are seeing now is a deviation from that and a collective fed that doesn't leave a lot of time for mistakes and overreaction. when you move that high that quickly, you don't get a chance to wait to see how the economy response. if there is a hairtrigger response to the jobs report tomorrow, it might be hard to unwind if they overcorrect to quickly. it's a balancing act.

>> we just heard about jeffrey's telling their employees you have to come back to work. if you have to stay home with your kids to take somebody to the doctor, that's fine but they made it clear and more big wall street banks are doing this kind of thing. you work with so many companies across the country, you talk about this kind of thing all the time. what are you hearing? what is the trend more broadly? will people be more in the office? >> i think you will see a return to office with the return to school. it's interesting because most jobs can't do that remotely. a lot of people have managed working on site many through the pandemic. i think where the negotiation will fall in the future is not working from home specifically but workers who want more autonomy over their time. our survey, people want more

control of their time regardless of the work location. so the happy medium for companies and workers may not be just remote work but more autonomous work, more flexibility in the work schedule that could be the middle ground. >> so great to have you with us. coming up next, broadcom delivers an update for the current quarter. this is bloomberg. ♪

broadcom gave a strong forecast for the quarter. they don't expect to be hit by the new export rules affecting china. >> it looks like the export rules which are restricting exports from nvidia and amd to china are not impacting broadcom and they came out with a strong sales outlook which was welcome news on wall street. the companies reducing fears

that spending on infrastructure is slowing. shares were up 2%. they beat expectation for profit and revenue as well. the company expects solid demand affecting continuing investment by customers. a bigger picture for broadcom, they have done fairly well this year where a lot of rebels -- rivals have not. customers have put off big-ticket purchases. broadcom sells a wide range of chips to apple, google, and cisco. drop into the bloomberg and you will see that they have become a bellwether and also invaded the fate of so many other chip companies which have had a very difficult year.

>> the other side of the story a big plunge in chip stocks. >> nvidia took a lot of their peers down in the regular u.s. session. these were significant drops. nvidia took a lot of their peers down because they warned that the new government rules about the exports of artificial intelligence chips, the ai chips to china could hurt the revenue in the range of hundreds of millions of dollars. they warned they have two chips in particular that will require government approval before they can be sold. they followed up with another announcement that they have been given a license to provide support to u.s. customers in china.

to phrase one analyst, you can see chip pain for the bigger industry, there are clearly more broad takeaways that the government here in the u.s. is taken the more aggressive approach to software into chip exports to china. >> plenty more ahead, this is bloomberg. ♪

>> a quick check of the latest business flash headlines, lululemon is jumping. the latest sign that high income shoppers remain strong. the company is aiming to double sales by 2026 by selling more goods to men and opening stores overseas. jeffrey's has asked employees to be in the office on a more consistent basis. the company has reported no issue with employees who want to work from home time to time. they are stressing the need to be more at the office to maximize fourth-quarter results. twitter is issuing an edit button. users will be able to make

changes to their tweets for up to 30 minutes after originally published. prior visions will still be viewable. >> let's take a quick look at what is happening to currency. once again, things are flat. a bit of a slight move in the aussie dollar and new zealand as well. the japanese dollar-yen at 140.18. a little bit of pullback in the dollar waiting for trading to get more underway broadly. the jobs report is coming tomorrow. daybreak asia is next. there's a whole lot coming up. this is bloomberg. ♪

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the world of politics and the world of business. balance of power with david westin. weekdays. this is bloomberg. you are watching daybreak: