stories this hour. raining in soaring power costs as germany helps households struggling with energy bills. haidi: tesla curbing its ability to stem inflation with rate hikes. traders way the tightening trend. kathleen: a mixed day on wall street. upon trying to rally after they dropped report, most people see a 75 basis point rate height is likely. you see that they have got a bit of a mixed opening from the futures market. up on the s&p, further down on the nasdaq because of the concern of a aggressive rate hikes. the s&p was down 3%.

8% over the past three weeks. stocks have not fallen. that is not good news. in terms of the bond market, there was a rally, particularly the short end. the yields were down to 3.3% to 3.52. today we can see that there is a of a rise in prices and a pullback in yields are as people are questioning what the jobs report means to the fed. crude is down 7% last week. it is up by more than half of a percent. global demand concerns about that with aggressive central bank rate hikes and with the covid lockdowns in china, what does that mean for the oil price over time? look at the chart, a simple story. looking at the 50 day moving average for all major indexes

was down below the average. a sign of continued negativity and not positive sign for stocks going ahead. haidi: the correlation we use almost all asset classes falling into an environment that points to a global uncertainty and so much of that has to do with central banks. we get a positive and more decisions excluding the rba decision this week. they are expected to be set for the half-point hike and it has raised prices. you may see the rba taking a pause but almost all economists expecting another move in this week's meeting. looking pretty tepid at this point. down .2%. we are seeing a decline of .3%, we saw the in the longest weekly losing streak since june. we are headed for the shortened holiday trading week.

not a great deal of carry through from the markets in the u.s.. the aussie dollar is filling the risk off trade. we saw the dollar taking a risk, the dollar bull should hang onto the long haul their positions even if it is near a crossroads. it is not yet time to exit according to currency strategists at j.p. morgan. take a look at new zealand as well. sitting up of the key .140 level. kathleen: let us look at the jobs report. payrolls are quite good, on top of the month of -- of the month before. a 3.5 percent raise, that got people going. people want to buy some bond with the unemployment rate.

it went to 3.5%. here is the secret message beneath that number. a lot of people came back to the labor force. the participation rate up 2.4%, it has gained 0.3 points for the 25-50 five-year-old it was 82 point -- and change. this pushed up unemployment. if you have not got a job yet, you are counted as unemploy ed. another sign for the fed that they made another 75 basis point rate hike. haidi: a completely different picture when you look at the risk in china for beijing as we head through leadership there. they have to test their results when it comes to covid zero. the result is unflinching.

they are extending the lockdown in areas of the latest outbreaks. that is grappling with these energy shortages and output disruptions. we are seeing the districts of the western negativity and more mass testing as well from sunday onward as a chance to get the covid outbreak under control. this further intensifies the lockdown situations and control measures are in place beginning on sunday. other district or announcing the third round of covid test on monday. we expect a return after that. we are talking about the sixth largest city, around 21 million people being affected. the biggest to be closed off since shanghai and there is so much fear, you see the panic buying, people trying to get out of the city when the lockdown was announced because of the concern about this turn into a

painful lockdown that shanghai suffered through. commodities prices, energy demand in particular. the story of the weekend is that you can see the special emergency intervention measures because gazprom is a political move, not opening up the key pipeline. kathleen: it is not a complete surprise, europe has been hunkering down for this for some time, hoping it would not happen. the powerpoint caring so much of their energy, natural gas is a that they depend on very heavily. the question is what next? rationing? millions of dollars to businesses, households, to help them pay those bills. german officials say they have enough supply and there will be able to take care of this and get through the winter even if it is cold. the president of the federal network energy regulator warned

that even with gas storage and 95% and there would be enough for 2.5 months of demand. german storage only stands at 85%, we quote a professor from the international energy at sciences in paris and he says the eu is in red zone as further demand disruption needs to take place. they have to have people use less. how are they going to do that? it is quite a tough position and a dark cloud hanging over the ecb. they may have a recession starting. haidi: it seems like a hard decision when you consider the magnitude of the rate hike. you do not envy christine lagarde. that is a huge amount of different challenges that the continent is trying to deal with. let us take a more closer look at how all of this is playing

out across markets in different asset classes. let us talk about the fx market reaction to what we see as we look at the energy crisis in the eu? >> we have seen the ramifications of what happened on the weekend play out. most significantly in the euro which is down against the u.s. dollar this morning and as you mentioned, we are going to meet this week. there are expectations of a 75 basis point rate increase. that is not going to be enough to assure up the euro which has fallen below parity. as you mentioned, they are trading that fine line with what has been going on over the weekend. as a worsening energy crisis,

fitting into fears of a recession in europe and of course anything like that going to have far broader impacts across markets. the euro is the main thing or we have seen the main as it were we have seen that play out this morning. kathleen: how about the u.s.? the u.s. is looking at what now after the strength in the labor market. look at the eci report. how do you add europe into the mix? the chinese covid lockdowns into the mix? they on the burner, but the back burner. >> there are obstacles that the market has to deal with. jobless reports, what is strong, he does not add anything to the

case of the fed adding tighter policy. there was a little bit of oil they go 75 later this month -- i will they go to 75? this will keep weighing on the market. we have fears of precision in europe and this worsening energy crisis is another headache for investors. that is already a show of the back foot because of the exit lighting and higher interest rates. haidi: there are some pockets of

opportunity in asia, in particular southeast asia. we see that compared to global equities and the rest of the region. how is the market shaping up as we get into the last few months of the year? >> there are pockets of opportunity, there may not be enough to support asian markets. we are starting to see another week off day, this is again going to be hit today because of the energy prices -- crisis and what it means for global growth and demand and the demand from europe. it is incredibly uncertain. how deep this is going to impact investors. they already have to deal with the headwinds from china as you mentioned, they are widening the lockdown. they are sticking to the covid zero policy that impacted

chinese growth and is continuing to weigh on investors. this is an opportunity there. as we head into the end of the year, as europe heads into winter with as energy crisis, it will be further pain. a lot of uncertainty as they try to figure out where is the bottom of this market? this market brought out that they have seen. i think period of uncertainty as investors try to figure out how to position themselves going into the end of the year. kathleen: taking us around the world, let us go over to vonnie

quinn. >> authorities in china and japan are making preparations for typhoons. the strongest global storm so far this year. shanghai has closed a major container port while simples coastal cities will be suspended monday. they have canceled flights in okinawa. forecasts to move northward into the east china sea with winds of 185 kilometers an hour. the next uk prime minister is promising action to alleviate supply problems. conservative party member is expected to name their leader. her plans to slash taxes are worrying investors. pakistan has added another district to its calamity hit areas. torrential rains hit areas of

the north tower previously unaffected. it has emerged villages and swung through agricultural lands. 3 million people are displaced as they have confronted the highest rainfall in three decades. one of india's oldest fortunes has been killed in a road accident. they and another passenger died when they crash in mumbai. they had an active role in their father's conglomerates. he had been chairman of fund through 2016. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. haidi: still ahead, we take a look for opportunities in the barn markets. you are watching europe and latin america in particular. we have a preview of the rba

decision with a guest. she talks about maintaining the rage when it comes to rate hikes. this is bloomberg. ♪

haidi: let us take a look at the week ahead. the saudis have said that output cuts could be on the table to slow what they call a yo-yo market. rate hikes in australia on tuesday as inflation and the energy crunch is rattling europe. the ecb is expected to raise rates by 75 basis points. inflation edged down in august,

food prices are stabilizing. moving on to the uk prime minister announced on monday. kathleen: the currency is near the low 30 decades and a surge in art or domestic stocks. the cost of living crisis will be the prominent problem for the winter. that is the week ahead. haidi: let us take in deeper. tiana is at amb -- diana is a economist at amb. do you feel a sense that there is the pressure given that the ordinary cycles may take a pause to see how the data plays out? >> that is playing a role in why

the rba is being so aggressive in raising rates. we would have had 225 basis points. the most aggressive rate hike cycle we have seen since 1994. the rba is concerned about the inflation out q. that is why they are raising rates quite aggressive late tomorrow and over the coming months. haidi: let us take a look at this chart. we have a lot of questions with the labor market and when it comes to wage price growth. what would the rba be watching given we have a reasonable pace of wage growth? >> i do not think wage growth is particularly strong or as strong as the rba would have liked to have seen at the moment. we have a tight labor market. wages growth is stuck at under 3% on annual basis. if you look globally, it is five

or 6%. that is similar in the u.k. and in europe. the liaison is saying that growth will -- will take a bit longer to come through. we are not going to see the level of growth that the rba has forecasting -- been forecasting. a lot of pressure put on borrowers and on households. the wages growth is not going to be there. we see real wage declined because inflation is high and too much pressure on households with the cost of living issues coming up for them. pressure on households that has been one of the pillars of that has rba keeps referring to. haidi: the external factors are deteriorating too when you look at the pressures on china. how much will that feed through to the australian economy and the demand we see from that major market? >> there are some buffers. we know about the related

savings at that households have made since the pandemic started. 10% worth of gdp in household savings. the buffers that homeowners have made because interest rates have fallen. that happens when you have high inflation and rising rates. we have not. seen the data to yet the data we have received so far, the hard data is a lagging indicator of the economy. consumer sentiment, building approvals, they are telling us that we may run into trouble. the hard data is holding up. that is what happens when we get a lag from changes to interest rates to the economy. i do not think that the rba is giving yourself enough time to watch the impacts. kathleen: i want to follow up on this, jim bullard was the first,

the fed president talking about move more aggressively and front rate hikes rather than waiting a long time to see how they play out because you want to make sure they are having an impact on inflation expectations. you want to have an impact on what yields are and how much tightening or are getting from the market. do you think that applies to the rba? is it different spaces where wages are? it is not the same case? >> there are a few differences between australia and the u.s.. the main difference i see is that inflation is much more of a problem in the u.s. than it is in australia. you could see the potential of a wage price spiral emerge in the u.s. because wages growth is much higher compared to what we have in australia. even though that labor markets are extremely tight. there is a disconnect in the sterling weight system that is not -- in the australian weight system that is not connecting.

has inflation expectations get out of control here. kathleen: i am sure that you poured over it like everybody else, what does a need for the fed needing to get more aggressive in a 75 basis point rate hike? >> there is a concept of lacking data. i do think that the fed will look through the data and continue on its aggressive rate hike cycle because i do think that they are worried that inflation expectations can get out of control a little bit in the u.s.. there are reasons to be worried about wage price spirals emerging in the u.s. and inflation getting too high. i think we are going to see another 75 basis point rate hike from them. >> it is great to have you with us here. more to come on daybreak australia. this is bloomberg.

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kathleen: a quick check on the business flash headlines india's anti-money laundering agency has targeted an investigation into a chinese loan app. it was prompted by allegations of extortion and harassment of customers involving the app. the company is cooperating with the agency. possibly it will investigate the use of personal data by personal media apps. the home affairs minister told newspapers that they put a modern security challenge to authorities. last month, the government announced a review of social media competition involving facebook and twitter. citigroup has been trimming its workforce and demand continues

in the housing sector. u.s. retail bankers have $1.2 billion in mortgages and is down 15% compared with a year ago. haidi: coming up, the biden administration allowing pump era tariffs to continue on chinese imports while he continues to weigh the options. we have the details ahead. this is bloomberg. ♪

>> eu ministers are said to discuss measures to rein in surging energy costs.

this involves a gas price caps and derivative trading. it will be considered on friday. gazprom's decision to keep the pipeline shot is real urgency in europe. -- shut is reviving urgency in europe. a chinese city will intensify lockdowns and extend control measures for at least three days. as a lockdown asserted on thursday, to other parts of china are under covid lockdown, nationwide, 1700 cases were reported before saturday. indonesia raised money to ease the burden. the most use gasoline is increasing by more than 30%. the president says state funds must be used wisely worried most of these subsidies are going to the wealthier people who own cars.

-- wisely. most of these subsidies are going to the wealthier people who own cars. the doctors fear reduced growth. investors are watching the outcome in chile after political tensions a what of latin america's richest nations. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. haidi: australia will investigate the data harvesting practices of chinese social media apps. we talk about the implications of what they want to do. >> this was in a local media yesterday and they are millions of australians accessing an app where the use of data is questionable. last month, we had a revealed on the u.s. and u.s. data was repeatedly access from china.

this is the concern behind the fed minister has. some users may know that there is something not quite right about how their data is being used but use the app anyway. they look into this and come back with a range of options on how to address this problem with what it calls a questionable data collection practice. as a clear idea that is ruling out a plan. -- ban. kathleen: what could this mean for the already tense relationship between australia and china? >> they chose words very carefully, they are not trying to name china specifically and it is not just tiktok, it is other apps as well. you can read between the lines here, since the election of the new government there has not been a fall between australia and china but relations are less

icy. home affairs is looking at what it calls the next phase of working to combat foreign interference in australia. again, not naming names. suggesting that the problem of foreign interference is not going away. kathleen: time for morning calls ahead of the asia trading day. treasury yields are breaking out with five and 10 year measures back to their. eyes. 10-year yield's are moving closer to levels that will restrict economic activity. equities seem bumpy and a further brought out in this dynamic of real yield in decelerating growth. haidi: southeast asian growth making it an investment favorite. credit suisse, the croatian -- growing bullish hope. the benchmarks index is doing

better than the asia-pacific index and said to outperform for a third straight quarter as well. even in uncertain times and there are pockets of opportunity. kathleen: discussing the most likely areas of distressed debt and investment ideas around that. this is bloomberg. ♪

haidi: europe's energy crisis is deepening, they are discussing measures to deal with the issue. let us is bringing in david, what are these special intervention measures? are they likely to be effective? >> this list of tools that they are likely going to be putting on the table. the meeting friday of ministers, and emergency steps that they will be discussing is getting longer. it has already exploded based on

news last week. price caps on russian gas and renewables and coal. this goes into a broader exercise of limiting the impact of gas prices on power prices and the second bullet point you see on your screen which is going into the liquidity management measures in the energy financial market for the suspension of derivatives trading. a credit line support for market participants, especially those participants with high margin calls. a lot of it is in place on top of this, germany which is one of the worst hit here also put out on the weekend $65 billion in order for them to offset deals that has a surging energy prices and this goes into whether this

works or not. you have a bit more in energy prices. gases come down from the peak. certainly, look at some of the prices, we are north of 500 euros. we have not seen going into it what is going to be a testy season. i imagine that begins sooner rather than later within the next few months. kathleen: there is a lot of talk about the concerns over a cold winter coming. this has been front of mine for many for some time now. let us take a look at the treasury markets. there was a rally on friday after the unemployment rate rose human though it rose because the labor markets got tired. we see part of the features of showing a gain in price.

this bullishness continues at least for now. people are thinking at least the jobs report was not stronger than we expected to get the fed to get more aggressive and take on more aggressive rate hikes. there was quite a selloff in the market and yields rising quite a bit and maybe a little respite as people wait for the fed rate hike decision. let us move on to the u.s. stress test. down to 22%, having fallen seven months out of eight. we bring in our next guest who invests in stress driven opportunities. the managing partner at converium capital. you stress debt, it is down. 22% does that mean there is more opportunities and there are all kinds of ways to make money in distressed debt? >> thank you for having me.

i focus on distressed and dislocated and orphaned capital structures where there is no fundamental issue with the business. there is a immaterial overhang that is affecting the valuation. we can take advantage of price security and a centrally get a security that has little downside at a potentially very significant upsides. as an opportunistic investor, that can invest across the capital structure and as and geographies, you can pivot to where the opportunities are. a lot of talk about the distressed market recently, a lot of people have been focusing on the equity markets. it has created a lot of interesting pockets of opportunity today. we think we see a lot more going forward. two pockets will focus on today in strategy are really convertible bonds, mainly europe

and distressed sovereign debt. kathleen: great. you are joining us ahead of the song hong kong investment meeting. let us start with european convertible bonds. what makes of so attractive? what is happening in their region and even globally? >> european credit has been hit by a perfect storm. european credit has been trading at a pretty big discount to u.s. credit or a number of macroeconomic issues that are affecting europe specifically. you have equity market valuations that are down very significantly and many european companies that have perfectly good businesses took advantage of low rates. interest rates are going up, macroeconomic conditions in europe and a week equity market

valuation is creating a perfect storm and we have had the opportunity to look for and by many very attractive businesses in europe that generate good cash flow and have good modes and have sustainable businesses and really we can create these capital structures at a discount from what they were. i can go into a few examples on those. haidi: what are some of those examples? give us those examples. >> one of the things we haven't focused on is a french nursing home operator, large business. the number one player in the region. they own a lot of their real estate. the market conditions we discussed, you have convertible bonds that are down from above or to roughly $.70 on the dollar. where you are buying the ponds to date, they are covered from the equity value in the state

and the cash they have on the balance sheet and getting the business entirely for free. where the bonds stay today, you are getting a 9% yield. a multiyear option on the stock going back to where it was last year. we think it is an extraordinary set up to take. -- there. haidi: we see some of the heaviest credit losses. local government risk or private sector risk. are there opportunities there or is the macro outlook too high? >> we tend to not focus on opportunities in china. we tend to like to go were a lot of other folks do not want to be active in. we focus on smaller, more orphaned capital structures. some in latin america, where there is necessarily less eyeballs. that means security prices tend to be a little bit more depressed.

we have not spent much time in china. clearly, we are paying attention. kathleen: how do you start looking for a good opportunity? do you go by industry? by region? what is your number one starting point? what is the main thing are looking for when you are looking to put some money someplace? >> downside protection. we like to focus on one of the opportunities. there are so many great analysts in specific sectors, geographies, or asset classes. when something bad happens in their specific focus, they tend to have biases that may affect their desire to get involved and have more and distressed situations. we may be losing money.

we are able to come in and take advantage of some of these dislocations. it is about paying attention to micro events that affect specific companies and more macro events. with europe, it became very clear that european credit was feeling a lot of pain and on top of that, with the number of bonds that have been issued, it was clear to us with equity market pain that there was going to be a lot of interesting opportunities. we dug in looking at convertible bond markets in europe, zeroing in on businesses that generated cash flow, that had assets, downside protection and it was clear to us why the opportunity existed. we factored those in together and we liked to have securities and portfolios that had little downside and had multiple ways for us to win. haidi: that is a great summary of your approach. i am wondering about the convergence of all of those sectors.

notice that play out in the japanese market for you? >> japan is interesting and we really are asset class agnostic. where it is clear that it is orphaned. what has been so attractive to us about japan for many years if you have credit mike downside protection, given how have credit markets have been through credit downside protection or you have businesses that have 20 of cash and distressed multiples because analysts feel that certain companies in japan are not able to change and we have been pretty excited about again being able to buy great businesses at very attractive prices and having multiple ways to win. japanese equities have been and will be very interesting for our allocations. kathleen: in distressed debt

markets you are looking at companies, common equity bond type approaches. you step back and look at the whole story playing out of aggressive central bank rate hikes. how much will it be a plus for you when they finally signal that they are slowing down and they're going to pull back rate hikes? are there any senses but it may be a negative? >> it is math. rates going up, it is causing a big barn market correction. when you take a step back and look at spreads today, spreads are nowhere near their wide. as central banks move, the bond market should we and we think that many companies and countries that have benefited significantly over the years from ultra low interest rates to sustain themselves when they

have been burning cash and have higher interest rates, highly unsustainable capital structures. they hit a wall. we do think that the music has stopped. what has begun with a lot of bonds trading where they are today signals to us that many companies and countries that have unsustainable capital structures, even at 5% interest rates will really need to restructure. creating opportunities for us. haidi: great to have you with us. let us take a look at the sovereign pace when we look at australia and new zealand. we see this relentless bond rally. putting this trading at ease as we see the rba moving towards the fourth .5 point hike.

we see a bit of a move when it comes to australia and new zealand. the qe dollar -- kiwi dollar coming under pressure. we see more globally, the aussie dollar is bearing the brunt of the risk off trade. sitting under 68 u.s. cents. the short end yield falling. the year bond seeing a drop. -- the three year bond seeing a drop. be sure to tune in to bloomberg radio. we are broadcasting live from our studio in hong kong. listen in with bloomberg radio.com. this is bloomberg. ♪

haidi: i look ahead in terms of the day, australia and new zealand. we get the numbers for august and the inflation gate. new zealand will defer discussion on increasing the conservation levy until late last year -- next year. as a priority is for tourism and customers. we are watching mining shares after gold increases in the second quarter. there are two new projects in

the west coming online. kathleen: an indian startup is starting a funding rally to amass $23 billion. the education provider is in talks with sovereign wealth funds from abu dhabi which could invest a combined $800 million. it will be used to make an acquisition in the u.s.. u.k. is among the potential sites for a factory that was built for ev cells. the taiwanese battery startup is looking at options across europe and southeast asia. they promise reduced charting times, longer driving ranges and a no fire risk. haidi: when it comes to the set up of the market, not much positives, tailwinds to be had. continued hawkishness from

central banks including the rba expected to push forward with its fourth half-point rate hike this week. we are seeing the aussie dollar, the force of the risk off trade. kiwi is a little bit softer, shy of 61. we are ahead of the key 140 handle. the bearish sentiment given the extended lockdown in china and the myriad other issues facing the chinese economy at the moment. look at the equity session because we are seeing probably a downside when it comes to the side of trading. .3% lower at the end of cash trading. kiwi stocks also up by a quarter of 1%. trading in the future session with chicago up .3%. we also saw the longest losing

streak since june. the hawkish commentary from the fed adding to the global uncertainty and we continue to watch as a developments when it comes to the eu energy crisis. a big week ahead for the ecb, it is a matter of the magnitude of the moves that they opt for. as energy shock really testing christine lagarde and the ecb. kathleen: it is interesting to see if any of this angst is becoming more of a crisis every day. of that will be over into u.s. stocks. features were nearly curating -- getting a little bit more negative again. they may look at the doctor and see no matter what happens, the employment was up and it does not detract from the likelihood

that the fed may do a 75 basis point rate hike. the number we have to watch now is in job. the next cpi report, how hot is it? that is what is on the market's mind. we speak to the u.s. special presidential envoy for climate john on the presence of china -- promise of china and america working together on global warming. that is it for daybreak australia. daybreak asia is next. stay with us. this is bloomberg. ♪

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kathleen: welcome to "bloomberg daybreak: asia."