shery: welcome to daybreak asia.

haidi: the top stories this hour, asian stocks and bonds at this hour come off of u.s. having the worst stock day in two years. the quarters of a percentage point next week, some are even betting on a four point move. ether under pressure ahead of the merge. shery: it is still early in the session but coming out of the back of the s&p 500 seeing its worst days since june of 2020. technology stocks leading the decline, nasdaq 100 moving more than 5%. harder than expected inflation -- hotter than expected inflation numbers. we saw it at the highest levels since 2007 and that in against the 10-year yield deepening in

today's session as well. crude slightly higher in the asian session at the moment. we see the strength of the dollar weighing on oil prices and we had some idiosyncratic news with the biden administration planning to restock the emergency crude reserves. haidi: geopolitics, a big week for data. president jinping and reports of the sanctions package being pushed against china by the u.s. and possibly the european union as well. agent stocks can go any direction but down. we are seeing indicators downside of 2.3% as we get into the cash trade. we are watching the yield curve after we had the planting, watching the belly, kiwi stocks

up by 1.4%. although lead aussie dollar -- although the aussie dollar is holding steady. haidi: consumer prices were pretty hot last month. another historically large interest rate hike from the federal reserve. for more, let us bring in our policy editor, kathleen hays. let me start with you because we did see the headline easing, not as much as expected and the core accelerating as well. >> federal reserve has two federal rate hikes. they have signaled 75 and people are talking about a 100. that is the concern. they have to speed up and get more aggressive. everything is disappointed, the headline cpi is standing at

8.3%. it was supposed to be down to 8.1. not getting down as much, even with another drop in energy prices last month of 5%. that is because of the core cpi, that continues to move up and that is part of the headline cpi. you see it going from 6.3% -- 6.1% and it was supposed to go on the other direction and in fact on the month it was a monthly jump. people are talking about it. our chart team, this encompasses core services prices like rental prices, things like medicine, medicare, medical care, transportation, all of these things that the prices do not change too often. it went up to 6.1% from 5.8%.

the biggest month change in 48 years. the fed is worried that if it does not get inflation under control fast enough, it will see this kind of thing. you spend more because you have to and because you got a raise and you pushed your boss for it, this could make it harder to get rid of inflation. i was surprised after this morning, the first congressperson i spoke to after the numbers rolled out, 100 basis point hike, this number and needing to do something fast. this would not be surprising. when i saw larry summers talking about it as well, i thought i guess there is something to it. he said if you are the fed, he would. i think the biggest issue for them not to do it is that it has

not been single ahead of time. -- signaled ahead of time. there have been signals from the fed even in this blackout period, the stars are lining up for the 75 basis point move. can they do that? do they need to? that is the other question. most people figure 75 basis points, 100 will be the frosting most people are not looking for. haidi: we are looking at market expectations and what is already baked in. what would 100 basis points due to rate assets? >> that will be more pressure for sure. one important thing to note is that the s&p 500 fell 4.3% but it did close above resistance level. trading at 3900. that is one indication there is some support here.

1% hike in rates will do a lot of damage. pricing in the future is caught between 75 and 400 basis points. that indicates there is some trepidation there. nobody is making in 1% yet. if we get indications about the economy, that could strengthen the case. we will not know until the fed acts a week from now. shery: let us talk about the bond space. we see a deeper inversion and most parts of the treasury curve are inverted as well. signs of a recession becoming even stronger. >> this is it, the famous indicator of a recession and such a great tool. we have seen today that two year yield and the two year surge up

20 basis points. i think it was high as 22 basis points. that tells us that the traders are gearing themselves for a recession as we invert the 10 year, it was five basis points to the highest level in a few months. since early june. there is a growing expectation of some sort of slow down in the fed really wants. one other is a soft landing or it would -- whether that would be a soft landing or a recession. that is an idea that traders are toying with. there is an uncertainty and volatility today. investors are trying to get in there when they think inflation has peaked. it is not coming down as quickly as expected. i think the broader trajectory is somewhat clear. the city is getting on top of inflation.

it will take time. that is the situation we face at the moment. shery: richard with kathleen hays. let us get you to the first word headlines. >> european union is moving to cap energy companies. this is a lower cost power generators, other plans include a levy on fossil fuel companies excess profits and mentors were consumption costs. this would take the block a step towards rationing energy in the current crisis. vladimir putin will hold bilateral meetings with the leaders of china and iran. legislators calling on him to resign. the u.s. is preparing another round of military aid for kyiv citing a shift in momentum after

ukraine recaptured land in the past week. xi jinping and vladimir putin will hold the first in-person meeting since the invasion of ukraine. it has been one thousand days since xi jinping has ventured abroad. before that, he is stopping in kazakhstan where he introduced his road and infrastructure plan nine years ago. chinese officials are telling banks to release their exposure. the watchdog and overseeing body over estate investment says they strength of the conglomerate shares and dollar bonds have tumbled in recent months. global news 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. shery: national australian

currency bank joins us. the latest inflation data. up next, find out how higher prices will not moderate in the near term. this is bloomberg. ♪

>> the corporate for today was not fantastic. >> inflation is going down. >> not at the pace that the fed is comfortable with. >> the fed has more reasons to do a 35 basis points. -- 75 basis points. >> i think .75 is on the table. >> it will not be a pivot anytime soon. the fed does a pivot and starts to cut in the second half of next year, that needs to come off. >> they would hurry it up. >> the fed is in overdrive. they will make a policy mistake. haidi: investors weighing in on

the implications of fed policy. our next guest does not expect any return to moderation in the rest of 2022 or sometime after that. saxo bank's steen jakobsen joins us. how do you change your view on how markets will parade and how to investors trade in the situation? >> the critical data point was the trade inflation that continues to rise. that is a cpi demand. we are into what economists call wages drifting. that increases the run rate and it will be at least twice the average we have seen, two percent being the benchmark and we are at a minimal of 3% if not

5%. the equity market continues to think that you get a pivot on the fed which as i have told you, if we are going to be wrong, it is because we are too hawkish. not because we are staying within transitory. the market was transitory. it is embedded, strategy, the constraint of oil. haidi: we have had news you cannot trade in the situation. going into the third meeting with an expectation of 75-100 basis points? how do you trade in this market? >> intangible assets, know-how and the likes. only 10% of the economy as tangible assets. the supply is the issue, innovation to grow supply lines, what you do is that on the fact

-- bet on the fact that the economy will grow on the intangible. platforms and digitization. i am not against digitization but we cannot write an economy with supply constraints with 90% being intangible assets. you need to wait for the real world and that is a massive positive. it is about productivity, investing in people, getting back to good old values like customer value. the digitalization to a product in terms of what it offers as opposed to a service. shery: what does that mean in long-term trends you are talking about? >> it means that in the 20 space you will be overweight in energy, commodities, defense spending, cybersecurity, you

will be long listed. to balance that out, i think investors globally need to educate themselves in the long volatility. volatility being long is a loss year after year but it is in your portfolio. stay balanced. every time you take an investment decision, there is only one question to ask, am i investing into an activity or am i investing into something that is against movement in interest rate? interest rate is going up and will go much further than the market wants. shery: do you think investors have it wrong in thinking that the fed will stay course? that they will stay hawkish? higher inflation or deeper recession? how do you really hedge that in the market? >> how do i get a pivot?

we are in a peak hawkish window. we have a hawkish fed, a strong dollar that -- the equity market wants. it will be a liquidity crisis. we have seen such a small moves, the swedish government stepped up and paid the margin call. i think the only way you get the move is by seeing a liquidity crisis. it has not traded in the market in over 30 years, the market only changes when you have a liquidity situation. people do not go bust because of that, they go bust because they run out of the liquidity. haidi: i do expect this to come to china? >> i expect china to act against liquidity.

it is increasing. 6-9 months activity will be higher. as a problem is how does that compare to where we are today? haidi: overall productivity in china at the moment? the demand for debt? >> i think there is a big chance we have a qe probe in china to make sure that the product is 25% of qe. i think it will become a little bit weak. it has fallen because of the energy curve. energy is important. we see that there is a massive and great -- increase in shipping. they are ordering all of these tankers to bring in oil, there

is oil that is higher. tiny activities are picking up, unlike others. shery: is that because a lower inflation in china gives them the way for policymakers to do that? what happens? do you expect authorities to drop zero covid policies after the congress? you have a huge change in how open they are when it comes to consumer spending and momentum we make it from such a change? >> the propaganda of the communist party, the zero covid policy is one of the biggest things they ever achieved. they are not going to bail out of that. we know from around the world this has covid has less deaths. 9-12 months from now they will not back down or change the

policy but china will go for operating 70 percent capacity to 100%. the impulse to the ability to navigate what is the real issue in china which as you have both pointed out which is the debt load. it is not a great story but it is a much better story than others when it. you think europe is like two minutes away from switching off the lights and china is going into a bankruptcy. neither is happening. the truth is between hot and cold here. haidi: we talked about the tectonic plates shifting. you think they'll be the most interesting period for markets in the economy. the biggest risks and opportunities? >> the biggest opportunity is we move the model which is based on a former model. look at australia, property and

dividend placement is really well-placed despite the resource economy. i think the ability of having high prices creating lower prices over time is what is going to work. we even need to continue to move to a productivity model. the downside is it comes with a huge burst of inflation. i think it stabilizes, we have seen an environment where it is falling through, doing things in the real economy that can improve the totality of the economy. people in university, technical colleges, i think this is about investing in people that will drive business and pushed the economy of low productivity and the economy moving forward to solutions for energy, supply chains, and

greater values in how we make our money. haidi: great having you here in sydney. chief economist and cio here. terminal subscribers can find dayb , you can always play around with settings so that you can get the news on the industries and assets that matter to you. this is bloomberg. ♪

shery: we are seeing weakness of around 200-4485 per u.s. dollar. we are watching the 145 level, the level that we are watching is the 1998 low of 147.66. the yen position rising to a

record last week. authorities are warning against a robert weakening of the yen. -- a sudden weakening of the yen . haidi: it is a like the doj trying to push a boulder uphill to make sure the policy is not a data divergence. jp morgan's investment bankers saying that uncertainty around inflation and a fed hikes and a potential recession. they are talking about layoffs up but the ceo says at the bank needs to be careful about headcount productions -- reductions. reading revenue will likely drop in the third quarter in line with the slowdown hitting wall street. they are likely to drop by a percentage in the mid-to high single digits. this is as clients stay on the

sidelines to enter on the fx markets with inflation running hot, a possible rate hike next week. this is bloomberg. ♪

>> think it will be an honest impact, it will also be very

likely nothing in the sense that there is no disruption that's going to be experienced. there is virtually no disruption that has been experienced by software developers and it will be as smooth as if your iphone or laptop has upgraded its operating system automatically overnight. >> ethereum co-founder and consensus ceo. take a look at how crypto assets are trading at the moment. we are seeing the broad pressure on bitcoin continuing after the cryptocurrency fell as much as 11% to 20,050 six. remember, we haven't seen such a big plunge since back in june where we had that 15% collapse. bitcoin is down more than 50%. even if your, which is headed towards that long anticipated software upgrade, fell almost 9% in the previous session because we see the downside in the asian

session. for the latest in the crypto markets let's bring in our team editor, john. is it all about the u.s. cpi report? >> a lot of it is. bitcoin is bubbled into the macro picture at this point. cpi is such a big key indicator, where the federal reserve might go, and how much money is going to be in the global system. so, bitcoin really did take a tumble, and it's back around that 20,000 level, but it hasn't really been able to escape from the past couple of months. >> the activity in the markets run either, what is that telling us about the merge? >> there is a lot of uncertainty, or at least people hedging and trying to may be put in a couple hedges just to make sure that they will be ok if

either, but we have the merger set, people will be watching for it in the coming day or so, and we will see what happens. it is a little bit of wildcard, a little bit of an uncertainty, which markets tend not to like. but right now ether is outperforming bitcoin over the past couple of days ahead of that merge. >> what about the planned crypto exchange? what's the significance of that? >> this is pretty interesting, they will be starting up in november with a launch in january. it's just showing that institutions are really seeing crypto as something they want to be in. there might be very prepared for the volatility at this point and kind of excepting it that they are using this time when prices might be a little bit lower, to still plan things out and they have not exited the space or given up on it. it's still something that these big institutions like citadel,

fidelity do want to be in going forward. >> our asset team editor speaking of volatility across asset classes. take a look at the yen. we are watching the 145 level. but that 1998 level is what will be in focus. we are hearing from japan's currency chief speaking in tokyo, saying that he's concerned about the sudden effects move. they will monitor it with a sense of urgency. they are not ruling out any options and effects. let's bring in some reaction. when you take a look at the inflation, the relentless strength in the greenback, and just the hopeless policy and data divergence between the boj and the fed, there's not much they can do. >> there isn't much they can do unless the boj changes its policy. do your point at the moment, given the commitment of the boj, dollar-yen is essentially the

most in yields, which of course have gone up 340. but importantly, when you look at history, the yields tend to peak around where the cash peaks. expectation is to end well above 4%. it means there's a lot for the coming months. and that also means the prospects for high dollar-yen levels that we should all be expecting. >> is that on your list of possibilities between now and next week? will we have a better idea? >> 75 is this most likely scenario, but the message will be important. it's very much committed to its aggressiveness in terms of hiking. but the fact that they see several lower cpi and now we start from zero because the july lower print is an anomaly. the obvious one is in line from 6% average in the first half of the year. so when you see several prints from here, that means at least you would think november

december is when the fed would change its tune. >> what would it take for any change to come from the boj, given where the fed is going on where central global banks are going? this chart showing the history of yen intervention, the last time we saw some sort of intervention from the ministry of finance, in order to weaken the yen, will we see something to strengthen the wind -- yen coming from the ministry of finance in terms of yield curve control changes? >> we think the pressure is rising. one thing we need to remember is that cpi is coming on the 20th of september, which is two days ahead of the boj and at the moment, dollar-yen is at the high level. so we have seen the pressures decreasing for the boj. in terms of intervention, and less you have coordinated efforts coming from other central banks, the intervention will prove to be futile. for us the key driver will be

cpi shrinking. if it does bring above 3%, it would be a surprise. the markets looking forward to 3.9. it could've happened, and that will increase. and as you say, what can they do, it will have to be an adjustment to the yield curve control policy. >> what about the pressure of central banks, given the strength of the dollar. we see central bank reserves being depleted across the region >> our general sense here is across emerging markets and also countries that are suffering from shock from these energy prices. it's super inflationary, and the central banks will need to step up their aggressiveness in order to fight that inflation, regardless of what accounts for the cost of lower and lower growth and rising unemployment. >> when you take a look at the commodity and risk currency

prices, is it really the u.s. dollar driving or is a concern we might see demand destruction? >> the aussie is a risk. in terms of trade, it's super positive. that has been reflected in the process. superfine against the new zealand dollar against the euro and against the pound. but when it comes to the u.s. dollar, it's all about the prospect of slope growth, the prospect of the fed, very aggressive in terms of the hike. and you know, we should be ready for lower levels if it continues to be a problem. haidi: what are you watching specifically, and do we continue to see the yuan playing that kind of anchor role in that space? >> yes, there is an anchor role, but you look at china and inflation is not a problem. you look at china slowing down with much of headwinds coming

from the property sector. it was the same time the huge confidence issue had the zero covert policy. so how does china get out of the problem is through infrastructure and the export side of the economy. and that's where it plays the part. but if you see it essentially trying to slow down the depreciation rather than prevented. so the role is important, but it is granted -- gradually moving toward 7%, think will happen towards the end of the year. haidi: sherry mentioned the view that we have seen across a lot of these emerging nations, whose most at risk? will we see fed tightening, or are these financial problems coming around? >> in terms of history, they are in better shape. but you look around in those companies that -- country suffering from energy shock.

despite the fact that it's better economically than others, it does have more exposure. we have to keep an eye on how things develop over the coming months. haidi: currency strategists, we were just talking with roderigo about the direction of the yen and it looks like there is still a little bit of an impact. raising that drop on the currency chief's comments about being very concerned about the recent sudden moves in the fx situation. he did say he does not rule out any options when it comes to the effects response. you see the yen raising that earlier decline, sitting out 140 461 per dollar at the moment. we continue to watch for that 145 level. shery: a little bit of an impact on we will continue to watch that given that we already have global intervention coming from governor kuroda and shih-tzu key is warming -- warning of the rapid depreciation of the yen. really that was short-lived. coming up, reports the u.s. is

considering sanctions on china for the potential invasion of taiwan. we look at that as xi jinping returns to return -- repairs to return to the world stage. this is bloomberg. ♪

vonnie: this is daybreak. saudi arabia says the crude

production at 11 million barrels a day last month. the monthly production level as been reported to opec since april 2020 when there were 12 million barrels a day. the increase follows the agreement to speed up the return of supplies as u.s. and other key consumers try to -- fuel costs. tencent has won approval for a new gain, the first time since chinese regulators closed licensing. it was cleared by the national press and provocation a ministration. they also made the new list of a game. tennis -- tech crackdown for online gaming when regulators halted it. queen elizabeth coffin has arrived at westminster hall, where her body will lie and stay until her funeral. thousands of people lined the streets of the area where the cortege was moving as the hearst made its way past.

global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. shery: we are on typhoon watch and china. shanghai has upgraded its typhoon warning to the third highest level. this would be the typhoon that's expected to make landing in the province. of course in shanghai, our very vulnerable -- they are very vulnerable to the typhoon. local media says it will cause a heavy wind rain storm and shanghai from 8:00 a.m.. china's main goal is halting most covid text -- test requirements on the typhoon. we are watching a closely as this is an area that is a busy container shipping hub and could have implications for global supply chains. staying in china, president xi jinping embarking on his first trip abroad. in nearly a thousand days meeting vladimir putin.

this stands as the ukraine war rages on in the u.s.-made sanction -- mae shanks and china over tied -- may sanction china over taiwan. stephen engle is in hong kong. there's a lot at stake for president xi jinping in this visit to central asia. stephen: absolutely, what a time for him to pick to go up already -- go abroad for the first time. this is the first time in early 1000 days that xi jinping has left mainland chinese soil and he will go to kazakhstan today and on wednesday and then onto a meeting with vladimir putin gathering in uzbekistan. there will be a meeting there tomorrow. yes, there are high stakes all around, obviously against the backdrop of the war in ukraine as a rages on. as well as the backdrop of xi jinping's no limit partnership that he essentially struck with who and back in february, just weeks before putin invaded ukraine.

so there are market implications because in february chinese stocks did sink on the potential of further sanctions against the chinese official in china as a whole and that they could potentially be embroiled in their support for vladimir putin, not necessarily support for the war. they tried to stay as neutral as possible, but any headlines we could get out of uzbekistan with xi xiping doubling down on his support for vladimir putin and and de facto support for the war could have implications because we do also have the separate issue but related, this report out of reuters citing unnamed sources saying u.s. officials are in early stages of mulling potential sanctions on beijing further additional new sanctions on china as a way to deter beijing from invading taiwan. there's a lot at stake, obviously.

lots at stake for vladimir putin. probably needs xi xiping's in china support much more in the face of those sanctions by the eu and the united states. also, gas sales and energy sales from the eu needs china's continued support and energy. haidi: we are hearing that the first u.s. inspections of chinese audits could take place in hong kong this week? stephen: that's right, the u.s. inspectors a part of the organization that is in charge of auditing or reviewing the audits of these companies that are listening to american exchanges, chinese and hong kong firms have refused to hand over the audits on national security issues. in the deal was reached last month breaking that deadlock between u.s. and chinese officials to allow the united states to inspect the audit

books of some 200 chinese companies, potentially because of new legislation in the united states that could potentially be kicked off those exchanges. sources are telling us the pc aob inspectors could be arriving in hong kong. hong kong has been decided as a potential neutral site for u.s. inspectors to look at those books. it could be arriving as early as this week. this will be the first step, our sources are saying, alibaba and young china, among others, could be the first time for china to open the books to the american inspectors. there's a lot to be determined yet. how are those audits going to be handed to the united states, will chinese officials be in the room as well as they inspect those audits? will there be stacks of paper, will they be on thumb drives? essentially the inspectors, if they do arrive in hong kong this

week, their first order of business will be to determine whether china is complying with ideal and checked that box, then move onto the audit check. haidi: stephen engle there with the details of that and just another layer of risks for the markets. it's already looking like it will be a pretty ugly day in asia. it's hard to see when you take a look at how nikkei futures and australian futures are trading. nikkei futures down by 2.8% at the moment. we see australian futures down the most since the early part of may. we saw the worst session for u.s. stocks since 2020. the s&p down by 4%, nasdaq down by over 5%. u.s. inflation not easing as much as hoped. we are seeing market expectations for the fed's move next week. somewhere between 75 and 100 basis points also watching 145 and the start, but a little bit of again or a fallback from that

depreciation after options from the currency chief. the country is struggling with a lowest fertility rate in the world. this is bloomberg. ♪

haidi: we are seeing japan

orders crossing the bloomberg at the moment. that number for the month of july seeing an actual gain of 5.3%. we did have expectations with the contractions and that is a big bump up from that 9/10 of a percent gain we saw previously as well. that is the month on month number. we also are expecting the year on year number to come through as well. we have seen expectations of a bit more of a bump up when it comes to orders, given that we have seen a little bit more demand when it comes to china, at least in the year on year basis. we can really see 2022 seeing another leg of this two-year upside in the datapoint backlogs could also potentially upset any decline sentiment. shery: let's turn to south korea, because it's on record for the lowest fertility rate last year, and that's prompting to stave off the damaging

demographic crisis. this bring in our career economy editor. this also really has the broader macroeconomic implications of why this demographic challenge is happening. everything is expensive. property prices are expensive. tell us some of the drivers of korea's falling birth rate. >> you are right, this has a lot of implications for the economy in the long term. if you have a fertility rate that's very low, which means you are having fewer and fewer babies, which means that the total labor force will continue to shrink, that's puts a lot of pressure on the social worker system because you have more older people than younger people who are able to provide the revenues to basically provide and run the system. there is also the fact that the economy will slow down because there are fewer people actually working to contribute to that

economy. so this is a big problem and there's a lot of social and economic factors driving this very low for korea. haidi: we have seen similar issues on some of those when it comes to the fertility rate in the population concerns and china. the government policies haven't really been successful there, are there better policies in different policies in korea that could help? >> certainly. i think one of the reasons that a lot of developed countries are having this problem, especially in korea, is because it's becoming very hard, it's getting better, but it's still very hard for a woman to be able to manage a career along with childcare. that's especially hard in korea because we have seen from different economic indicators that the share of women who drop out of the labor force when they are in their 20's and 30's is the highest among the nations

from korea. which, along with other economic indicators, basically shows that women are feeling torn between childcare and their careers. and they are facing this choice of, should i stick with my career or should i stick with childcare? many people in korea just drop out of the labor force and that's the major reason behind the fertility rate being so low in korea. shery: the government just can't pay these women to have kids if you don't change economic pressures. our economic editor. we are watching the korean want to start trading in the next hour. we saw a little bit of a boost in the korean won, but we are still talking about the 2009 lows. it's really downside pressure for most asian currencies, given the research in the u.s. dollar. u.s. cpi numbers, expectation of not only 75 basis point rate hike after inflation numbers, but the potential basis points

is having implications on the currency markets. japanese yen this continuing to lose ground against the u.s. dollar, but then the currency chief say they are pulling out any options of effects response. that sense the japanese yen slightly higher and currently unchanged against the greenback. haidi: pretty limited impacts from that verbal warning from the currency chief. take a look at just the downside be expected to see when we get into equity cash trading. nikkei 225, nikkei futures down by 2.9%. futures up by the most since early may and continuing to watch dollar-yen. interestingly, u.s. futures were a little bit more optimistic. but that is not playing out for the asian open. ♪

shery: this is "daybreak asia", we are counting down to the major market open in the reaction to the surgeon u.s. dollar, what that means for asian assets as we have inflation numbers coming in hotter than expected. that really leads to expectations of not only is 75 basis point rate hike coming from the fed, but isn't 100 basis points. haidi: when it comes to the yen, we see that 145 level in view. there warning from the currency chief, you see that upside for the end. you will continue to watch how things are when it comes to the australian open as well. but certainly a lot this morning. shery: really not surprising that you see the great divergence coming from the fed and the boj and what those two central banks are doing. we saw the 10 year yield really rally in the new york session. the two year yield is also the highest since 2007. the inversion of the two tenses really steepening and potentially signaling warnings

of a recession. we continue to watch the two year yield. that 376 is the level in the asian session. we are seeing the nikkei falling 1.7 percent, reversing four sessions of gains we saw for japanese stocks. we continue to watch as we talk about the japanese yen giving away a little bit and that 145 level after we saw the currency chief coming out earlier this morning talking about not really eliminating any possibilities when it comes to reacting to those effects moves. we continue to watch the 10-year jgb move because it's a .25%. the limit for the boj that will continue to be watching for more reaction coming from the central bank there. perhaps we have a little bit more optimism coming from the economic numbers earlier today. it actually jumped more than 5%, more than expected earlier when it comes to those numbers from the previous month. take a look at the kospi. we were watching the korean equity market very closely.

talking about a loss of more than 2.5%. we are a little bit above for korean assets, because they had just come back from holiday. the result of catch up in that market and even the korean won has strengthened. take a look at that, we are talking about being very close, the 1400 level against the u.s. dollar. we are talking about 13 year lows against the greenback, haidi. haidi: take a look at australia. already, given the futures are trading at the lowest since march. we see it at half a percent, pretty steep decline year because utilities materials, i tease are the biggest losers. we do see that dive below 5% for the nasdaq 100. but, there is this idea that perhaps even with 100 basis points, markets will still keep in mind the hopes of a pivot because there are other blogs that maybe that means the next jumbo size hike will be the

last. let's get back to that cpi report from the u.s. it shows inflation is getting harder. so what did the fed do to call it off with 100 basis point rate hike? that's something that parts of the markets are starting to consider. i have kathleen hays here. i have to wonder, we talk a lot about the lag in some of these data points, is there an argument that they should be more patient and waiting, or do they need to move forward with more aggressive moves? kathleen: the arguments of them not waiting is that the longer you wait in the higher inflation gets, the more inflation expectation, expectation of rising inflation and prices and a willingness to save more because you think they will be higher in a month, it's going to get that. you talk about monetary policy and rates, so when it comes to price moving that's a concern for the fed. it happened in the report in

august, people thought, the headline will fall and maybe the court will be steady, but it will show progress. the problem is the cpi on a monthly basis was up 1.1. but it was still down .1. on a year-over-year basis it's down 8.3 instead of a .1. that's what we are supposed to fall to. the gouge and gas prices is moving economics. that's kind of the only good news, energy prices. and that does not have to do with expectations and inflation getting too intense. this is a great thing from the atlanta fed. they had their biggest year-over-year monthly move in 40 years. and it's all about core services prices, and that's the part you don't want to get entrenched. what we have already seen at the price of rental costs, housing prices rising. medicare, health care that is, and transportation costs.

these things get built into the economy and they tend to build on themselves. now, when it comes to the fed, 100 basis points, most people say, probably not. number one, they haven't had time to signal it. number two do they need to do it at one more 75. isn't that enough. 100% for 75 now they are talking more about the possibility of the hundred basis points and when you hear somebody like larry summers, former treasury secretary, one of the economist from when the fed thought inflation was still transitory, it said, no it's not, you have to move now. if he was at the fed he would do 100 basis points, store credibility, drive home that message, we will do everything we can to drive down inflation. that's the argument for doing it. it would be the unexpected frosting on the cake. and people with the fed that are making a mistake by not getting more aggressive, they would be happy. i think most people are thinking

75 is the best, but he prepared. shery: our global economic and policy editor kathleen hays. we could see that price -- surprising the market. heading to the u.s. cpi numbers. easing of market sentiment. there is peak inflation and that was the position we had in the market. that has reversed completely. you are seeing their korean won tumbling very close about 1400 level. these are lows that we have not seen since 2009. same thing for the japanese yen. we had verbal intervention earlier but we are at that 1.4% level. the comes to the nikkei and the topics losing ground by 1.2%. really the market implicate since have been huge from these cpi numbers. a spring in our chief global equity strategists to break it all down for us when it comes to the asian markets. what are you closely watching now that we have that cpi number and we are headed towards the fomc? >> i think there are two things

for this time. certainly, the difficulty for hong kong is that matching is 75 for 100 basis point rise that would be quite considerable tightening in financial conditions. and on the second side of the ledger is the exchange rate. as you alluded to in your report , the dollar is going to continue to get a firm bid and alongside china, get deflationary pressures. it came in well below expectations and showing that they still need to cut rates. it's going to put pressure on asian exchange rates to weaken. unfortunately there's room for the chinese currency to trade on the softer side of seven going forward. shery: let me ask you, headed towards the fomc meeting, what's the best trade? we have been asking are mliv pulse question about the best trade ahead of the fomc and some

of the options there were something that we had seen after the cpi numbers. some of the options that were long growth come along value. do you have a certain trait that you like? >> i agree that the version will remain much deeper for much longer. i.b. -- both the two in the five in the to and attend will remain entrenched going into 2023. probably the best trade is to still go along volatility. credit spreads have been a relatively benign over the last couple of weeks, but effects volatility always leads overall asset volatility. hence, i think that will be the best trade going into the fomc. haidi: is the prevent now off the table, or is there an argument as our garfield reynolds is arguing, that if we get 100 basis points, it takes us closer to that being the last jumbo move and being closer to a

recession that can mean moving us closer to a rate cut cycle? >> i have some sympathy with that. it has not necessarily been right. i think the irony is that whatever it does now, the fomc, it's likely mean that rates remain on hold, and i don't think that's necessarily the news that the equity markets wanted to see. i think paradoxically you might get a spike of 100, but the way the yield curve is performing is saying that these rates are going to remain quite tight for quite a considerable amount of time. and i think, therefore, we are not going to get those relief rallies that people had anticipated, including myself, i have to say. haidi: does china become a good alternative as inflation remains slow and stimulus remains forthcoming? >> i think if you could hedge the chinese currency, i think that's a very reasonable assumption.

we have to take into account that this is probably one of the weakest times of growth for china coming into the congress. certainly i don't think there will be any major announcements until after the 16th meeting. the only issue is that i do feel that the markets will try to pressure the yuan to break through seven, and that in itself probably lends itself to being in the side of 300 than the hang seng. i think the hang seng will take news of the breaking of the currency and breaking that level pretty poorly. haidi: always great to have you with us, particularly on a market exciting day like this as we see equities trading lower. the chief global equity strategist at jefferies. not just what we see across equities market, but across the bond market. we saw treasuries really continue to see that tightening. in particular we saw the yield surging.

20 basis points to 3.775. we are seeing that tenure yield also looking like this, and of course watching when it comes to sovereigns in australia and in new zealand as well. in japan in particular, given that we had that huge policy divergent story continuing to play out. general consensus is that there's not a lot that the governor can do short from boj's policy tweet. let's get you to vonnie quinn in new york with the first word headlines. vonnie: the kremlin's as vladimir putin will hold bilateral weekends with the -- putin is facing pressure at home over the war in ukraine with about 15 units of legislators calling on him to resign. the u.s. is preparing another round of military aid for kyiv, shining based -- citing a shift in momentum after ukraine

recaptured 6000 square kilometers of land. chinese president xi jinping and vladimir putin will hold their first in person meeting thursday since the invasion of ukraine. it's been almost 1000 days since they went abroad. they will meet on the sidelines and use pakistan. he unveiled his belt and road infrastructure plan nine years ago. chinese authorities will examine their financial exposure. sources say several regulators, including china's banking, made the request. over the financial strength of the conglomerate. dollar bonds have tumbled in recent months. the etherium network is set to have a merge sometime between wednesday and thursday. the long anticipated software change will lower the energy used by 99%, consuming very

little -- very little power. in the currency will resemble more of a financial asset that pays interest, like a pond or certificate of deposit. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn, this is. shery: global shipping outlook from hsbc and the storm from the largest container hub. europe's market watchdog is mowing circuit breakers to calm the markets. the trading impact is next. this is bloomberg. ♪

shery: the worse they are seeing into weeks. we are seeing health care industrials, materials leading the declines on the ms ci asia-pacific index. we are seeing tech stocks losing more than 1.5% at the moment. this as we got the u.s. cpi numbers coming in hotter than expected, and really the global bond yields rising. the dollar stronger. asian currency under pressure. haidi: in that wide yield differential really playing out

when it comes to the yen. we are still at 145 at the moment. this as we saw the fluctuation in the break. but that double intervention had a limited effect. the currency chief was talking about the concerns of sudden effects moves and they would not be ruling out any options in responding to foreign-exchange moves. that would break 145. if it happens, we put 14678 into play. that was a play we reach before back at joint of japan u.s. intervention back in 1998. we continue to watch for that. let's bring up bloomberg effects and strategist for more. the problem is we see widening yield curve differentials, which is not a great deal they could do in short of changing policy. >> that's exactly the problem, that it's based on fundamentals. someone says yes, it's based on interest rates. therefore dollar-yen should be going higher. so while this verbal intervention is trying to stand this rise, the fact is it's not

going to work if u.s. yields keep pushing higher with the japanese yields. i think another key thing to look forward to is what that fed dot plot next week is raised higher, and a good chance it will be, will add even further pressure, and you will see dollar purse higher. the inflation is one thing, if they try to do some intervention, if it's one-sided it won't work. intervention could be tough. back in july, janet yellen said, only in exceptional circumstances should they intervene. and she said those don't exist at the moment. the u.s. was quite happy for the strong dollar because it helps control inflation. shery: where is the dollar going? the declines given also that the euro strength consider -- continued on ecb hawkish and is. but where are the cpi numbers headed? david: i think the risks are

towards dollar grinding higher near term. one of the key things is if equity continues to push low today and tomorrow, that should be dollar supportive and tends to benefit in those haven environments. so i think the risk of a going higher, obviously the focus is on the dot plot. you do it in the bank of england position as well. the mark -- the markets will see how hawkish the faces down. they may try to spend dollars a little bit. but at the end of the day its expectations and the dollar gets normal hawkishness and if they do, the dollar should move higher. shery: effects and rates strategist. and where the dollar is it it has implications -- dollar is headed has implications -- gaining in the asian session. here is the new york session on news that the biden administration could be making purchases to restock the strategic reserve about offsetting some of the concerns about the bearish inflation number. bloomberg's su keenan joins me with the latest.

what are we seeing in the oils market? su: the oil has been swinging with the dollar in recent days. we are also seeing an asian trading, west texas intermediate nearing $88 and that's near 85 on that bearish inflation data, which was offset by news of the biden administration appearing to be planning to restock the strategic petroleum reserves, or spr's. the spr dropped significantly earlier this year when biden ordered the release of 80 million barrels. setting an amount that is released, but drop the reserve down to a 38 year low, the lowest since 1984. the white house considering buying oil when it drops below $80 a barrel to restock the reserves. again, that drawdown from the reserves we've used back in

march after russia invaded ukraine, and there were concerns about supply gas. many of those concerns no longer exist as the price of oil has come down. one energy traders said this restocking reserves may not be for $100 crude, but it does offer a buffer to the downside risk. you are looking at the downside risk in this chart, we had oil surging in the months after the invasion, now it has come down dramatically. the plus side of the pullback is gasoline prices dropping into the bloomberg. we are now seeing significant drops in gasoline, not just in the future, but at the retail level for consumers. at one point here in the u.s., on the west coast in california, gas prices were more than seven dollars a barrel and they have come down significantly. one of the reasons biden is crediting himself with somehow avoiding inflation. but that is to be debated. back to you.

haidi: fresh signs of energy trading. that's already about circuit breakers. su: we have talked about the dramatic surge in energy prices dropping into the bloomberg again. that increasing tenfold in the past year. because a lot of the european leaders took action, we've seen dramatic fluctuations of price and that has put a lot of strain on the energy markets, more so than in weeks before. european securities and markets authorities has now been monitoring both the market in the clearinghouses, and the fluctuations we are seeing in trading and what they've decided to do is a couple things, perhaps putting circuit breakers in place to calm things down. perhaps doing things to provide more security all of this because the eu itself has an emergency intervention plan starting to come together that involves capping energy demand, perhaps qualm back profits from

the big energy companies, and all of this is designed not only to reduce demand but to maintain the price spikes we've seen following russia's invasion of ukraine, also holding its emergency meeting one week ago, or last friday. coming up with the answers, several governments have an ounce multibillion dollar price packages in recent days to support utilities and consumers in the search and prices. gas prices again, natural gas prices have started to fall because of that list of measures you are seeing in front of you. many of them getting it and it appears to be on the way. haidi: bloomberg's su keenan there with the latest. we are taking a look at our futures in the european session opening up. we already saw that cash session falling as we saw after three days of gain of inflation in the u.s. topping those expectations, fueling those fears that we will

see a more hawkish fed for longer. euro up by 1%. across msci europe. futures also down by just about the same amount. we are releasing a lot of that risk off sentiment, also playing up when it comes to the ftse 100 down by 1% in the future session as well. as we look ahead to that inflation number, that wage supply is really lifting 75 basis point from the bank of england and its next meeting there as well. shery: watch what we can expect from the fomc by 75 basis points, 100 basis points, and that is really having implications for the treasury space. we are seeing a five year yield jumping to the highest since 2008 and topping that peak that we saw in june. the two year yield, also the highest since 2007, and we have seen that deepening burden happening in the new york session. coming up -- coming off some of

that level at the moment, we are seeing above that 35 basis points differential when it comes to the two-year period ten-year rate. in the tenure at the moment is trading up around that 3.4%. but it's really the global bond yield spike that we are seeing that we were following up the moment. plenty more to come. this is bloomberg. ♪

shery: is a quick check of the latest business flash headlines. jp morgan's investment bank may fall by half as fine stay on the sidelines with an uncertainty around inflation. fed hikes have a potential recession. we talk of layoffs across wall street. the former ceo says the bank needs to be very careful about headcounts reduction. citigroup has warmed -- warned

that trading group will likely drop with a broader slowdown hitting wall street. the markets revenue is likely to drop a percentage in the mid to high single digits with investment banking revenue likely to plunge 50% as client stay on the sidelines. take a look at how the korean won is trading. talking about very close 1400 for u.s. dollar. we are hearing from authorities in south korea saying that the government is killing most -- closely monitoring effects and markets with the uncertainty of major country rate hikes to rise. we will continue to check the markets when we are back. this is bloomberg. ♪

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and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you. haidi: we are half an hour into the asia-pacific trading session.

wrist assets taking an early beating as expected. that's look at the market action. david ingles is here. anything stand out? i had a few days off, came back this morning at almost wished that i hadn't. david: i was off yesterday as well, i'm in your boat, i wish i was in here. but, it is what it is. quite ironic how it's called inflation. the markets reaction is anything but, the complete opposite of inflation. a couple of things i mentioned very early is, obviously we are looking at a sizable loss in the asia-pacific which just about every sector group within the markets in the open are down. silver lining with the u.s. futures stabilizing and nifty futures not really falling as much as we saw overnight, which might indicate a near term and the markets. the other thing i watch today, apart from the equity market is what's happening in the bond market. there is the rise in yields in

the five-year yields dropping the junior high. that takes us into the jgb story quite directly, because we are on intervention watch, we are at levels where they did come in and they did come in with purchases and could come in within the next hour. shery: what are you guys talking about not wanting to come back. this is a very exciting day, i'm so happy you are here. this is an exciting, exciting market session that continues. david: i guess what's interesting is when you look at the specific sectors, obviously with yields on the way up, that's going to be the usual suspect, big tech, growth names are quite literally in the path of higher rates. that's one thing to watch. the third group you will be watching closely, which is also the first group, the online gaming, that's the tencent story, and to what extent the good news out of tencent and net needs, and then winning approval might be able to offset the bad

macro news and we will see what market reaction is going to be like. brokerages, they are warning out of city in terms of revenue drops, we will see what that means for asian brokers. and obviously on the back of the risk assets in the crypto and ether. we will see you at with that. 20,100 there. haidi: it's down by over 3%, what does that tell us about what happens in china? david: for one, we should stop calling it golden, if i'm being honest. it hasn't been golden -- yes, bronze. you look at the contract on the hang seng index and at last traded at 18 a, which might indicate by the time we open in the first few minutes, we might actually take out the low recently and we traded below 19,000. that's one to watch with the moving average and the shanghai composite. in the end of this says there's

enough bad news out here with the typhoon battling through and heading into shanghai. the third-highest morning. a lot of things we are watching today and markets. shery: david ingles there with a very exciting session in the asian market. we are also watching a typhoon and china. the largest container shipping company in asia facing a second major storm. the typhoon is going towards eastern china and is brought to a standstill as the potential slowdown adds fuels to the concerns. the head of research with hsbc, good to have you with us. we have talked about these supply chain disruptions. how much damage will this latest typhoon do? >> it's business as usual in the shipping world. and we have had typhoon pre-covid and we had it during covid and we will probably have it.

what changed over the last two years is because overall supply chain did not have much room for disruption, and that's how the typhoon made everybody realize what disruption could do to the sector. but at this point over the past few months and since our supply chain disruptions to the demand weakness, we will see, but we are not overly worried about the disruption that this could cause. shery: when it comes to shipping industry, are there some names less vulnerable than others whether it's typhoon disruptions or covid disruptions in business across the region? >> it is a global sector. eventually, even if one particular group is doing better than the other, it could force that. but if you are talking about the typhoon related disruption, then

it sensible enough to presume this shipping lines adds more exposures on the margins. but in the larger scheme, idle think this shipping lines have a very diverse effect for global trade. haidi: shorter-term or medium-term, weather conditions and issue, what is the broader outlook for the sector? >> for the sector, the last two years have been the best ever that the sector has seen, and one thing we can say for sure is that what shipping will not miss is the cyclicality. so the role where the big note is back making us forecast that with the global trade, especially the trade declining next year, coinciding with a

percent to 9% of new levels over the next two years. and in the case of the supernormal profits out of the window. haidi: how do you do capacity, particularly in the long haul? are we close to normalization? >> know, we are not close to normalization. rates have declined over the past few months, but we are still more than what we were pre-covid. but one thing is for sure that we are in the process of normalization and it's happening sooner than what most of the industry observers would have thought a few months back. and that's the beauty of shipping and we are not very far off from the pre-covid era. because of the overall supply chain in our view is more than what it was pre-covid, and therefore supply chain

disruption could be long, therefore we expect the industry to remain positive in this decade, unlike what we saw in the last decade. haidi: hsbc global research head of transport. we do have more to come on daybreak asia. this is bloomberg. ♪

vonnie: tencent has won approval for a new game for its first time since chinese regulators froze licensing. a game developed was among 73 titles in the national publication and ministration. its arrival also made in your list of approved games. china's tech crackdown spread to online when they faulted licensing. the eu is moving towards plans to cap energy for consumers. they want a lid on revenues to lower-cost generators. they include the levy on fossil fuel companies with mandatory consumption costs. they take the loss to rationing energy for the current crisis. saudi arabia says they were just over 11 million barrels a day last month.

as the highest monthly production level of their kingdom has reported to opec since april 2020. it cost 12 million barrels a day. it follows the group to speed up the return and total supplies as the u.s. has key consumers trying to tame fuel costs. queen elizabeth's call thin --queen elizabeth ii coffin arrived in london. her body reliance day. thousands of people lined the streets of the capital as the hearst made its way past. the queens funeral will take place on monday. global news, 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. shery: take a look at how crypto assets are trading at the moment. we continue to see the downside pressure after bitcoin lost about 10% in the previous session. we are seeing ahead towards at 20,000 level. we have seen a big recovery coming from the lows in june, but that's really not being held

up. we actually saw the fall of 11%. we have fallen about 15% back in june. even the hike over the merge of a ethereum did not really stop either from falling 9% in the previous session. the bonds tied to either ahead of the theory and blockchain upgrade, which is expected to happen as early as wednesday. the ceo of consensus systems in the cofounder of the ethereum foundation told us the upgrades in merge will have enormous impacts. >> we think it's going to be probably nothing and it's a playful phrase in our ecosystem that indicates, a bit sarcastically, that we think it will be enormously impactful, but it will also be very likely nothing in the sense that there is no disruption that is going to be experienced by any users.

there is virtually no disruption that is being experienced by software developers who will be as smooth as if your iphone or your laptop as upgraded its operating system automatically overnight. in terms of impact in the history of our ecosystem, there have been to major events so far. bitcoin, at the development of ethereum, a much more programmable and expressive blockchain technology. this is number three, in my opinion. emily: you are painting the picture of smooth sailing, no one will notice it will be seamless. this also isn't necessarily real-world proven. what is your biggest concern about things that potentially could go wrong? >> tiny little concerns. there has been so much testing that the merge itself is likely

to be very smooth but we haven't tested it and that context of the whole big ecosystem, which is becoming an economy in its own right. so there are lots of little projects that may be read from the blockchain or depend on it in some ways. it's possible that some of those little projects haven't upgraded what they need to upgrade in order to have their own smooth transition, but all the major services that depend on blockchain have already done the work. kalee: talked about the work that the independent exchanges have in the reason that they are pausing the deposits including layers and have they reacted with ethereum after the merge. are there changes that need to be made for any projects tied to a ethereum that made to alter changes to really react to this merge? >> we have been telegraphing this for many years, and telegraphing it very explicitly

for many months. so, as i've said, all major exchanges, all major infrastructure have done the work. so, there's nothing to be concerned about. >> you mentioned the ecosystem around it. what if you're -- what is your expectation about how the economics change? is there a sense of how much people are going to stay in the initial month of the merge at what that will mean for what a fury is worth? >> there is always an anonymous amount of either state. the emergences moving on the x occasion -- execution chain into the single system. there's already a huge amount and we anticipate with the reduction in this overhanging uncertainty, once the merge is complete, that many more actors, including institutions,

financial institutions, will take that as a sign that the coast is clear and that they can treat their yielding asset as something that they want to participate in as a d correlated or uncorrelated asset, and an infrastructure that they already consider potentially systemically important in the future, and need to gain expertise. so we have spoken to many financial institutions that are ready to dive in. haidi: a cerium cofounder and ceo speaking exclusively with bloomberg's kailey leinz encz and ali bostic. when it comes to make asian stocks on market. nikkei down 2.8%. reaching that two weeks year and asia. kospi off by 2.5%. pressure when it comes to

currency. watching the fluctuations in the yen, which continues to lose data as we have global intervention from the japanese in currency chief. the yield differential is really the key thing when it comes to performance between the yen and the dollar pay there as well. australian stocks down by 2.9%. it's regardless of whether you look at utilities, materials or health care. tech also following the selloff across the nasdaq 100. we had that downside of 5% plus when it comes to tech stocks of the u.s. more than 4% downside for the broader s&p 500. kiwi stocks down by one and about .25%. shery: we were slightly higher earlier in the asian session and have given up all of those gains and really those tech futures leading to decline down 2.1%. even small-cap really feeling the brunt. we have seen the russell 2000 and the new york session seeing

it more safe since june. that was when we had that massive selloff. we had things really trending lower, especially after the higher cpi numbers. everything on the s&p 500 was down, but those yield sensitive stocks in the tech sector took a hit. coming up, we are watching for the chinese markets opening. reports now saying that the u.s. is considering issuing sanctions on beijing to deter the country from invading taiwan, we will have the details next. this is bloomberg. ♪

haidi: twitter shareholders said elon musk reported the $44 billion buyout, paving the way for a trial next month. he tried to scrap the offer he made in april, claiming it was twitter's user base.

the trial is currently set for october 17 in delaware. they pursued stricter regulations of social media in response to a whistleblower testimony. the former security chief said the company had outdated software and user data in a reactive security policy. he also emphasized what he thought was an effective enforcement from the ftc. sources say both sides will have -- from investors including the norwegian software wealth fund. they will now evaluation of around 70 to 85 billion euros to finalize the -- over the weekend and start taking investor orders early next week. the joint venture of taiwan's company plans to build a ship factory. investment in the project will be more than $19 billion -- $19 billion. it will include assembly and

testing as well as display production. shery: a look ahead to the chinese market. opening porters in the u.s. considering sanctioning china to deter any potential invasion of taiwan. our chief china market correspondent joins us for more. we have plenty to watch in the chinese markets today. >> very, very, very busy morning. that report is nothing to calm nerves in an already very nervous market. the report is saying that washington is considering -- with lots of questions and the feasibility of this, given china and u.s. entanglement in terms of trade. what is doing, the report is not helping what was already a testy session. we do have some meetings to watch. because of dollar strength and because of this report. so seven per dollar is really in the spotlight as well.

also news on gaming approvals finally having -- and a risk off session in the u.s. that leads to a very eventful open for china. haidi: our chief china markets correspondent. look at what we are watching for the markets opening in hong kong and china. tencent one approval for a new game for the first time since chinese regulators paused all licensing and 2021. also on the september approvals list. we are also watching a lot of these crypto related stocks. but cohen -- bitcoin dipping to the lowest since june. it is push for a software -- software upgrade. shery: take a look at how markets are trading. we are seeing the downside pressure really wrought across asian. really more than 2.5% at the moment. every sector is in the red and

japanese equity markets. tech, stocks leading the gains, even energy is down. remember, energy was slightly higher in the new york session, given that we of course have seen news of the u.s. planning to restock emergency food reserves, and that really led to some market dynamics changing in the oil space as well. we continue to watch the korean markets as well, down 2.4%. but really, the narrative right now seems to be on that stronger dollar on that stronger than number. i what really that's doing to asian currencies. we are watching the japanese very closely. the korean won is very close at the 1400 level against the u.s. dollar. haidi: and it remains very interesting given we have very low levels and inflation. a much forthcoming situation when it comes to stimulus and easy money policy from the pboc.

we will watch how chinese markets react. the broader markets, i find it very interesting, this idea that perhaps the fed pivots. if you look at your dollar trading overnight it did seem like there was a future rate cut from the fed that was still being traded there. potentially, if we do get 100 basis points, that means that might be the last of the jumbo hikes. does that get anymore certainty? shery: in the cpi numbers coming out, talking about the potential 100 basis point rate hike. the more economist change their rate hike leading from a 75 to 100 basis point rate hike, with a more aggressive path of rate will be needed to be increasingly entrenched in inflation. the former treasury secretary talked about picking 100 basis points to reinforce credibility. of course you are watching the u.s. cpi numbers as you also sought gasoline prices dropping

more than 10% in august. what does that mean? will americans go out and spend more and give the economy more? we will see as futures are really taking a hit. haidi: that's it. you have the likes of jeffrey saying he'd rather see 25 basis points. you think the fed should wait and see for the transmission of monetary policy, but the risk of that transmission is that inflation expectations get entrenched even deeper. so much to talk about. we will talk about all this in the next hour, explaining why he believes markets should not overreact with inflation and also the latest on the travels through central asia. ♪

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david: good morning from hong kong. it is 9:00 here, in the city of beijing, and also shanghai. yvonne: our top stories this morning -- asian stocks slide following harder than expected inflation data from the u.s. traders now certain the fed will raise interest rates at least .75% next week with some betting on a full point move. and u.s. leaders arrive in hong kong for a first look at deals. hotter than expected, but the markets definitely went ahead of themselves. david: the size of the hike that is coming next week and the

surprising news taking place with almost a full rate hike added to the tightening over the next three meetings. asia obviously seeing some very steep losses. we are on track for some steep losses here. that might indicate a near-term floor over the next 12 hours or so, but as you can see, very big loss across some of these markets coming online. two-year yields, five-year yields, 30-year yields continuing to move higher with most if not all major treasury curves as we speak, we are on intervention watch. 25 above zero is where we are right now. have a look at currency markets in china. this is one to watch. we had the finance ministry

talking about dollar-yen. i think we have bitcoin. iron ore is down about 2% in singapore. risk off day and unsurprisingly so. yvonne: you have to wonder about the minister of finance. we continue to see asia fx fall. the taiwan dollar dropping below 31 for the first time since 2019. we continue to watch a lot of these rate sensitive sectors, tech very much in play this morning. here is what we saw when it comes to the nasdaq, and 5% drop there. let's talk about that u.s. august cpi trade. inflation still hot. will the fed actually cool it all down with a 100-basis-point hike this week? let's get to kathleen hays, our

policy editor. kathleen: it was pretty close to the fed's nightmare when it came to inflation. it came down a bit, but less than expected mostly because of a 5% drop in energy prices. the monthly cpi up .1. is it supposed to be down .1. it is at 8.3%. it was supposed to go down to 8.1% according to the fed. most of the cpi is going to be the core. food and energy are going higher, and that is the problem. the monthly jump of 0.6%, it was supposed to stay at 0.3 percent, already a heavy monthly increase. it is definitely moving in the wrong direction. you annualize that, monthly, it

is going up at a 7% rate. health care, transportation, things that can rise slowly, but instead it posted its biggest monthly increase in four years. that is a big concern for the fed because, remember, the whole idea, couple of rate hikes, show people we are serious, do something fast about inflation and do not let inflation get entrenched in expectations. that is the concern when you see a report like this. david: the debate now is 75 or 100. maybe next weekend, the fact that 75 might even be dovish. how likely is 100 now? kathleen: the first person i talked to this morning after the numbers came out said you cannot rule out 100 basis points.

i said, are you serious? he said yes. he said it would not surprise him at all if they did something like that. and larry summers said if he were at the fed he would do a 100-basis-point hike because that would give some credence to the possibility. the biggest setback would be the challenge is they have been signaling for a while now we are open to 75, we will look at 50. would 100 be too much for the right amount? i will not be shocked if they did 100, but i would be maybe surprised and i would not be expecting it, but nobody is really ruling it out. david: all right, kathleen hays our global economics and policy editor there. let's get some reaction from the markets. if there is anything that is

transitory, it was the stockmarket rally. you say don't overreact to the number. how can we not overreact to this number one markets do not seem to be able to figure it out? >> maybe i'm looking at different things than a lot of people, but i just do not see the need for a 5% nasdaq down move today off of .1% from expectation. i have worried the fed is getting way ahead of the underlying economy, and this will be the pinnacle. yvonne: does it in anyway pushback? you are still looking at the first quarter of next year for maybe some sons of easing. >> the pivot is a tough thing to talk about when you're talking so tough to the market. everything has been so hawkish,

in sun valley with the conference. you cannot get much tougher as far as talk goes. we are talking about we are 6% away from where we want to be, arguing over .1%. if there is a blowoff rally in the stock market, this, to me, kind of feels like a blowoff rally in the economic data numbers. david: up until that 5% drop, you did have a sizable move up in global equity markets. longer-term, what does it mean if you do have broader and stickier inflation? what does it mean for market conditions these next 12 months? >> i think that no one has a crystal ball. his very few times in a market career when you get to put two

g2 economies, the united states and china, next to each other and see what they are doing. they are polar opposites right now. how long can this go on? who is right, who is wrong? obviously, there is not consensus. the pboc is easing. 75 basis points was a huge, monumental move a few months ago, and now we are talking about 100 basis points as if it is no big deal. i think we need to take a step back, look from a more rational point of clarity and understand that you are going to get functionally into the numbers, but this is supply-side driven, and i really do not think there is an economy underneath the fed that can hold any sort of rate rises like this right now. i think the pivot comes in the first quarter when i think they will be looking to ease at that point because the economy just

does not support this sort of activity here. yvonne: what do you do until then? do you stay defensive, look for entry points now or do you seek shelter and hide out? >> i wish there were more options in the u.s. equity markets. you have netflix down, nvidia down 10% today, amazon down 7%. i don't know of many opportunities where you get to have a market run like you had last week where everyone thought they kind of missed it, and suddenly you wake up and get this entry point here. i think this is not clear sailing to the upside, but i think these are entry points given the fact that most people have to understand we are kind of at the end of this inflation, and there has to be some sort of anticipation that we are going to have some falling off, and we don't have a meeting in october,

so they cannot raise in october. i think that you've got to take risks here. if you are taking risks, there are some large cap tech names that gave you good entry points today. david: if you are, i guess, willing to take a chance and invest, you have to really look through the fall -- the v, areol the opportunities are? >> i don't say that with a lot of conviction. if you bought every time a boj governor came on tv and talked about the yen, you have been run over. there's no way to figure that out, and i think right now, as you both know, i'm a long-term china bowl.

i just do not know if the uncertainty in the party next month with covid, with tech crackdowns, i think entry points are 20% to 30% higher because i would be chasing the rally to get there. if you are not looking at the chinese bond market, if you balance between some sovereign and some corporate, you could probably get about the idea, but equity-wise, unfortunately, in the u.s., and i don't know really where else to go, plus the dollar strength here, you will see a lot of trump pain in the fixed income markets. yvonne: you are seeing that redhead line across your screens here, boj, as expected, boosting

bond purchases by 475 billion yen, really trying to at least cap these yields at the moment, given what we have been seeing. david: they're looking at this as a defensive version. yvonne: not ruling out any options. david: i guess that is as far as they can go verbally. we will get to the pboc picks for the day a little later, but in the meantime, vonnie quinn has your first word news. >> vladimir putin facing pressure at home over the war with ukraine. meanwhile, the u.s. is preparing another round of military aid for kyiv, after ukraine captured

more than 6000 square kilometers of land. chinese president xi jinping and russia's vladimir putin will hold their first meeting thursday since the invasion of ukraine. the leaders will meet at the security for in uzbekistan. the eu is moving towards a plan to cap energy company cash to consumers. other plans include a levy on fossil fuel companies. the move takes the bloc step closer to rationing energy. yvonne: still ahead, the risk for chinese assets.

we have more on credit suisse recent lowering of chinese bonds. david: we are minutes away from the open up trade here in hong kong, and as you can see, we are headed into a very rainy wednesday morning with a typhoon barreling through. this is "bloomberg markets: china open." good morning. ♪

david: some breaking news right now. the strongest bias on record

after that big move up in dollar-china. yvonne: let's bring back the chairman and ceo of capital link . how does that measure up against your view? >> we could go back to that famous day when there was a line drawn in the sand at seven, and everyone refuted if there was an actual trade that went above seven or not. i think we are out of those times. the market is much more mature and at the end of the day, the pboc has many levers to combat some of this stuff. i think right now, you are seeing -- as i said, i think

this is kind of a blowoff move. you have cpi moving, the dollar moving against all major currencies, and i don't necessarily think this is anything more than a trading opportunity here. i don't necessarily think it changes any sort of thought process. what it does to me, i think, is it raises the question of what will be the message to the market from now until october 15 and the party congress, and that, to me, is something you have to watch very closely. it seems to me there's been some deals made or some compromises leading up to this and the third term for president xi, and this is probably the first time in five times this week with there is not a lot of information coming out and people really guessing what is going on.

how is everything going to move here, and i think there's not a lot of conviction behind some of the big china hands that normally give you some insight, so i would watch the pboc. i think president xi would like an exclamation point on that date on the 15th. i don't think he is going to get it. i would worry about the conversations and headlines that come from the pboc as it relates to currency. david: in some ways to your point, that is a trading opportunity. it is a symptom of the economy that when you look at the state of it, it is difficult to take advantage of valuations. you mentioned earlier on you are a long-term china bowl. what do you think investors

could take advantage of? >> this is not going to be the best investment advice ever given, but i would say wait for cautionary four weeks and maybe the lack of clarity here, the huge amount of variables, the currency moving so much probably tells people to wait and see. maybe you don't jump in here. i don't necessarily think there's some quick trade. caution may be the right way to play this. watch to see how the dollar reacts. i don't think you get a follow-through tomorrow in the u.s. i think you get some tracking sideways and some movement up and then some jawboning out of the doves a little bit and then i think we are not so really worried. i think you have to pay very

close attention to the headlines coming out of china in the next four weeks. as i said, this is probably a were-week period that is as blind as we have and going into the change of leadership or maybe not change of leadership but change of strategy and change of some of the key people , and where does the public stand on this? that's where you really have to get some insight before you can have conviction to try to take advantage of this. yvonne: always great to have your thoughts. 15th straight day we have seen a stronger bias, and it is the strongest we have ever seen. david: quite a sizable movement. we can see it is actually weaker from above that level. yvonne: some thoughts to watch at the open, movement in the tech space given what we saw in

the nasdaq overnight. watching adr's closely given that we have seen sources telling us that regulators could be coming to hong kong soon when it comes to these audits of adr 's. tencent and nethe's getting green lights from chinese regulators in terms of gaming titles. much more ahead here on bloomberg. ♪

>> i think markets overreacted to this. >> inflation is slowing down but not at a pace the fed is comfortable with. >> the fed is not going to blink. >> the fed will now have more reasons for 75 basis points next

week. quick that number is going up with november expectations rising as well. >> markets are continuing to predict the fed starts to pivot and then starts to cut the second half of next year. i think that needs to come off the table. >> it puts the fed into overdrive, and if they are in overdrive, sooner or later, they are going to make a policy mistake. >> reality check there. some of our guest weighing in on the latest inflation data and what it means for the fed. david: and what it means for your money. the taiwan dollar trading above 31 for the first time since 2019. the chinese currency is in focus today. >> yeah, we saw the strongest fixed rate on record versus estimates here, and once again,

15 straight days. the pboc trying to send a signal of trying to arrest these declines. we sound like oaken records at this point. we are already seeing a 2% drop in the hsi. asian tech having its worst day in a while. david: tencent gaining approval. data coming out of hong kong and we will preview the next trip

>> the stock market does not necessarily reflect the state of the u.s. economy, as you know. the economy is still strong, unemployment is low, jobs are up. manufacturing is good. i think we are going to be fine. >> are you worried about the inflation number? >> no, i'm not. david: there we go. the u.s. president underscoring the strength of the economy. the good news is if you are looking for a buying opportunity, you are probably going to get it today. yvonne: maybe, if you have the guts for it. 2% lower for your hang seng. dollar is roaring back on the back of inflation numbers we got from the u.s. headed in the right direction, but cooling not enough. i guess it was once again

wishful thinking that we were leading up to peak inflation and we really woke up to some reality checks here. in the chinese market, we are 1% lower across most encz marks today. renminbi, the strongest bias on record, even feeding out the one we saw last week. we are seeing some stabilization at least. we are still close, to that seven handle. we continue to seek a bit of weakness. we are watching all these pairs, renminbi-yen, zero. we are watching commodity markets given that dollar strength coming back, all heading lower today, copper and iron ore in china lower by 1.5 percent. there was that news on oil prices talking about the u.s. may be considering refilling those strategic reserves. that did help the market a little bit, but take a look

where comes to hang seng, ouch. we are getting close to those lows of the year. a lot of disappointment. there was a lot of speculation we could have gotten something earlier this week. has not quite transpired. 1% -- 1.3% lower for tencent. good news for them getting their daily titles approved. not really moving markets today. adr's, regulars coming into hong kong in the next few days or so. still a lot to work out the kinks, though, in this deal. we saw double digit gains yesterday. deutsche bank was one of the analysts out there.

david: quite a bit of cash flow. it really takes you to a macro story. before the inflation trend cannot, we work looking up 150 basis points of hikes in the next three meetings. it is now 180 points. a whole rate hike added on here. what do we know now that we did not know yesterday? >> a couple of things have changed. one is that people were obviously optimistic going into

the cpi report. part of the reason you had such a dramatic move in equity markets and bond markets, to some extent, was that obviously, people have started to position for an outcome where inflation was slightly softer. you have to unwind your positive bets and start changing your mind and repositioning for the fact that you have just seen an inflation number which is too high, bringing the fed back into the picture. they might do 100 basis points if the situation is serious enough. they might get to 4% by the end of the year and probably go beyond 4%, and markets need to readjust to that. yvonne: you will see the pboc tried to do what is best to maybe cap dollar-china right now. you are still seeing the likes of barclays saying it could hit

115 by the end of the year. >> they will have to look -- they will have to work very hard. we looked at the option profile, and you can see partly why the pboc has been so aggressive. over the next few weeks, you have a whole series of options expiring, and they are very big. next week, you've got one which is expiring for 5.5 billion dollars. there are several others for $2 billion or more, so the pboc has an a lot of work to do. they know once the market pushes through those rupture levels, it is on most like free space on the other. the dollar you want starts to gain traction with a general move in the dollar. the pboc has its finger in the dam here knowing that if it takes its finger out, there's a whole line waiting on the

others. it will be hard work, but you can see why they are being so aggressive. david: final question on the yen. what are the real options now for japan when it comes to the yen? >> they can keep up the more -- keep up the verbal intervention. they can get more aggressive. it really comes down to the bank of japan changing control. even if they did it by 10 hour 20 basis points, that would be something the market is not fully expecting, so they bank of japan certainly has the will to give the yen some support. david: september 22 is the date to watch.

let's bring in other next guest who recently turned neutral to overweight. tell us why. >> several reasons. one is that the economic situation in china has deteriorated more severely than what we had previously expected because of two reasons. one is the covid outbreak. those are the two domestic reasons. we choose to be more conservative and downgrade equities from overweight to

neutral. >> what are you looking for in the next few weeks? our previous guest says there's just so much uncertainty, and the president heading overseas, which is probably rare leading up to this big event in october. how do you look at these opportunities given so much uncertainty? >> the fact that the communist party leader is heading overseas suggests two items. one is probably that the domestic situation is pretty much under control and therefore he is quite at ease, but the negative thing is about the uncertainty when he is traveling overseas, especially right before the 20th party congress. that can bring along some of the uncertainty, and the second

thing is pension. we have been expecting stimulus to come through. having said that, the stimulus that has come through so far has been less effective or weaker. we do expect more stimulus to come through to support the sector. that could lead to long-term consolidation.

yvonne: when you look for these potential entry points, you were saying maybe look at the potential entities. when you look into these areas where maybe it is time to add more risk to the table, and what does it mean for markets moving forward? does it mean we had lower or we are range bound for the year? >> i think in the meanwhile, we will look at a range bound situation, given the fact that there are a lot of things that can be under control, for some of the covid outbreak, for example, the power shortage. there are things that are keeping a ceiling for operations, but having said that, we do look for more stimulus to support some of the activity that the government can have control over.

over the long run when the uncertainties become more neutralized, at that point, that would be a more sustainable kind of uptrend for chinese equities in the long run. david: if and when things turn, what will be the first sector you would buy? >> i think speculative appeals in the -- i think there is some speculative appeal in the real estate sector. the other thing i would look at at this point would be the high dividend yield or value price while things are quite uncertain at the moment. yvonne: thanks for giving your thoughts to us. vonnie quinn is in new york with your first word news. vonnie: saudi arabia said it

raised crude production to 111 million barrels a day, the highest production the kingdom has reported to opec since april 2020 when output talked 20 million barrels a day. the u.s. and other key consumers try to tame soaring fuel costs. chinese authorities -- sources say several regulators including china's banking watchdog made a request reflecting concern over the financial strength of the dollar. the ethereum network is set to officially finalize a shift that will lower its energy use by 99% , and the digital currency will

resemble more of a traditional financial asset that pays dividends. queen elizabeth ii's koppen has arrived at buckingham palace. her body will lie in state until her funeral. global news 24 hours a day on air and bloomberg quicktake powered by more than 2700 journalists and analysts in more than 100 weight -- 120 countries. david: a preview of what is coming up, should i do it or should you? yvonne: just go forward. david: reports of the u.s. considering sanctions in china to deter a potential invasion of taiwan. we look at that and xi jinping while he prepares to return to the world stage. this is bloomberg. ♪

david: yeah, there we go. seeing some losses right now across these markets.

session lows. entre markets outperforming, relatively speaking. yvonne: take a look at the dollar. 13 under two -- 1392 for dollar-you on -- dollar-you on -- dollar-yuan. let's talk about china now. president jinping -- president xi jinping embarking on his first trip abroad in nearly 1000 days for a meeting with vladimir putin in -- uzbekistan as the ukraine war rages on and the u.s. considers sanctioning china over taiwan. david: we have a look at the trip and what is at stake. >> and lot to unpack, of his sleep. with because extent today, that was the first place xi jinping

launched the initiative, that he will go there as a state visit, but there will be a dialogue with other world leaders as well, but the key meeting will be between xi jinping and vladimir putin. the markets are on a bit of tender hooks on what he could announce their and putting could announce. we know putin could use china's support and has gotten it since february when they had that no limits partnership, and subsequently, of course, the invasion of ukraine. china has tried to distance itself to a certain degree from supporting the war, but they seem to be in lockstep on the number of policies, especially trying to de-westernize the world and world order. why central asia, you ask.

again, they can control the narrative in the dialogue. will they be able to dominate the narrative and dominate the dialogue at the g20? hour will it be the other way around? also i believe xi jinping will be at apac following the g20. it will be very interesting to see what kind of no limits partnership looks like so many months after the war. yvonne: we are also hearing that the first inspections of chinese audits could be happening. stephen: absolutely. this is the first step after the deal we got between u.s. and chinese officials to open up out of books of roughly 200 chinese companies that face delisting from the united states because of laws that have been passed to essentially enforce the rules that the sec tried to enforce

for several decades to get chinese firms and hong kong-based firms to open up their books for inspection by the body led by inspectors to look at those audits. we are hearing from sources that the first team will come to hong kong potentially as early as this week to start the process. we are hearing that alibaba and yum china could be among the first companies where the audit books are open, but so many questions remain -- will chinese inspectors be allowed to be in the room at the same time? will there be stacks and stacks of hard copy paper? will they be on thumb drives? how to get that data out of china, and will it be the required data? yvonne: still got a lot of kinks

to iron out. stephen: so many. i did not even mention the other report as well that there could be more sanctions coming from the u.s.. they are at least mulling it, on china, to essentially avert or try to deter a beijing invasion of taiwan. that hung on the market overnight. yvonne: thank you, wrapping up the geopolitics. a quick check of the headlines now. twitter shareholders have approved elon musk's proposed $44 billion buyout. musk has since tried to scrap the offer, claiming he was misled about twitter's user base. the trial is currently set of the week of october 17 in delaware.

an insurer backed by billionaire richard lee has been seeking to raise about one billion u.s. dollars in offerings which could happen as early as the first quarter. its quarterly value of new business rose 11% year on year. david: just on the other side of the break, we. bonds, stocks, commodities, everything but the dollar, yields on the way up. there is plenty more ahead. this is bloomberg. ♪

david: look ahead now if you are long these markets. this selloff has a tremendous amount of hot sauce on it. bright sea of red on your screen. taiwan dollar has been taking it on the chen and yields are up just about across the board here. yvonne: you mentioned the trends are basically inverted at this

point. the dollars coming back in a big way. just when you thought you could get into asia, that headline figure there. you have wages being a key driver of inflation now. david: more sustained, more demand-driven, something the market is going to really lean into when you look at policy ahead. yvonne: for next week. they are saying -- what? 75, and the markets are basically fully pricing that in the next week. i saw 100 a few weeks ago tweeted out as a joke, and now people are really discussing it. david: have a look at this. the hang seng -- what is the level now?

discount in block trade coming in. yvonne: what we saw kind of started yesterday. they were talking about how banks work reporting exposure to crypto, but the company has come forward denying the reports. not enough to shakeup anything. we will give you an update coming up. david: our next guest will come on to talk about if central banks really have to all of the fed. this is bloomberg. ♪

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rishaad: as we explore the market, it is just coming to 11:00 a.m. yvonne: asian stocks and bonds tumbling as harder than expected u.s. inflation feels bets on a jumbo fed hike. the dollar holding a sharp rebound. the pboc sticking with its rigorous defense of the renminbi. david: breaking news right now. fulsome with the big corporate news out of china. there were some reports that china might be telling banks to look at exposure to the company. the company has come out and said that the cbrc